Company Fixed Deposits: Best Rates & Schemes
When most people think about fixed deposits (FDs), the first thing that comes to the mind is approaching a bank to open one. However, that is not the only place where you can open fixed deposits. Many finance houses and Non-Banking Financial Companies (NBFCs) also offer investors the facility to open fixed deposits that offer interest rates that can be higher than what most banks offer.
What is a Company Fixed Deposit?
A company FD or company term deposit is nothing but a type of FD that is issued by companies such as finance companies, housing finance firms or other types of NBFCs. Company fixed deposits are a great way to raise funds from the general public for many firms/companies. These time deposits are usually rated for their credibility by a number of rating agencies such as ICRA, CARE, CRISIL, etc.
Top 9 best company FD schemes 2018
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. Some corporate FDs even pay more than 9.00% per annum. For example, HUDCO pays 9.15% p.a for a tenure of 1 year and 9.40% p.a. for senior seniors for the same investment period.
- 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.
Eligibility Criteria for Company FD
|Who can apply?
- Senior citizens
- Those who are above 18 years
- Minors can open an account along with a guardian
How to choose a company FD
- Check credit rating: All fixed deposits offered by the various companies come with a credit rating issued by institutions like CRISIL. These ratings will help you determine if you should invest with them or not.
- Check interest rates offered: For obvious reasons, this should be the first step you take because if you don’t then some day you might realise that a company you ignored offers you better interest rates than the current one.
- Check the minimum and maximum amounts: Since most of the companies define what the minimum and maximum amount that can be put in an FD is, it is best to check it. In case you wish to start an FD with Rs. 25,000 but the company you choose allow a minimum of Rs. 50,000 then you will be in a soup.
Company fixed deposit interest rates
The important things that you need to know about the fixed deposit interest rates offered by non-banking finance companies are:
- The interest rates are determined by the duration of the term deposit.
- Most companies offer cumulative and non-cumulative interest rates.
- Some companies offer a slightly higher interest rate for senior citizens.
- Some companies also offer higher interest rates for employees who open FDs with them.
- Sometimes the facility of higher interest rates may even be extended to the family of an employee.
Faqs on Company Fixed Deposit
1. What is the difference between a bank FD and a company FD?
In terms of differences, both are FD accounts and offer the same features. Bank FDs are generally regarded more safer and pay lesser interest rate.
2. Are corporate FDs and company FDs the same?
3. Is there an option for premature withdrawal?
Yes. The deposit can be broken before the maturity period but some NBFCs mandate a longer minimum investment period that may go upto 6 months to a year.
4. How to apply for a company FD?
You can apply for a company FD online or by contacting the firm where you want make an investment.
5. Are FD receipts issued?
Receipts may be issued to those who have applied for an FD offline/by visiting the branch.
6. Are senior citizens eligible to get a higher interest rate?
Yes, in most cases.
7. Is TDS applicable even for such FDs?
8. How is interest paid to the deposit holder?
Interest payments will be credited to the bank account of the customer electronically as per the chosen frequency of interest payment.
9. Can you apply for a company FD online?
In most cases, yes.