Fixed Deposits

Company Deposits:

Company deposits like bank deposits are also fixed term deposits carrying a prescribed rate of interest. If you are looking for regular return which are higher than those offered by banks, then investing in company deposits is a handy product for both individuals and corporate. As per latest regulatory guidelines, it is mandatory for rated companies to take deposits. And we at Security promote rated companies which are AA+ or AAA in order guarantee the safety and returns of your investment.


1. How to choose a Corporate Fixed Deposit Scheme?

Answer: Firstly, ignore unrated Company Deposit Schemes and schemes of little known companies. Always look at AA+ or AAA schemes. Choose the company with a better reputation. Once you choose a company, choose the schemes that have given a better return. If you don’t need regular income, opt for cumulative schemes over regular income options. 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 the track record of the company on parameters like prompt dispatch or payment of interest warrants or the principal. Always involve your Financial Planner / Investment Advisor for advice in all transactions.

2. Is an FD receipt provided by companies like banks? What is the interval for interest payable?

Answer : Yes, companies also provide an FDR (Fixed Deposit Receipt). This receipt is provided post confirmation on the realization of funds, that is, post confirmation on receipt of funds in the company’s account. Like banks, for company fixed deposits too, the investors can choose to have the interest paid monthly, quarterly, semi-annually or annually.

3. Is TDS deducted on the interest earned from a company fixed deposit?

Answer : TDS is deducted only if the interest earned from a company fixed deposit is more than Rs. 5,000/- in a financial year.

4. What is the minimum and maximum period of holding a Company Fixed Deposits?

Category Minimum Duration Maximum Duration
Manufacturing Companies 6 months 3 years
NBFCs 1 year 5 years
Housing Finance Companies 1 year 7 years

5. Can fixed deposits be used as collateral for personal or business loan?

Answer : Company fixed deposits can be used as collateral while securing loans from certain Housing Finance Companies and NBFCs. Details on acceptable collateral can be sought while approaching these institutions for loans.

6. Can a company fixed deposit be closed prematurely?

Answer : Premature closure is mostly not allowed by companies. Some companies allow premature settlement prior to the first 6 month period of the deposit. However, the closure process is very cumbersome.

6. Do I have the option to choose a nominee for a company fixed deposit?

Answer : Yes, the application form has an option for choosing a nominee.

7. What happens to the deposit in case of demise of the fixed deposit holder?

Answer : The status of the deposit in case of death of the holder depends on the type of holding of the deposit.

Mode of Holding Procedure
Joint - Anyone or Survivor In case of demise of either of the 2 holders, the survivor has to inform the company and submit a copy of death certificate. On receipt of the intimation and the death certificate, the company deletes the name of the deceased holder and survivor receives the proceeds on maturity
Joint - Either or Survivor In case of demise of the first holder, the survivor needs to intimate the company of the same along with the death certificate and can then claim the deposit proceeds on maturity.
In case of demise of the second holder, the first holder can get the name of the demised holder deleted and appoint a new second holder.
Jointly Both The surviving holder can claim for the deposit proceeds on maturity by informing the company of the death of the joint holder along with the death certificate.
Single with Nomination The deposit proceeds on maturity will be paid to the nominee(s), however, in case the deceased left a ‘Will’ then due process shall be followed as per the companies norms and the proceeds be transferred as per the terms of the ‘Will’.
Single without Nomination The heirs of the deceased have to comply with various formalities like providing a ‘Will’ or a ‘Succession Certificate’ to claim the maturity proceeds.

Post Office Schemes:
These are offered by the Government of India and are a safe, secure and a risk free investment option. They include Public Provident Fund (PPF), National Savings Certificate (NSC) and Kisan Vikas Patra (KVP), Senior Citizens Savings Scheme (SCSS). The minimum investment required is Rs. 500 per annum. The PPF and NSC also qualify for tax deduction under section 80C.

What are the features of Post Office Schemes?
Answer: Features of Post Office Schemes are listed below:
They are a safe and a secure investment option offered by the Government of India
There is no tax deduction at source (TDS) except in Senior Citizen Scheme.
They come with the facility of nomination
There is a provision of changing the nomination anytime.
They can be transferred anywhere within the country
They offer an attractive rate of interest
They can be held jointly or solely

What are the types of Post Office Schemes available and what are their features?
Answer: Types of Post Office Schemes are listed below:



Post Office Monthly Income Scheme

Account may be opened by individual or jointly by two/three adults
NRIs/ HUF cannot open account
8% per annum is paid monthly as interest premature encashment facility is available only after 1 year with penalty of 2% & 1 % if prematurely broken between 1-3 yrs & 3-6 yrs respectively
Interest income is taxable but there is no TDS
5% bonus is payable on maturity.
Interest is payable
Nomination facility available
Most suitable scheme for senior citizens and for those looking for a regular monthly income

Post Office Time Deposit Scheme

Account holder can be individual, joint or minor above the age of 10 years.
Account cannot be opened by NRIs/ HUF
Minimum amount of deposit is Rs 200/- and there is no maximum amount
Facility of redeposit is available after maturity
Account can be closed after 6 months but before 1 year without interest
No rebate under section 80 C
Interest income is tax payable
Deposits are exempted from Wealth Tax
Interest is payable annually but is calculated quarterly
Nomination facility is available
Account can be transferred from one post office to any other in India

Public Provident Fund

It is a statuary scheme of Central Govt of India
The scheme is for 15 years
One deposit of Rs 500/- is compulsory in each financial year
8% is the rate of interest compounded yearly
Minimum deposit is 500/- and maximum 7000/- pa
The deposit can be in a lumpsum or in 12 installments annually
The deposit need not be made every month. Thus it suits the convenience of the investor.
An account where the deposit is not made, is termed as discontinued account and it cant be closed before maturity
It can be reactivated by paying the minimum deposit ( Rs 500/-) and a penalty of Rs 50/-
Withdrawal is permissible every year from 7th financial year 50% of balance amount.
Joint account is not permissible
Premature closure is not permissible unless it’s a case of death
Deposits in PPF qualify for rebate under section 80-c of Income Tax Act
The interest is totally tax free
Nomination facility is available
Loan facility available from 3rd financial year
The best option for long term investments

Senior Citizens Savings Scheme

Main objective of its launch in 2004 was to check the decline in interest income of senior citizens
9% interest per annum payable quarterly
Minimum deposit Rs 1000/- and maximum Rs 15 Lacs
Premature closure facility available with penalty
Individuals of age 60 years and above can invest
Retiring individuals under V.R.S age 55 years can invest within 03 months of V.R.S. with documentary evidence.
Facility of joint account with spouse
Investment is completely risk free.

Post Office Savings Account

Minimum amount of Rs 20/- can be invested, in cash.
Minimum amount of Rs 50/- can be invested , in cheque
Minimum balance of Rs 500/- has to be maintained in cheque account
Maximum balance permitted is Rs 1 lakh in single account
Maximum balance permitted is Rs 2 lakh in joint account
Account can be open on behalf of minor also.
Interest of P.O. Saving a/c in tax free.

National Savings Certificate

A Tax saving instrument under SEC 80C
Can be purchased individually or jointly or by minor through guardian
Cannot be purchased by companies, societies, trusts, NRIs, HUFs.
Rate of interest is 8% compounded half yearly
Minimum investment is of Rs 500/- and no limit fro maximum amount
Annual interest has to be reinvested and qualifies for tax rebate for first 5 years under section 80C
Facility of reinvestment on maturity
Certificates can be transferred before maturity but cannot be encashed
Interest income is taxable but no TDS
Deposits are exempted from wealth tax
Nomination facility available
Facility of getting a duplicate certificate available in case of loss of original one.

Kisan Vikas Patra

Money gets doubled in 8 years and 7 months
Interest rate of 8.00% is compounded half-yearly.
Encashment facility available after 2 years 6 months
Can be purchased by individuals, 2 adults jointly or minor over age of 10 years through guardian
Cannot be purchased by companies, societies, trusts, NRIs, HUFs.
KVPs can be encashed before maturity by transfer to another post office of investor’s choice
Facility of reinvestment on maturity
KVPs can be transferred from one person to another
Interest income is taxable but no TDS
Deposits are exempted from wealth tax
Nomination facility available
Facility of getting a duplicate KVP is available in case of loss of original one
Facility of purchase/payment of KVP to holder of power of attorney

National Pension Scheme:

National Pension Scheme (NPS)  is a voluntary defined contribution pension system administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA), created by an Act of the Parliament of India. It was launched on 1st January 2004 to encourage not only the employees of the state and central governments but also the citizens working in private and public sectors.
A subscriber of NPS is allotted a unique Permanent Retirement Account Number (PRAN), which can be used from anywhere in India.
NPS offers two types of accounts:
Tier – 1 Account: is a non-withdrawable account meant solely for savings and utilization post retirement. The funds can only be withdrawn once the subscribe turns 60 years of age.
Tier – 2 Account: is a freely withdrawable account form which the subscriber can make withdrawals as per their requirements.  
Tier-2 Account cannot be opened without opening a Tier-1 Account.
A minimum contribution of Rs. 6000/- per year with a minimum one time contribution of Rs. 500/-is required to be made under Tier-1 Accounts. Under Tier-2 Accounts, the minimum contribution amount is Rs. 2000/- per year and Rs. 250/- one time.

Some of the benefits of this scheme are:
A voluntary pension scheme eligible for all Indians between the age group of 18 to 60
It is a transparent and cost effective as contributions are invested in pension fund schemes and the value of the investment can be checked daily
Opening an NPS account and acquiring a PRAN number is simple.
As a subscriber is identified by a unique PRAN number, change of employment does not affect your existing pension savings
It is regulated by PFRDA with transparent investment norms. The funds are monitored and managed by fund managers of NPS Trust.
Tax benefits on the contribution made towards NPS can be availed under section 80C of the Indian Income Tax Act.

What documents are required to open an NPS account?
Answer: Basic identity and address proof are the only documentary requirements.
Address Proof can be any one of the following can be submitted Passport, Ration Card with photograph, Bank Passbook, Aadhar Card, etc.
Identity Proof can be any one of PAN Card, Aadhar Card and Photo identity Card, Passport, Ration Card with photograph, Job Card issued by NREGA, Electricity Bill, Water Bill and Bank Passbook, etc.

What class of assets are permitted to investment under NPS?
Answer: Under Tier I, there is only one scheme (default) available to Central/State Govt. wherein the       contributions are allotted to three Public Sector Pension Fund Managers; SBI Pension Funds Private Limited, UTI Retirement Solutions Limited and LIC Pension Fund Limited. These pension funds invest their AUM in the proportion of up to 55% in Government Securities, up to 40% in Debt Securities and up to 5% in Money Market Instruments.

Under Tier II, assets under consideration for investment are segregated based on their risk returns:
Asset class E : "High return, High risk" (equity market instruments)
Asset class G : "Low return, Low risk" fixed income instruments
Asset class C : "Medium return for credit risk" bearing fixed income instruments.

Can I choose where my funds are invested under NPS?
Answer: NPS gives two options, Active or Auto. Under Active Choice, the subscribers can choose a fund manager and provide the ratio in which their funds can be invested among the asset classes.
Auto Choice is ideal for individuals who either do not have the necessary knowhow for choosing the allocation ideal for them or do not want to make that choice. Under this option, the investments are made in a life-cycle fund. Here, the ratio of funds invested across three asset classes will be determined by a pre-defined portfolio. At the lowest age of entry (18 years) the auto choice will investment 50% of wealth in E Class, 30% in C Class and 20% in G Class. These ratios of investment will remain fixed for all contributions until the subscriber turns 36. From 36 years on, the percentage of contribution in E and C asset class will decrease annually while it increases in G class annually till it reaches 10% in E, 10% in C and 80% in G class at age 55.


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