Short Term Investment Options in India

In India, there are several short-term investment options available for individuals looking to invest their excess cash in highly liquid assets that can be easily converted into cash within a period of 5 years. These options are specifically designed to provide a safe and temporary avenue for investment.

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What are Short-Term Investments?

Short-term investments, particularly when viewed through the lens of Non-Resident Indians (NRIs), are crafted to deliver significant returns within a relatively brief timeframe, spanning from a year to just a few months. These investment strategies are customised to align with anticipated near-future expenses, considering the distinctive financial considerations of NRIs.

NRIs commonly harbour specific financial goals and responsibilities that may diverge from those of resident investors. Their inclination is often towards investments that promise swifter and more foreseeable outcomes rather than embracing long-term strategies that entail prolonged waiting periods.

Although short-term investment plans for NRIs can generate optimal returns to meet their financial objectives, it's crucial to acknowledge that they may not yield the substantial results associated with long-term investment options. Nevertheless, owing to the lower risks involved, short-term investment plans are frequently favoured by seasoned investors, including NRIs, who seek a balanced approach to wealth management.

Best Short-Term Investment Options - Highlights

  • Short turnaround time

  • Optimum returns for less investment

  • Lesser investment amount

  • High liquidity

  • Low risk

Now that you're familiar with the key features of the finest short-term investment options in India, let's explore the top 13 short-term investment plans, including options suitable for NRIs.

Best Short-Term Investments Options in India for NRI/OCI/PIO

Let’s take a look at the best short-term investment options for 2024.

  • ULIP (Unit-Linked Insurance Plans)

  • Recurring Deposits

  • Savings Account

  • National Savings Certificate

  • Liquid Funds

  • Investments in NCDs/Corporate or Company Deposits

  • Treasury Securities

  • Debt Instrument

  • Bank Fixed Deposits

  • Post-office Time Deposits

  • Large Cap Mutual Funds

  • Stock Market/Derivatives

Investment Options Yearly Returns (in %)
Recurring Deposits 6-7%
Savings Account 2-7%
Money Market Account 5-9%
Debt Instrument 7-11%
National Savings Certificate 6-8%
Liquid Funds 3-5%
Investments in NCDs/Corporate or Company Deposits 8-11%
Bank Fixed Deposits 5-8%
Post-office Time Deposits 5.5%
Large Cap Mutual Funds 8-13%
Corporate deposits 7-8%
  1. ULIPs

    ULIPs, or Unit Linked Insurance Plans, are a popular investment option for NRIs. These plans present a distinctive blend of insurance and investment, empowering NRIs to potentially increase their wealth while safeguarding their financial well-being. NRIs can select from a variety of funds tailored to their risk tolerance and investment objectives. Moreover, ULIPs provide the freedom to switch between funds, making them an appealing option for NRIs seeking to enhance their investments over time.

  2. Recurring Deposits

    • Tenure- NRIs can open an RD account for tenure as short as 6 months and in multiples of 3 months, up to 10 years. 

    • Liquidity: Typically, an NRI recurring deposit scheme entails a minimum lock-in period of one month. If prematurely closed within the first month, only the principal amount is refunded, with no interest paid.

    • Returns: NRI RD accounts provide competitive interest rates, comparable to those of Bank FDs. Currently, for tenures of 12 months and beyond, the interest rate stands at 6.5% per annum.

    • Taxation: The interest earned on the invested amount in NRI RD accounts is added to one's income and taxed based on the individual's income slab rate. TDS is deducted if the interest earned exceeds Rs. 10,000.

    **You can use the online FD calculator to analyze potential returns before making an investment decision for short term investments in india. 

  3. Savings Account

    For Non-Resident Indians (NRIs) looking to handle their finances from overseas, an NRI Savings Account offers a convenient and secure option to deposit and manage funds in their home country. This specialized account is tailored to meet the distinct financial needs and preferences of NRIs, providing features like effortless repatriation of funds, competitive interest rates ranging from 2-7%, and seamless online banking services.

  4. National Savings Certificate

    The National Savings Certificate (NSC) stands out as a favoured investment choice among Non-Resident Indians (NRIs) seeking to secure their financial future. NRIs can harness the advantages of NSC by investing through designated banks or financial institutions. This certificate provides a stable and secure path for NRIs to build their savings, all while benefiting from tax advantages.

    Investment Plans for NRIsInvestment Plans for NRIs
  5. Liquid Funds

    Often referred to as money market accounts, NRI Liquid Funds offer a secure way to preserve capital while providing respectable returns. They are considered one of the best short-term investment options in India for Non-Resident Indians.

    • Tenure - NRIs can open a money market account for a duration of less than 13 months, providing flexibility in managing short-term finances.

    • Liquidity - This short-term investment option in India is highly liquid, allowing NRIs to redeem their investments swiftly when needed.

    • Returns - While returns on liquid funds are not guaranteed or fixed, they currently offer an interest rate of 7% per annum.

    • Taxation - Profits earned on the invested amount in this short-term investment plan are added to the income of the individual and taxed accordingly. However, profits earned on investments held for more than 36 months are taxed at 20% post-indexation.

  6. Debt Instrument

    NRI investors can find secure short-term investment options in debt instruments. Various choices such as liquid funds, ultra-short-duration funds, and low-duration funds accommodate different investment durations. Liquid debt funds, in particular, offer excellent liquidity, surpassing traditional savings accounts. These funds typically yield returns ranging from 7-9%, and the taxation is tenure-dependent.

  7. Bank Fixed Deposits

    Fixed deposits, also known as short-term savings instruments, allow individuals, including NRIs, to invest a lump-sum amount in a bank for a fixed period. It is considered one of the safest short-term investment options in India, offering a fixed FD interest rate and providing guaranteed returns.

    • NRIs can choose tenure durations ranging from 7 days to 10 years, with the option to renew deposits upon maturity for reinvestment.

    • This short-term investment provides high liquidity for NRIs, effectively managing reinvestment risk.

    • NRI fixed deposit accounts ensure guaranteed returns, with interest rates ranging from 8% to 9% for investments over a year. These rates remain stable even during market volatility.

    • It's crucial for NRIs to be aware of the high-income tax rate, up to 30%, including on accrued interest, applicable to FDs.

  8. Post Office Time Deposits

    Post-office time deposits are one of the safest and best short-term investment plans, offering assured returns. The scheme is provided by India Post and is particularly popular among people residing in rural and remote areas of India.

    • Tenure- NRIs can open a post office time deposit scheme for a tenure of 1 year, 2 years, 3 years, or 5 years.

    • Liquidity- In the post office scheme, the interest is calculated on the deposited amount annually. Premature withdrawal is not allowed within the first 6 months.

    • Returns- The post office time deposit account offers competitive return rates. Below are the returns:

    Account Tenure Applicable Interest Rate
    1-year account 6.90%
    2-year account 7.00%
    3 years account 7.10%
    5 years account 7.50%
    • Taxation- The interest earned on the deposited amount is added to the income of the individual and is taxed according to the income tax slab rate the individual falls under. 

  9. Large Cap Mutual Funds

    Large-cap mutual funds in India offer a short-term investment avenue. These funds strategically invest in the stocks of well-established business organisations, aiming for significant growth within a relatively brief period, typically 1 to 3 years. These investment plans are not only excellent for small investments but also cater to the preferences of Non-Resident Indians (NRIs), providing quick and intelligent returns.

    • Tenure: Invest in large-cap mutual funds for 3-5 years.

    • Liquidity: Large-cap mutual fund schemes offer high liquidity to investors, coupled with attractive returns on investment.

    • Returns: As a secure short-term investment, large-cap mutual funds pose low risk and provide substantial returns of 8%-13%.

    • Taxation: For debt funds, capital gains tax is applicable. Short-term capital gains tax (STCG) is levied on profits earned from funds held for 3 years, while long-term capital gains tax applies to funds held for over 3 years.

    • NRI Inclusion: These investment options are also suitable for NRIs seeking a balanced approach to tenure, liquidity, and returns.

  10. Treasury Securities

    Treasury securities, commonly referred to as treasury bills, are a great choice for short-term investments. They offer high liquidity, making it easy for NRIs (Non-Resident Indians) to access their funds when necessary. Additionally, these instruments provide a secure investment option, giving NRIs peace of mind. The maturity dates for these securities typically range from 91 to 365 days.

  11. Stock Market/Derivatives

    For Non-Resident Indians (NRIs) with a solid understanding of the market and a willingness to take on higher risks, investing in shares, commodities, and derivatives can be an attractive option. These investments can be customised to align with short or long-term financial goals.

  12. Investments in NCDs/ Corporate or Company Deposits

    Non-resident Indians (NRIs) may find it wise to consider investment avenues such as NCDs (Non-convertible debentures) and Corporate/Company Deposits. These options offer appealing returns ranging from 9-12%, specifically designed to align with the NRI perspective while ensuring adherence to relevant regulations. NRI investors stand to gain from the stability and growth potential offered by these financial instruments.

SIP Investment for NRIsSIP Investment for NRIs

How Do Short-Term Investments in India Work for NRIs?

For Non-Resident Indians (NRIs), short-term investment opportunities work in a similar way as domestic investors. Short-term investments in India for Non-Resident Indians (NRIs) function as a strategic financial approach. For shorter durations, NRIs can opt for various instruments like ULIPs, fixed deposits, money market funds, or government securities. These investments offer quick liquidity and flexibility, allowing NRIs to capitalize on opportunities without committing to long-term holdings. The returns, while typically lower than long-term options, provide a balance between security and earning potential, making short-term investments an attractive choice for NRIs looking for quick and efficient financial growth in India.

What are the Related Terms to Short-Term Investments Plans in India?

  1. Cash Investment

    This is a short-term bond, generally less than 90 days, offering returns in interest payments. As compared to the other investment options, cash investment generally offers a low return.

  2. Cash Equivalents

    These are investment securities which provide high liquidity and have high credit quality. As a short-term investment option, these securities have low-risk and low-return profiles.

  3. Money Market

    The money market is the segment of the financial market in which financial instruments which have a short-term maturity period and high liquidity are traded. Money-market funds are considered a very safe short-term investment option. However, the returns are comparatively low as compared to the other investment options.

  4. Financial Assets

    These are liquid assets, which derive profit from ownership claims or contractual rights. Stocks, cash, bonds, mutual funds, and bank deposits are some of the examples of financial assets.

  5. Short-term Investment Fund

    This is a conservative investment fund that offers low risk and high returns. Short-term investment funds are considered a liquid investment fund and a safe investment option to achieve short-term financial objectives.

Investment Plans for NRIsInvestment Plans for NRIs

Wrapping it Up!

Short-term investment options in India present NRIs with a versatile and efficient financial strategy. Whether through ULIPs, fixed deposits, money market funds, or government securities, these instruments offer quick liquidity and flexibility. The attractiveness of short-term investments for NRIs lies in the balance they strike between security and earning potential, making them a pragmatic choice for those seeking agile and effective financial growth in the Indian market.

FAQ's

  • What investment is best for the short term?

    For short-term investments, consider options like Fixed Deposits, ULIP (Unit-Linked Insurance Plans), Recurring Deposits, Savings Accounts, National Savings Certificate, Liquid Funds, or Short-term Debt Mutual Funds. These provide relatively stable returns over a shorter period, making them suitable for goals within 1-3 years.
  • What can I do with 2 lakh rupees?

    With 2 lakh rupees, you have various options based on your financial goals. Consider investing in ULIPs, starting a Systematic Investment Plan (SIP), or opening a Fixed Deposit for a slightly higher interest rate. Additionally, explore low-risk options like Government Savings Schemes or consider it as an emergency fund.
  • Can I do SIP for 6 months?

    Yes, you can start a SIP (Systematic Investment Plan) for as short as six months. However, keep in mind that SIPs work best as a long-term investment strategy. If you're investing for a shorter duration, consider lower-risk options to minimise market volatility impact.
  • What are the Requirements for Short-Term Investments in India?

    Any investment is called a short-term investment if it fulfils the two basic requirements for investors:
    • It provides liquidity.

    • Investment should be made for a short-term period of 12 months.

Past 10 Year annualised returns as on 01-07-2024

^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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