NBFC, interest rate, bank FDs, Company Deposits, risk, premature withdrawal, investing, business news

Bank FD or Company Deposit: Which option is much better for interest?

Finance

New Finance Year Fixed Deposit Can Be Good for Investors. This is because high interest rates are available on deposits. A few weeks ago, State Bank of India (SBI) had increased 10-25 basis points for fixed deposits for all the periods. It is expected that other banks can make similar announcements.

According to a report of April 4, 2018, the non-banking finance companies (NBFCs) such as Shriram Transport Finance, Mahindra and Mahindra Financial Services and HDFC had increased five to 50 bps over selective periods. On April 12, it was announced that Mahindra Finance is offering 25 BPS additional interest on depositing the online company’s website.

This can be good news for investors who are looking for alternatives to fixed income investments. However, the question is who should you choose – bank FD or company deposit Most banks offer less interest than the FD Company Deposit, but there is less risk than Fixed Deposit.

Know what happens Company Deposit: Company Deposits are issued by non-banking finance companies (NBFCs) and manufacturing companies. The company raises funds by issuing such a deposit. These are unsecured loans in a way that does not guarantee investors in the default position. This is because the company deposits more interest than the bank deposits and they have higher risk compared to the FD. Due to high interest rates, many retail investors are attracted towards it, especially senior citizens.

How much is the interest on Company Deposit:
The company gets 50 to 100 bps more than the fixed deposit on the deposit. Senior citizens get 25 to 40 bps more than normal rates. Before cutting income tax, SBI currently pays an interest of 6.4 per cent to 6.75 per cent over a period of 10 years from a year. For senior citizens, the rate is 6.9 per cent to 7.25 per cent. In comparison, Diwan Housing Finance (DHFL), like NBFCs, pays interest from 7.7% to 8% on their corporate deposits. For senior citizens this rate is between 7.95 to 8.25.

How much does it cost:
Bank FD is a very safe financial product. That is why investors like to invest in it. At the same time, the FD offered by the public sector bank is also safer as these are supported by the government. Bank FD is safer than Company Deposit as these rules apply to Reserve Bank of India. However, if the bank becomes the default, under your Deposit Insurance and Credit Guarantee Corporation, your deposit in the bank gets up to one lakh rupees insured. But this thing can not be applied to the company FD. Returns are more than the bank’s FD but the risk is also high. If you default on the company, you lose all your money.

What is the company doing in the deposit?
What to do if you want to invest: If you want to invest in a company deposit then invest in a company that has a high credit rating. Ratings Agency CARE, Crisil, ICRA, Brickwork Company give rating to the deposits.

Immature withdrawals:
Generally, the company can withdraw from deposit and bank FD before finishing tenure. Penalty also appears on this. It depends on every institute. Keep in mind that some banks give FDs without unregistered withdrawals. For information, please inform that the company deposits more penalty on immature withdrawal.

Taxation: Taxes on bank FD and company deposit are taxed on the basis of income tax. Therefore, the higher the tax bracket, the more tax they pay. Under the Income Tax Act 1961, TDS is deducted on the interest of more than Rs 10,000 on the bank FD. At the same, there is a limit of Rs 5000 on Company Deposit. You can claim by filling your TDS Form 15g.

Bank FD can be made from seven days to 10 years. Although NBFCs are for six months to 10 years. FD or company deposit is for those who want regular income and are in the lowest tax bracket.