What are company fixed deposits (FDs)?
These are deposits placed by investors with Non-banking Finance companies (other than banks) or corporates over a fixed term for a specified rate of interest. The deposits are governed by the Companies Act under section 58A. The company FDs entail relatively higher risk as compared to the bank fixed deposits (FDs) but they also fetch higher returns. The bank FDs currently offer interest rates between 6.7 percent and 7 percent for a period of 1 to 10 years, whereas the company FDs ensure higher returns with an interest rate of 8 percent and above, for a tenure of 1-5 years.
Types of company FDs
There are two types of company FDs – cumulative and non-cumulative. For cumulative company FDs, compound interest is calculated either quarterly or annually, that’s paid in lump sum at the time of maturity. In non-cumulative FD, the interest is paid out periodically, as chosen by the investor. The regular interest payout helps you to meet your daily expenses. Cumulative FDs earn you higher returns in comparison to the non-cumulative FDs.
Features and Benefits of company FDs
- Credit Ratings: Company FDs are normally certified by credit agencies like CRISIL and ICRA that determine the stability of the company and the safety of your FDs when invested in the company. The higher the ratings, the safer your FD investment.
- Higher interest rates: Company FD interest rates are pre-determined and are insulated from market volatility. Unlike the bank FD’s, the company FDs offer higher interest rates to depositors, and guarantee higher returns on the invested money for a given tenure.
- Tenure: The tenure of the company FDs usually ranges from 1 to 5 years, providing flexibility to the investor to choose the fixed tenure or the maturity period.
- Periodic interest payment: Most company FDs provide the option of periodic interest payouts on a monthly, quarterly, or annual basis to its depositors. These options allow the investor to meet any planned expenses with the fixed interest income.
- Renewal and Withdrawal: Company FDs are subject to renewal and withdrawal, just like any popular investment options. At the end of the tenure, you can either completely withdraw the company FD or renew it. The renewal option enables the investor to avail a slightly higher interest rate over and above the existing ones. However, a premature withdrawal of the FD does attract a penalty based on the total amount accrued.
- Disbursal: The periodic interest payouts or the final maturity amount of the company FD are directly credited into your bank account.
- TDS (Tax Deducted at Source): As per the section 194A of the Income Tax Act of 1961, interest earned on company fixed deposits is taxable by 10 percent in case it exceeds Rs. 5000 per year. The TDS is calculated by the company based on the frequency payouts to the investor to whom the TDS certificate is handed out on a quarterly basis. If the investor furnishes the form 15G/15H during the application stage for the fixed deposit, he/she will not have to pay any tax on interest income.
Choosing the best company FD
Choosing the best company FD depends on the features and benefits that it has to offer to its potential investors. Also, the best company FD is one that offers online access to customer’s fixed deposit account along with an easy application process. With Finserv MARKETS, you can now avoid visits to any branch or a lengthy documentation process by availing the online process to invest in company FDs. On Finserv MARKETS, you can invest online in fixed deposits that offer competitive interest rates ranging from 8 to 8.95 percent depending on the flexible tenor between 1 to 5 years. You need to meet any of the following eligibility criteria to invest in fixed deposit on Finserv MARKETS:
- Indian Citizen residing in the country
- HUF(Hindu Undivided Family)
- Sole proprietors, partnership firms, and companies
- Clubs, Societies, and Associations
- Family trust
The fixed deposit available on Finserv MARKETS is certified with a stable ICRA MAAA and CRISIL FAAA rating – the industry’s highest safety ratings that assures you of investment safety and security. Also, you can track online your fixed deposit returns 24X7 anytime, anywhere!
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