Corporate Fixed Deposits Compare

Additional Useful Information

• For example, let us say an investor invests ₹10,000 in a fixed deposit with a corporate institution. The duration selected at the time of investing is 1 year and the rate of interest offered by the corporate is 7%. At the end of this tenure of 1 year, the corporate will return an amount of ₹10,700 to the investor. This includes the original invested amount of ₹10,000 plus ₹700 which is the interest earned on the original amount at the rate of 7%).

• Corporate Fixed Deposits can be Cumulative or Non – Cumulative.

• In a Cumulative Corporate Fixed Deposit, the return / interest is given to investors at the end of the fixed period (Tenure), along with the original, invested amount.

• In a Non – Cumulative Corporate Fixed Deposit, the return / interest is given to the investor periodically (monthly / quarterly / six monthly etc.), and not as a lump – sum at the end of the tenure.

Returns *

• A Corporate Fixed Deposit generally guarantees returns in the form of a fixed interest rate.

• Interest earned is the only return that is available from a Corporate Fixed Deposit.

• In recent years, the return has ranged between 3% – 8.5%.

• In general, longer the period of the fixed deposit (Tenure), higher is the rate of return.

• Senior citizens (aged above 60 years) typically receive a higher rate of return than non-senior citizens.

Risk Level

• Corporate Fixed Deposits are relatively safe investments. Credit risk always exists however, the risk is low.

• On a comparative basis, they are marginally riskier than Bank Fixed Deposits.

• They are generally safer than other investment modes.  

Liquidity

• Corporate Fixed Deposits are considered highly liquid.

• At any time during the tenure, an investor can place a request with the corporate to close the Fixed Deposit. Upon receiving this request, the Corporate will give back the original invested amount along with any due interest and / or less any penalty deductions due to premature closure.

Interesting Facts

• A key difference between a corporate fixed deposit and a bank fixed deposit is that the corporate fixed deposit offers a higher interest rate (rate of return).

• Reserve Bank of India (RBI) has issued stringent guidelines and conditions for corporates who are allowed to offer corporate fixed deposits. Only on fulfillment of those, will corporates be able to offer the scheme.

• Unlike bank fixed deposits, RBI does not insure the principal amount in case of default by the corporate. 

Tax Implications

• This scheme is taxable. Taxes are levied on the interest collected.

• Any interest that investors receive is added to their taxable income and they need to pay tax according to their income slab.

• Like Bank Fixed Deposits, Corporate Fixed Deposits are not applicable for any tax deduction under Section 80C of the Income Tax act.

Where To Invest

• Company Fixed Deposits: Up to 7.05% Interest Rates, Open Corporate FD (bajajfinserv.in)

• https://www.moneycontrol.com/fixed-income/corp_fd_main.php#data

• Shriram City Fixed Deposit | Book Fd in just 5 mins