Fixed deposits, more commonly known as FDs, are one of the most sought after instruments for investing money for a stipulated period in lieu offering good returns.
FDs offered by corporates and housing finance companies (HFC) offer a pre-determined rate of interest and even render special schemes for some segments like senior citizens. This helps organizations to raise funds and deploy them for business intents while on the other hand, depositors enjoy assured interest earnings on their investment.
Investors may be wary of some factors like what can be the benefit of investing in Corporate FD or in fixed deposits offered by HFCs rather than equity, mutual funds or even Bank FDs. How safe are they and are there any tax norms attached to these earnings? Let us look at the answers here..
Benefit of investing in Corporate FD:
- For those averse to capital market risks and uncertainty, fixed deposits are the right choice as they are the safest investment bet. Any change in the FD rates will only affect new investors. Even in that, fixed deposits offered by corporates and HFCs furnish a comparatively higher rate of interest than Bank FDs. For PNB Housing FD rates, click here
- Investors have little to worry about as their deposits are locked for a certain number of years, during which they can opt for non-cumulative interest payment of their choice — monthly, quarterly, half-yearly or annually — or cumulative, where the principal amount and the total interest is paid out on maturity
- The power of fixed deposit lies in compounding, where the money earned over a period is reinvested
- Many deposit taking corporate houses and housing finance companies offer fixed deposits through a wide network of brokers and relationship managers across the country who provide impeccable service to the customers. With PNB Housing, you can go to the extent of availing statement of accounts, raising queries and speak to the officials through live chat through their customer portal. Feature like auto renewal of your deposit automatically without any hassle is also available.
Safety:
- Not all companies and HFCs can offer deposits in India. Apex bodies issue licenses to applying organizations, only after which they can accept deposits from public
- Corporate FDs and those offered by HFCs are rated by credit rating agencies depending upon various factors. Fixed Deposits rated as ‘AAA’ or higher indicate high levels of safety and can be considered by investors. To know the credit rating of PNB Housing fixed deposit, click here
- FDs are considered as safe investment, however, to mitigate any miniscule risks one should verify the offering company’s fundamentals, financials, reputation and brand vintage along with credit ratings before executing the transaction
Tax Liability:
- Just like bank FDs, interest earned on corporate FDs and fixed deposits offered by HFCs are also taxable at the highest income tax bracket of the deposit holder. However, the investor needs to pay tax only if the annual interest income from the deposit is above INR 5,000.
FDs offered by companies and HFC can be a great bet laden with various benefits and exciting rate of returns, almost at par with what most Indian investment instruments offer, that too with minimal risk. However, it is prudent to do a thorough research before you pick your favourite fixed deposit.
