Many companies in the country are offering as much as 9% interest rates on their fixed deposits. Considering the current interest rate environment, the interest rates look attractive. Financial planners, however, cautioned investors to understand the risks that come with company FDs before investing.
Company fixed deposits (FDs) or corporate FDs are popular among investors who want fixed returns that are slightly higher than what bank FDs give, even if it is at a slightly higher risk. However, just like FDs, interest payment on corporate FDs is fully taxable at your income tax slab rate, so factor in the post-tax returns.
An AA rating indicates that the degree of safety regarding timely payment is strong. The higher the rating, the better the risk capacity of the issuer. Also, make sure the terms of premature redemption are not very stringent. Here’s a list of corporate FDs that are rated AA and above