Deposits thus mobilised are governed by the Companies Act under Section 58A. Company FDs are tempting due to the high rate of interest that they provide as compared to FDs offered by private and public sector banks. However, they are an unsafe investment option. As they are not secured against the assets of the company, the chances of default in payment of interest and principal is significantly higher than Bank FDs.
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. Bank Fixed Deposits however are secured to the extent of Rs. 5 Lakhs.
If one is still looking for high interest returns then one should always check the rating of the company before investing in that company’s fixed deposit. Financial institutions such as CRISIL and ICRA rate the companies and their FDs. If a company FD has a rating of AAA, it means that it is a safe and secure investment. However, tread with caution if the rating is lower as there could be numerous risks involved.
The major benefits of investing in company fixed deposits are high interest, flexibility of tenure and no Income Tax is deducted at source if the interest income is up to Rs 5,000 in one financial year.
One has to be careful regarding TDS. In the case of a company fixed deposit, TDS is deducted if interest income crosses Rs 5000, but in the case of a bank fixed deposit, TDS is only deducted after interest income crosses Rs 10,000.
| Particulars | Debt Funds | Fixed Deposits |
| Invested sum (Year of purchase-2015) | Rs 2,00,000 | Rs 2,00,000 |
| Return rate | 7% | 7% |
| Holding period | 3 years | 3 years |
| Fund worth at the end of tenure | Rs 2,45,000 | Rs 2,45,000 |
| Inflation | Adjustment available | Adjustment not available |
| Indexed Cost of Acquisition (Year of sale-2019) | Rs 2,20,472 | – |
| Taxed Amount | Rs 24,528 | Rs 45,000 |
| Tax to be paid (assuming highest tax bracket of 30%) | Rs 4,906 (Tax rate applicable is 20%) | Rs 13,500 |
| Returns after tax | Rs 40,094 | Rs 31,500 |
Ultimately, you should weigh your decision on your risk appetite, income tax slab, time horizon, and investment goals.
| Company | Ratings | 12-23 Months | 24-35 Months | 36-47 Months | 48-59 Months | 60-120 Months | for Sr Citizens Extras |
| PNB Housing Finance | FAA + by CRISIL AA+ by CARE | 5.9 | 6.15 | 6.6 | 6.6 | 6.7 | 0.25 |
| 12 Months | 24 Months | 36 Months | 48 Months | 60 Months | |||
| Shriram Transport Finance-Unnati Scheme | FAAA by CRISIL MAA+ by ICRA | 6.5 | 6.75 | 7.5 | 7.6 | 7.75 | 0.3 |
| 12 Months | 24 Months | 36 Months | 48 Months | 60 Months | |||
| M&M Financial Services Ltd | FAAA by CRISIL | 5.5 | 6 | 6.3 | 6.45 | 6.45 | 0.25 |
| 12-23 Months | 24-35 Months | 36-47 Months | 48-60 Months | ||||
| Bajaj Finance Ltd | FAAA by CRISIL MAAA by ICRA | 5.65 | 6.1 | 6.5 | 6.5 | 0.25 | |
| RBI Bonds | Soverign | 7.15% p.a. payable semi annually/Reset by RBI on every 1st Jan & 1st July | Nil | ||||
You can get greater and big payoffs from corporate FDs as compared to Bank FDs.
You can choose FDs as per your preference from tenures such as monthly, quarterly, or annually.
You can enjoy better liquidity with corporate FDs with lower lock-in period than Bank FDs.
These FDs are backed up by reputed rating agencies that lower the risk factor.
You can apply for premature withdrawal easily by following a few rules and regulations.
We can avail stable returns and benefits from much reduced volatility by high rated companies.
You get a complete transparent way to invest in mutual funds with us.
With our 24x7 digital access, you get complete support with reliability in all your investments.
Our professional team guides through every thin and thick details of mutual fund investments.
