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Whether advance taken from customers by real estate company on which no interest has been paid will be treated as advance or deposit as per the Companies Act 2013?

Whether advance taken from customers by real estate company on which no interest has been paid will be treated as advance or deposit as per the Companies Act 2013?

As per the Rule 2(xii) of the Companies (Acceptance of Deposits) Rules, 2014, any amount received in the course of, or for the purposes of the business of the company – as advance, accounted for in any manner whatsoever, received in connection with consideration for property under an agreement or arrangement is exempted from the definition of the Deposits but if such advance is not adjusted against the property in accordance with the terms of agreement or arrangement then it will be treated as deposit. Further, whether interest is charged or not is immaterial.

Thus, advance taken from customers by real estate company shall not be considered as deposits. But if it is not adjusted against the property in accordance with the terms of agreement or arrangement, then it will be treated as deposit.


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