FIXED DEPOSIT

 

Deposits in Companies, Financial institutions and Non-Banking Finance Companies (NBFCs) that earn a fixed rate of return over a period of time are called Fixed Deposits.
Deposits thus mobilised are governed by the Companies Act under Section 58A while for NBFCs and Banks, it is regulated by RBI.

 

       Benefits of investing in Company Fixed Deposits are:

• Fixed interest.

• Short-term deposits.

• Lock-in period is only 6 months for Company FDs while for Banks, it starts from 7 days.

• No Income Tax is deducted at source if the interest income is up to Rs 5,000 in one FY

• Investment can be spread in more than one company, so that interest from one company does not exceed Rs. 5,000

 

These deposits are unsecured, i.e., if the company defaults, the investor cannot sell the documents to recover his capital, thus making them a risky investment option.

 

• Some of the points that investors should keep in mind.

• Diversification – Investors should select more than one company and also more products rather than just concentrating solely on FDs.

• Tenure - Depends upon Investor's own financial requirement as well as the Interest Rates being offered across the tenure of all the other comparable products.

• Periodic review of the financial health of the company wherein one has invested its funds.