Friday, 12 November 2010

Company Fixed Deposits, An Interesting Investment Option

According to Section 58A of Companies act a company can invite fixed deposit from public. This Fixed deposit is known as Company Fixed Deposit. Under this deposit scheme company will pay a fixed rate of interest for a stipulated period of time. These deposits can be collected by financial institutions and Non-Banking Finance Companies (NBFCs).

Advantage of Company Fixed Deposits

High Interest. The investor will get a good rate of interest from this Company Fixed Deposits. Normally the companies pay more interest than the interest rate of Bank Fixed Deposits.

Short Term Deposits. Normally this fixed deposit allows a short term option the investor can opt and the very short lock in period such as 6 months.

Income Tax. The Company may deduct tax (TDS) as per the existing income tax rules.  At present up to Rs. 5000 of interest there is no TDS. But the investor can deposit in various companies so that the interest will not be more than the TDS limit.

Disadvantage of Company Fixed Deposits

Company Fixed Deposits are unsecured, and this feature makes it a risky investment option.

How can we make it beneficial?

Choose the right company. If you can select the right company we can make this deposit an interesting investment option. You should choose the right one and should avoid the bad one.

Deposit in different companies. You should spread your deposits in a large number of companies with different type of companies. If you do so you can diversify your risk in different industries or institutions.

Deposit only a portion of investment. Invest only around 10% of your investment in Company Fixed Deposits. Choose other type of financial products. Keep in mind that does not put all your eggs in one basket.

Keep the deposit for the right period. Experts say that one year to three year duration is ideal for company fixed deposits. Fix the time period according to the rate of interest.

Keep an eye over your deposit .You must review the performance of the company time to time and decide whether the investment should be renewed or reshuffled. Watch the share prices, financial reports etc. in newspaper and other publications and confirm the performance of the company.

Totally company fixed deposit is a very good investment option for those who wish to deposit their money in any fixed income investment and the rate of interest also may be very good than all other fixed income deposit and the risk involved in it is not seriously affected by the market fluctuations.

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  1. [...] give a good interest for these fixed deposits. You can deposit money in fixed deposit in your own bank where you have a savings account or any other bank (you have to submit residence [...]

  2. [...] Some approved companies accept fixed deposit from General Public and these investments and comparatively low risk and steady income schemes. But when you choose the company, go for some good companies. Read more about company fixed deposits. [...]

  3. i want to invest in company fixed deposit can any one suggest me how can i invest in company