The financial market offers various investments options for all type of financial needs. Investing in short term investments options not only increase your value of money as well as lowers your risk of running out finances when you really have pressing situation. In this article, I will share short term investment options in India. Before that let’s understand meaning of short term investments.

What do you mean by Short Term Investment?

A short term investment is something you want to do in near future or something you want to accomplish soon. Any investment which has time period of 1 to 3 years is defined as a short term investment. Investor with short term money have 3 primary objectives:

  • Safety of Capital
  • Flexibility to withdraw in shorter period
  • Should be easy to convert them into cash

 1.Saving Account: Saving bank account is one of the safest or easiest way to access your  money. The biggest advantage of putting your money in saving bank account is that there is Zero Risk. It allow you to withdrawn your money at any point of time even sometimes liquid mutual fund redemption may take around 2 days.

You can expect around 4% to 7% returns from such saving account. Also you can claim tax rebate under section 80TTA of Income Tax Act of upto Rs.10,000 on money generated from your saving bank account. Anything more than Rs. 10,000 interest income is considered as “Income from Other Sources “and taxed according to your tax slab.

 2.Bank FDs: Keeping your surplus money in the form of FDs has also been a common practice since ages. It is one of the safest short term plan available in market & we do not need any explanation of this. Now you can book as well as redeem FDs online .The advantage is, it is easy to handle and at the same time, if you redeem online, then you get cash immediately in your saving bank account. Returns from FDs are taxable according to your tax slab.

3.Recurring Deposits: Another reliable and effective secured investment option and also inculcates the saving habits. The big advantage of RD is that once you start a recurring deposit, the interest rate does not change. It can be opened with any bank or postal department, tenure ranging from 6 months to 10 years. Interest received from RD is taxable according to your tax slab.


4.Liquid Mutual Funds: These funds are invest in government securities, Certificate of Deposits, Commercial papers and Treasury Bills and have short maturity period of 4 to 91 days. You can expect 4% to 7% post tax return. These funds never go down from their base value under normal market conditions. It is very easy to enter and exit from these funds. You can expect 4 % to 7% post tax return. Taxation of liquid fund is exactly like other debt fund. If your holding period is less than 3 years, it is taxed according to your tax slab or if you hold more than 3 years, then it will be taxed at 20% with indexation benefit.

5.Ultra Short Term Mutual Funds: The Ultra short term mutual funds invests maximum of the portfolio in fixed deposits These funds are slightly riskier than Liquid Funds. Investments can be made in such options for the period of 1 to 3 years. You can expect a slightly higher return However, taxation rules are same as that of liquid Mutual Funds.

6.Fixed Maturity Plans (FMPS) : These are closed ended debt Mutual Funds that invest in treasury bills, certificate of deposit and government bonds. FMPs are consider as a less risky. They are exactly like bank FDs.However, they are more Tax efficient compared to FDs and you can expect better returns than FDs.

7.Arbitrage Funds: Arbitrage funds take advantage of mispricing of securities in different markets. Simply stated, the fund manager buys a stock (shares) in cash and sells the same in future market. The difference between the two is your return on investments. It is a variant of equity mutual funds but best suited for investors having short term investment horizon like 1-3 yrs


All these short term investments may not be suitable for everyone. They would depend upon the risk appetite and tenure of investments .Before you take a decision on these investments, have clarity regarding the terms and condition of the product or instruments.





The mutual fund industry of India is continuously evolving.Along the way, several  industry bodies are also investing towards investors education.Yet very less of our households consider mutual funds as a investment avenue.It is still consider as a high risk option.In fact basic inquiry about the type of mutual funds revels that these are perhaps most flexible, comprehensive and hassle free modes of investments that can accommodate various types of investor needs.

There are wide variety of Mutual Funds schemes that cater to your needs, whatever your age,financial position,risk tolerance and return expectations, Mutual Funds give you the option to invest your money across various asset classes like equity, debt and gold.This allows you to diversify your investments and reduce your portfolio risk.With so many options available in the market, however, it can be confusing to select type of mutual fund as per your financial goal.Here’s look at the some of types of Mutual Funds

1. Types of Mutual Funds on the based on Structure                                                                      1.Open Ended Funds : Open Ended funds are preferred for their liquidity because these funds are  open to purchases and redemption at any time.They do not have a fixed maturity date.Open ended funds are not generally listed on any exchange.Ongoing transactions are based on the net asset value (NAV) of the fund.Hence, unit capital of open ended funds can fluctuate on daily basis.

2.Close Ended Funds : Closed end funds operate for a specific period of time.On specified maturity date, all units are redeemed and scheme comes to a close.It means these schemes have fixed maturity period.To provide a liquidity, these schemes are compulsorily listed on stock exchange  .Investors may buy and sell the units, at the price prevailing in the stock market.

3.Interval Funds : Interval funds are a variant of closed-end funds.They are primarily closed-ended but become open ended at specific intervals.Subscriptions and redemptions allowed at specific intervals during specified transaction period.Minimum duration of interval period has to be 15 days.No redemption is allowed except during the specified transaction period. This schemes have to be mandatorily listed.

2.Types of Mutual Fund on the basis of underlying asset

A Scheme can be also classified as a growth scheme,income scheme or a balance scheme its asset class.Such  scheme may be open ended or close ended as described  earlier.Such scheme classified  as follows :

Equity/Growth Funds : These scheme normally invest major part of their corpus in equity stocks/shares of companies.Such scheme are consider high risk of funds but also tend to provide high return.The aim of these scheme is to provide capital appreciation  over medium to long-term.Equity funds can be further categorized  as –

1.Index Funds :Index funds will only invest in those stocks that constitute a particular index.These funds replicate the portfolio of particular index such as BSE,NSE S&P NSE 50 etc.NAV of such funds would rise or fall in accordance  with rise and fall in index.This would vary as compared to benchmark owing to factor known as a tracking error.

2.Tax Saving/ELSS Funds : These funds offer tax rebate to investor under tax laws prescribe from time to time.Such funds are growth oriented and invest predominately in equities. There is 3 years lock in period in these mutual funds & best suited for long investors  seeking tax rebate and looking for a long term goal.

3.Sector Funds: Sector funds are invest in specific sector like banking, pharma, IT , infrastructure ,etc .or segments of capital like large cap, mid cap,small cap,etc.While these funds may give higher returns,they are more risky compare to diversified funds.Investors need to keep a watch on these funds, much exit on an appropriate time.

Debt/Income Funds : These scheme invest in fixed income securities like a corporate bonds,debentures,government securities, commercial papers and other money market instruments.These funds are less risky compare to equity mutual funds.Such funds are not affected due to fluctuations in equity market.The NAV of the such schemes are affected because of change in interest rate in country.Capital appreciation in such scheme may be limited.The aim of this fund is to provide regular and steady income to investor.Debt Funds can be further categorized as –

1.Liquid/Money Market Fund :These scheme generality invest exclusively safer short term instruments such as treasury bill  ,commercial papers and certificate of deposits.Aim of liquid fund is to enable high liquidity and reasonable return.These funds provide relatively higher safety of principal and liquidity, but the return is also very low.Such funds are appropriate for corporate and individual investors as a mean to park their surplus funds for short periods.

2.Glit Fund :These funds  invest exclusivity in government securities.Government securities have no default risk.NAV of these funds also fluctuate due to change in interest rate and other economic factors as is the scheme with income/debt oriented schemes.

3.Fixed Maturities Plan (FMP) :FMPs, are closed-end debt funds that invest in debt instruments with maturities that match the tenor of the scheme..These have fixed tenure like fixed deposits, though no return is promised or gardened. Securities are redeemed on maturity and proceeds paid to investor.FMPs have to be compulsorily listed on recognized stock exchange.

4.Capital Protection :These are close ended scheme, typically club debt securities with a derivative instrument or equity shares.The primary  objective of this scheme is to safeguard the principal amount while trying to deliver reasonable returns.A large portion of the principal amount is invested in debt instruments.


3.Balance Funds :  These are funds that invest in mix of asset classes.In some cases proportion of  equity is higher than debt while in others vice a versa .The aim of balance fund is to provide both growth and regular income.NAV of such funds are likely to be less volatile compared to pure equity fund.These are appropriate for investors looking for moderate growth.

Other Funds :

Exchange Traded Funds (ETF) :ETF is a fund whoes units are trade like stock on the stock exchange.These can brought and sold only in stock market at real time prices which could be different from its unit NAV.You would need demat account to invest in this fund.

Gold ETF : Gold ETFs are exchange traded funds that are mean to track closely the price of physical gold. .Each unit of Gold ETF  lets the investor own 1 gram of gold without physically owing it.With these funds, you are not only relieved of hassles of safekeeping your gold but also assured of purity since these fund invest in certified gold bars.You are also spared of the wastage and making charges that you would typically incur when you buy gold from jeweler You can also get option to convert it to physical gold with selected jwellers..

Fund of Funds (FOF) : FOF invests its corpus in other funds.Its portfolio holds other funds of the same funds house, or other fund houses   These funds have two layers of expenses : one for FOF and the other for the schemes in which it invests. Such funds enables the investors to achieve greater diversification through one scheme.







There are many ITR forms for filing a income tax return such as ITR-1 (Sahaj) , ITR-2, ITR-3 ,ITR -4 and ITR-4S (Sugam), ITR- 5 & ITR-6 and ITR-7.These forms are released every year by income tax department. To file Income tax returns one need to fill the appropriate Income tax return form. Which income tax return form a taxpayer should file depends on tax payer’s income and on the disclosure requirement to the tax payer, where he/she may be resident with foreign income or assets applicable.  So which form should you fill? Due to technical wording it is not easy for common man to select appropriate form. This article explains different kinds of income tax return form and which one to fill. However even after that reading this article any query/doubt is left, then please comment in comment box.

Let’s understand in detail who should file which income tax form forms.


This form can be used if you have

  • Salary or Pension Income
  • Income from One House Property (excluding cases where loss brought forward from previous year)
  • Agriculture income which is less than R.5000
  • Income from Other Sources like FD/Shares/NSC etc (excluding Winning form Lottery and Income From House Race)



This form can be use if you have

  • Salary or Pension Income
  • Income from Multiple Houses
  • Income from Capital Gains
  • An asset in foreign country or income from a source outside India.
  • Agriculture income which is more than Rs.5000
  • Income from lottery & horse racing



  • Salary or Pension Income
  • Income from Multiple House Properties
  • Income from Other Sources like FD/Shares/NSC etc.
  • Agriculture income of more than Rs. 5000
  • Income From lottery or house racing



ITR 3 can be filed where taxable business income is only from the salary, interest, commission, remuneration, or bonus receivable from the firm as a partner



ITR-4 form can be used by an assessee who has income form business & profession.(gross receipts 0f more than 60 laces a year) This form covers all kind of business & professions irrespective of any income limit. Assessee can also report income for salary, house property, lottery winnings, capital gains, speculative income i.e horse race in ITR 4 together with Business income.



ITR 4S form can be filed by an Individuals, HUF or Partnership firms. This form can be used if you have

  • Income from Salary or Pensions
  • Income From One House Property( excluding cases where loss is brought forward from previous year)
  • Income from Other Sources (excluding Winning from Lottery and Income from Race Horses)
  • Income From Business (for small businessman and professionals from business or profession and gross receipts up to 60 laces a year)
  • Agriculture income which is less than Rs.5000.



ITR-5: FOR FIRMS, AOP’s, and BOI’s

This forms can be used by Firms, Co-operative Banks, Co-operative Societies, Limited Liabilities Partnership (LLP), Association of Persons (AOP), Body of Individuals (BOI), Artificial Judicial Persons.

Applicable for all sources of Incomes.



Companies other than companies claiming exemption under section 11 are those whose income from property is held for charitable or religious purposes.



139(4A) – To be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purpose.

139(4B)– To be filed by a political party it the total income without giving any effect to the provisions Section 139 A exceeds the maximum amount that is not chargeable to income tax.

139(4C) – To be filed by every scientific research association, news agency, association or institute referred to in Section 10(23A), Section 10 (23B).fund or institution or university or educational institution or any hospital or other medical institution

139(4D)– To be filed by every university, college or other institution, which is not required  to furnish return of income or loss under any other provision of this section.




In recent months, the tax department has stepped up efforts to ensure tax compliance. New rules have been introduced to plug tax leaks and officials are cracking down to evasion. The reason is improved monitoring due to stricter know your customer norms and online filing of returns , both of which have made data processing easier and faster. Many of taxpayers have already received tax notices.

If you have received the income tax notice then there is need to panic .A notice doesn’t essentially mean you have got committed against law and even minor error in legal document will invite a notice from tax department. This are certain measures you need to follow to minimize your chances of getting notice.  Hope you will find this information useful especially individuals who manage their taxes on their own will find it particularly helpful.


  1. CHECK YOUR FORM 26 AS (Tax credit statement)

If there is mismatch between the TDS deposited by your employer and income     tax, you may get an income tax notice .26 AS gives the details of the TDS deposited on your behalf .You can view them through NSDL or Income Tax website, or even through your banks online portal

In case, TDS deducted by employer is not reflecting, in your 26 AS, it is better to contact your employer to rectify their TDS return. You should always check your tax credit statement (26AS) online before filing the return



A lot of Taxpayers don’t know if they have to file their return. Some believe they can skip filing if TDS has been paid .Others believe that since they don’t have a tax refund to claim ,they don’t need to file a return. Anybody with an income above basic exemption is liable to file his return .According to income tax law if your gross income is Rs.2.5 lakh per year for people below 60 Rs. 3 lakh for senior citizens above 60 and Rs 5 lakh for very senior citizens above 80. The rest of us including NRIs, have to comply.

Non filing returns not a very serious offence if all your taxes are paid. You will only get a notice asking you to do the needful. The tax laws allow taxpayers to file delayed returns even after due date has passed. But you have to pay interest as well as penalty up to Rs.5000.



Some taxpayers who file their return online without digital signature think their work is done once the tax return uploaded. They don’t realized that if ITR V is not submitted within 120 days of uploading, the return will be deemed invalid. Please follow the dos and don’ts of sending ITR V to the CPC correctly



This is common mistake. Many people knowingly or unknowingly don’t include interest income from their saving account, recurring deposits & fixed deposits in their income .They believed that interest income of upto Rs.10000 is tax free. Actually, the tax exemption of Rs. 10000 a year under Sec 80TTA applies only to interest earned on balance in saving bank account while Interest income from recurring deposits, fixed deposits and infrastructure bonds is fully taxable. In case of fixed deposits & recurring deposits, a TDS will be deducted in case of interest income exceeds Rs.10000 in financial year. But whether the interest income taxable or not, you have to disclose all your interest income in your tax return.


Even through few incomes (like all interest income including saving bank interest) are exempt from taxation, you steel need declare it while filing your returns. You can then claim exemption for the same. Similarly, dividend income has to be reported in the ITR even through it is tax free. This year’s budget has proposed a tax on dividend income if it exceeds Rs.10 Lakh.


If there is mismatch between the income & your investments & expenditure, you are likely to get scrutiny notice. For example if your income in the year is Rs.10 lakh, and you invested Rs.25 lakh, you need to justify the source of funds, the same applies for expense also.


Any high value transaction (With or without quoting PAN) that you thought you can get away with can invite a notice from income tax department. For e.g. in a year cash deposited Rs.10 lakh or more , investments in mutual funds of Rs.2 lakh or more, investments in share of company of Rs.1 lakh & more, credit card purchases Rs. 2 lakh or more ,or purchase of bonds and debentures worth Rs.5 lakh or more in a year, purchase or sale of property Rs.30lakh or more. To explain the source of income the taxman can you a notice & ask to file a return. So plan this transactions carefully & legally.




Mutual Funds Industry today is one of the most preferred investment options all over the world. Since several mutual fund schemes are available in market it is very difficult for an average investor to select the right mutual fund. There is danger in choosing mutual fund on its past performance or returns & if you make the wrong choice you could lose money or could not achieve your target or purpose for which you have invest in Mutual Fund. So how do you go about selecting the right mutual fund?

  1. Investment objective, Time Horizon: Each fund have its own logic of investment & targeted customers. You should try to match the objectives and investment philosophy of mutual fund, with your investment goal & time horizon. You need to figure out if the mutual fund objectives would cater your investment need. Time Horizon is the length of time until you need to sell your investment. It can be called Short Term, Medium & Long term.
  • Short Term: If you have short tenure, picking a debt fund is a good option. These funds invest in debt securities such as Treasury Bills, Government Securities, Bonds & Debentures where risk is very low
  • Medium Term: For Investor with medium tenure, Balance Fund which have exposure to both debt & equity are a good option. Equity oriented balance funds invest at least 65% in equity fund & rest in debt securities. Debt oriented balance fund invest 65% or more in debt fund, and balance in equity to offer a yield – kicker to debt investor.
  • Long Term : This investor can opt for more exposure to Equity .Equity fund invest primarily in equity & equity related instruments.

Size of the Fund (Asset Under Management) : A large fund has some obvious cost benefits. The most important benefit pass to investor when the fund size grows reduction expense ratio in the fund. A large AUM will allow skillful fund manager to exhibits his expertise effectively. Overall large fund can take better advantage of opportunities.

Top 5 AUM as on 31.12.2014 (Source AMFI)

Sr No.              AMC Name Average AUM                   (In crores)
1 HDFC Mutual Fund 150467.74
2 ICICI   Prudential Mutual fund 136763.11
3 Reliance Mutual Fund 126069.04
4 Birla Sun Life Mutual Fund 107968.20
5 UTI Mutual Fund 87390.13
  1. Mutual Fund Charges & Fees: Mutual fund make their money by charging fees to investor. Its important to know the different type of charges & fees .These fees are classified as exit load & expense ratio. These fees have major say in determining the net return on investment. Mutual fund charge an exit load on investments which are redeem before a stipulated timeframe. Expense Ratio is recurring fees charge by asset management Companies like management fees, operating expenses, marketing expenses & distribution expenses are born by scheme. Lower expenses benefit you for longer term. As the funds grow in larger in size the fixed expense associated with the fund get spread over more investor ,reducing the expenses & leaving more funds for investment.
  2. Fund Manager Experience:- Many investors do not give importance to the fund manager. Fund Manager Plays vary important role in Fund’s performance. There is need to look closely at the fund manager & several of the details that are present so that there is proper picture available for the individual for their specific investments .The fund manager with the help of his team looks at current situation of the economy, analyzes the securities that can be benefit from the current state of economy and invest in securities that conform to the funds objectives .You must judge fund manager based on the time period the fund manager has spent with the fund house ,Co fund managers role , performance of the scheme & his past record .The fund manager with tenure of 3 to 5 years or more is consider ideal for the purpose of selecting fund.
  3. Risk & Return associated with investment:-Risk & Return are an integral part of investment. It is computed by comparing the return of fund after adjusting for the risk assumed. A good mutual fund is one who gives better return than others for the same kind of risk taken. Popular methods of measuring Risk adjusted returns are Sharpe Ratio, Treynor Ratio. Also check Standard Deviation, Alpha & Beta of the fund
  • Sharpe Ratio :-Sharpe Ration is a simple one number representation .It indicates return per unit of risk. Therefore higher the ratio, better the fund.
  • Treynor Ratio:- It is very similar to Sharpe Ratio. It indicates excess return over the risk free rate to additional risk taken .Higher the ratio better the performance of the fund.
  • Standard Deviation:-It measures volatility of the returns from mutual fund scheme over a particular period .Higher the standard deviation of returns higher the risk. Hence while comparing the performance of the two funds ,you should opted for the one with lower standard deviation ,which would indicate the fund will not experience extreme highs & lows and its value will continue to grow gradually.
  • Alpha:-It tells us what extra or less the fund manager has generated out of given portfolio in comparison to benchmark. In other words it is the performance ranking of the fund manager.
  • Beta:- It tells you how much a fund’s performance would swing compared to benchmark. It is typically measured by assuming that the market portfolio, as represented by an index, will have a beta of 1.Stocks with a beta lower than 1 is tend to be less volatile than the index & vice-verse.
  • R-Squared:- It is the statistical measure which indicates how is the movement of the fund in the line with the index. High R-Squared means it is highly matching with the Index performance which it is following.

The above mentioned few points are basic things you need to check before investing. You can get all this information related to scheme on the website of the fund. Also find these details, comparison on the website of mutual fund tracker such as Value Research, Money Control, Indian Mutual Fund, etc.

Disclaimer:- The opinion expressed in article are personal opinion of author. This platform is used to spread the knowledge about Personal Financial Planning.