Competitive Company FD Rates: Maximise Your Investments

Fixed Deposits (FDs) are a popular savings tool in India, offering stable and assured returns over a fixed tenor. While traditional bank FDs are widely known, company FDs or corporate Fixed Deposits, often provide more attractive interest rates. This article explores how you can maximise your investments by choosing company FDs, with a mention of Bajaj Finance fixed deposit and other leading options.

What are Company FDs?

Company FDs are fixed deposit schemes offered by Non-Banking Financial Companies (NBFCs). They typically offer higher interest rates compared to bank FDs, making them an appealing choice for investors seeking better returns. The higher rates are often a reflection of the higher risk associated with NBFCs compared to banks.

Current Company FD Rates

Here is a comparison of interest rates from some prominent NBFCs:

Disclaimer: The above cumulative FD interest rates are valid as of 3rd July 2024. These rates may change at the issuer’s discretion.

Benefits of Company FDs

1. Higher Interest Rates: Company FDs generally offer higher interest rates than bank FDs.
2. Flexible Tenors: Company FDs often provide a range of tenors, from as short as 12 months to as long as 60 months, allowing investors to choose a period that aligns with their financial goals.
3. Additional Interest for Senior Citizens: Many company FDs offer an additional interest rate for senior citizens, usually around 0.25% to 0.50% more than the standard rate. This makes it an attractive option for retirees seeking regular income.
4. Credit Ratings: Reputable credit rating agencies like CRISIL and ICRA rate company FDs, helping investors assess the safety and reliability of their investments. Higher-rated FDs indicate lower credit risk.

Factors to Consider Before Investing in Company FDs

1. Credit Risk: Company FDs carry a higher credit risk compared to bank FDs. It is crucial to check the credit ratings of the issuer before investing. FDs with high credit ratings (e.g., CRISIL FAAA or ICRA MAAA) are generally safer.
2. Liquidity: Company FDs may have less liquidity compared to bank FDs. Premature withdrawals might be subject to penalties or may not be allowed until a certain period has elapsed.
3. Tax Implications: Interest earned on company FDs is taxable under “Income from Other Sources.” TDS (Tax Deducted at Source) is deducted if the interest income exceeds ₹5,000 in a financial year.
4. Issuer’s Financial Health: Assess the financial health and stability of the NBFC or company offering the FD. This can be gauged from their annual reports, profit margins, and overall market reputation.

How to Invest in Company FDs

Investing in company FDs can be done through online platforms or by visiting the branch office of the NBFC. Here are the steps:

1. Research and Compare Rates: Use reliable financial websites or consult with financial advisors to compare the current FD rates offered by different companies.
2. Check Credit Ratings: Ensure the issuer has a good credit rating from recognised agencies.
3. Fill out the Application Form: Complete the application form available online or at the NBFC’s branch. You will need to provide identity proof, address proof, and PAN details.
4. Submit the Form: Submit the form along with the required documents and the deposit amount through cheque, demand draft, or online transfer.
5. Receive the FD Receipt: Once the deposit is processed, you will receive an FD receipt detailing the terms of the deposit, interest rate, and maturity date.

Risks Associated with Company FDs

1. Default Risk: Unlike bank FDs, Company FDs are not covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance. This means if the company defaults, you may lose your investment.
2. Interest Rate Risk: While Company FDs offer higher interest rates, they are more susceptible to interest rate fluctuations. If market rates rise significantly, the fixed rate on your Company FD might seem less attractive.
3. Reinvestment Risk: Upon maturity, if the interest rates offered by Company FDs have dropped, you might have to reinvest at a lower rate, affecting your returns.

Taxation on Company FD Interest

Interest earned from Company FDs is taxable under the head “Income from Other Sources.” It is subject to TDS if the interest income exceeds ₹5,000 in a financial year. The applicable TDS rate is 10% if you have provided your PAN, and 20% if you have not. It’s essential to declare this interest income in your Income Tax Return (ITR) to avoid penalties.

Company FDs offer a lucrative alternative to traditional bank FDs, especially for investors seeking higher returns. By carefully selecting issuers with high credit ratings and understanding the associated risks, you can effectively maximise your investments. With competitive rates offered by certain issuers, company FDs can significantly enhance your financial portfolio.

Remember to always check the latest rates and issuer stability before investing, ensuring a balanced approach to growing your savings.