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Nidhi Company and its Compliances

Nidhi Company and its Compliances

Nidhi Company is defined under Section 406 and Section 620A of Companies Act 2013. One must strictly adhere to the Nidhi compliances if one fails to meet its compliances heavy penalties will be levied. As per the Companies Act, 2013 Nidhi Company is a non-banking financial entity. Its function is borrowing and lending money among its members. The main motto of Nidhi Company is cultivating the habit of thrift and savings among its members. It is also known as Mutual Benefit Society or Company. Before moving ahead you all must know the answer to one question which is given below-

Rules and Regulations One must Know for Nidhi Company Registration

Nidhi company registration is primarily governed by the Companies Act 2013. Nidhi Company is a public company. The main regulatory body of the Nidhi Company is the Ministry of Corporate Affairs (MCA). Nidhi company is also required to do the compliances as stipulated under the companies act 2013 and Nidhi rules 2014. It is also regulated by the Reserve Bank of India, but only for deposit-taking activities.

List of Nidhi Company Rules and Compliances

There is a big list of Nidhi Company’s rules and Compliances. These rules and compliances are not easy to understand. But we will definitely make it easy for you. With the help of the following points-  

Annual Compliances

  • Nidhi Company must have a paid-up share capital of Rs.10 lakh.
  • In a year, 200 members must be there with the company. 
  • Its deposit should be 20 times more than the paid-up capital.
  • Total 10% is mandatory to be deposited as revived in the bank. 

Annual filing Compliances

  • Form NDH-1 must be filed within 90 days after one year of formation. 
  • Form NDH-2 is required to be filed in case you need extra time for the fulfillment of the compliances. However, an extension is possible to max. for 30 days.
  • Form NDH-3 is for the half-yearly filing, which means 30 days of September and March. ADT-1 is for the appointment of the auditor. 
  • An auditor is required to be appointed for 5 yearsin case of firm and 1 year in case of Individual. Form AOC-4 will be filed for the Financial Statements. The form  must be filed within 30 days of the Annual General Meeting (AGM). 
  • Form MGT-7 will be filed for the annual return of the company. It must be filed within 60 days of the Annual General Meeting. 

Documentary Compliances

It is mandatory for Nidhi Company to maintain Books of accounts, statutory registers providing the small details, Financial statements, Director’s reports, and Statutory Meetings. 

Annual General Meeting must be conducted within 6 months of the end of the Financial Year. Income tax return due date for the companies is up to 30th September of the Annual Year.  

Compliances regarding Loan limit of the Nidhi Company 

Nidhi Company can provide loans to the members of the Company. The company has the following limits while giving loans to the members- 

Amount DepositedLoan Sanctioned
2 Crores2 Lakhs
2-20 Crores7.50 Lakhs
20- 50 Crores12 Lakhs
Above 50 Crores15 Lakhs

 Note-However, if the company is not making a profit in the last 3 preceding years, then the above amount cannot exceed 50% of the limit as described data in the above table.

The loan can be given against gold or silver jewelry, immovable property, receipt of fixed deposit, national saving certificate, other government securities, and insurance policies. 

Nidhi Company has the power to provide loans but it has some limitations on the interest rate. These limitations are given below- 

1.     Interest rate cannot be exceeding 7.5% of the highest rate of interest on the deposits by Nidhi Company. 

2.     Interest shall be calculated on the reducing balance method. 

3.     On saving bank accounts the maximum interest cannot be exceeded above the rate of nationalized banks. 

4.     On fixed and recurring deposits the rate shall not be exceeding the rate of the Reserve Bank of India[1]

Penalties in case of Nidhi Company’s Failure of compliances

If any company fails or delay to fulfill its compliances there are certain penalties that will be levied on the Company. These penalties are given below- 

Failure in filing formsFailure in income Tax FilingFailure in Tax Audit 
a.      Directors will directly charge a fine of 5000 Rs. b.     Penalty of 50 Rs. Per day on each form, if delayed in filing.a.      5000 Rs. till 31st of December. b.     10,000 Rs. after 31st of December. a.      0.50% of Turnover. b.     15000 Rs.  c.      Or whichever is less. 

Conclusion

A lot of focus has been made on the Nidhi Company and its Compliances these days. This is because as per survey done, presently there are few entities that fulfill the criteria of Nidhi Company. Due to such non- compliances sometimes Nidhi company collapse as well. Therefore knowledge of Nidhi company compliances is very necessary to protect your company from heavy losses or penalties. And also we are living in a digital world where it is not difficult to maintain these compliances. There are lots of companies in the market which can help you with that for instance Bizadvisors

Read our article:All You Need to Know About GST Composition Scheme

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