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Best investment options in India

There are several investment options in India that offer high returns. Some of these are ideal as short-term investments, while others make for excellent long-term investments.

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Best investment options in India

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The Indian financial market is teeming with a variety of investment options that offer high returns to the investor. Right from government-backed schemes like Public Provident Fund (PPF) and National Pension System (NPS) to high-risk-high-reward investments like direct equity, there are multiple investment options available to beginners and to seasoned investors. Irrespective of whether you’re looking for short-term investment options or for long-term investments, you’ll undoubtedly find the ideal alternative from among the many investment choices available in our country.

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Term Insurance Plans

Canara HSBC Oriental Bank of Commerce Life insurance offers online Term insurance plans which helps to secure your family financially in your absence.

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iSelect+ Term Plan

Whole life cover option available

Increase your life cover with changing life stages

Return of premium & in-built protection options

Multiple premium payment options

Avail tax benefits on premiums paid as per tax laws


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Double life cover in case of accidental death

Return of premium on maturity

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Life Insurance

Life insurance is a long-term investment choice that provides the added advantage of a protective life cover. Investing in a life insurance plan is vital if you wish to secure the future of your family and ensure that they have a financial safety net to rely on in the event of your sudden demise.

Features of life insurance

To invest in life insurance, you need to pay your insurer a sum of money called the premium.

Premiums can be paid as a one-time, lump sum amounts, or as periodic payments made on a monthly, quarterly, half-yearly, or annual basis.

Most life insurance policies last for 10, 20, or 30 years. Some insurers may offer longer policy terms i.e. Whole life covers which last till the time one attains 99 years of age.

Life insurance gives you death benefits in case you pass away during the policy term.

If you survive the term, the policy reaches maturity and you receive maturity benefits, often along with bonuses or loyalty additions.

Many life insurance policies also come with the added benefit of investing in rider options, which enhance the coverage. Riders include accidental death benefits, accidental disability covers, critical illness covers, and terminal illness covers, among others.

Unit Linked Insurance Plans (ULIPs)

Unit Linked Insurance Plans (ULIPs) are investment options that combine the benefits of investment and insurance. As the name suggests, these are insurance plans that also contain an element of investment. ULIPs are ideal long-term investments for people with varying risk profiles.

Features of Unit Linked Insurance Plans (ULIPs)

To invest in ULIPs, you need to pay a premium to the insurer.

The premium can be a single, lump sum amount, or it could be periodic payments levied on a monthly, quarterly, half-yearly, or annual basis.

A part of the premium goes towards providing you a life cover. This aspect of the plan behaves like a regular life insurance policy and ensures that your beneficiaries receive death benefits in case of your demise.

The other part of your premium is invested in stock, bonds, or mutual funds.

You can choose from a variety of funds and instrument choices available.

ULIPs have a lock-in period of five years, after which you can make partial withdrawals.

The premium invested is eligible for deduction under section 80C of the Income Tax Act.

The maturity benefits received from the plan are tax-free.

Public Provident Fund (PPF)

Backed by the government of India, the Public Provident Fund (PPF) is a long-term investment scheme that offers attractive interest rates. To invest in PPF, you need to open a PPF account with a bank or a post office and deposit your investment in the said account.

Features of Public Provident Fund (PPF)

You can open a PPF account with a deposit of only ₹100.

The minimum amount to be deposited annually is ₹500, while the maximum is ₹1,50,000.

You need to make a deposit in your account at least once each year to keep your account active.

A PPF account has a lock-in period of 15 years. Thereafter, you have the option to extend your investment tenure by a block of 5 years.

The rate of interest credited on your PPF account balance is 7.9% per annum.

The amount invested is eligible for deduction under section 80C up to ₹1,50,000.

Hybrid mutual funds

Hybrid mutual funds allow you to enjoy the advantage of high-risk-high-reward investments combined with the safety of debt or fixed-income instruments. These mutual funds are essential investment options that invest in both equity and debt instruments.

Features of Hybrid mutual funds

Depending on the allocation of funds between equity and debt, there are 7 types of hybrid mutual funds identified by SEBI, namely aggressive, balanced, conservative, multi-asset allocation, dynamic asset allocation, arbitrage, and equity savings funds.

Hybrid mutual funds help you diversify your portfolio using a single investment option.

You can invest in hybrid funds using a lump sum amount or through a Systematic Investment Plan.

The returns offered by hybrid mutual funds vary depending on the allocation of assets.

National Pension System (NPS)

The National Pension System is another long-term investment option that is a voluntary savings scheme introduced by the government of India. The primary objectives of NPS are to provide income to investors in their old age, and to extend the cover of security in old age to all citizens of India. NPS also aims to provide reasonable market-based returns over the long term.

Features of National Pension System (NPS)

NPS is easily portable across jobs and offers tax advantages for individuals, employees, and employers.

The minimum age to invest in NPS is 18, while the maximum is 65.

The amount you invest in NPS can be directed into four different asset classes, namely equity, corporate debt, government securities, and alternative investment funds.

You can choose the combination of asset classes to invest in based on your risk appetite.

Investment in NPS is deductible up to ₹1,50,000 as per section 80C of the Income Tax Act.

An additional investment of ₹50,000 can be claimed as a deduction under section 80CCD(1B).

Fixed deposit (FD)

Fixed deposits are ideal for investors who’re looking for stable investment options that offer high returns at a steady rate. Depending on the choices you make, fixed deposits can be used as short-term investment options or as long-term investments.

Features of fixed deposits

The exact terms of a fixed deposit vary from one bank to another. However, on average, the tenure of a fixed deposit ranges from 6 months to 10 years.

The rate of interest also varies from one bank to another, but the interest offered to senior citizens is generally higher than the corresponding rate offered to regular investors by a margin of 0.25% to 1.00%.

The interest can be withdrawn or reinvested.

Tax-saving fixed deposit

A tax-saving fixed deposit is essentially a bank fixed deposit that is specifically made with the intention to reduce tax liability in addition to enjoying the benefits of capital appreciation.

Features of tax-saving fixed deposit

The interest earned on these deposits is taxable.

The amount deposited can be claimed as a deduction from your total income as per section 80C of the Income Tax Act, up to ₹1,50,000.

These deposits have a lock-in period of 5 years. If you withdraw your deposit before this period is complete, the principal amount also becomes taxable.

Recurring deposit (RD)

A recurring deposit allows you to invest small amounts periodically, so you can earn a decent rate of return over the course of the investment period. It helps you cultivate the habit of saving and investing.

Features of a recurring deposit

Like a fixed deposit, the tenure of a recurring deposit can also range from six months to ten years.

The minimum amount required to begin a recurring deposit varies from one bank to another. However, it can even be as low as ₹100.

The rate of interest also depends on the bank’s policies. On average, it’s typically higher than the interest offered on savings account balances.

Direct equity

Investing directly in the share market can offer high returns over the long term. You can make use of this investment option if you wish to leverage market movements. Keep in mind that direct equity comes with a high element of risk attached, so it’s a good option for risk-friendly investors rather than for conservative, risk-averse investors.

Features of tax-saving fixed deposit

To invest in direct equity, you need a demat account and a trading account.

You have complete control over your investments, right from the stocks you pick to the period for which you choose to hold them.

Over the long term, equity generally delivers higher inflation-adjusted returns than most other asset classes.

Equity-oriented mutual funds

If you wish to combine the advantage of investing in equity with the benefit of professional expertise, equity-oriented mutual funds may be just what you’re looking for. Here, the pool of money collected from investors is invested in equities. You are allocated units in the fund in proportion to your investment.

Features of equity-oriented mutual funds

These mutual funds invest primarily in equities, so you get to enjoy the benefits of high returns over the long term.

Since these funds invest in the equity market, the risk factor is also on the higher side.

There is no fixed holding period, although an exit load may be charged when you redeem your funds.

The gains on equity funds held for less than 1 year are short-term capital gains, which are taxed at 15%.

The gains on equity funds held for more than 1 year are long-term capital gains, which are taxed at 10% provided they exceed ₹1 lakh annually.

Equity Linked Savings Scheme (ELSS)

ELSS is another one of those investment options that combine the benefits of tax savings as well as capital growth. They are effectively equity-oriented mutual funds that invest your funds in the stocks of large-cap, mid-cap, and small-cap companies.

Features of Equity Linked Savings Scheme (ELSS)

With a lock-in period of 3 years, ELSS is an excellent short-term investment option that offers tax benefits.

Investments in ELSS are deductible from your total income as per section 80C of the Income Tax Act, up to ₹1,50,000.

Long-term capital gains from ELSS over and above ₹1 lakh are taxable at 10%.

There’s no exit load charged for ELSS investments.

Debt mutual funds

Debt mutual funds are ideal investment options for risk-averse investors. Since they have no specific lock-in period, you can choose to invest in these mutual funds as a short-term investment strategy or as a part of your long-term investment plan.

Features of debt mutual funds

Debt funds invest in safer assets such as government bonds, corporate bonds, and other fixed income instruments.

The rewards obtained from debt funds are relatively more stable.

The gains on debt funds held for less than 3 years are short-term capital gains, which are taxed at your regular slab rate.

The gains on debt funds held for more than 3 years are long-term capital gains, which are taxed at 20% with indexation.

National Savings Certificate (NSC)

National Savings Certificate (NSC) is a long-term investment option backed by the government of India. It is a secure, low-risk investment that offers guaranteed returns to investors. You can invest in NSC through any post office.

Features of National Savings Certificate (NSC)

NSC offers a return of 7.9% per annum.

The minimum amount of investment needed is ₹100.

The amount invested is eligible for a deduction from the total income as per section 80C of the Income Tax Act, up to ₹1,50,000.

You can choose from two investment tenures, namely 5 years or 10 years.

Banks and other financial institutions accept NSC investments as collateral to provide loans.

Savings account with sweep-in facility

To combine the advantage of the liquidity a regular savings account offers with the high interest rates associated with fixed deposits, many leading banks in India now offer the sweep-in facility. Also known as the auto-sweep feature, this option helps you keep your funds liquid and simultaneously earn a higher rate of interest.

Features of savings accounts with sweep-in facility

Any amount in excess of a stipulated amount is automatically converted into a fixed deposit.

The fixed deposit can be linked to a savings account or a current account.

You can opt in and opt out of this option as per your requirement.

You get to specify all the terms of the facility, including the amount and the kind of account the FD is linked to.

The interest earned on the FD portion is higher than the interest credited on your regular savings.


Bonds are long-term investments that have the capacity to generate steady returns in the face of inflation. The Indian financial markets offer quite a few options for investing in these debt instruments, such as non-convertible debentures, AAA rated PSU bonds, and government bonds.

Features of bonds

All bonds come with a maturity date.

The rate of interest applicable to a bond, also known as coupon rate, can be fixed or floating.

The interest obtained is taxed under the head ‘income from other sources,’ as per your applicable slab rate.

The capital gains arising from your investments on maturity of the bonds can be taxed as short-term or long-term capital gains, depending on the period they were held for.

There are also many tax-free government bonds you can invest in, if you wish to enjoy capital appreciation without any added tax burden.

Senior Citizens Savings Scheme (SCSS)

The Senior Citizens Savings Scheme is a short-term investment option that specifically intends to help people over 60 enjoy a steady stream of income during their post-retirement phase. The scheme is backed by the government of India.

Features of savings accounts with sweep-in facility

The deposit has a maturity/lock-in period of 5 years. You can choose to extend it once by a block of 3 years.

The prevailing rate of interest on SCSS deposits is 8.6%.

You can invest in SCSS through public banks, private banks, or post offices.

The minimum amount for SCSS deposits is ₹1,000, while the maximum is ₹15,00,000.

The amount invested qualifies for a deduction under section 80C, up to ₹1,50,000.

Post Office Monthly Income Scheme

Abbreviated to POMIS, this is among the many government-backed investment options that seek to offer a steady stream of income to investors. The MIS system can be availed of by anyone who is over 10 years of age.

Features of Post Office Monthly Income Scheme

The current rate of interest on the amount deposited is 7.6% per annum.

The minimum amount to be deposited is ₹1,500.

The maximum amount that can be deposited by a regular single account holder is ₹ 4,50,000. In case the account holder is a minor, the maximum amount that can be deposited is ₹ 3,00,000.

For joint accounts, the maximum amount that can be invested is ₹ 9,00,000.

MIS comes with a maturity period of 5 years.

Sukanya Samriddhi Yojana (SSY)

Started in 2015, this is a relatively new long-term investment plan for parents or guardians of girl children. You can open an account to invest in this scheme through any office or branch of India Post or through any commercial bank.

Features of Sukanya Samriddhi Yojana

The scheme offers an interest rate of 8.4% per annum. The interest is compounded and credited annually.

You can open an SSY account for a girl child before she turns 10 years of age.

The minimum amount to be deposited is ₹1,000, while the maximum is ₹1,50,000.

You can make deposits into the account for a maximum period of 15 years from the date of opening the account. The maturity period, however, is 21 years from the date of account opening.

You can make partial withdrawals up to 50% of the balance when the girl child attains 18 years of age, for the purpose of higher education or for meeting wedding expenses.

The investment made, the interest received, and the maturity proceeds are all tax-free.

Initial Public Offer (IPO)

An IPO is a kind of public offering where the stocks of a company are sold to institutional and retail investors for the first time. Depending on the strength and the financial standing of a company, IPOs can prove to be extremely profitable. You can invest in IPOs as a short-term investment strategy.

Features of IPOs

Since investing in IPOs is essentially an investment in direct equity, you require a demat account and a trading account.

The price of shares in an IPO can be determined through a fixed price strategy or through book building issue.

In a fixed price strategy, the company fixes the price of shares issued through the IPO. In book building, you need to bid for the prices within a specified range.

Go through the prospectus of the company before investing in its IPO.

Gold ETFs

Gold Exchange Traded Funds (ETFs), which are open-ended mutual fund schemes, give you the opportunity to invest in the gold market without buying or selling physical gold. Since the entry and exit points are yours to decide, you can make use of gold ETFs as a short-term investment option or as a long-term investment alternative.

Features of gold ETFs

Gold ETFs are highly liquid investment options.

You need a demat account and a trading account to invest in gold ETFs.

1 unit of gold ETFs is equivalent to 1 gram of gold.

Investing in gold ETFs help you hedge your assets against inflation in the long run.


With this wide range of investment options available in the Indian financial market, you can easily diversify your investment portfolio significantly over the long run. To achieve optimal diversification, ensure that you invest in a healthy mix of short-term and long-term investments, and in a balanced variety of high-risk and low-risk alternatives. This way, you can meet your financial goals in various stages of life easily, and your exposure to risk is also balanced.

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