Best Short Term Funds
3Yr. Returns
5Yr. Returns

Best Short-Term Mutual Funds in 2020

Updated on

Learn about India’s best short-term mutual funds and where to invest and earn returns in a short-term investment horizon. This article covers the following:

1. What are Best Short-term Mutual Funds?

Mutual fund schemes are open-ended schemes having a maturity period ranging from 15 days to 91 days are classified as short-term mutual funds. The maturity period depends on the assets. These funds invest in high-quality assets that are of low risk. This investment option is best suited for people seeking asset options with low risk. For investors on the lookout for some of the best short-term mutual funds (15 days or less) available, the liquid fund option is a great bet. Others looking at a maturity period of two to four months can choose from the ultra-short-term funds available.

2. How are Best Short Term Mutual Funds Taxed?

Dividend option and growth option are the two categories under short-term mutual funds. The tax treatment of dividend and growth options differ considerably. The tax treatment for a growth option mutual fund is the same as that of a bank fixed deposit. The income generated from these funds is added to the total income of the investor and taxed accordingly. Investors opting to invest in dividend option enjoy tax-free treatment on the returns generated by their investments.

3. What is the Returns Potential of Best Short-Term Mutual funds?

Some short-term mutual funds in India offer comparatively higher returns on investment as against bank deposits. The return rate could range between 8% and 9%, again, based on the assets in the fund portfolio. Considering the tax benefits, the return on these investments tends to be higher than the post-tax returns from other forms of investments.

4. Top 10 Short-Term Mutual Funds

The following table shows the top five short-term mutual funds based on the five-year returns. You can consider various factors like Sharpe Ratio, fund’s investment objective, and risk involved while terming a fund ‘best’.  
Fund Name 1-year Returns Link
SBI Magnum Constant Maturity Fund 13.1% Invest Now
HDFC Short Term Debt Fund 9.95 Invest Now
Aditya Birla Sun Life Floating Rate Fund-Long Term Plan 8.64% Invest Now
ICICI Prudential Ultra Short Term Fund 8.41% Invest Now
Aditya Birla Sun Life Ultra Short Term Fund 10.23% Invest Now

5. How to Invest in Mutual Funds?

Investing in mutual funds is made paperless and hassle-free at ClearTax. Using the following steps, you can start your investment journey right now!

i: Create your account on

ii: Enter your personal details, the amount, and period of investment

iii: Get your e-KYC done in less than 5 minutes

iv: Choose from the expert-picked funds