Corporate FDs

Company fixed deposits

Company fixed deposit is a deposit in company for a fixed rate of return over a fixed period of time. The rate of interest is determined by the tenure of the deposit as well as other factors. The deposit made in a company fixed deposit is governed by section 58A of the Companies Act. Company fixed deposits are a good option for investment as they provide higher rate of interest compared to bank deposits. They are good sources of regular income which may be dispersed monthly, quarterly, half yearly or yearly interest incomes. However, as these deposits are unsecured, in case of default by a company, the investor cannot sell the deposit documents to recover his amount. The investor has no claim over the assets of the company in case of winding up of the company. This makes Company Fixed Deposit a risky investment option. Hence, performance of the company should be reviewed from time to time and at the maturity of deposit, by analysing Balance Sheet & Share Prices movement. This will be helpful in deciding whether the deposit should be renewed or not.

Benefits:

  • Higher rates of interest.
  • Flexible tenure ranging from 6 months to 7 years.
  • No TDS in case the interest is only Rs. 5000 in one financial year.
  • Nomination facility available.
  • Regular interest incomes - monthly, quarterly, half-yearly, or yearly.