Company fixed deposits are rather popular in India, given the fact that they beat most fixed interest bearing securities, including government securities and bank deposits.
How and where to buy company fixed deposits?
You basically can have two choices when buying a company fixed deposit:
1) Buy through a broker
There are many brokers in the country that help you buy company fixed deposits. For example, many individuals strongly advocate buying through Bajaj capital. This is one of the oldest companies in the business.
It is also lead manager to many of the companies. They also provide door to door service, where the exceutive will help you fill your company fixed deposit.
Your stock broker too would be able to help you to place a company fixed deposit.
Normally, they do have an association with the lead brokers.
2) Investing in company fixed deposits through the company
You can also approach the company directly if you wish to place deposits. At the moment there is no facility to make an online application. This is because there is a need to fulfil know your customer requirements or what is called KYC.
Read: What Is KYC?
Brokers like Bajaj Capital would also help you fill and meet your requirements through the documentation process. Now, it is important to remember that many top brokers also act like consultants. For example, they also offer you advise on the tax deducted at source, guidance on the AAA ratings and safety along with high returns.
They are prettty professional and most of the executives also know their business well.
Things to remember when buying a company fixed deposit
When buying a company fixed deposit, you should remember the following:
Company fixed deposits will attract a TDS, if the interest amount is more than Rs 5000, unless you fill the form 15g or form 15h. Normally, in the case of banks it is Rs 10,000, after which a TDS is applicable.
Read: What is form 15g and 15h
2) Company fixed deposits are unsecure
Company fixed deposits are not secure deposits. What this means is that if the company defaults, your money could disappear. You must seek professional advise before investing.
You must also look at deposits that are AAA rated, which rarely default in servicing principle and interest amounts.
3) Interest rates
Interest rates on company deposits are normally higher than bank deposits. A good quality deposit can offer an interest rate that is higher by 1-2 per cent. It is not a bad proposition in a falling interest rate regime.
Why we like company fixed deposits?
Company deposits are not as liquid as Bank deposits. You need to send the certificate to the company for redemption. However, they offer higher interest rates, which make them lucrative. In fact, at a time when interest rates are falling, they are excellent picks. We have no hesitation in recommending strong companies like Bajaj Auto company fixed deposits or the deposits from Mahindra Finance.
Buy them in case you are looking to invest.