Safe 3-year investments plan with high returns in India
For those looking to get higher returns on their savings, here is a list of the best high return investment options for you to make your wealth grow.
- Saving account
- Liquid funds
- Short-term & ultra-short-term funds
- Equity linked saving schemes
- Fixed deposit
- Fixed maturity plans
- Treasury bills
- Gold
Investment Option
|
Expected Annual Returns
|
Liquidity
|
Risk Level
|
Lock-in / Minimum Tenure
|
Savings Account
|
5–7%
|
Very High
|
Very Low
|
No lock-in
|
Liquid Mutual Funds
|
5–6%
|
Very High
|
Low
|
No lock-in
|
ELSS (Equity Linked Savings Scheme)
|
Market-dependent
|
Low (3-year lock)
|
Moderate to High
|
3 years (mandatory lock-in)
|
Debt Mutual Funds
|
Around 5–7%
|
Moderate to High
|
Low to Moderate
|
Flexible tenure
|
Fixed Deposits (FDs)
|
4–7%
|
Moderate
|
Very Low
|
Flexible (3 years or more as needed)
|
Ultra Short Duration Funds
|
5–6%
|
Very High
|
Low
|
No lock-in
|
National Savings Certificate (NSC)
|
~7.7%
|
Low
|
Very Low
|
5 years (early withdrawal is rare)
|
Treasury Bills (T-Bills)
|
Varies (usually lower)
|
Very High
|
Very Low
|
Up to 1 year
|
Fixed Maturity Plans (FMPs)
|
6–8%
|
Low
|
Low to Moderate
|
Locked for the duration (e.g., 3 years)
|
Gold (Digital or Physical)
|
3–4%
|
Moderate
|
Low to Moderate
|
Flexible (exit anytime)
|
ULIPs (Unit Linked Insurance Plans)
|
Market-linked
|
Low (3-year lock)
|
Moderate
|
3 years minimum (ideal for long-term goals)
|
Read along to know more about how these investment options can help you get better returns.
Best short-term investment options in India
1. Savings accounts
Recently, the falling repo rate regime has brought the savings account interest rates to an average of 2-4%. However, leaving your money in a savings account ensures no decline in your principal amount, as there is no effect of market fluctuations on your savings.
2. Liquid funds
Liquid funds are debt mutual funds that are highly open-ended income schemes. They invest in short-term fixed interest generating money market instruments. By investing in liquid funds, you benefit from high liquidity with easy access to your money, along with attractive returns. However, it is best to park only a portion of your surplus cash in liquid funds, as there are several tax implications.
3. Short-term and ultra-short-term funds
These are also debt mutual funds with a more extended maturity period, ranging between 90 days to 3 years. Due to comparatively longer tenure, these funds protect the investments against reductions in interest rates. As a result, they are more stable as they charge an exit load. Returns on short term debt funds are attractive for those falling in a higher tax slab than bank fixed deposits. However, both short term and ultra-short-term funds are affected by market volatility, unlike fixed deposits.
4. Equity linked saving schemes (ELSS)
Equity linked saving schemes are the tax-free funds with more than 60% investment in equities. They have a lock-in of 3 years to allow the fund to grow as no redemptions are allowed. These convert into open-ended funds after 3 years – which means you can sell them and redeem them for use. You can take a call depending upon your goal and the returns you are receiving from the fund.
5. Fixed deposit
Fixed deposit (FD) is often hailed as one of the most stable and safe investment with high returns in India. It is advisable to invest in fixed deposit because of the following reasons:
- Accumulate higher returns by availing FD schemes from credible financiers
- Hassle-free renewals provide you with the benefit of compounding, so you get more returns
- Deposit Credit Guarantee Corporation of India ensures all bank FD up to Rs. 1 lakh, which ensures better security
- You need not fear about the depreciation of your principal amount, as there is no effect of market fluctuations
- Add an element of certainty of returns, as you get assured returns on your deposits
6. Fixed maturity plans (FMPs)
Fixed Maturity Plans (FMPs) are close-ended debt mutual funds with a predefined maturity period, typically extending up to five years. These funds invest in debt or money market instruments that align with the same maturity timeline. For instance, if an FMP has a tenure of three years, it will invest in securities set to mature at the end of those three years.
FMPs tend to gain popularity towards the end of the financial year due to their potential tax benefits. However, they come with certain drawbacks—most notably, limited liquidity, as investors cannot redeem units before maturity.
7. Treasury bills
The government raises funds by issuing treasury bills and government bonds. Treasury bills are short-term instruments with maturities of 91, 182, or 364 days, while government bonds have a longer tenure ranging from 5 to 10 years.
Treasury bills are issued at a discount and redeemed at face value upon maturity, allowing investors to earn returns from the price difference. While they offer attractive returns, one limitation is that investments must be made in multiples of Rs. 25,000 when purchasing directly from the government.
8. Gold
There are 3 ways you can invest in gold:
Physical form: It is mandatory for you to have a PAN Card.
Exchange-traded funds (ETFs): Gold ETFs are mutual funds where each unit represents 1g of gold, either in its physical or electronic form.
Sovereign gold bonds: These offer a high-interest rate without the risk and hassle that comes with purchasing physical gold. These bonds do not attract tax after you redeem them.
After the 2008 financial crisis, gold prices increased twice in three years and have risen to almost three and a half times since then. This is because after the world’s economy collapsed, investors began to take protection in gold. In addition, through diversification, gold helps to keep your portfolio intact.
Reasons to choose investment options for 3 years
- Clear investment horizon: A three-year horizon gives clarity and structure to your financial planning. It allows you to align goals with realistic timelines and avoid unnecessary long-term commitments.
- Better liquidity balance: Investment options for 3 years usually offer a practical liquidity balance, meaning your money is not locked in for too long while still earning reasonable returns.
- Inflation protection: Choosing the right short-duration instruments helps provide moderate inflation protection, ensuring your purchasing power is not significantly reduced over three years.
- Goal-focused planning: A 3-year period is ideal for funding near-term goals like travel, education fees, or home improvements.
- Lower market uncertainty exposure: Compared to very short-term investments, a three-year duration can smooth out minor market fluctuations.
Tax implications on short-term investment plans in India
When you are planning your investments and finances, it is imperative to consider the impact of taxation on your capital too. For example, deposits are subject to TDS if the interest income on your FD exceeds Rs. 50,000 in a financial year (Rs. 1,00,000 for senior citizens) for banks, and Rs. 10,000 for NBFCs. The profits you make from mutual funds are also governed by different tax regulations.
Mostly, all kinds of debt mutual funds attract short-term capital gains tax and long-term capital gains tax. All these taxes have an impact on the returns your investment is gathering, so be mindful of the taxation aspect as well.
However, often investors tend to compromise on returns to offset tax. If you were to choose to invest in Bajaj Finance Fixed Deposit, you could earn high returns that offer higher savings compared to tax-saving instruments. Thus, it is essential to make an intelligent choice that offers higher savings on your deposits.
