Company Fixed Deposit: Why You Should Invest
A company term deposit, often known as a company FD or corporate FD, is a type of FD provided by corporations such as finance companies, housing finance companies, and other types of NBFCs. For many firms/ companies, company fixed deposits are an excellent means to raise capital from the public. A variety of rating organisations, like ICRA, CRISIL, and others, frequently grade these term deposits for their credibility.
Company fixed deposits are comparatively better than bank-fixed deposits as they offer higher interest rates. The FD rates change basis several factors. One of them is the repo rate change made by the Reserve Bank of India (RBI).
While investing in a corporate FD, you may want to choose issuers offering high-interest rates. However, it is equally important to check for the credibility of the financier, failure of which may lead to a risk of delays or defaults. Hence, it is best to choose a safe company fixed deposit accredited with high stability ratings by credit rating agencies like CRISIL and ICRA.
What to keep in mind when choosing a company FD?
1. Safety ratings
Some company fixed deposits are officially certified by credit rating agencies such as CRISIL and ICRA. This rating is done on a 14-point rating system, which determines the assumed risk levels. These will assure you of the company’s fixed deposit stability from time to time. The higher the rating, the safer your investment. You can also compare the track record of company fixed deposit rates and determine those offering higher interest rates. For instance, Bajaj Finance Fixed Deposit has ratings of CRISIL AAA/ STABLE and [ICRA]AAA(Stable), which is the highest in the industry.
2. Past repayment history
A company with timely interest payments and no default repayment of fixed deposits is ideal. For example, Bajaj Finance is one of the only NBFCs to have ‘negligible unclaimed deposits. This indicates the highest safety of your deposit and the assurance of timely payments and default-free experience. Additionally, the trust of more than 5 lakh happy FD customers and a deposit book of over Rs. 50,000 crore is a testament that Bajaj Finance is one of the most reliable FD issuers.
Benefits of investing in a company fixed deposit
1. Flexible periodic interest payout options
Companies like Bajaj Finance offer periodic payment options like monthly, quarterly and annually. These options can help you achieve a fixed income for your planned expenses. You also have the option to choose interest payout at maturity, which will help you create a sizeable corpus.
2. No effect of market fluctuations
FD rates are pre-determined and free from market fluctuations, and with a company fixed deposit, you can also earn higher interest.
3. Liquidity
A loan against a fixed deposit is readily available for up to 75% of the invested amount. Another way to achieve liquidity is the option of premature withdrawal with a minimal penalty.
4. Additional rate benefits
Company FDs offer benefits such as revision of interest rate based on your investment tenure.
Bajaj Finance FD offers interest rates up to 8.60% p.a. for tenure of 42 months. You can also calculate your fixed deposit portfolio returns by using the online FD calculator. You can adjust the tenure and the principal amount and see the maturity amount you will receive. It is a simple and valuable tool for portfolio planning.
Eligibility Criteria for Corporate/Company FD
The following entities qualify to apply for a corporate FD:
- Indian Residents
- Non-Resident Indians (NRIs)
- Hindu Undivided Families (HUFs)
- Clubs
- Corporations
- Associations
- Societies
- Educational Institutions
- Partnership Firms
- Cooperatives
Documents Required for Corporate FD
To open a corporate FD, the following documents are required:
- Voter ID Card
- Ration Card
- Passport
- Driver’s License
- Aadhaar Card
- PAN Card
- NREGA Job Card
- Valid Employee’s ID
- Government-validated address proof
- Two colour passport-sized photographs
How to Invest in Corporate Fixed Deposits?
Investing in a Corporate FD is a simple process that allows individuals to earn higher returns compared to traditional bank FDs. A Corporate Fixed Deposit is offered by NBFCs and corporates with varying tenures and interest rates. Follow these steps to invest in a Corporate FD:
- Choose a Trusted Issuer: Select a company like Bajaj Finance with a strong credit rating for better security.
- Select Tenure & Amount: Decide on the deposit tenure and investment amount based on your goals.
- Complete KYC Process: Provide identity and address proof for verification.
- Make the Payment: Invest through online banking or offline modes.
- Receive Acknowledgment: Get a receipt confirming your Corporate FD investment details.
Tax Implications on Corporate Deposits
Interest earned from corporate fixed deposits is subject to income tax based on your tax bracket. For instance, if you're in the 20% tax bracket, you'll pay 20% tax on the interest earned. If the interest earned in a financial year from a corporate FD is over Rs. 5,000, TDS (Tax Deducted at Source) is deducted as per the Income Tax Act. To prevent TDS deduction, the FD holder can submit Form 15G or Form 15H for senior citizens to the bank or non-banking financial institution.
