Company fixed deposits are the fixed deposits with the companies. These companies can be financial institutions or the non banking financial companies. Fixed Deposits in companies earn a fixed rate of return over a period of time. Financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits from the common investors. These deposits are governed by the Companies Act under Section 58A. These are unsecured investment i.e., if the company defaults, the investor cannot sell the documents to recover his capital, thus making them a risky investment option.
Benefits of Investing in Company Fixed Deposits
- Offer high Interests
- These are Short-term deposits
- No deduction of Income Tax at source up to Rs 5,000 p.a. on the interests for one financial year
- Relatively short lock-in period of only 6 months
- Investment can be spread in more than one company, so that interest from one company does not exceed Rs. 5,000
How to Choose Right Company Fixed Deposit Offer?
It is very important to choose right offer as this is an unsecured investment option and huge risk is associated with these investments. Check these criteria before selecting any offer:
- Check the rating of the offer and reputation of the groups as well as the size of the company
- Prefer to invest into big companies
- Check the financial of the company
- Check the dividend history
- Check the pervious offers and issues relating to the fixed deposits
- Check the market conditions
- Compare the interest rates offered by the company with prevailing market rates.
- Avoid offers with lower ratings
- Avoid offers with very high interest rates
- Prefer public limited companies
- Avoid new companies, unregistered bodies
- Avoid companies with accumulated losses or liquidity problems
Periodic Review of Investment
Periodic review of investments into company fixed deposit is imperative. You must ensure that you continue your investment only when there have been no additional risks that cropped in after the investment. Also don’t put your all the money into one company fixed deposits. Go for many company deposits.