How to compare investments in company documents with other debt instruments?
A large portion of Indian investors seeking fixed income savings instruments, which include many products from fixed-income bank deposits, postal savings accounts, government bonds and provident funds of public pension funds and investment funds liquid funds or plans to name a few. Of all debt instruments, bank accounts, savings over 50% is fixed with respect to the Indians. In the past year and a half of interest on bank deposits was a fixed interest rate (also called time deposits) significantly. Today is the interest rate on bank deposits of nationalized banks and major online banks have more than 6 to 8% depending on the duration and popular postal savings, KVP and NSC and PPF offer 8%. It is obvious that investors would be better solutions to fixed income products to search. If you opt for a higher return on bank deposits and postal savings account and if you want to have more money, could provide the investment company in deposits, yields of around 9% are looking at 12%. Although the yields of the assets of the society are much better than all the debt instruments, but you have the various aspects such as risk, liquidity, tax and before deciding to invest in companies with deposits of understanding. Here are some key points of investment in company deposits.
Risk: the presentation of companies is an unsecured loan company, an investor does not have a lien on the assets of the company. Where the company is experiencing financial difficulties or go into bankruptcy, the assets secured creditor a first priority, and it is their turn until all guaranteed loans were paid by the Company. In comparison with bank deposits, company presentation is much safer due to the return of 100,000 rupees DICGC (Deposit Insurance and Credit Guarantee Corporation of India) is guaranteed. The security of your deposit depends on the financial health of the company.
Liquidity: Although the company are the files for periods of 1 to 5 years since, but the deposition of the company are traded on exchanges, are not transferable. In general, early retirement conditions are not favorable, and therefore can be described as the company continues deposits illiquid compared with mutual funds and bank deposits.
Taxability: interest income is expected from passive fixed-term deposits in the hands of investors and issuers of income tax before interest is charged investors should be deducted. Interest income is included under “other income” on your tax return. You must make the decision to invest in business deposits in the tax bracket that applies to your base.
Return: The interest rate varies in different societies. Many companies offer the option of deposits with interest, with interest monthly, quarterly or annually collected in this case the interest earned by the same interest rate and therefore higher reinvested earnings. With options for monthly interest rate to provide the highest cumulative return. At present, the effective interest rate on deposits of various companies about 9% to 14%.
How to Invest: Today, many online trading companies and securities brokerages free as HDFC and ICICI Direct Investment Fund provides business presentation online and offline.
