Investments are financial instruments that enable people to generate wealth for the future and meet financial goals. Regular and periodic contributions from a part of your income into investment products gradually build up funds that help achieve financial goals over time.
Best investment options in India are of two types – short-term and long-term investments. Short-term investments are designed to produce high returns within a short period, which can be a few months to a year. Investors wanting to get their money multiplied without waiting for many years opt for short-term investments. Long-term investments are for more than 5 years and are usually opted by people wanting to build a corpus of funds for various reasons such as retirement, children’s marriage, buying a house, and more.
Both long-term and short-term investment options have been explained below –
Best Investment Options in India
Recurring Deposit is one of the best investment options in India for the short term. A recurring deposit account can be opened for a minimum period of 6 months and a maximum of 10 years in multiples of 3 months. The interest on the fund deposited in the RD account is 6.5% per annum for 12 months or more.
The minimum lock-in period of recurring deposits is 1 month. If the investor prematurely withdraws the amount within a month, only the principal amount is paid. TDS is deducted if the interest earned on the principal amount is more than Rs. 10,000.
Bank Fixed Deposit
Bank Fixed Deposit has always been one of the best investment options in India. One of the primary reasons is that bank fixed deposits are considered one of India’s safest investments. Money can be invested in a bank fixed deposit for 3, 5, or 10 years. A fixed interest rate that can go up to 6.5% per annum is provided on bank fixed deposits.
From February 2020, the fixed deposits are insured up to Rs. 5 lakhs for both the principal amount and the interest earned. The fund is withdrawn after the end of the period. Premature withdrawal is allowed, but a penalty is imposed on premature withdrawal.
Public Provident Fund
Public Provident Fund is a safe investment with high returns in India. The interest rate on PPF accounts is fixed by the government each year. The current interest rate is 7.1%. PPF investments have a maximum tenure of 15 years. The limit for investment each year is Rs. 1.5 lakhs.
The investor can claim an income tax deduction on the amount deposited in the PPF account as per section 80C of the Income Tax Act. The entire deposit amount can be claimed for a tax deduction because both the income tax deduction limit and the deposit limit of PPF are Rs. 1.5 lakh. The investor is also not liable to pay tax on withdrawal and the interest earned.
Money Market Account
A Money Market Account is also called a liquid fund. The money is invested in short-term government securities or certificates. It provides the maximum liquidity and least risk among all mutual funds. Due to high capital security and good returns, the money market account is one of the best investment options in India for the short term.
A Money Market Account can be opened for less than 13 months. There is no lock-in period and the maturity time limit is just 91 days. MMA provides high liquidity, which can be retrieved swiftly. The interest rate is dynamic. The current interest rate provided on money market accounts is 7% per annum.
An investor can withdraw funds from money market accounts anytime. However, it might take 2-3 days to get the cash.
Sukanya Samridhi Yojana
Sukanya Samridhi Yojana is one of the best investment options in India for financially securing the future of the girl child. This is a government-backed scheme with assured high returns. The current interest rate on the deposits under this scheme is 7.6% compounded annually. The minimum deposit for a year is Rs. 1000/-. Deposits can be made to the SSY account until the girl attains 14.
The account matures when the girl attains the age of 21. SSY comes under the exempt, exempt, exempt category. This means the deposit made to the account, interest earned, and the maturity amount is all exempted from taxation under section 80C of the Income Tax Act.
National Savings Certificate
National Savings Certificate is also a good option for anyone looking for the best investment plan in India. NSC is offered by the post office and a few public sector banks. The minimum deposit amount is Rs. 100/-. The time period of the investment is 5 years. The current interest rate is 6.68%. The interest rate is fixed by the government each year.
A tax deduction can be claimed on the purchase of NSCs to a limit of Rs. 1.5 lakhs under section 80C of the Income Tax Act. The entire amount can be withdrawn on maturity.
Large Cap Mutual Funds
Large Cap Mutual Funds are investments made in the stocks of large business companies. Large Cap Mutual Funds rank as among the best investment options in India for the short term because they provide large returns within short tenure of 1-3 years. Investment in large-cap mutual funds can be made for a maximum of 5 years.
Large Cap Mutual Funds investments are for short durations; hence, the risk is low. The returns are high ranging between 8% to 13%. Large-cap mutual funds provide both high liquidity and high returns.
The short-term capital gain tax applies to the fund’s capital gain with a tenure of 3 years. Long-term capital gain tax is applicable on the capital gain on the fund having a tenure of 5 years.
National Pension System
The National Pension System is one of the best investment options in India for the long term. The investor can continue to invest in this scheme till he/she attains the age of 60. After that, 60% of the corpus fund can be withdrawn while the remaining 40% is used for an annuity plan which provides a regular income.
It is prudent to research every type of investment plan to determine the best investment plan suited to your financial needs and requirements.
Lastly, make sure that you consider getting a health cover as part of your investment options. It will protect your hard-earned money against medical emergencies and inflation.