Like banks, some companies and NBFCs are also allowed to collect deposits from investors with the promise of fixed interest. This is called Corporate FD. It gives more interest than Bank FD.
New Delhi. With interest rates increasing, customers are now turning to fixed deposits to get higher returns. In such a situation, corporate FD can be a good investment option. However, investors should choose corporate FDs wisely and invest only in triple-A rated companies.
Like banks, some companies and NBFCs are also allowed to collect deposits from people at an interest rate for a fixed period of time. This is what is called Corporate Fixed Deposit. Like banks, guaranteed returns are given here too. On the other hand, corporate FDs get more interest from banks. There are a few things you should keep in mind while taking a corporate FD.
Credit Rating
Before taking a corporate FD, it is important that you check the credit rating of that company. Companies that have better ratings will give you lower interest rates though your money will be more secure. On the other hand, companies whose ratings are low will give you more returns. For example, corporate FDs with triple-A rating will be safer but will give lower returns. Experts believe that people should invest in more secure FDs.
Choose short term FDs
RBI is continuously increasing the repo rate and due to this, interest rates will also see a steady increase. Hence investors should focus on short term FDs. So that they mature early and the same amount can be invested in FDs with profits once again for higher returns.
Tax on FD
Keep in mind that FDs are classified as income from other sources and are subject to tax. If you get returns of more than Rs 5,00 in a year from corporate FD, then 10 per cent TDS will be levied.
Diversify Deposit
You should invest in FDs of different tenures from multiple banks and corporates. This makes your money more secure. You can invest in FDs from 180 days to 5 years. At the same time, if you need money in a few days, then there is also the option of FD of 15 days or 45 days.
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