Acceptance of Deposits by Companies: formula sheet

Key formulas

Definition of deposit, Section 2(31)

Deposit = any receipt of money by way of deposit or loan or in any other form by a company − categories prescribed as exempt

Wide definition. Receipt is a deposit by default; only prescribed categories are excluded. Prescribed categories are in Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014.

Money from Government, banks and institutions

Exempt: amounts from Central/State Government or a statutory authority; loans or facilities from banking companies, SBI, notified banking institutions, co-operative banks; loans or financial assistance from public financial institutions or insurance companies

The lender's identity decides exemption. A loan from a bank is exempt. A loan from a private individual is not, unless another exemption applies. For statutory authorities and other entries, follow the exact wording of the Rule.

Money from another company

Amount received by a company from another company = exempt, as per the wording of Rule 2(1)(c)

Applies to receipts from a company. It does not cover receipts from individuals, firms or LLPs.

Foreign sources

Exempt: amounts from foreign governments, foreign or international banking and financial institutions, foreign collaborators, foreign bodies corporate, foreign citizens, and persons resident outside India, subject to FEMA

The FEMA condition is part of the exemption.

Commercial paper and share application money

Exempt: amount against commercial paper or other instruments issued under RBI guidelines; share application money held pending allotment under a valid offer

Application money is exempt only while it is appropriated against the amount due on allotment or refunded as the law requires.

Director's money, Rule 2(1)(c)(viii)

Exempt: any amount received from a person who, at the time of receipt, was a director of the company or a relative of the director of the private company; the person must furnish, at the time of giving the money, a written declaration that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others; the company shall disclose the details in the Board's report

This rule is in the Deposit Rules, 2014, not in the Act text supplied for this page, so it is not verified against that text. Check the exact wording in your study material. A relative of a director of a public company is not covered on this wording.

Business advances and security deposits

Exempt: advance for supply of goods or services if adjusted within 365 days of receipt; security deposit for performance of a supply contract

If the advance is not adjusted within 365 days, it is treated as a deposit on expiry of that period. The Rule also has a proviso on advances; check its exact wording in your study material.

Other common exemptions

Exempt: promoters' unsecured loan required by a lending bank or institution (while that loan is outstanding); amounts accepted by a Nidhi company only as per the Nidhi Rules; chit subscriptions only as per the Chit Funds Act; collective investment scheme money only as per the applicable SEBI regulations

Learn these as one-line items with the condition attached. Each exemption is subject to the exact wording of the Rule, so check it in your study material.

Basic rule (Section 73(1))

No deposits from the public unless the Chapter allows it

Banking companies, NBFCs (as defined in the RBI Act, 1934) and companies specified by the Central Government are outside this prohibition.

Deposits from members (Section 73(2))

Resolution in general meeting + Rules + conditions (a), (b), (c), (e), (f)

Remember the five conditions: circular, filing with the Registrar within 30 days before issue, DRA, no-default certificate, security.

Deposit repayment reserve (Section 73(2)(c))

DRA ≥ 20% × deposits maturing in the next financial year, deposited on or before 30 April

Kept in a separate account with a scheduled bank. Section 73(5): it can be used only to repay deposits.

Public deposits (Section 76)

Public company with prescribed net worth or turnover + Section 73(2) compliance + annual credit rating

The Act says only 'prescribed' net worth or turnover. The Rules-based figures (net worth of at least ₹100 crore or turnover of at least ₹500 crore, and a special resolution filed with the Registrar before inviting the public) are to be verified against the current Companies (Acceptance of Deposits) Rules, 2014.

Charge for secured deposits (Section 76(1))

Charge created within 30 days of acceptance, for an amount ≥ the deposits accepted

Applies to companies accepting secured deposits from the public.

Amount limit (Rule 3)

Non-eligible company: members' deposits including outstanding ≤ 10% of (paid-up share capital + free reserves + securities premium). Eligible company: members and public together ≤ 35% of the same base

Rules-based figures, not in the Act text. Verify the 10% and 35% limits against the current Companies (Acceptance of Deposits) Rules, 2014. The limit includes deposits already outstanding.

DRR amount

Minimum DRR deposit = 20% × deposits maturing during the following financial year

Paid on or before 30 April each year (section 73(2)(c)). For 30 April 2028, the base is deposits maturing during 2028-29 (1 April 2028 to 31 March 2029). It is not total deposits.

Where the DRR money is kept

Separate bank account in a scheduled bank, called the deposit repayment reserve account

Not a general current account of the company.

Use of DRR account

Only for repayment of deposits

Section 73(5). No other use is allowed.

Unsecured deposit label

Deposits not secured, or partly secured = unsecured deposits; say so in every circular, form, advertisement and related document

Proviso to section 73(2)(f).

Charge for secured deposits (public company, section 76)

Charge on assets ≥ amount of deposits accepted, created within 30 days of acceptance

Applies to a company accepting secured deposits from the public under section 76(1), second proviso.

Credit rating

Rating from a recognised credit rating agency, obtained every year during the tenure of deposits

Section 76(1), first proviso. Applies to a public company accepting deposits from persons other than members.

Repayment

Repay deposit with interest as per the agreement

Section 73(3). On failure, the depositor may apply to the Tribunal under section 73(4).

Tenure under the Deposit Rules

Normally not less than 6 months and not more than 36 months

Rule-based, with a limited short-term exception. Check the ICAI material for the exact exception limits.

Circular to members

Circular must show: financial position + credit rating + number of depositors + amount due on earlier deposits + other prescribed particulars

Section 73(2)(a). The circular follows the prescribed form (Form DPT-1 under the Rules).

Filing the circular

Copy of circular + statement filed with Registrar within 30 days before the date of issue of the circular

Section 73(2)(b). Filing comes before issue, not after.

Unsecured deposits

Deposits not secured, or only partly secured = 'unsecured deposits'

Must be stated as such in every circular, form, advertisement or related document (proviso to section 73(2)(f)).

Circular in form of advertisement

English newspaper + regional-language newspaper (state of registered office, wide circulation) + company website

Rule 5 of the Companies (Acceptance of Deposits) Rules, 2014.

Validity of circular

Earliest of: 6 months from close of the financial year of issue | date financial statements are laid at AGM | last date by which AGM should have been held

Rules, 2014. Whichever of the three comes first.

Deposit receipt

Issue within 21 days from receipt of money or realisation of cheque/draft

Signed by an officer authorised by the Board and countersigned by another authorised person. Rules, 2014.

Register of deposits

Kept at registered office; entries authenticated by company secretary or another authorised person; preserve at least 8 years from end of the financial year of the last entry

Rule 14. Confirm the latest wording in your ICAI material.

DPT-3 return

Filed by 30 June each year, with information as on 31 March, certified by the auditor

Return of deposits and particulars of receipts not treated as deposits. Rules, 2014.

DPT-4 statement

Pre-commencement deposits and unpaid sums + repayment arrangements, filed within 3 months of commencement or of the due date

Section 74(1)(a) gives the statement and the three-month period.

Section 73(1): general bar

No invite / accept / renew of deposits from the public, except as the Chapter provides

Banking companies, NBFCs and companies specified by the Central Government (after consulting RBI) are exempt from this sub-section.

Depositor's remedy, Section 73(4)

Company fails to repay under 73(3) → depositor applies to Tribunal

Tribunal may order payment of the sum due, compensation for loss or damage, and other orders it thinks fit.

Old deposits, Section 74(1)

File statement with Registrar within 3 months; repay within 1 year from commencement or due date, whichever is earlier

Applies to deposits accepted before the Act commenced. Section 74 is a transitional provision and these periods have long expired. Renewal must follow Chapter V and the rules.

Company's relief, Section 74(2)

Company applies → Tribunal may allow further time as reasonable

Tribunal looks at financial condition, deposit amount, interest payable and other matters. Largely of historical relevance now, since the Section 74(1) periods have expired.

Penalty, Section 74(3)

Company: fine ₹1 crore to ₹10 crore. Officer in default: imprisonment up to 7 years, or fine ₹25 lakh to ₹2 crore, or both

The company also pays the deposit and interest due. Officer's punishment is 'or ... or both' here.

Penalty, Section 76A(a): company

Fine not less than the LOWER of (₹1 crore, twice the deposit accepted); maximum ₹10 crore

Also pays the deposit and interest due. Applies to contravention of Section 73 or 76, or failure to repay in time.

Penalty, Section 76A(b): officer in default

Imprisonment up to 7 years AND fine of ₹25 lakh to ₹2 crore

The text says 'and fine', so both apply. Do not write 'or both' here.

Fraud proviso, Section 76A

Officer acted knowingly or wilfully, with intent to deceive the company, shareholders, depositors, creditors or tax authorities → action under Section 447

Separate from the ordinary Section 76A punishment.

Damages for fraud, Section 75

Company fails to repay deposits referred to in Section 74 + deposits accepted with intent to defraud or for a fraudulent purpose → every officer responsible for the acceptance is personally liable without limit for depositors' losses

Section 75 applies only to failure to repay deposits referred to in Section 74, not to Section 73 or 76 deposits. Any person, group or association who suffered loss can take action. This is in addition to Section 74(3) and Section 447.

Deposit repayment reserve account, Section 73(5)

The account may be used only to repay deposits

Section 73(2)(c): by 30 April each year, deposit at least 20% of deposits maturing in the next financial year in a separate account with a scheduled bank.

Quick revision

• Section 73(1): no company shall invite, accept or renew deposits from the public except as Chapter V provides.
• The proviso to Section 73(1) says the prohibition in Section 73(1) does not apply to banking companies, NBFCs (as defined in the RBI Act, 1934) and other companies the Central Government specifies after consulting the RBI.
• Deposits from members need a resolution in general meeting and must meet the Section 73(2) conditions.
• The circular must include the company's financial position, credit rating, number of depositors and amount due on previous deposits.
• A copy of the circular is filed with the Registrar within thirty days before the date of issue of the circular.
• Deposit repayment reserve: at least 20% of deposits maturing in the next financial year, deposited by 30 April in a separate account at a scheduled bank.
• The deposit repayment reserve account can be used only to repay deposits.
• Deposits that are not secured, or only partly secured, must be called 'unsecured deposits' in every circular, form and advertisement.
• Section 73(4): if a company fails to repay a deposit accepted under Section 73(2), or interest on it, the depositor may apply to the Tribunal for an order to pay the sum due, for loss or damage, and for other orders the Tribunal thinks fit.
• Section 76: an eligible public company can accept deposits from persons other than members, with a credit rating every year during the tenure.
• Secured public deposits: create a charge on assets within 30 days of acceptance, for at least the deposit amount.
• Section 74 applies only to deposits accepted before the commencement of the Act: file a statement with the Registrar within three months, and repay within one year, whichever is earlier. The Tribunal may allow further time.
• Section 74 default (pre-commencement deposits not repaid in time): fine from ₹1 crore to ₹10 crore on the company; officers in default face up to 7 years' imprisonment or fine of ₹25 lakh to ₹2 crore, or both.
• Section 75: where a Section 74 deposit is not repaid and it is proved the deposits were accepted to defraud, officers responsible are personally liable without limit, apart from Section 447.

Common mistakes

• Treating every loan received by a company as a deposit, or every bank-type receipt as exempt. Fix: Always do two steps: apply the wide definition, then test against the exempted list. Decide only after both.
• Exempting a loan from a relative of a director in a public company. Fix: Rule 2(1)(c)(viii) covers a person who was a director at the time of receipt, or a relative of the director of the private company. Confirm the exact wording in your study material. This rule is not in the Act text supplied for this page. Both cases need the written declaration.
• Saying any company can invite deposits from the public if it passes a resolution. Fix: Remember the order: ban first, then the member route, then Section 76 for eligible public companies only.
• Applying the percentage limit to the new deposit alone and ignoring deposits already outstanding. Fix: Compute the limit, then subtract outstanding deposits. The Rules count the new deposit together with those outstanding.
• Computing 20% on total deposits outstanding instead of deposits maturing in the following financial year. Fix: Underline 'maturing' and 'following financial year' in the question. Take only those deposits that fall due in the following financial year, for example 2028-29 for a 30 April 2028 deadline.
• Using deposits maturing in the year that has just ended, or in later years, as the base. Fix: The base is the financial year following the one that ended on the 31 March before the 30 April date. For 30 April 2028, it is 2028-29. Do not use 2027-28 or 2029-30.
• Saying the circular is filed with the Registrar after it is issued. Fix: Remember section 73(2)(b): the copy is filed within thirty days before the date of issue.
• Leaving out the credit rating or the details of earlier deposits from the contents of the circular. Fix: Use the checklist: financial position, credit rating, number of depositors, amount due on earlier deposits.
• Saying the depositor applies to the Tribunal for more time under Section 74. Fix: Section 74(2): the company applies for more time. Section 73(4): the depositor applies for payment or compensation.
• Writing that officers in default under Section 76A face imprisonment 'or' fine. Fix: Section 76A(b) says imprisonment up to seven years and fine of ₹25 lakh to ₹2 crore. Learn both sections separately.

Exam tips

• Case questions list many receipts. Make a tidy list: receipt, giver, exempt or not, reason. It earns step marks and keeps you from missing an item.
• For MCQs, the trap is almost always a condition: relative in a public company, no declaration, or advance older than 365 days. Check the condition before choosing 'exempt'.
• Quote Section 2(31) for the definition and Rule 2(1)(c) for the exemptions. Do not guess section numbers for other provisions.
• Learn the exempted list as groups: Government and institutions, foreign sources, other companies, director money, business advances, special cases. This is faster to recall than a long list.
• Because the Rules can be amended, check your latest ICAI study material and amendments for January 2027 and later sittings for the exact list and limits.
• Write the section number with each condition: Section 73(1) for the ban, Section 73(2) for members, Section 76 for the public.
• In numerical questions, always state the base, the percentage, the outstanding deposits and the balance as separate lines. Step marks depend on it.
• Learn the five conditions of Section 73(2) as a list: circular, filing within 30 days before issue, DRA, no-default certificate, security. MCQs often change one detail.