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Microlesson · 5-min read

Definition of 'Deposit' under Section 2(31) and Rule 2(1)(c)

# Definition of 'Deposit'

## Statutory Definition — Section 2(31)

> "Deposit" includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India.

## Anatomy of the Definition

FeatureExplanation
Inclusive definitionThe word "includes" → it is not exhaustive. The definition can stretch to cover other receipts of money.
Modes of receipt covered(a) Deposit, (b) Loan, (c) Any other form of receipt of money
RepaymentTime-bound — must be repaid on agreed maturity
SecurityCan be secured or unsecured
Who can acceptPrivate co. → only members; Public co. → members; Eligible public co. → members + public

## Key takeaways

1. The phrase "in any other form" is a residuary catch-all. Companies cannot rebrand a borrowing under another label (e.g., 'advance') to escape the definition — the substance prevails.

2. The exclusions are listed in Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 — covered separately.

## Transitional Issue — Pre-1 April 2014 amounts received by Private Companies from Members/Directors/Relatives

This is clarified by General Circular No. 5/2015 dated 30-03-2015:

  • Amounts received by private companies from their members, directors or relatives BEFORE 1st April, 2014 shall not be treated as 'deposits'.
  • Condition: The private company must disclose in the notes to its financial statements:
  • the figure of such amounts; and
  • the accounting head under which such amounts are shown.
  • However, any renewal or fresh acceptance on or after 1 April 2014 must comply with the Companies Act, 2013 and the Rules made thereunder.

> Why this concession? The Companies Act, 2013 came into force from 1 April 2014; pre-existing arrangements were grand-fathered to avoid disruption.

Worked example

### Example 1

Example: XYZ Pvt. Ltd. received ₹10 lakh from one of its directors on 15-03-2014 (i.e., before commencement of the 2013 Act provisions on deposits). The company shows this in its 31-03-2024 balance sheet. Will it be a deposit?

Solution: As per General Circular 5/2015, amounts received from a director of a private company before 1st April 2014 are NOT treated as deposits, provided the company discloses (i) the figure, and (ii) the accounting head, in the notes to the financial statements. If XYZ Pvt. Ltd. makes the disclosure, this ₹10 lakh continues outside the deposit regime. But if the amount is renewed on or after 1 April 2014, the renewal must comply with the Companies Act, 2013.

### Example 2

Example: A company receives ₹5 lakh from a shareholder, calling it a 'business advance' but with a repayment maturity and interest. Is it a deposit?

Solution: The substance of the transaction (time-bound repayment with interest) makes it a receipt of money in the nature of a loan/deposit. Since the definition under Section 2(31) is inclusive and uses the phrase 'in any other form', mere labelling as 'business advance' will not exclude it. It will be treated as a deposit unless it falls within one of the specified exclusions in Rule 2(1)(c).

⚠️ Common exam mistakes

  • Treating the Section 2(31) definition as exhaustive. The word 'includes' shows it is inclusive and capable of expansion.
  • Forgetting the disclosure conditions for the pre-1 April 2014 grandfathering — disclosure in notes is mandatory; without it the relief is lost.
  • Believing that the grandfathered amount is permanently exempt. It is — but only until renewal; on renewal post-1 April 2014, full Act compliance kicks in.
Bare-Act text Section 2(31); Rule 2(1)(c) · Companies Act, 2013 & Companies (Acceptance of Deposits) Rules, 2014 · click to expand
Section 2(31): "deposit" includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India.
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