How Can You Benefit from Company fixed deposits

Company fixed deposits have regained their popularity with the investor. They offer healthy returns, which sometimes are much higher than bank FDs. There are many benefits associated with this kind of investment as it gives you more returns compared to the banks.

Today, there are a number of entities offering FDs that fall under this bracket. These include housing finance providers, government-owned companies, financial and non-banking financial institutions. These type of investment practice falls under the purview of the Companies Act, Section 58A.

The benefits of company FDs are given as under:

• Better returns: In most cases interest rates offered on such FDs is quite high, especially in comparison to bank FDs. With a reliable name, a company FD is one of your best ways of getting good returns on your money.
• Quick returns: Unlike most kind of investments, this offers one of the fastest returns in the market. The interest period can be fixed according to a month, quarter, half an year or on yearly basis. It assures you one of the most flexible schedules on any investment.
• With a little juggling you can reduce your taxes. One need not pay Income Tax at Source if the income is less than or upto the specified limit as per norms. Keeping this in mind, you can spread your investment across different companies and avoid TDS at all.
• Safe: While a company FD may be reliant on the performance of the relevant company, it is still much safer than other methods. You cannot misplace or lose it. since it is non-transferable, no one can snatch it from you. However, you can name your nominee.

Factors top look out for:

• Research: As in case of any investment you need to do some research before you take out the chequebook. Start with checking the credit rating by certified agencies like CRISIL or ICRA of the company you are going for. Careful scrutiny should continue even after you have parked your funds. You will need to review your investment when your deposit needs maturity. You will then need to decide whether you want to continue or reshuffle.
• Avoid: If something sounds too good to be true, it probably is. Avoid companies that are offering interests far higher than the market rate. Stay even farther away from unlisted companies. They are dicey at best and potential ruin at worst.
• Be safe: As the saying goes, do not put all your eggs in the same basket. Spread your investment across companies.

After a spate of scams and under-performing company fixed deposits investor faith in these had taken a hit. However, with a little care and research, this can easily be avoided, giving you the benefit of one of the best performing investment options in the market today. It is always wise to keep your eyes and ears open while making a financial decision and make an informed decision so that you might not regret later on.