Fixed Deposits

While bank fixed deposits (FDs) are a popular investment choice, Non-Banking Financial Companies (NBFCs), Housing Finance Companies (HFCs), and Corporate FDs offer an attractive alternative. These non-bank fixed deposits often provide higher interest rates, flexible tenures, and additional benefits compared to traditional bank FDs. Non-bank fixed deposits offered by financial institutions like housing finance companies and NBFCs (for example, HDFC Deposits by HDFC Ltd) present an alternative that can potentially offer higher yields. However, they come with a different risk profile and regulatory framework.

Benefits Compared To Bank FDs

1. Higher Interest Rates Than Bank FDs:

   • Non-bank FDs offer 1-3% higher interest rates than bank FDs, making them an attractive choice for investors seeking better returns.

   • Interest rates range from 7.5% to 9.6%, while bank FDs typically offer 6.5% to 7.5%.

   • Higher returns help in faster wealth accumulation and capital growth.

2. Safe & Reliable Investment Option

   • AAA and AA+ Rated FDs are considered safe as they are issued by financially strong institutions.

   • Governed by RBI, NHB, and SEBI regulations, ensuring transparency.

   • Non-bank FDs from reputed NBFCs and HFCs have a low default risk.

3. Multiple Payout Options (Regular Income or Growth)

   • Non-Bank FDs offer both Cumulative & Non-Cumulative Options, allowing investors to choose regular income or capital appreciation.

     • Cumulative FD: Interest is compounded and paid at maturity (ideal for wealth growth).

     • Non-Cumulative FD: Interest is paid monthly, quarterly, half-yearly, or annually (ideal for retirees & pensioners).

4. Special Benefits for Senior Citizens & Women Investors

   • Senior Citizens (60+ years) get an extra 0.25% - 0.50% interest

   • Some NBFCs & HFCs offer exclusive schemes for women investors

5. Flexible Investment Tenure (1 Year to 10 Years)

   • Unlike bank FDs, which typically offer 5-10 year tenures, Non-Bank FDs provide greater flexibility:

     • Invest for short-term (12 months) or long-term (up to 10 years)

     • Customize FD tenure based on financial goals

Taxation & TDS on Non-Bank Fixed Deposits

• If interest exceeds ₹5,000/year, TDS at 10% is deducted (if PAN is provided).

• If no PAN is provided, TDS at 20% is deducted.

• To avoid TDS, submit Form 15G (below 60 years) or Form 15H (above 60 years).

• Interest is added to your income and taxed as per your income tax slab.

• No 80C tax benefits (unlike 5-year bank FDs).