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When we talk about investments in India, fixed deposits are one of the most favoured ones. According to the latest survey by Business Standards, Indians have saved about ₹103 trillion across 24.23 million deposits. Similar to the concept of bank fixed deposits, some corporations and NBFCs offer corporate fixed deposits. These fixed deposits are known for their short-term period and higher returns. You can choose to invest in different types of corporate fixed deposit schemes, depending on your needs and eligibility.
The new type of fixed deposits associated with corporations, rather than banks, have higher returns to offer, even in the short term. Get to know about the corporate fixed deposit to enhance your income and diversify.
Key Takeaways
- The returns are higher in corporate FDs than in traditional bank FDs
- Ideal for those investors who are looking to increase their income in a short period of time.
- Corporate FDs serve the interest payout needs with varying options, from regular paying interest to compounded interest at maturity with non-cumulative and cumulative options.
- These are suitable even for NRIs
- Corporate FDs are rated by renowned agencies like ICRA, CRISIL, and CARE.
- Salaried individuals, homemakers, NRIs and retirees can invest in Corporate FDs
- Based on individual tax slab, it is taxed with TDS on earned interest if it exceeds INR 5,000 in the financial year.
- Premature withdrawal option is available but comes with a penalty for breaking it
What are Corporate Fixed Deposits?
Corporate fixed deposits are one of the types of fixed deposit schemes offered by corporations. The RBI has granted permission to a certain number of Non-Banking Financial Companies (NBFCs) to accept public deposits.
Similar to standard bank FDs, corporate FDs are considered to be safe investment alternatives. The fund can be used by the corporation for lending to its borrowers or for growth purposes; however, the interest rate is fixed and not affected by market fluctuations. Company FDs are a great way for a lot of organisations to get funding from the general public. Several rating agencies assess the reliability of these fixed deposits, such as CRISIL, CARE, and ICRA.
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Types of Corporate Fixed Deposits
Based on the corporate fixed deposit plans, these are the types of corporate fixed deposits:
Cumulative Corporate Fixed Deposits
A corporate fixed deposit that accumulates interest until the completion of the maturity period is known as a cumulative corporate fixed deposit.
The principal amount increases as interest received within a year or period is invested again or added to the initial principal amount. This, in turn, increases interest. This is where compounding is used to its full potential. When your corporate FD matures, you will be paid the maturity amount, which is the sum of your initial deposit and cumulative interest.
Who can invest?
This kind of corporate FD works well for people who do not rely on interest income. These could be people with a consistent salary or those who make a good profit in all of their businesses.
Non-Cumulative Corporate Fixed Deposits
The depositor receives regular payments for the interest accrued in a noncumulative corporate fixed deposit. Interest is paid out on a monthly, quarterly, or semi-annual, yearly basis, depending on the specific conditions.
Investors who invest in this type of FD receive a steady return because the bank does not withhold this interest. Since the benefit of compounding is not completely used, it pays lower interest than cumulative corporate FD.
Who can invest?
The best applicants for this kind of corporate FD are homemakers, freelance workers, and retired people who want to take payments on their funds on a regular basis.
NRE and NRO Corporate Fixed Deposits
Non-Resident External (NRE) corporate Fixed Deposit is a tax-free, totally repatriable Indian Rupee deposit suited to Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) looking to maximise their overseas profits. According to section 10(4) of the IT Act, the principal amount, along with the interest received on these fixed deposits, is not taxable. The tenure extends from one to three years.
The Non-Resident Ordinary (NRO) corporate fixed deposit is a partially repatriable Indian Rupee FD for NRIs and PIOs who would like to deposit money earned in India. The interest earned on NRO deposits is liable for TDS.
Who can invest?
This type of corporate FD is ideal for NRIs and PIOs who want to invest in Indian corporate FDs.
Steps to Apply for Corporate Fixed Deposits Options
Investing in corporate FD schemes is an easy process that consists of a few fundamental steps.
Step 1: Look into the different corporations that offer corporate FDs. Check for credit ratings from agencies such as CRISIL or ICRA; a higher rating shows reduced risk. Select a corporation that has a stable financial standing and is renowned.
Step 2: After deciding on an organisation, go over the Corporate FD’s terms. Take into account the minimum investment amount, payout timing, duration, and interest rate. Make sure that the conditions fit your risk threshold and investing goals.
Step 3: Visit GoldenPi and go to the corporate fixed deposit sections. Choose the best option once you have read about the features of each corporate fixed deposit available on GoldenPi.
Step 4: Get the application from the Golden Pi website. Provide the required information, including your full name, address, PAN, and bank account details.
Step 5: In addition to the application form, provide the KYC documents. This typically requires a photograph, address verification, and a copy of your PAN card.
Step 6: Depending on the alternatives available, choose how much you want to invest and make the payment through your chosen payment option.
Step 7: Following the processing of your application and payment, you will be issued a CFD. This document serves as a record of your investment.
Step 8: Keep tabs on the interest payments and the maturity date. When the principal matures, reinvest it if it fits with your personal goals.
Corporate FDs
| Corporate FDs | Tenure | Interest |
|---|---|---|
| Shriram Finance FD | 1 to 5 years | 7.59% to 8.47% |
| Muthoot Capital FD | 1 to 5 years | 7.21% to 8.38% |
| Manipal Housing Finance FD | 1 to 5 years | 8.25% to 7.75% |
| Mahindra Finance FD | 1 to 5 years | 7.50% to 8.1% |
| Bajaj Finance FD | 1 to 5 years | 7.40% to 8.1% |
Bottom Line
Corporate FDs provide an ideal option for people looking to increase their income while also diversifying their investments. Investing in Corporate Fixed Deposits is a smart way to earn higher returns while minimizing risk, offering a stable income stream and a reliable alternative to diversify your portfolio. In comparison to bank FDs, they yield better returns. It is possible to compare them based on rating and operational variables, which facilitates one’s task of choosing an appropriate corporate FD option.
GoldenPi offers an extensive platform for people who want to invest in different types of corporate fixed deposits. You can assess your investment amount and maturity amount by entering the details for your investment. Happy investing!
FAQs on Types of Corporate Fixed Deposits
1. What are the different types of corporate fixed deposit schemes available?
The options in corporate FDs are available based on payout options such as cumulative FDs that accumulate interest up until maturity, non-cumulative FDs that pay regular interest, and NRE and NRO corporate FDs for NRIs with some tax benefits. Thus giving higher returns to meet varying investor needs.
2. What is the difference between corporate bond funds and corporate FD?
Depending on personal financial objectives and risk tolerance, one could select between corporate bond funds and a corporate fixed deposit. Bond funds offer diversity but are susceptible to market swings, whereas fixed deposits give stable returns at a lower risk.
3. Can we break corporate FD before maturity?
The amount of the penalty may differ between banks and other financial institutions. It normally entails a 0.5% to 2% decrease in the interest rate.
4. What is the tax rate for corporate FD?
Interest earned from Corporate FD is taxed as per the marginal tax slab rate of an individual. Also, 10% TDS is deducted from the interest payable if the total interest earned by an individual is >=Rs. 5,000/- in a Financial Year.
Resident Individuals can avail exemption from TDS by submitting form 15G / 15H (as applicable). However, this declaration has to be submitted in every FY until maturity.
5. What is a corporate deposit?
A corporate deposit is an interest-bearing deposit service that banks and other authorised financial institutions provide to their corporate banking customers. The target market for corporate deposits may include significant non-profits, governmental organisations, public agencies, and commercial enterprises.
6. Can a private company offer corporate FD?
The following are the requirements for Corporate/Company FD eligibility: businesses that are registered under the 1956 Companies Act. Both private and public limited liability organisations are eligible. Any non-partnership firm that is not an unincorporated organisation is eligible.
