Hyderabad: As interest rates are increasing, banks, NBFCs and corporates have started revising their deposit rates. Corporates in particular started declaring short-term deposits for their funding needs. Certain precautions must be followed when choosing these as they fetch high interest.
Before investing in corporate deposits, it is imperative to check credit ratings. The interest paid by corporates with low risk is relatively low. Firms with low ratings tend to offer higher interest rates due to high risk. Therefore, investors should first check the ratings given by CRISIL, ICRA and CARE. Deposits with good ratings can be considered relatively safe. Experts say that the AAA-rated ones will give slightly lower returns, but money will be safe and the interest will come on time.
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At present we are witnessing a rising phase of interest rates. So, don't opt for long-term deposits. Invest in short-term deposits for now. After adjusting the interest rates... then depending on your goals, you can switch over to long-term deposits. Check now for deposits within 12 months. Interest earned on corporate deposits should be included in total income. To that extent, tax should be paid based on applicable slabs. TDS is applicable when the interest exceeds Rs 5,000. So, we can do away with TDS by submitting Form 15G/15H.
Those who want to diversify their investments can consider these. However, those who want their money back in two to three months should opt for bank deposits within those periods. Never forget to avail nominee facility for every deposit. Some small banks also offer higher interest rates. Hence, you chalk out a plan whether to invest in big banks, small banks or the corporate sector.
