With attractive interest rates and uncomplicated terms and conditions, Fixed Deposits have become popular amongst people who prefer safe investment plans.
A Fixed Deposit requires you to invest a lump sum for a specific period of time. Usually, the rate of interest for a Fixed Deposit depends on the tenure you choose, and is non-negotiable. You can use online FD calculators to predetermine your overall gain from your investment.
Although you can withdraw an FD whenever you want, it’s advisable you wait until its maturity date. Premature withdrawal will result in loss of interest and you might even have to pay a penalty.
Though FD returns are lower, when compared to other investment options available in the market, they’re steady and guaranteed. Hence, first-time investors generally prefer investing in bank Fixed Deposits to avoid taking unnecessary risks.
But, if you’re willing to take a little risk to earn higher returns, then you should consider investing in corporate Fixed Deposits.
What are Corporate Fixed Deposits?
Corporate Fixed Deposits are offered by companies instead of banks and NBFCs and they come with a higher rate of interest. However, before you invest in a corporate FD, you should know that it’s a risky investment scheme.
Companies offering corporate FDs run a risk of getting bankrupt or they can be hit by recession at any time. If this happens, they might not be able to repay the principal or interest amount when your FD matures.
Also, remember that in the case of a corporate FD, TDS is applicable if the interest amount crosses Rs.5,000. Whereas, in the case of conventional Fixed Deposits, you don’t have to pay TDS unless the interest earned is more than Rs.10,000. So easy way to bypass TDS on FD interest.
How to Invest in Corporate Fixed Deposits?
You can apply for a corporate FD by either downloading the application form from the company’s website or collecting it in person from their office. If you’ve made up your mind to invest in a corporate FD, you should be careful about the company you choose.
Financial institutions like CRISIL and ICRA rate companies based on their financial stability and customer service. You should opt for corporates with AAA rating as they offer some of the best FD rates and are not likely to go bankrupt anytime soon.
Corporate Fixed Deposits are good investment options as they come with a high rate of interest. However, before investing in them, you should verify the company’s financial status to ensure that you’ll be repaid when the FDs mature.