Finance

Short Term Investment Plans For Availing Tax Benefits

short term investment

As you start earning planning for your investment and saving goes hand in hand. Both have its importance. As saving in order to have a secured future is very crucial, having proper investment strategy to achieve you short and long term goals is equally important. The individuals should have a good mixture of balanced conservative and aggressive investment options in their investment portfolio including the government backed avenues.

If we talk about tax saving investment options then there are plethora of it. As investments are the best financial instrument which helps you to achieve the financial goals of life, there are many best investment options available in the market to cater the requirements of individuals. Tax Saving investments are majorly of two type short term and long term.

The investment plans not only help you create a financial cushion but also is a great way to save bundles on your taxes. As compared to the long term investment short term investment plans are also very advantageous and provides continues flow of income from a particular interval of time.

For you knowledge, further in this article we have discussed some of the best short term investment plan that provides tax benefits.

But, before we dig into the plan let’s give some insight on what is short term investment plans.

Short term investment is defined as the investment made for the time period of 1-5 years. There are various benefits of having a short term investment plan as compared to the long term investment plan. The major benefits of short term investment plan are that it includes lower risk and the money is not kept on any lock in period by the financial institutions and bank. Moreover the short term investment plan also provides quite substantial return on investment and thus one can easily achieve the major objectives of investment like safety of capital and return on capital.

Best short term investment plans are:-

  1. Fixed Deposit- Fixed deposit is one of the most efficient and safest short-term investment plans available in the market. Fixed deposit plans provides fixed rate of interest per year ranging from 4-11%.the plan comes with a maximum tenure of 10 years. However, one cannot take out the money before the completion of maturity period. The plan also provides tax deposit on the interest paid under section 80C of Income Tax Act 1961.
  2. Saving account- apart from fixed deposit saving accounts are also the safest short-term investment plans available in the market. Moreover, it is the easiest way to assess the money. Saving account are mainly used for liquidity. One can open his/her own saving account with any bank or financial institution and can keep the money in the bank till required. Depending on the duration and amount of money kept in the account, the saving account offers an interest rate of 4-7%.
  3. Liquid Funds- This is type of mutual fund in which the investment is made in short term government certificates and securities of deposits. As under this option of investment the invested amount is secured, one can exit or enter the fund at any time. As the redemption takes around two days it is wise not to throw restricted amount in your emergency fund. On liquid fund investment you can expect a post-tax return of 4-7%. An individual can consider investing in liquid fund in order to park money for a period of minimum one day to maximum 90 days or even higher. Under liquid fund the investor can choose to invest in either dividend option or growth option. Liquid funds also provide tax exemption under section 80C of Income Tax Act 1961.
  4. Gold Investment- when it comes to short term investment then gold investment is considered as one of the wisest options. The gold investment comes handy at the time of emergency and also provides protection and stability during the time of bank crisis. Another advantage of investing in gold is that the value of gold keeps on in increasing and is not affected by the ups and down of financial market. With the burgeoning demand of gold investment in the market, in the past few years the gold investment has showed a return of 23.5%, which is quite phenomenal.
  5. National Pension Scheme- Started by the Pension Regulatory Development Authority of India, NPS is a government owned scheme that runs with an objective to provide financial protection to the individual after the retirement. This is also an effective investment scheme which also provides tax benefits. In fact NPS is one of those tax saving investment options that provides tax exemption more than the limit of Rs1 lakh under section 80C of Income Tax Act,1961. One can also invest in 5 years postal NSC if you want to make a short term investment of 5 years.
  6. Short Term Funds- the investment under short term funds are made in securities which mature in 1-3 years. As any other debt funds short term funds also provides tax benefit under section 80C of Income Tax Act 1961. However, these funds are risky they also offers good return on investment in a short run. These funds are most suitable for those investors who want to make quick money and have high risk appetite.
  7. Bonds- A bond is describes as the money offered by the investor as a loan or entity be it government or corporative entity it is known as bond. Bonds offer high liquidity and are risk free. At the time of maturity the principal amount with a fixed interest rate yearly is payed back to the borrower. This option is most suitable for those individuals who wants to diversify their investment and can opt for bond in order to fulfill their short term investment plans.
READ  Can I Refinance Car Loan If I Have Bad Credit?

So these are some of the best short term investment plan that works as a financial planning tool in order to achieve your short and long term goal.

Leave a Comment