# Premature Surrender of Deposits (Rule 15)

## General Rule — Interest Reduction

If a company repays a deposit after 6 months from the date of deposit but before maturity, then:

Reduce interest by 1% from the rate which would have been paid for the period the deposit actually ran.
Do not pay interest at a rate higher than this reduced rate.

## Part-Year Treatment

If the actual period contains part of a year:

If part is 6 months or more → count it as one full year.
(If less, fraction is ignored for slab determination.)

## Exceptions — No Interest Reduction

The 1% reduction does NOT apply if premature repayment is:

1. To comply with Rule 3 — i.e., to bring total deposits within permissible ceiling limits.

2. War/emergency related — to provide for war risk or related benefits to naval, military or air force personnel or their families during a national emergency declared under Article 352 of the Constitution.

## Premature Renewal for Higher Interest

If a depositor wants to renew the deposit before maturity to get a higher rate of interest:

> The company may pay the higher rate ONLY IF the deposit is renewed for a period longer than the unexpired period of the original deposit.

## Key Memorisation Cues

6 months minimum before any premature repayment is even allowed.
1% reduction is the general consequence.
2 exceptions to the reduction rule.
Renewal-for-higher-rate test: new period > unexpired old period.

Worked example

### Example 1

Example 1 — Interest Reduction: ABC Ltd. accepted a 3-year deposit from Mr. X at 10% p.a. on 1-Apr-2023. X seeks premature withdrawal on 1-Oct-2024 (1 year 6 months run). Rate for 1-year deposit (the actual period) at acceptance was 8% p.a. Calculation: Since the part-year is 6 months, count as 1 year, treating run period as 2 years for slab. If the rate for 2-year deposits at acceptance was 9% — pay 9% – 1% = 8% p.a. for the actual run period.

### Example 2

Example 2 — Renewal for Higher Rate: Mr. Y has a deposit with XYZ Ltd. with unexpired period of 1 year. He wants to renew prematurely to lock in current higher rates. Rule: He can get the higher rate only if he renews for a period longer than 1 year (the unexpired period). A 1-year renewal will not qualify.

### Example 3

Example 3 — Exception (Emergency): During an Article 352 emergency, premature repayment is made to a deceased Air Force officer's family. No 1% reduction applies.

⚠️ Common exam mistakes

Reducing the interest rate from the original contracted rate instead of from the 'rate applicable for the period actually run'.
Treating a part-year of less than 6 months as a full year — only 6 months or more is rounded up.
Forgetting that premature repayment within 6 months is barred altogether (the rule only deals with repayment 'after 6 months but before maturity').
Applying the 1% reduction even in exception cases (Rule 3 compliance or Article 352 emergency).
In renewal-for-higher-rate cases, allowing the new period to equal the unexpired period — it must be LONGER.

Bare-Act text Rule 15, Companies (Acceptance of Deposits) Rules, 2014 · Companies Act, 2013 · click to expand

If a company makes repayment of any deposit after the expiry of 6 months from the date of such deposit but before the maturity date, it should reduce the interest on such deposit by 1% from the rate which the company would have paid had the deposit been accepted for the period for which such deposit had run; and the company should not pay interest at a rate higher than the rate so reduced. Reduction is not applicable where premature repayment is made (a) to comply with Rule 3 (to bring deposits within permissible limits), or (b) to provide for war risk or related benefits to defence personnel/families during emergency under Article 352.

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