# Amounts NOT Considered as Deposit [Rule 2(1)(c)]

Rule 2(1)(c) lists categories of money that are received by companies but are NOT treated as deposits. These are genuine commercial/regulatory transactions carved out of the deposit framework.

## Memorise These Categories by Grouping

### Group A: Government & Sovereign Sources

(i) Any amount received from:

Central Government
State Government
Any source whose repayment is guaranteed by Central/State Government
Local authority
Statutory authority (constituted under an Act of Parliament/State Legislature)

### Group B: Foreign Sources

(ii) Amounts received from:

Foreign Governments
Foreign/international banks
Multilateral financial institutions (IFC, ADB, CDC, IBRD, etc.)
Foreign Govt-owned development financial institutions
Foreign export credit agencies
Foreign collaborators
Foreign body corporates and foreign citizens
Foreign authorities/persons resident outside India

> Condition: Subject to FEMA, 1999 and rules thereunder.

### Group C: Banks & Financial Institutions

(iii) Loan/facility from any banking company, SBI & subsidiaries, notified banking institutions, corresponding new banks, co-operative banks.

(iv) Loan/financial assistance from Public Financial Institutions, Regional Financial Institutions, Insurance companies, Scheduled banks.

### Group D: Capital Market Instruments

(v) Amount received against commercial paper or other instruments per RBI guidelines.

(ix) Amount raised by issue of:

Bonds/debentures secured by first charge (or pari passu charge) on assets in Schedule III (excluding intangibles), OR
Bonds/debentures compulsorily convertible into shares within 10 years
Limit: Secured amount cannot exceed market value of charged assets (assessed by registered valuer)

(ixa) Listed Non-Convertible Debentures (NCDs) not creating charge on assets — listed on recognised stock exchange per SEBI regulations.

### Group E: Inter-Corporate & Subscription

(vi) Amount from any other company — Inter-Company Deposit (ICD).

(vii) Amount held towards subscription to securities (share application money/advance for allotment) — appropriated only against allotment.

> Critical Time Limits (Rule 2(1)(c)(vii)):

> - Securities must be allotted within 60 days of receipt

> - If not allotted, must be refunded within 15 days of expiry of 60 days

> - Otherwise → treated as DEPOSIT

> - Adjustment for any other purpose is NOT treated as refund

### Group F: Directors & Promoters

(viii) Amount received from a director of a company OR relative of a director of a private company — at the time of receipt.

> Conditions:

> - Director/relative must furnish written declaration that money is NOT from borrowed funds/deposits

> - Company must disclose details in Board's Report

(xiii) Promoter's unsecured loan brought in pursuant to stipulation of lending financial institution/bank.

> Three conditions (cumulative):

> 1. Loan brought due to stipulation by lending institution

> 2. Loan provided by promoters themselves or their relatives or both

> 3. Exemption available only till FI/bank loans are repaid

### Group G: Employees

(x) Non-interest bearing security deposit from an employee under contract of employment — not exceeding annual salary.

### Group H: Trust & Business Advances

(xi) Non-interest bearing amount received and held in trust.

(xii) Amounts received in course of/for purposes of business:

(a) Advance for supply of goods/services — must be appropriated within 365 days (no limit if subject of court proceedings)
(b) Advance for immovable property consideration — to be adjusted per agreement
(c) Security deposit for performance of contract
(d) Advance under long-term projects for supply of capital goods
(e) Advance for warranty/maintenance — period not exceeding 5 years or common business practice (whichever less)
(f) Advance allowed by sectoral regulator or directions of Central/State Govt
(g) Advance for subscription to publication (print/electronic)

> Trap: If amounts under (a), (b), (d) become refundable because company lacks necessary permission/approval — they become DEPOSITS.

> Deemed deposit after expiry of 15 days from the date they become due for refund.

### Group I: Special Regulatory Schemes

(xiv) Amounts accepted by Nidhi Company under Section 406.

(xv) Chit fund subscriptions under Chit Fund Act, 1982.

(xvi) Amounts under Collective Investment Scheme regulated by SEBI.

### Group J: Start-ups & Alternative Investment

(xvii) Start-up Convertible Notes:

Amount of ₹25 lakh or more
Received by start-up company
By way of convertible note (convertible into equity OR repayable within 10 years)
In single tranche from a person

> 'Start-up company': Private company incorporated under Companies Act 1956/2013, recognised per DPIIT Notification GSR 127(E) dt 19-02-2019.

> 'Convertible note': Instrument evidencing receipt of money initially as debt, repayable at holder's option OR convertible into equity on specified events.

(xviii) Amounts from Alternate Investment Funds, Domestic VC Funds, InvITs, REITs, Mutual Funds registered with SEBI.

Worked example

### Example 1

Example 1 (from text): Soorya Ltd. raised ₹20,00,000 by issuing 20,000 NCDs of ₹100 each. These NCDs do NOT constitute a charge on company's assets and are LISTED on a recognised stock exchange per SEBI regulations. Is it a deposit?

Answer: NO, it is not a deposit. Under sub-clause (ixa) of Rule 2(1)(c), amounts raised by issue of non-convertible debentures not constituting a charge on assets and listed on a recognised stock exchange per SEBI regulations are excluded from the definition of deposit.

### Example 2

Example 2 (from text): Siddhi Transporters & Logistics Ltd. appointed Ratnakar as Supervisor at an annual salary of ₹6,00,000. He was required to deposit ₹6,50,000 as non-interest bearing security under his contract of employment. Is this a deposit?

Answer: YES, it is a deposit. Sub-clause (x) of Rule 2(1)(c) excludes employee security deposits only if non-interest bearing AND the amount does not exceed annual salary. Here ₹6,50,000 > ₹6,00,000 (annual salary). Had the security been ₹6,00,000 or less, it would NOT have been a deposit.

### Example 3

Example 3 (from text): Greedwood Limited, a registered start-up company, received ₹20 lakh and ₹10 lakh on different dates by way of convertible note from one person. Is the aggregate (₹30 lakh) excluded from deposit definition?

Answer: NO, it WILL be treated as a deposit. Sub-clause (xvii) requires the amount of ₹25 lakh or more to be received in a SINGLE TRANCHE from a person. Since Greedwood received it in two tranches (₹20L + ₹10L), the exclusion does not apply.

### Example 4

Example 4: ABC Ltd. received ₹50 lakh as share application money on 1st January 2026. It could not allot shares within 60 days (i.e., by 2nd March 2026). It did not refund the money within 15 days thereafter (i.e., by 17th March 2026). What happens?

Answer: The amount of ₹50 lakh shall be treated as a DEPOSIT under Rule 2(1)(c)(vii). Time limits: allotment within 60 days, failing which refund within 15 days. Failure to comply results in deemed deposit treatment.

### Example 5

Example 5: XYZ Pvt. Ltd. takes a loan of ₹3 lakh from Mr. P, a director, who himself borrowed it from a friend to lend to the company. Is this a deposit?

Answer: YES, it is a deposit. Sub-clause (viii) requires the director to furnish a written declaration that the amount is NOT from borrowed funds. Since Mr. P borrowed the amount, the declaration cannot be truthfully given, and the exemption fails.

⚠️ Common exam mistakes

Forgetting the 60-day + 15-day rule for share application money — students often think it must be refunded only when company refuses allotment.
Ignoring the requirement of written declaration for loans from directors/relatives — without it, the amount is a deposit.
Confusing 'first charge' bonds with all bonds — only those secured by first/pari passu charge OR compulsorily convertible within 10 years are excluded.
Missing the 'single tranche' requirement for start-up convertible notes — splitting into multiple receipts forfeits the exemption.
Confusing relative of director of private company with relative of director of any company — the exemption for relatives applies only to private companies (for non-director relatives).
Forgetting that security deposit from employee must be (a) non-interest bearing AND (b) not exceeding annual salary — both conditions must coexist.
Treating ICD (Inter-Company Deposit) as needing special compliance — it is simply excluded by Rule 2(1)(c)(vi).
Missing that the 365-day appropriation limit for advances does NOT apply when matter is subject of legal proceedings.

Bare-Act text Rule 2(1)(c) · Companies (Acceptance of Deposits) Rules, 2014 · click to expand

Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 — 'Deposit' includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include — (i) any amount received from the Central Government or a State Government; (ii) any amount received from foreign Governments, foreign or international banks; (iii) any amount received as a loan or facility from any banking company; [and so on through sub-clause (xviii)]

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Amounts NOT Considered as Deposit [Rule 2(1)(c) Exemptions]

Worked example

⚠️ Common exam mistakes