NRIs by way of capital contribution, can invest in bank deposits, company deposits, shares, debentures and mutual fund. A large number of NRIs are encouraged to invest in stock market, mutual funds, Certificate of deposits and other fixed deposits. NRE accounts have better interest rate than Non Resident Ordinary account. Your parents or spouse can access the same account wherein you can save your rental income, interest income received from fixed bank or corporate deposits, profits earned through mutual funds, shares and debentures etc.
If you are planning to invest in Certificate of Deposit, then you must open an FCNR account. Foreign Currency Non Resident account is also held on repatriation basis.
Corporate fixed deposit or a Company fixed deposit to make it sound simpler is an investment avenue which is offered by various Financial institutions, NBFCs or other Public Limited Companies that earns a fixed rate of return over a period of time. The yields are usually higher than a Bank fixed deposit therefore these investments are considered slightly riskier than Bank deposits as they carry Credit Risk since it all depends on the functioning and performance of the corporate. The investor cannot sell the documents to recover his invested amount even if the company defaults as there are no assets backing them up.
Credit rating of the company plays the significant role in investor`s decision. Opt for a company with AA or AAA rating, as company rated below could be risky.
It offers the potential to earn compounding interest on your money by re-investing the principal amount along with the interest earned. In terms of flexibility you can choose the tenure ranging from 1 to 10 years and opt for the interest frequency as per your requirement. Most of the issuers today offer monthly, quarterly, half yearly or annual options. It is advisable to invest in these deposits at regular intervals for a fixed amount and tenor so that on maturity it could act as steady income stream and to avoid the major risk of investing in these i.e. credit risk, spread your investments with different companies for different tenure to minimize the risk.
Taxation of Company Deposits
There is no tax concession or benefit on either of the amount invested or on the interest earned on the investment, annual interest earned on a deposit amount will get added to the total income of an investor.
What is Credit rating
A credit rating is an assessment of general credit worthiness of Individuals, companies & countries and its likelihood of not defaulting. It is based on the history of borrowing and repayment as well as the availability of assets and the extent of liabilities. Credit rating for companies is usually done for the debt instruments such as debentures, commercial papers, bonds, fixed deposit etc so that the investor can get the idea about the financial strength and creditworthiness of the company. It is an ultimate guide for Investors of debt instrument and helps in analyzing the future ability of an issuer to make the timely payments of principal amount and interest on their debt instrument.
For Individual, Every Bank, financial institution who lends money/credit card to individual make an enquiry into CIBIL and check for an Individual rating in CIBIL and accordingly they approve and reject an application for loan and credit card.
Let’s say for example, rating agencies like CRISIL, CARE and ICRA ltd expressed the credit rating in alphabetical or alpha-numerical symbol if AAA (Triple A) rating has been given to any company then it means higher safety for an investor if he chooses this particular company to invest in.
Key Partners – Corporate Deposits
- HDFC Ltd
- Mahindra Finance Ltd
- PNB Housing Finance Ltd
- Dewan Housing Finance Ltd
- Shriram Deposits
- LIC Housing Finance Ltd
