What is a corporate fixed deposit?
A corporate fixed deposit is a term deposit placed with a company rather than a bank, typically a deposit-taking NBFC or a housing finance company. It works much like a bank FD. You invest a sum for a fixed tenure at a stated rate, and receive interest either periodically or at maturity.
These companies are regulated by RBI, and housing finance companies also come under National Housing Bank oversight. Corporate FDs usually offer more than comparable bank FDs. That extra interest is payment for taking on the company's credit risk.
Not every NBFC can take deposits from the public. Only companies RBI has specifically permitted may do so, and they must hold an investment-grade credit rating. It is worth confirming an issuer's status on RBI's website before you invest.
Credit ratings and the missing safety net
Bank deposits are insured by DICGC up to ₹5 lakh per depositor per bank. Corporate deposits have no such insurance. Your money is only as safe as the company that holds it, which is why the credit rating matters so much.
| Rating | What it broadly signals |
|---|---|
| AAA | Highest degree of safety for timely payment |
| AA+ | High degree of safety |
| A and below | Lower safety and higher risk |
We focus on AAA and AA+ rated issuers, but even a high rating is not a promise. Ratings can be cut during your tenure, and a higher rate than similarly rated peers can be a sign the market sees more risk.
Tax, TDS and payout choices
Interest from corporate FDs is added to your income and taxed at your slab rate, under both the old and new regimes. The issuer deducts TDS once your interest crosses the threshold in the current rules.
| Payout option | Suits |
|---|---|
| Monthly or quarterly | Retirees and others who need regular income |
| Cumulative | Savers who do not need income now |
On a cumulative deposit, tax is due every year on interest that has accrued, even though you receive it only at maturity. Many issuers also offer a slightly higher rate to senior citizens.
Things to compare before you choose
- Current rating from each agency that rates the issuer.
- Rate for your tenure and payout option, compared with similarly rated issuers.
- Premature withdrawal terms.
- How much you place with any one company. Splitting a larger sum across issuers and maturity dates, a ladder, also gives you money back at regular intervals.
Our team compares rated deposits across several issuers and handles the paperwork, nominations and tax forms for you.
