Amounts NOT Considered as Deposit — Rule 2(1)(c) Exclusions

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

Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 carves out a long list of receipts that are excluded from the definition of 'deposit'. Mastering this list is essential — examiners frequently test borderline situations.

## Category 1: Receipts from Government / Statutory Sources [Item (i)]

Amount received from:

• the Central Government or a State Government;
• any source whose repayment is guaranteed by the Central or State Government;
• any local authority;
• any statutory authority constituted by an Act of Parliament or State Legislature.

## Category 2: Receipts from Foreign Sources [Item (ii)]

Amount received from:

• Foreign Governments;
• Foreign or international banks;
• Multilateral financial institutions (IFC, ADB, CDC, IBRD, etc.);
• Foreign Government-owned development financial institutions;
• Foreign export credit agencies;
• Foreign collaborators;
• Foreign bodies corporate and foreign citizens;
• Foreign authorities or persons resident outside India.

> Caveat: Receipt of such funds is subject to FEMA, 1999 and the rules/regulations made thereunder.

## Category 3: Loans / Facilities from Banks [Item (iii)]

Amount received as a loan or facility from:

• Any banking company;
• SBI or its subsidiary banks;
• A notified banking institution;
• A 'corresponding new bank' under the Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980;
• Any co-operative bank.

## Category 4: Loans / Financial Assistance from Specified Institutions [Item (iv)]

Amount received as loan/financial assistance from:

• Public Financial Institutions (PFIs);
• Regional financial institutions;
• Insurance companies;
• Scheduled banks (as defined in the RBI Act, 1934).

## Category 5: Commercial Paper / RBI-approved Instruments [Item (v)]

Amounts received against issue of commercial paper or any other instrument as per RBI guidelines/notification.

## Category 6: Inter-Corporate Deposits (ICDs) [Item (vi)]

Any amount received by a company from any other company — commonly called Inter-Corporate Deposit (ICD).

## Category 7: Subscription/Application Money [Item (vii)]

Amounts received and held towards subscription to securities (including share application money or advance toward allotment pending allotment), so long as it is appropriated only against the amount due on allotment.

> Trap — when share application money DOES become deposit:

> - If securities are not allotted within 60 days of receipt of application money, AND

> - The amount is not refunded within 15 days from completion of those 60 days,

> → such amount shall be treated as deposit.

> - Note: Any adjustment of the amount for any other purpose is NOT treated as refund.

## Category 8: From Director / Relative of Director of a Private Company [Item (viii)]

Amount received from a person who, at the time of receipt:

• was a director of the company (any company), or
• was a relative of the director of the PRIVATE company.

Conditions:

• The director/relative must furnish a written declaration that the amount is not given out of funds borrowed or accepted as loans/deposits from others.
• The company must disclose details in the Board's Report.

## Category 9: Bonds / Debentures [Item (ix)]

Amounts raised by issue of:

• Bonds or debentures secured by a first charge (or pari passu first charge) on any assets per Schedule III (excluding intangible assets); or
• Bonds or debentures compulsorily convertible into shares within 10 years.

Cap: The amount of secured bonds/debentures shall not exceed the market value of the secured assets as assessed by a Registered Valuer.

## Category 9A: Listed Non-Convertible Debentures (NCDs) [Item (ixa)]

Amounts raised by issue of NCDs:

• Not constituting a charge on the company's assets; AND
• Listed on a recognised stock exchange per SEBI regulations.

## Category 10: Employee Security Deposit [Item (x)]

Amount received from an employee, not exceeding his annual salary, under a contract of employment, in the nature of a non-interest-bearing security deposit.

## Category 11: Amounts Held in Trust [Item (xi)]

Any non-interest-bearing amount received and held in trust.

## Category 12: Business Advances [Item (xii)]

Amounts received in the course of, or for the purpose of, business:

> Refund trap: If amounts received under (a), (b) or (d) become refundable (with or without interest) because the company lacks the necessary permission/approval to deal in those goods/properties/services, the amount is deemed to be a deposit.

>

> Deeming on delay: Such amount is deemed to be a deposit on expiry of 15 days from the date it becomes due for refund.

## Category 13: Promoter's Unsecured Loan [Item (xiii)]

Amount brought by promoters by way of unsecured loan in pursuance of a stipulation by a lending financial institution/bank. All three conditions must be met:

1. Loan is brought because of stipulation by the lending institution on the promoters to contribute such finance;

2. Loan is provided by the promoters themselves or by their relatives or by both;

3. The exemption is available only till the loan from the financial institution/bank is repaid — not thereafter.

## Category 14: Nidhi Companies [Item (xiv)]

Any amount accepted by a Nidhi company in accordance with the rules made under Section 406 of the Act.

## Category 15: Chit Subscription [Item (xv)]

Amount received by way of subscription in respect of a chit under the Chit Funds Act, 1982.

## Category 16: Collective Investment Scheme [Item (xvi)]

Amounts received under any Collective Investment Scheme in compliance with SEBI regulations.

## Category 17: Convertible Notes — Start-ups [Item (xvii)]

Amount of ₹25 lakh or more received by a start-up company by way of a convertible note (convertible into equity shares OR repayable within ≤ 10 years), in a single tranche, from a person.

Key terms:

• "Start-up company" — a private company under the 2013 (or 1956) Act, recognised under Notification G.S.R. 127(E) dated 19-02-2019 of DPIIT.
• "Convertible note" — an instrument evidencing receipt of money initially as debt, repayable at the holder's option OR convertible into equity shares on occurrence of specified events.

> Critical drafting trap: The ₹25 lakh threshold must be received in a single tranche. If split into multiple tranches (e.g., ₹20 lakh + ₹10 lakh on different dates), the exemption is lost even though aggregate exceeds ₹25 lakh.

## Category 18: SEBI-Registered Funds [Item (xviii)]

Amount received from:

• Alternate Investment Funds (AIFs);
• Domestic Venture Capital Funds;
• Infrastructure Investment Trusts (InvITs);
• Real Estate Investment Trusts (REITs);
• Mutual Funds;

— all registered with SEBI.

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