Corporate Fixed Deposits: 6 Key Points You Need to Know
The most common form of financing in India is a fixed deposit. Similar to banks, the RBI allows certain corporations and NBFCs to take deposits with a set interest rate and term.
These are referred to as company or corporate fixed deposits.
Corporate FDs can help you financially ensure your future in these times of high market volatility and uncertain returns because they offer fixed, dependable returns.
Investors have a choice between generating a consistent income with the pay-out option and building money with the cumulative option.
6 Reasons to Invest in Corporate FDs
- Get Fixed for Predictable Returns
- Ideal for regular income or accumulating capital
- High interest rates. 0.25% extra for senior citizens
- Invest in AAA-rated companies that provide high safety and low risk
- Flexible Investment Tenure and Interest Payment Frequency
- Independent of market volatility
Corporate fixed deposits are also like bank fixed deposits, except that the money is invested in corporations and not banks.
Financial institutions and non-banking finance companies also take such deposits. Fixed deposit schemes are of two types: one is cumulative, and the other is a non-cumulative fixed deposit scheme.
If you are planning to invest money in corporate fixed deposits, then you need to know six points.
There is Risk in This Investment
Investing in corporate fixed deposits is more risky as compared to bank fixed deposits because there is no guarantee of any insurance act behind it, while bank fixed deposit schemes up to Rs 1 lakh are guaranteed by the Deposit Insurance Credit Guarantee Corporation.
Rate of Interest
The rate of interest on corporate fixed deposits is higher as compared to bank fixed deposits.
Continuance of the Payment of Interest
Interest is payable monthly, quarterly, half-yearly, annually, or at maturity, depending on the mode chosen.
Premature Withdrawal
Any person can withdraw money from the corporate fixed deposit before the maturity period, but the additional charges that are prescribed for this have to be paid.
Pre-maturity Payment
No interest is payable if paid before maturity. No interest is payable if the payment is withdrawn from the corporate fixed deposit within a period of six months.
Credit Rating
If the rating of the corporate fixed deposit is good, then the company fulfils its responsibility by paying the principal amount and interest on time.
What are corporate FDs?
Many businesses and non-banking financial companies (NBFCs) allow the gathering of fixed deposits for a set period of time at a set rate of interest, just like banks.
Corporate fixed deposits provide a range of term choices and guaranteed returns, much like bank fixed deposits do. These FDs offer higher interest rates than standard bank FDs as well.
Is the corporate bond better than the corporate FD?
You can receive higher returns from business bonds than from bank fixed deposits, yes.
However, your earnings will be taxed at the correct rate based on your tax bracket if you invest in corporate bonds and keep them for less than three years.
Are corporate FDs taxable?
It is true that corporate FD interest that is earned over Rs 5,000 annually is subject to taxation; the interest is given after TDS has been taken out.
Your revenue will include the earnings, and taxes will be subtracted in line with your tax brackets.
Is corporate FD safe in India?
Yes, the majority of CFDs are given by reputable companies that have received credit ratings. ICRA Limited, CRISIL, etc.
