Most of the people invest in bank fixed deposits for safe investment, on which interest is paid from 6 to 7.5 per cent.
Most of the people invest in bank fixed deposits for safe investment, on which interest is paid from 6 to 7.5 per cent. Apart from bank FD, you can also invest in corporate FD. Corporate FD gives you more interest than bank FD. But, what is a corporate FD? What is different in a corporate FD compared to a bank FD? How to invest in Corporate FD and is there any risk in it?
Different FD options
Can open Fixed Deposit (FD) with the bank.
These FDs can open with government and private banks.
NBFC, Department of Posts, Corporate Deposit Options.
There are many types of these deposits.
There is also a deposit for senior citizens.
Tax Saver, Recurring Deposit, FD for NRIs.
What is Corporate FD?
The investor opens the FD with the company.
The duration and interest rate are fixed.
It is called Corporate FD or Company FD.
Financial institutions maintain NBFCs deposits.
These FDs are regulated under the Companies Act.
Unsafe FD
Corporate FD is unsecured investment.
It means if the company sinks.
Can’t sell paper to get back the capital.
Therefore it is a risky investment.
How many types of FD?
Corporate FD can be issued by any company.
Companies issue FDs to raise funds.
Housing finance, transport and other companies are issued.
Investment in corporate FDs is through intermediaries.
The company appoints a broker for the application.
Physical application form has to be filled for investment.
KYC documents have to be given along with the check for the amount.
What documents will be required?
It takes 3 to 4 documents for corporate FD.
PAN card, address proof have to be given along with the form.
PAN can be provided with address proof only.
Will there be a tax rebate?
There is no tax exemption on corporate FDs.
They are high risk FDs.
Expect high returns from them.
Investing is beneficial only after investigation.
How is the tax calculated?
If 15H and 15G form is not filled.
TDS will be deducted on corporate FD.
Interest on FD included in ‘Income from other sources’.
This will be taxed according to the tax slab.
These five investment options are giving more returns than bank FD, know what are the benefits
How different is bank from FD?
Insurance is not covered on company deposits.
There is insurance cover on bank fixed deposits.
Deposits up to `1 lakh are covered.
This limit is for all your deposits.
Deposits more than `1 lakh, even so cover.
DICGC provides this insurance.
DICGC – Deposit Insurance and Credit Guarantee Corporation.
How secure is corporate FD?
Corporate FDs carry more risk.
Higher returns are also possible with risk.
Find out about the company before investing.
Never be in a hurry to invest.
Do a good research on your level.
Previous company performance, customer service.
How is the company’s financial performance?
Also know about director, promoter.
How to invest in Corporate FD?
The company appoints a broker for the application.
Physical application form has to be filled for investment.
With check, KYC documents have to be given.
PAN card, address proof have to be given along with the form.
Get up to 10% return on FDs of companies, should you invest?
How safe is FD, how to know?
FD can be selected on the basis of rating.
Before investing, do check the rating of the company.
Agencies like CRISIL, CARE, ICRA give ratings.
Company FD rating AAA then it is safe to invest.
If the rating is low then there will be many risks involved.
In such a situation, it is important to be cautious during investing.
Investment Period in Corporate FD
Corporate FDs can range from 1 year to 7 years.
See also interest rate, lock-in period, security of capital.
Based on this, choose the FD period.
Can I open FD online?
Online FDs can be opened.
It is completely dependent on the intermediary.
Can open FD online facility.
How much return on investment in Corporate FD?
Fixed rate of return in corporate FD.
The rate of interest will be fixed at the time of FD.
Interest rates will not change until the entire maturity.
That is why they are called ‘fixed income assets’.
Which investors good for?
Those who want regular income.
Banks want higher interest rates than FDs.
What to take care of?
Do check the rating of the company.
Do research before investing.
Look at the financial condition of the last 3 years of the company.
Find out the dividend history of the company.
See the performance of the sector in which the company is located.
Important things
Choose more than one company to diversify your investment.
Think of investing in different sectors and industries.
Do not put more than 10% of the investment in a single company.
It is not right to take a decision only after seeing high interest rate
Find out – how much time will you get the fixed interest?
Read the information given in the application form carefully.
Make sure to appoint a nominee for FD.
