List of 9 Best Short-Term Investment Options in India for High Returns in 2022

“Do not save what is left after spending but spend what is left after saving” is a famous quote by Warren Buffet. It sums up the importance of saving money for a better future.

Money plays an indispensable role in all our lives. Every day each one of us wakes up to do our jobs so that we get paid. But are we investing that hard-earned money in the right avenues, so that it fetches good returns and helps us achieve our immediate goals? If not, then it is time for us to look at short-term investments.

Let’s understand this through an example – Rahul and Sanjay are childhood friends and graduated from the same college. Both joined the same start-up company, drawing a salary of Rs 40,000 per month. While Rahul was saving Rs 20,000 each month in recurring deposit (RD), Sanjay chose to splurge all his money on partying, eating out, buying expensive shoes, etc., leaving him with no cash by month-end. In a year, Rahul was able to save Rs 2.40 lakhs plus the interest in his RD, which he used to buy himself a new bike. On the other hand, Sanjay remained the same, hoping he would get a salary hike and cover-up for all the missed savings opportunities.

But COVID-19 pandemic struck in 2020, and their company closed down due to poor business, leaving Rahul and Sanjay jobless. Since Rahul had savings in his RD, he was confident of overcoming the crisis and started looking out for suitable jobs. Sanjay got scared about his future with no savings and no salary, went into depression, and approached Rahul for help, who eventually brought him out of the pathetic situation. Now, Sanjay understood the power of savings and the need to start investing early.

Nobody can predict the future, but we can certainly be prepared to tackle it by planning our finances and saving on the right investment options in India. The COVID-19 pandemic has taught the valuable lesson of savings, as it can only help us overcome the uncertainty of life.

So, what are short-term investment plans?

Investment options in India can be classified as short-term and long-term. Short-term investments can be made for shorter tenors of a year or two. It could be used to buy jewelry or a bike/ car or laptop or plan your holiday or anything that you might require soon. There are several lucrative 1-year investment plans that can help you make some quick returns. If you are investing for more than 5 years, it can be classified as long-term investments. It also means that you won’t be requiring those funds until the need arises. You could also consider re-investing your short-term investment gains, which can help contribute to your future.

9 Best Short Term Investment Plans with High Returns in India for 2022

Let’s have a look at the 09 best short-term investment options in India that provide you higher returns on their investments to achieve your short-term goals as mentioned below:-

1. Recurring Deposits (RD)
2. Fixed Deposits (FD)
3. Corporate Deposits (CD)
4. Debt Mutual Funds
5. SIP in Equity Mutual Funds
6. Stock Market
7. Savings Account
8. National Savings Certificate (NSC)
9. Treasury Securities

Let’s understand these best short-term investment Plans in India for safe investments in 2022 details:-

1. Recurring Deposits (RD)

This is the most common short-term investment option used by many to park their money for short-term needs, securely as they are offered in all banks. It allows you to earn fixed interest on the amount invested till maturity. You can open a recurring deposit (RD) account just by logging into your net banking account. Please choose the amount to save every month, specify the tenure, and it is done!

• Rate of return: 4% to 6% per annum
• Duration: 6 months to 10 years
• Taxability: The interest earned from the RD account is taxed as per the individual’s tax slab after adding to your income.

2. Fixed Deposits (FD)

Fixed Deposits (FD) is another popular way of creating a corpus for short-term investments offered by banks. The amount is invested for a specific period ranging from 7 to 10 years for a fixed rate of return, after which it automatically matures, allowing for withdrawal. Although the interest rates are higher than savings accounts and RD, there is no possibility of early withdrawal.

• Rate of return: 2.5% to 5.5% per annum
• Duration: 7 days to 10 years
• Taxability: The FD interest is added to your income and is taxed as per your income tax slab.

3. Corporate Deposits (CD)

Just like bank fixed deposits but the only difference is these deposits are collected by corporates for expansion and operations. The interest rates are slightly higher than the bank FD’s as the risk of default is higher. Those who have a risk appetite can invest in these corporate FD’s and earn better returns compared to bank FD.

• Rate of return: 6% to 8% per annum
• Duration: 1 to 3 years
• Taxability: The interest is added to your income and is taxed as per the prevailing income tax slab.

4. Debt Mutual Funds

These mutual funds primarily invest the money in debt instruments such as government bonds, treasury bills, commercial papers, corporate bonds & similar to other money market products. This is one of the best short-term investment options for people who are risk-averse and looking for better short-term returns.

• Rate of return: 8% to 11% per annum
• Duration: 6 months to 3 years
• Taxability: Short-term mutual funds are calculated if you redeem the units within three years, and long-term capital gains are levied if held for more than three years on your income.

5. SIP in Equity Mutual Funds

Systematic Investment Plans (SIP) work best in the long-term perspective, but one can make use of them for shorter durations as well, to get decent returns too. If you are looking at an investment period of up to 1 year, it is suggested to start a SIP in large-cap mutual funds since they invest in large companies, which can rise faster in the market.

• Rate of return: 8% to 15% per annum
• Duration: 6 months to 5 years
• Taxability: Similar to debt MFs, the returns from equity MFs are also calculated based on short-term capital gains and long-term capital gains.

6. Stock Market

For high-risk takers, the best short-term investments are stock markets to invest in and earn maximum returns. If you could spot the right stocks, then invest in them for a few months to double your investment. There is a huge chance to lose your entire capital in case you bet on the wrong stocks.

• Rate of return: 10% to 100% per annum
• Duration: 1 month to 5 years
• Taxability: The returns are added to your income, and tax is calculated as per your income tax gains.

7. Savings Account

Savings Account is amongst the popular short-term investment plans in India. It is a deposit account at a bank or a financial institution wherein you can keep your extra cash and earn interest. It provides maximum liquidity as the users can withdraw their invested amount whenever they want. Moreover, there is no limit on the deposit amount, and several banks offer zero balance accounts.

• Rate of return: 3.5% to 7% depending on different banks.
• Duration: Unlimited
• Taxability: Interest from a savings account is considered as an additional income and comes under taxable income.

8. National Savings Certificate (NSC)

National Savings Certificate (NSC) is a tax-saving short-term investment plan and is available at post offices. Being a government-backed scheme, it has low risk and gives fixed returns. However, the interest rates of NSC are subject to change periodically according to the decisions taken by the Finance Ministry.

• Rate of return: 6.8%
• Duration: 5 years
• Taxability: Investing in 5-year NSC can offer you tax benefit under Section 80C of the IT Act, but the interest income will be taxable.

9. Treasury Securities

Backed by the Government, Treasury Securities offers high liquidity and safe capital with decent returns. These are a good option to keep your assets in a safe place; however, Treasury Securities provide lower returns than debt funds.

• Rate of return: 7.8% on an average
• Duration: 91 days to 1 year
• Taxability: Taxes are to be paid according to the income tax slab as these are considered under income from other sources.

Short-term investments are the best option to accomplish your short-term financial goals. With short-term investments, you can ensure financial freedom that will help manage unexpected expenses. In addition, it offers you the flexibility to withdraw money whenever required without waiting for a long time. Moreover, you can make substantial profits within a short period as short-term investment plans provide stability, liquidity, and low transaction costs, thereby showing ways to avoid unwanted problems significantly. There are many long-term investments plans in India available for investments you can choose one from them according to your future plans.

The list mentioned above should have given you an overview of the various short-term investment options in 2022 in India. So, whichever avenue you choose to park your hard-earned money, make sure to have a clear goal and stick to it till the end, to make the money work for you, even when you are sleeping. Happy Investing!