Company Fixed Deposit (FD) | Top 6 Things You Shouldn't Miss

What is a Company Deposit?
The deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest is called Company Fixed Deposit. Financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits. Deposits thus mobilized are governed by the Companies Act under Section 58A. These deposits are unsecured, i.e., if the company defaults, the investor cannot sell the documents to recover his capital, thus making them a risky investment option.

Benefits of Company FDs-
-Higher interest rates: The best thing about a company FD is the interest rate. The rates paid are comparatively much higher than what is paid for an average bank FD.

-Periodic interest payment options: There are a number of interest payout options to choose from such as monthly, quarterly, half-yearly, and yearly.

-Credit ratings: Almost all company FDs are rated by autonomous agencies such as ICRA, CRISIL and CARE. This offers customers a chance to go for a well rated FD.

Disadvantages of Company FDs
-Risky:Unlike bank FDs that come with a certain guarantee and deposit insurance, company FDs may be risky. This is what is referred to as ‘default risk’. Though this may be the last resort, it is better to be fully aware of the risk factor before making an investment in such an FD scheme. This risk may be mitigated to some extent by going for a well-rated company scheme and doing some background verification.

-No tax benefit: The interest that is earned on these types of FDs will be fully subject to tax. The tax treatment will be the same and there will be no difference, even when it comes to TDS.

To know more about Fixed Deposit, click on the following link:

Tax-Saving FD for Section 80C Deductions

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