New Rule Alert: How Does the Ceiling on Employee Security Deposits Affect You?

New Ceiling on Employee Security Deposits

Until now, there was no ceiling on employees' security deposits taken by companies. However, as per Rule 2(1)(c)(x) of the Companies (Acceptance of Deposits) Rules 2014, which has come into force from today, i.e., 1st April 2014, a ceiling has been fixed. Now, a company can only take an amount from an employee not exceeding his annual salary under the contract of employment with the company in the form of a non-interest-bearing security deposit. This is just for your information.

Thanks

Dear Agrawal ji,

Thank you very much for sharing the information. I read the notification and found myself confused.

Understanding the Applicability of Rules 2014

What I understand is that these rules from 2014 are applicable to companies registered under the Indian Companies Act, except for:
(i) a banking company;
(ii) a non-banking financial company as defined in the Reserve Bank of India Act, 1934 (2 of 1934) registered with the Reserve Bank of India;
(iii) a housing finance company registered with the National Housing Bank established under the National Housing Bank Act, 1987 (53 of 1987); and
(iv) a company specified by the Central Government under the proviso to sub-section (1) of section 73 of the Act.

Definition of "Deposit"

The Companies Act defines in section 2(13) "deposit" as 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.

Clarification on Rule 2(1)(c)(x)

Now, Rule 2(1)(c)(x) states: "deposit" includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of a non-interest-bearing security deposit.

I have a question here: What is a non-interest-bearing security deposit? Does this mean I can take deposits from my employees?

I would be highly obliged if you could shed some light on this.

Regards,

A non-interest-bearing security deposit means the security deposit paid to the company by individuals will not attract any interest, and the company will not pay any interest for the deposited amount as security. Upon completion of the contractual agreement between both parties, the amount deposited as security will have to be returned to the depositor by the company without adding any interest to the said amount.

Thank you.