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Understanding Corporate Fixed Deposits: 5 Key Terms to Know
When it comes to investing your money for fixed returns, Corporate Fixed Deposits (FDs) are becoming a popular choice among investors. These FDs are offered by corporations and non-banking financial companies (NBFCs), providing an alternative to traditional Bank FDs. Before diving into this wealth-building instrument, it’s essential to familiarise yourself with some key terminologies.
1. Interest Rate
Interest rate is the percentage of the principal amount that a company pays you for keeping your money invested in their FD scheme. It is crucial to compare interest rates offered by different corporations to maximise your returns.
2. Credit Rating
Credit rating indicates the creditworthiness of a company issuing the FD. It reflects the company’s ability to repay the principal amount along with the promised interest. Higher credit ratings signify lower risk, making it a safer investment option.
3. Lock-in Period
The lock-in period is the duration for which your money remains invested in the FD without any premature withdrawals. It’s essential to understand the lock-in period before investing to avoid liquidity issues.
4. Cumulative vs. Non-Cumulative FDs
Cumulative FDs reinvest the interest earned back into the FD, leading to compounding returns. On the other hand, non-cumulative FDs pay out the interest at regular intervals. Choose the option that aligns with your financial goals.
5. Tax Implications
Interest earned from Corporate FDs is taxable as per your income tax slab. Understanding the tax implications can help you plan your investments more effectively and avoid any surprises during tax filing.
By familiarising yourself with these key terms, you can make informed decisions when investing in Corporate Fixed Deposits. If you need expert guidance on wealth management and investment strategies, feel free to book a consultation call with ebizbasket, your trusted financial advisor.
Reach out to us at info@ebizbasket.tech to schedule your consultation and take the first step towards building a secure financial future.
