Can I get high returns from 1-year investments?

While 1 year investments prioritize safety and liquidity, some options like debt mutual funds and arbitrage funds can offer slightly higher returns than traditional savings accounts or FDs. However, very high returns usually come with higher risk, which is not advisable for such a short time frame.

Are 1-year investment plans taxable?

Yes, returns from most 1-year investment plans are subject to taxation. For example, interest from FDs and RDs is taxable as per your income tax slab. Gains from debt mutual funds held for less than 3 years are taxed as short-term capital gains. Arbitrage funds, if held for less than 1 year, are also subject to short-term capital gains tax.

Can I withdraw my money before maturity in a 1-year FD or RD?

Yes, premature withdrawal is possible in most FDs and RDs, but it may attract a penalty or reduced interest rate. Itâs important to check the terms and conditions with your bank or financial institution before investing.

Can NRIs invest in 1-year investment plans in India?

Yes, NRIs can invest in certain 1-year investment options like NRE or NRO Fixed Deposits and some mutual funds, subject to specific regulations. Itâs best to consult your bank or a financial advisor for details.

What should I avoid in 1-year investments?

Avoid high-risk instruments like equity shares or equity mutual funds, as they are volatile and may not perform well in a short time frame. Also, beware of schemes promising unusually high returns with little transparency.

Best Investment Plans For 1 Year^~

When it comes to investing, not everyone is looking to lock away their money for years on end. Sometimes, you may have a short-term financial goal like planning a vacation, building an emergency fund, etc.. In such cases, you need investment options that are safe, liquid, and offer reasonable returns in a short period. Fortunately, there are several smart investment plans designed specifically for a 1 year horizon. These options help you grow your savings without exposing your capital to unnecessary risks or sacrificing easy access to your funds.

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What are the Best Investment Plans for 1 Year?

Best investment plans for a 1 year horizon are financial products designed to offer capital protection, liquidity, and reasonable returns within a short period. Unlike long-term investments, these options focus on minimizing risk and ensuring that your money is accessible when you need it. Since the investment time is short, the emphasis is on safety and quick access rather than high returns or aggressive growth. Such plans are ideal for individuals looking to invest surplus funds, save for short term goals, or build an emergency corpus without exposing their capital to significant market volatility

Top Best Investment Options for 1 Year

Here are the most popular and effective investment options for a 1-year period in India:

Investment Option	Key Features	Typical Returns	Liquidity	Risk Level
Fixed Deposits (FDs)	Guaranteed returns, flexible tenure, insured up to ₹5 lakh	4-7% p.a.	Moderate	Low
Debt Mutual Funds	Invest in government/corporate bonds, high liquidity, low risk	5-7% p.a.	High	Low
Liquid Funds	Subtype of debt funds, invest in short-term money market instruments	4-6% p.a.	Very High	Very Low
Arbitrage Mutual Funds	Exploit price differentials in equity, low volatility, tax-efficient	6-7% p.a.	High	Low
Treasury Bills (T-Bills)	Government-backed, 91/182/364 days maturity, no default risk	Auction-based	High	Very Low
Recurring Deposits (RDs)	Regular monthly deposits, fixed interest, flexible tenure	4-6% p.a.	Moderate	Low
Fixed Maturity Plans	Closed-ended debt funds, fixed tenure, predictable returns	5-7% p.a.	Low (locked-in)	Low
Savings Account	Highest liquidity, instant access, low returns	2.5-4% p.a.	Very High	Very Low
Post Office Term Deposit	Government-backed, fixed interest, tenure options	6.9% p.a.	Moderate	Very Low

Fixed Deposits (FDs)

FDs are term deposits offered by banks and financial institutions where you deposit a lump sum for a fixed period (like 1 year) and earn a predetermined interest rate. Fixed Deposits are considered very safe, with returns guaranteed regardless of market conditions. Senior citizens often receive higher interest rates-sometimes up to 7.55% p.a. As compared to general rates around 6.7%–7.05% p.a. for a 1-year tenure. FDs are suitable for conservative investors seeking capital protection and predictable returns.
Debt Mutual Funds

These funds invest in fixed-income securities like government and corporate bonds. They tend to offer better returns than savings accounts and sometimes even outperform FDs, but carry moderate risk due to interest rate fluctuations. Debt mutual funds are popular for short-term goals and can be tax-efficient, especially for investors in higher tax brackets, since you pay tax only when you redeem your units. Returns can vary, but many funds have delivered 7–12% in recent periods, depending on the category and market conditions.
Liquid Funds

A subtype of debt mutual funds, liquid funds invest in very short-term money market instruments (like treasury bills, commercial paper) with maturities up to 91 days. They are highly liquid, allowing you to redeem your money quickly-often within one business day. These funds are ideal for parking surplus cash temporarily with almost negligible risk and returns typically higher than savings accounts but lower than longer-duration debt funds.
Arbitrage Mutual Funds

These are hybrid funds that exploit short-term price differences of securities between cash and derivatives markets. They offer stable returns with very low risk, especially suitable for short-term holding. Arbitrage funds benefit from market volatility, as more price discrepancies create more opportunities for profit. They are also tax-efficient because, for tax purposes, they are treated as equity funds.
Treasury Bills (T-Bills)

Issued by the Reserve Bank of India (RBI), T-Bills are short-term government securities with maturities of 91, 182, or 364 days. They are among the safe investment options since the government backs them. Treasury Bills do not pay interest directly; instead, they are issued at a discount and redeemed at face value, with the difference being your return.
Recurring Deposits (RDs)

RDs allow you to deposit a fixed amount every month for a specified period (like 1 year) and earn a fixed interest rate. Recurring Deposits encourage disciplined savings and are suitable for those who prefer to save regularly rather than invest a lump sum. Interest rates are similar to FDs for comparable tenures.
Fixed Maturity Plans

Fixed Maturity Plans are closed-ended debt mutual funds with a fixed tenure, often matching your investment horizon (like 1 year). They invest in fixed-income instruments that mature in line with the fund, aiming to provide predictable returns. Fixed Maturity Plans are less liquid than open-ended funds, as you can only redeem them at maturity.
Savings Account

A savings account is the most liquid option, allowing instant access to your funds. However, the returns are the lowest, typically 2.5–4% p.a. The main advantage is safety and liquidity, not growth.
Post Office Term Deposit:

Similar to bank FDs but offered by India Post, Post Office Term Deposit are government-backed, making them extremely safe. The interest rates are competitive, often around 6.9% p.a. for a 1-year deposit, and they are a preferred choice for risk-averse investors.

Why Should You Choose the Best Investment Plans for 1 Year

Choosing short-term investment plans for a 1 year period offers several advantages:

Capital Protection: Most 1 year investment options prioritize safety, ensuring your principal remains protected, which is important when the time frame is too short to recover from market downturns.
Liquidity: These plans usually allow easy and quick access to your funds, making them ideal for emergency needs or planned expenses within a year.
Low Risk: Short-term financial products like FDs, debt funds, and T-bills are less affected by market volatility, offering peace of mind to risk-averse investors.
Flexibility: Many options, such as liquid funds and recurring deposits, allow partial or full withdrawal without heavy penalties, aligning with unpredictable short-term goals.
Goal-Oriented: If you have a specific financial goal like a vacation, gadget purchase, or down payment, these plans help you grow your money safely without locking it away for years.
Portfolio Diversification: Short-term investments act as a buffer, providing liquidity and stability to your overall portfolio, especially when paired with long-term investments.

Conclusion

For investors seeking to park funds for just one year, the best investment plans are those that provide a balance of safety, liquidity, and reasonable returns. The right choice depends on your risk appetite, liquidity needs, and financial goals. By selecting the correct short term investment plan, you can ensure your money works for you efficiently, providing both security and flexibility for your immediate financial objectives

FAQs

Can I get high returns from 1-year investments?

While 1 year investments prioritize safety and liquidity, some options like debt mutual funds and arbitrage funds can offer slightly higher returns than traditional savings accounts or FDs. However, very high returns usually come with higher risk, which is not advisable for such a short time frame.
Are 1-year investment plans taxable?

Yes, returns from most 1-year investment plans are subject to taxation. For example, interest from FDs and RDs is taxable as per your income tax slab. Gains from debt mutual funds held for less than 3 years are taxed as short-term capital gains. Arbitrage funds, if held for less than 1 year, are also subject to short-term capital gains tax.
Can I withdraw my money before maturity in a 1-year FD or RD?

Yes, premature withdrawal is possible in most FDs and RDs, but it may attract a penalty or reduced interest rate. It’s important to check the terms and conditions with your bank or financial institution before investing.
Can NRIs invest in 1-year investment plans in India?

Yes, NRIs can invest in certain 1-year investment options like NRE or NRO Fixed Deposits and some mutual funds, subject to specific regulations. It’s best to consult your bank or a financial advisor for details.
What should I avoid in 1-year investments?

Avoid high-risk instruments like equity shares or equity mutual funds, as they are volatile and may not perform well in a short time frame. Also, beware of schemes promising unusually high returns with little transparency.

˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-06-2025

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in 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
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).

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Best Investment Plans For 1 Year^~

What are the Best Investment Plans for 1 Year?

Top Best Investment Options for 1 Year

Fixed Deposits (FDs)

Debt Mutual Funds

Liquid Funds

Arbitrage Mutual Funds

Treasury Bills (T-Bills)

Recurring Deposits (RDs)

Fixed Maturity Plans

Savings Account

Post Office Term Deposit:

Why Should You Choose the Best Investment Plans for 1 Year

Conclusion

FAQs

Can I get high returns from 1-year investments?

Are 1-year investment plans taxable?

Can I withdraw my money before maturity in a 1-year FD or RD?

Can NRIs invest in 1-year investment plans in India?

What should I avoid in 1-year investments?

Investment plans articles

Explore the popular searches and stay informed

Best Investment Plans For 1 Year~

What are the Best Investment Plans for 1 Year?

Top Best Investment Options for 1 Year

Fixed Deposits (FDs)

Debt Mutual Funds

Liquid Funds

Arbitrage Mutual Funds

Treasury Bills (T-Bills)

Recurring Deposits (RDs)

Fixed Maturity Plans

Savings Account

Post Office Term Deposit:

Why Should You Choose the Best Investment Plans for 1 Year

Conclusion

FAQs

Can I get high returns from 1-year investments?

Are 1-year investment plans taxable?

Can I withdraw my money before maturity in a 1-year FD or RD?

Can NRIs invest in 1-year investment plans in India?

What should I avoid in 1-year investments?

Investment plans articles

Explore the popular searches and stay informed

Best Investment Plans For 1 Year^~