Advice & Tips for Corporate FDs

Investors have many options available to them. For us Indians, the fixed deposit (FD) has always been the first choice. An FD puts your money to work for you. It also makes sure of a return at maturity. Also, if you invest in corporate FDs, you’ll receive a bonus.

Banks and NBFCs provide an investment chance which is called a fixed deposit. In this plan, your money will be secured for a set time with interest. Compared to a savings account,  the return on an FD is higher.

Read on to find out more about corporate FDs.

Corporate Fixed Deposit

• Some corporations and NBFCs, like banks, provide deposit plans. These plans are for long-term savings. Company FDs are another name for corporate fixed deposits. These firms provide fixed rates of return and terms to suit your needs.
• Financial stability is just one of the many benefits of establishing a business fixed deposit
• Corporate Fds typically have higher interest rates than conventional banks, resulting in greater rewards after the deposit term.
• Company FDs can be held for varying amounts of time, and interest can be paid at different intervals.
• There are special interest rates for the elderly.
• Corporate FDs can be used as collateral for loans.

What are the Advantages of a Company FD?

• These days, many investors are depositing in company FDs. These are a way to boost their income. Those in need of consistent income can consider corporate FDs.
• In particular, the higher interest rates on such FDs can be highly beneficial. It also provides financial safety to retirees.
• Corporate FDs are becoming increasingly important. It boosts investing methods of many financial advisors’ clients. Most financial experts agree that corporate FDs should account for at least half of your loan portfolio.
• As per the reports, the stock market is unstable right now. But putting your money into corporate FDs will give you a sure return. It will help your money grow steadily.
• Interest earned on corporate FDs is subject to taxation at your applicable rate. If the interest earned on a corporate FD reaches Rs 5,000 in India, the corporation must withhold 7.5% as tax. 
• Filling of form 15G or 15H saves from TDS.

Points of Consideration while Investing in Corporate FDs 

Investments in Corporate FDs are dangerous

The high rate of return offered by companies on FDs is enticing compared to the low rate of return. But they are risky and shouldn’t be relied upon as a financial base. Interest and principal payments are more likely to be missed on these loans than on those from banks. The company’s assets do not qualify as security in TDS.

• Take caution when calculating TDS. When your interest income from a corporate FD exceeds Rs 5,000, TDS is chunked out.
• However, in the case of a bank fixed deposit, TDS is withheld when your interest income exceeds Rs 10,000.

Higher interest rate

Company FDs (FDs) are a great investment opportunity. It is for those seeking a good interest rate. Interest rates on corporate FDs tend to be higher than those on bank FDs because of the higher risk associated with the former.

Investigate the company’s history 

It will help if you use extreme caution because it is your own money that you are investing. 

Do not make any hasty decisions. Before putting your money into a company’s FD, do your homework. Get an analysis of the company’s profile. This information will help you determine if the company is safe enough to invest in.

Withdrawal before Maturity 

There is a penalty for taking out your investment before the period. The same is the case with corporate FDs. After the deposit, the penalty can be levied after three months. It is best to know the penalty before investing.

Features of Corporate/Company FDs 

• Credit rating agencies, including CRISIL, ICRA, and CARE, have given Corporate FD high marks (AAA, for example). The rating helps investors decide whether or not to invest.
• They give creditworthy by indicating the likelihood of default on interest and principal payments.
• Depositors can select from many different interest options by NBFCs. Payout schedules vary from month to month, quarter to quarter, and semi-annually to annually.
• For an even greater rate of return, depositors might select the collected FD option. This option helps in the interest to be deposited. In this way, the depositor stands a better chance of profiting.
• A depositor may also request a withdrawal before the maturity date. Regarding public deposits, several HFCs and NBFCs impose a penalty rate of up to 2%.
• Some public deposits have a three-month lock-in term. During this time, the funds cannot be withdrawn.
• The highest interest rate on corporate FDs may also be offered. The max interest rate has a premium of 2%.
• Interest earned on FDs by corporations is subject to taxation at the rate given to the depositor.
• The deposit insurance plan provided by DICGC, an RBI subsidiary, does not apply to corporate FDs; they carry a higher level of risk.

Conclusion

It’s common practice for investors to focus more on star ratings. Before investing, it is important to examine the company’s history and finances. The track record is generally positive if the loss was an isolated incident. This could be a great investment opportunity for FDs from corporations. Be mindful of the company’s goals. Always evaluate whether or not they will have a positive or negative effect. By sticking to this, you can raise your chances of success. For more details, visit the Piramal Finance website for more details on corporate FDs.