12% Returns.
Not Regulated.
Not an FD.

Invoice discounting lets you lend money to businesses against their unpaid invoices. A business has a ₹10 lakh invoice due from a buyer in 90 days. Instead of waiting, they sell this invoice on a platform at a discount (say ₹9.7 lakh). You buy it, wait 90 days, and receive ₹10 lakh from the buyer — earning ₹30,000 (~12% annualized). The risk: if the buyer doesn't pay, your money is stuck. Recovery can take months or years.

It depends on the platform. Only 3 TReDS platforms (RXIL, M1Xchange, Invoicemart) are RBI-regulated — but they're for institutional investors only. Retail platforms like KredX, TradeCred, and Jiraaf operate as NBFCs, NOT under TReDS. They're not SEBI-regulated either. KredX has had multiple defaults since 2024 (Dunzo, Sapos). TradeCred claims zero defaults, but that's self-reported — not independently audited. Invoice discounting is NOT as safe as an FD.

Platforms advertise 10–14% IRR. But this is PRE-TAX. Platforms deduct 10% TDS, and gains are taxed at your income slab rate (not capital gains). At 30% tax bracket, a 12% IRR becomes ~8.4% post-tax. Compare: FD gives 7.5% pre-tax (~5.1% post-tax), liquid fund gives 7% (~6% post-tax). The extra 2–3% comes with illiquidity, default risk, and no regulatory protection.

Multiple defaults have occurred since mid-2024. Dunzo's post-dated cheque bounced in July 2023 — legal proceedings were filed but investors hadn't recovered money by December 2023. Sapos also defaulted. Investor reviews in 2024 report: payments never returned on time, no customer support updates, accounts locked out, and forced password resets with security concerns. The platform went from "India's leading invoice discounting platform" to overwhelmingly negative reviews.

TReDS (Trade Receivables Discounting System) is RBI-regulated with 3 licensed platforms: RXIL, M1Xchange, and Invoicemart. They handle ~₹60,000 crore annually with institutional-grade risk management. RBI now allows insurance companies to cover buyer defaults on TReDS. Private platforms (KredX, TradeCred, Jiraaf) operate as NBFCs — weaker regulation, no insurance backing, and open to retail investors. The higher returns on private platforms come with proportionally higher risk.

Returns are taxed as business income or income from other sources — NOT as capital gains. No indexation benefit, no LTCG rate. 10% TDS is deducted by the platform on every payout. You must declare the income at your slab rate when filing ITR. At 30% bracket: 12% IRR → ~8.4% net return. At 20% bracket: ~9.6%. At 0% bracket: full 12% (minus TDS, claimable as refund).

The platform files legal proceedings (arbitration or NCLT). But Indian legal recovery takes 2–5 years. Recovery rates on unsecured corporate debt are typically 20–40%. Your "90-day investment" can become a 5-year legal battle. Some platforms claim insurance or guarantees, but enforcement depends on the specific policy terms. Always check: what is the platform's legal recourse mechanism, and what is the historical recovery rate?

For most retail investors: no. FDs offer DICGC insurance (₹5L per bank), RBI regulation, premature withdrawal, and predictable returns. Invoice discounting gives 2–3% higher pre-tax returns but with: no regulation (for retail platforms), real default risk, illiquidity (money locked 30–90 days, longer if default), and complex taxation. If you still want to invest, limit it to 5% of your portfolio, use platforms with strong track records (TradeCred), and never invest money you can't afford to lock up.