Things you Must Know About Corporate Fixed Deposit

Corporate fixed deposits are offered by private and public sector companies rather than commercial and cooperative financial institutions. Hence, these fixed deposits are also known as company FDs.

Corporate FD rates are comparatively higher than conventional fixed deposits. However, investors must know a few aspects of these financial products before availing them. 

For example, company FDS is offered under Section 58A of the Companies Act, 1956. This Act states that companies will provide more priority to their shareholders instead of fixed deposit customers during bankruptcy or insolvency.

Hence, it is necessary to opt for company fixed deposits that come with ratings provided by agencies like ICRA and CRISIL.        

Also, company deposits don’t provide any interest if prematurely withdraw after 3 to 6 months of investment. A penalty fee of 0.5% to 1% is charged if withdrawn after that.

The lock-in period of company FDs is limited to 5 years as compared to standard fixed deposits. 

Corporate FDs attract TDS if the interest earned is more than Rs.5,000. Individuals below the threshold of taxable income can file Form 15G to avoid the same.

Lastly, corporate FDs also offer the facility of non-cumulative returns and loans against the deposit, like traditional fixed deposits.

Also, Read This: How To Check Provident Fund Status?