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Company Fixed Deposit is the deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest.

Why is interest from Company Fixed Deposit higher than Banks?
Company Fixed Deposits have always offered interest which is 2-3% higher than Bank Deposit rate, becaue they have to pay higher interest to banks for borrowing money.

Interest is paid on monthly/quarterly/half yearly/yearly basis or on maturity, and is sent either through cheque or through Electronic Clearing System basis.

TDS is deducted if the interest on fixed deposit exceeds Rs.5000/- in a financial year.

No, at the end of deposit period, the principal is returned to the deposit holder.

Ignore the unrated Company Deposit Schemes. Ignore deposit schemes of little known manufacturing companies. For NBFCs, RBI has made it mandatory to have an 'A' rating to be eligible to accept public deposits. One should go further and look at only AA or AAA schemes.

Within a given rating grade, choose the company with a better reputation.

Once you decide on a company, choose the schemes that have given a better return. Unless you need income regularly, you should prefer cumulative schemes to regular income options since the interest earned automatically gets reinvested at the same coupon rate, resulting in better yields. It also gives you a lump-sum amount at one go.

It is better to make shorter deposit of around 1 year to 3 years. This way, you can not only keep a watch on the company's rating and servicing, but also have your money back in case of an emergency.

Check on the servicing standards of the company. You should not invest in companies that care little about investor services, like promptly sending interest warrants or the principal cheque.

Involve your Financial Planner / Investment Advisor for advice in all your transactions. Do not bypass and invest directly.

Check whether the company accepts outstation cheques and makes payment through at par cheques, especially if you do not live in the same city where the company is situated.

Companies registered under the Companies Act 1956, such as

Manufacturing Companies.

Non-Banking Finance Companies.

Housing Finance Companies.

Financial Institutions.

Government Companies.

A Non-Banking Non-Finance Company (Manufacturing Company) can accept deposits subject to following limits. Upto 10% of the aggregate of paid-up share capital and free reserves if the deposits are from shareholders or guaranteed by the directors.

Otherwise upto 25% of the aggregate of paid-up share capital and free reserves.

A Non-Banking Finance Company can accept deposits upto following limits:

An Equipment Leasing Company can accept four times of its net owned fund.

A Loan or Investment Company can accept deposit upto one and half time of its net owned funds.

Company Fixed Deposits can be accepted by a Manufacturing Company having duration from 6 months to 3 years. Non-Banking Finance Companies can accept deposit from 1 year to 5 years period. A Housing Finance Company can accept deposit from 1 year to 7 years.

Companies that offer interest higher than 15%.

Companies that are not paying regular dividends to the shareholders.

Companies whose Balance Sheet shows losses.

Companies that are below investment grade (A) or less rating.

There is an old saying ["Don't Put All Your Eggs In One Basket".]

Company Deposits should be spread over a large number of companies. This will help you to diversify your risk among various companies/industries. Never put more than 10% of your total ingestible funds in one company.

These schemes are offered by the Government of India.

Safe, secure and risk-free investment options.

No Tax Deduction at Source (TDS).

Nomination facility is available.

Nomination can be changed at any time

These instruments are transferable to any part of India.

Attractive rates of interest.

Post Office Monthly Income Scheme

Post Office Time Deposit Scheme

Post Office Savings Account

National Savings Certificate

Govt schemes offered through Post Offices and Nationalised Banks:

Public Provident Fund

Senior Citizen's Savings Scheme

Salient Features

Interest rate of 8% per annum payable monthly.

Maturity period is 6 years.

Minimum investment amount is Rs.1000/- or in multiple thereof.

Maximum amount is Rs. 4.5 lakhs in a single account and Rs. 9 lakhs in a joint account.

Premature encashment facility after one year.

Interest income is taxable, but no TDS.

The Only Post Office scheme where monthly interest is payable.

Account can be opened by an individual, two/three adults jointly, and a minor through a guardian.

A minor having attained 10 years of age can open an account in his/her own name directly.

Non-Resident Indian / HUF cannot open an Account.

Minors have a separate limit of investment of Rs. 4.5 lakhs and the same is not clubbed with the limit of guardian.

A separate account is opened for each deposit.

Any number of accounts can be opened subject to the maximum prescribed limit.

Facility of automatic credit of monthly interest to saving account if accounts are at the same post office.

Facility of premature closure of account after 1 year to 3 years @ 2.00% discount.

Deduction of 1% if account is closed prematurely at any time after three years.

Facility of reinvestment on maturity of an account.

Interest not withdrawn does not carry any interest.

Maturity proceeds not drawn are eligible to earn savings account interest rate for a maximum period of two years.

Account is transferable to any Post Office in India, free of cost.

Nomination facility is available.

Rebate under section 80 C is not admissible.

Most suitable scheme for senior citizens and for those who need regular monthly income.

Deposits are exempt from Wealth Tax.

Salient Features

Rs. 1000/- grows to Rs. 1601/- in six years.

Minimum investment Rs. 500/-

Certificates can be pledged as security against a loan to banks/ Govt. Institutions.

A Tax saving investment under Sec 80C

Interest income is taxable, but no TDS.

Rate of interest 8% compounded half yearly

Two adults, individuals, and minor through guardian can purchase.

Companies, Trusts, Societies or any other Institutions are not eligible to purchase.

Non-resident Indian/HUF cannot purchase.

No premature encashment.

Annual interest earned is deemed to be reinvested and qualifies for tax rebate for the first 5 years under section 80 C of the Income Tax Act.

Maturity proceeds not drawn are eligible to Post Office Savings Account interest for a maximum period of two years.

Facility of reinvestment on maturity.

Facility of encashment of certificates through banks.

Certificates are encashable at any Post Office in India before maturity by way of transfer to desired Post Office.

Certificates are transferable to any Post office in India.

Certificates are transferable from one person to another person before maturity.

Duplicate certificate can be issued for in case the original one gets lost, stolen, destroyed, mutilated or defaced certificate.

Nomination facility is available.

Facility of purchase/payment to the holder of Power of Attorney.

Tax Saving instrument - Rebate admissible under section 80 C of the Income Tax Act.

Deposits are exempt from Wealth Tax.

Salient Features

The rate of interest is 8% compounded annually.

The minimum deposit is 500/- p.a

The maximum is Rs. 70,000/- p.a

Interest is totally tax free.

Tax saving instrument under section 80C.

Loan facility available from third year.

Withdrawal after 7th year.

The Public Provident Fund Scheme is a statutory scheme of the Central Government of India.

The Scheme is for 15 years.

One deposit with a minimum amount of Rs.500/- is mandatory in each financial year.

The deposit can be in lump sum or in convenient installments, not more than 12 installments in a year or two installments in a month, subject to total deposit of Rs.70,000/-.

It is not necessary to make a deposit in every month of the year. The amount of deposit can be varied to suit the convenience of the account holders.

The account in which deposits are not made for any reason is treated as discontinued, account and such an account cannot be closed before maturity.

The discontinued account can be activated by payment of the minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year.

The account can be opened by an individual or a minor through the guardian.

Joint account is not permissible.

Those who are contributing to GPF Fund or EDF account can also open a PPF account.

A Power of Attorney holder can neither open nor operate a PPF account.

The grand father/mother cannot open a PPF on behalf of his/her minor grand son/daughter.

The deposits shall be in multiples of Rs.5/- subject to minimum of Rs.500/-.

The deposit in a minor account is clubbed with the deposit of the account of the guardian for the limit of Rs.70,000/-.

No age is prescribed for opening a PPF account.

Interest is not contractual but the rate is notified by the Ministry of Finance, Govt. of India, at the end of each year.

The facility of first withdrawal in the 7th year of the account subject, to a limit of 50% of the amount at credit preceding three year balance. Thereafter one withdrawal in every year is permissible.

Premature closure of a PPF Account is not permissible except in case of death.

Nominee/legal heir of PPF Account holder on death of the account holder cannot continue the account. The account has to be closed in such case.

The account holder has an option to extend the PPF account for any period in a block of 5 years at each time.

The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible till the account is closed.

One withdrawal in each financial year is also admissible in such account.

A PPF account can be opened either in a Post Office or in a Nationalsed Banks.

The Account is transferable from one Post Office to another and from Post Office to Bank or from a Bank to a Post office.

Account is transferable from one Bank to another bank as well as within the bank to any branch.

Deposits in PPF qualify for rebate under section 80-C of Income Tax Act.

The interest on deposits is totally tax free.

Deposits are exempt from wealth tax.

The balance amount in the PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability.

Salient Features

Money doubles in 8 years and 7 months.

Facility of encashment after 2 ½ years.

Minimum investment of Rs. 500/-.

Interest income taxable, but no TDS.

Rate of interest 8.40% compounded annually.

Two adults, individuals and minor through guardian can purchase.

Companies, Trusts, Societies or other Institutions are not eligible to purchase.

Non-Resident Indian/HUF are not eligible to purchase.

Maturity proceeds not drawn are eligible for Post Office Savings account interest for a maximum period of two years.

Facility of reinvestment on maturity.

KVPs can be pledged as security against a loan to Banks/Govt. Institutions.

KVPs are encashable at any Post Office before maturity by way of transfer to desired Post office.

KVPs are transferable to any Post Office in India.

KVPs are transferable from one person to another person before maturity.

Duplicate can be issued for lost, stolen, destroyed, mutilated and defaced patras.

Nomination facility is available.

Facility of purchase/payment of Kisan Vikas Patras to the holder of Power of Attorney.

Rebate under section 80 C is not admissible.

Deposits are exempt from Wealth Tax.

Salient Features

Interest payable annually but calculated quarterly at following rates:

Minimum amount of deposit is Rs.200/-.

Account can be closed after 6 months but before one year without any interest.

Facility of redeposit on maturity of an account.

No interest is payable on undrawn interest amount.

Account can be opened by an individual, two adults jointly and minor through guardian.

A Minor who has attained the age of 10 years can open the account in his/her own name to be operated directly.

Non Resident Indian / HUF can not open the account.

Any number of accounts can be opened.

Two, three and Five years accounts can be closed after one year at a discounted rate of interest.

Deposits not drawn on maturity are eligible to saving account interest rate for a maximum period of two years.

Account can be pledged as security against a loan to banks/ Government institutions.

Accounts are transferable from one Post office to any Post office in India.

Rebate under section 80-C is not admissible.

Interest income is taxable.

Deposits are exempt from wealth tax.

Nomination facility available.

Salient Features

9% interest per annum payable quarterly.

Minimum Deposit: Rs 1000 and multiples thereof.

Maximum Limit : 15 Lakhs.

The scheme is for 5 years and can be extended for a further period of 3 years.

Premature closure facility is available after 1 year with nominal penelaty.

Risk free investment.

Individual aged of 60 years and above can invest.

Retiring employees aged 55 years and above can invest under scheme.

Joint account can be opened with spouse.

We are all well aware that interest rate on Small Saving Scheme has been reduced to 5% in the last four years. The decline in interest rate was initiated from January 2000.

The interest rate on December 31, 1999 in Monthly Income Scheme was 13% which came down to 8% with effect form March 31,2003. The decrease in the interest rate had a negative impact on the lives of Senior Citizens. The dwindling interest income was cause of concern and hardship for them .Interest income is a lifetime benefit for the senior citizens. The Budget for 2004-2005 had two beneficial aspects, as far as small Saving Schemes are concerned. The first one is that rates of interest on small savings have been kept stable with no change in rate of interest in any Post Office scheme. The second benefit came with the introduction of Senior Citizen Saving Scheme-2004 offering a higher rate of interest as compare to any other small savings scheme. The scheme has come into operation from August 2, 2004. The main objective of the scheme is to provide relief to the senior citizens and to check the further decline in their interest income.

Salient Features

Minimum amount Rs 20/- in case of noncheque account, Rs.500/- in case of cheque account.

Minimum balance of Rs.500/- is to be maintained for a cheque account.

Account is opened with cash only.

Maximum balance permissible is Rs. 1,00,000/- in a single account and 2,00,000/- in a Joint account.

Two/Three adults, individuals, minor through guardian can open an account.

A minor having attained 10 years of age can also open an account directly.

One individual account and one joint account can only be opened at a Post Office.

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