A Company Fixed Deposit is a deposit placed by investors with companies for a fixed term carrying a fixed rate of interest. CFDs are like unsecured loans borrowed by a company from the investors. These are similar to bank fixed deposits with a few differences. In this, the fixed deposits are held with companies. CFDs are offered by manufacturing companies and NBFCs for different tenures and with a different frequency of interest payments.
In simple words, the deposits placed by investors with financial institutions, Housing Finance companies and Non-Banking Finance Companies (NBFCs) for a fixed term carrying a prescribed rate of interest is called Corporate / Company Fixed Deposit.
Company Name | Rating | Interest(Min) | Interest(Max) | Tenor |
---|---|---|---|---|
Sundaram Home Finance Limited | 'FAAA' By CRISIL | 6.75% p.a. | 7.00% p.a. | 12 months to 60 months |
Shriram City Union Finance Limited | 'MAA+' By ICRA | 7.72% p.a. | 8.65% p.a. | 12 months to 60 months |
HDFC Limited | 'FAAA' By CRISIL, 'MAAA' By ICRA | 7.10% p.a. | 7.35% p.a. | 12 months to 84 months |
PNB Housing Finance Ltd | CRISIL FAA+ / Negative, CARE AA+ / Negative | 7.20% p.a. | 7.50% p.a. | 12 months to 120 months |
LIC Housing Finance Ltd | 'FAAA' By CRISIL | 6.60% p.a. | 7.10% p.a. | 12 months to 60 months |
ICICI Home Finance Company Ltd | FAAA by CRISIL / MAAA by ICRA / AAA by CARE | 7.40% p.a. | 7.80% p.a. | 1 - 10 years |
Mahindra and Mahindra Financial Services Ltd | 'FAAA' By CRISIL | 7.30% p.a. | 8.10% p.a. | 12 months to 60 months |
Bajaj Finance Ltd | 'FAAA' by CRISIL / 'MAAA' by ICRA | 7.60% p.a. | 8.10% p.a. | 12 months to 60 months |
Shriram Transport Finance Company Ltd | FAAA By CRISIL / MAA+ By ICRA | 7.80% p.a. (Non cumulative) | 8.75% p.a. (Non cumulative) | 12 months to 60 months |
CFDs are of 2 type-:
CFDs offer many benefits to an investor including-
An investor must consider the following factors before investing in a CFD-
Company Fixed Deposits |
Bank Fixed Deposits |
|
Issued By |
Manufacturing Companies & NBFCs |
Banks |
Regulated Under |
Companies Act, 1956 |
Banking Regulation Act, 1949 |
Investments Insured Up To |
?20,000 |
?1 lakh |
Interest Offered |
Higher than banks. |
Lower than CFDs. |
Minimum Investment Duration |
7 days |
6 months |
The interest earned on CFDs is taxable falls in the 'income from other sources' category of an investor. TDS is deducted for interest amount exceeding above ?5,000 a year. Investors falling in zero/nil tax bracket, need to submit Form 15H every financial year to avoid TDS deduction.
A company fixed deposit is a fixed-term deposit issued by a manufacturing company or an NBFC. The CFDs offer a predetermined fixed rate of returns.
Investors have the choice to choose cumulative and non-cumulative option for interest payments. In a cumulative option, interest is added to the principal and paid on maturity at the end of the term. In the non-cumulative option, interest is paid periodically like monthly, quarterly, half-yearly and yearly.
Yes, interest earned above Rs 5,000 a year from company FDs are taxable and the interest is paid after deducting TDS. The earnings will be added to your income and taxes will be levied as per your tax slabs.
The minimum investment amount for a company FD varies from company to company. For example, the minimum investment amount in Bajaj Finance FDs is Rs 10,000 whereas for FDs issued by HDFC it is Rs 20,000.
Yes, most companies offer a higher interest rate to senior citizens. The additional interest varies from 0.10 to 0.50%.
Yes, CFDs have premature withdrawal facility. However, you can withdraw only after 3 months from the date of deposit. You will also have to pay a penalty if you withdraw before maturity.
Yes, loan against deposit facility is available in CFDs. Investors can avail a loan up to 75% of the invested amount after 3 months from the date of deposit. The rate of interest on the loan will be 2% higher than the interest rate offered on the FD.
Any Indian individual or family trust, club, association, society, HUF, sole proprietorship, partnership firm, company, or group of companies can make a fixed deposit.
Yes. One can make a deposit in the name of minor provided such minor is represented by his natural or legal guardian and the Application Form for the deposit is signed by the natural/legal guardian, on behalf of the minor. All communication in relation to the deposit shall be addressed to the guardian.
Corporate or Company FDs are a very popular option among senior citizen investors as they give them assured returns, which are generally 1% to 3% higher than the interest rates being offered by banks for similar periods. Below is the list of Individuals and Group enterprises who can invest in corporate FDs.
Below is the list of documents needed by individuals to open a CFD.
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