5 Short-Term Investment ideas to avail Tax Benefits

Short Term Investment means the money which is invested for a short amount of time to get better and quicker returns. This type of investment plan is for people looking for something temporary to save their money for the near future. Now there are many options for you to choose from when it comes to short term investment plans. Let’s find out some of the best short term investment ideas that will help you avail of tax benefits.

Investments done for a short amount of time, generally within five years, are short term investments. These kinds of investments are usually done when you need to provide a temporary and safe place to keep your excess cash and get additional benefits in return. Short term investments can be converted into cash in just three to twelve months of your first investment. The main focus of short-term investments is to take care of the expected expenses that are about to take place soon.

Here are the top 5 short term investment ideas to avail tax benefits

1. ULIP: The Unit Linked Insurance Plan or ULIP comes with double benefit insurance and investment. This means that the plan provides life insurance as well as the ability to invest in financial instruments as per your risk appetite. The ULIP has a lock-in period of five years. Income tax deductions under Section 80C can be claimed for the amount contributed towards ULIPs.

2. Large Cap Mutual Fund– Large-cap mutual fund is a short-term investment scheme where you can invest in the stocks of larger businesses and organizations to achieve considerable growth in a short time. The tenure of this kind of short-term investment plan is from three to five years. The risk involved in this short-term investment plan is low, and the returns are higher, from 8% to 13%. Hence more people lean on this type of short-term investment scheme.

3. Debt Instrument– Yet another brilliant short-term investment scheme is the best one to avail tax benefits. This short-term investment plan is best for risk-averse people. Keeping your capital safe and secure and, at the same time, providing better results than most short-term investment plans is a good place for you to invest. You don’t have to worry about market volatility when it comes to debt instrument short-term investment. This type of short-term investment usually offers returns as high as 11%

4. Senior Citizen Saving Scheme: The scheme is specifically targeted at senior citizens. Seniors above the age of 60 years can open an SCSS account that has a term period of 5 years. You can open an account with any Indian bank. The SCSS provides tax benefits of up to Rs.1.5 lakh in a financial year under Section 80C of the IT act.

5. Fixed Deposits– Last but not least, bank fixed deposits are a top-rated short-term investment plan that helps you avail of tax benefits. Popularly known as short-term investment saving instruments, you need to put a lump sum amount in the bank of your choice for a fixed period in this type of short-term investment plan. It is one of the safest options, and it offers fixed interest rates.

These were the top 5 short-term investment plans to avail tax benefits. When it comes to selecting the right short-term investment plan, you should take into consideration the investment objective, risk appetite, maximum sum that you are willing to invest and other financial requirements. It is important to evaluate the risk-return factorbefore making a final call of investment.