Companies Act, 2013 · A Working Field Guide
Form DPT‑3 and Section 185, decoded for everyday practice
CA Pocket Guide Series — Issue 02 Form DPT‑3 and Section 185 of the Companies Act, 2013.
First edition, 2025–26.
Authored and published by CA Amit Mehta, Amit Mehta & Co., Chartered Accountants, Navsari, Gujarat, India.
© 2025–26 Amit Mehta & Co. All rights reserved. No part of this guide may be reproduced, distributed, or transmitted in any form or by any means without prior written permission, except for brief quotations used in professional reference with due credit.
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Inside this issue
Preface
Almost every dispute, query, and late-night phone call about company law eventually narrows to a single word: allowed?
Money has a way of moving in directions the law watches closely. It flows into a company as loans, advances, and deposits. It flows outward toward the people who run the company — its directors and those connected to them. Two provisions of the Companies Act, 2013 stand guard over these flows. Form DPT‑3 is the annual disclosure that asks a company to declare the money it is holding that is not share capital. Section 185 draws a firm line around who a company may, and may not, lend to.
In day-to-day practice these two sit side by side, and they are easy to confuse. Both involve loans. Both treat private companies differently from public ones. Both carry exemptions that hinge on the same recurring ideas — whether a body corporate has invested in the company, how much it has borrowed from banks, and whether it has defaulted. A practitioner who keeps the two clearly apart saves hours of second-guessing.
This little book is written for the people who live with these questions: practising Chartered Accountants and Company Secretaries, finance controllers, founders of private limited companies, and students preparing for professional examinations. It does not aim to reproduce the statute. It aims to give you a clean mental map — the kind you can recall standing in front of a client — of what is permitted, what is prohibited, and what is permitted only on conditions.
Throughout, one simple device recurs: a verdict. Wherever a transaction can be classified, you will see it marked ✓ Allowed, ✗ Prohibited, or ⚠ On conditions. Hold those three colours in your head, and most of company law's anxiety about loans quietly dissolves.
The Landscape
Before the detail, the big picture: why the law treats incoming money and outgoing director-loans as matters of public interest at all.
A company is not its founders' private purse. It is a separate legal person that holds other people's money — shareholders' capital, lenders' funds, customers' advances. The law's quiet anxiety is that this pooled money might be quietly siphoned, mislabelled, or lent to insiders on soft terms. Two mechanisms answer that anxiety.
The first gate is about visibility. Under the Companies (Acceptance of Deposits) Rules, 2014, a company that holds money it has received — whether that money counts as a regulated "deposit" or falls into one of the many exempted categories — must declare it once a year in Form DPT‑3. The form does not necessarily forbid anything; it makes the company state, on the record, what it is holding and from whom. Sunlight, as the saying goes, is the best disinfectant.
The second gate is about restraint. Section 185 governs loans, guarantees, and securities that a company extends to its own directors and to the web of people and entities connected to them. Here the law does forbid — firmly — and then carves out narrow, conditional openings. It is the difference between a window you simply look through and a door that is bolted, with a few keys held by very specific people.
An elegant editorial line-art illustration of two tall ceremonial gates standing side by side on a marble plinth: the left gate is an open latticed window of light (labelled by a subtle rupee motif), the right gate is a solid bolted vault door. A single stream of gold coins flows between them. Engraved, architectural feel.
Both gates wave through similar traffic and use overlapping passwords. A loan from a shareholder, for instance, touches the deposit rules and raises questions of disclosure. A loan to a body corporate in which a director is interested touches Section 185 and, on the borrower's side, the deposit rules again. And the very same yardsticks — "has a body corporate invested?", "are borrowings within twice the paid-up capital or fifty crore?", "is there any default?" — reappear in the exemptions to both regimes. Learn them once; use them twice.
Form DPT‑3
Once a year, a company writes down every rupee it is holding that is not its own capital — and decides which box that money belongs in.
Form DPT‑3 is filed under Rule 16 and Rule 16A of the Companies (Acceptance of Deposits) Rules, 2014. Every company other than a Government company must report the money it has received that is still outstanding: amounts that legally count as deposits, and amounts that are specifically not considered deposits under the Rules. The form is, in essence, a yearly reconciliation between a company's balance sheet and the deposit framework.
The single most common slip in DPT‑3 is ticking the wrong purpose. The form offers three:
Two practical rules follow from this table. A private company, which ordinarily cannot accept public deposits, files under option (b). And whenever a company carries a loan from a shareholder or member, the safe choice is option (c) — both (a) and (b) — because the position can straddle the line.
A clean vertical decision-funnel infographic: money enters at the top as a coin, passes through a sieve labelled "Rule 2(1)(c) exclusions (i–xviii)", and splits into two trays at the bottom — a green tray "Not a deposit · report under option (b)" and an amber tray "Deposit · report under option (a)". Minimal icons, no photoreal elements.
To anchor the chapters that follow, here is the shape of the answers you are heading toward — the everyday receipts a private company sees, and where they sit:
✓ Loan from a director (owned funds) ✓ Loan from a member, within limits ⚠ Advance from customer ≤ 365 days ✗ Loan from an LLP to the company
The form is short. The judgement calls — deadlines, who is exempt, which figures to use, and how to treat awkward receipts — are where the work lives.
DPT‑3 reports amounts outstanding as on 31 March and is due by 30 June each year. A common question is whether a return is needed when nothing is outstanding. The working position is that if the closing balance is nil as on 31 March, the return is not required — even where there were transactions during the year, so long as the balance has been cleared by year-end.
A short list of regulated entities sits outside the DPT‑3 net entirely:
The form draws on the company's numbers, and Rule 16A expects the figures reported to match the balance sheet. Where audited financials are not yet finalised by the filing date, non-audited (provisional) figures may be used — with the understanding that they should reconcile to the audited statements once available.
Most disputes about DPT‑3 are really disputes about classification. The table below settles the items that come up again and again.
*Exempt from being a deposit, subject to the director-status timing and owned-funds declaration.
Borrowings
A private limited company can raise money from many quarters — but each source comes with its own gate, and one or two are simply shut.
The deposit rules do not stop a private company from borrowing; they decide who it may borrow from without the money becoming a regulated deposit. The map below is the heart of everyday compliance.
The shareholder route has loosened over time. Two notifications trace the journey:
Under the 2017 relaxation, a private company may accept money from its members without any ceiling, provided all of the following hold true:
Section 185
If Chapters 2–4 were about money coming in, Section 185 is about money going out — toward the people who control the company. Here the law builds a wall.
Section 185 was notified on 12 September 2013 and then completely substituted with effect from 7 May 2018 by the Companies (Amendment) Act, 2017. The substitution mattered: it replaced a near-total ban with a more graded structure — an absolute prohibition for the innermost circle, conditional permission for the next ring, and clear exemptions beyond.
The two sections are easy to mix up but do different jobs. s.185 answers to whom a company may give a loan, guarantee, security (and, read together, investment). s.186 sets out the procedure, limits and disclosures to be followed. In practice they operate simultaneously — clearing the 185 gate does not excuse the 186 procedure.
The inner ring is sealed. A company shall not, directly or indirectly, advance any loan (including a loan represented by a book debt), or give any guarantee or security in connection with a loan taken by:
These are, in short, the individuals closest to the directors, and the firms they sit in. For this ring there is no relaxation — no special resolution, no exemption route. The wall has no door.
A precise concentric-ring diagram, like a target seen from above. The bolted innermost ring is labelled "185(1) · Absolute prohibition" in red; the middle ring "185(2) · Allowed on conditions" in amber with a small keyhole; the outer ring "185(3) · Exempt transactions" in green with an open gate. A company icon sits at the centre, the rings radiating outward.
Beyond the sealed inner ring, the law opens carefully guarded doors. Each has a key — and the key has conditions etched into it.
A company may give a loan, guarantee or security to any person in whom a director is interested — but only after turning two keys at once:
Typical examples of such "interested persons" are a body corporate, a company, or an LLP in which the directors hold sway. The door is real — but it only opens with members' explicit blessing and a genuine business purpose on the other side.
By a notification dated 5 June 2015, Section 185 does not apply to a private company that satisfies all three of the conditions below. Note how closely they echo the borrowing yardstick from Chapter 4.
In plain terms: a company may lend to any person in whom its directors are interested — for instance, a body corporate, a company, or an LLP — after fulfilling the conditions (special resolution + principal-business use). The route exists precisely to allow legitimate group and business lending while keeping it visible and member-approved.
Section 185(3) is the relief valve. It names transactions that sit entirely outside the prohibition — the cases the law was never meant to catch.
The restrictions of 185(1) and 185(2) simply do not apply to the four situations below. Think of them as an independent track running alongside the main section.
A loan to an MD or WTD escapes the section when it is given:
A company whose ordinary business is to provide loans, guarantees or securities — an NBFC or housing finance company, for example — is outside the prohibition, provided interest is charged at not less than the prescribed rate. The section was never meant to stop a lender from lending.
This is the most error-prone corner, so read the two rows carefully — the difference between a wholly-owned subsidiary and an ordinary subsidiary changes the answer completely.
So a holding company may give its wholly-owned subsidiary a loan, guarantee and security freely. But to an ordinary (non-wholly-owned) subsidiary it may give only a guarantee or security, and only in respect of a loan made by a bank or financial institution. A direct loan from a holding company to such a subsidiary is not allowed. In every case the funds must be used by the subsidiary for its principal business activities.
Reference
Everything so far, compressed into pages you can keep on the desk and act from.
In closing
Strip away the clause numbers and these two provisions tell one coherent story. A company is entrusted with money that is not its own, and the law insists on two disciplines: declare what you hold, and do not quietly route it to insiders. Form DPT‑3 enforces the first; Section 185 enforces the second.
Once you see them this way, the detail stops feeling arbitrary. The same yardsticks recur because the same worry recurs. The private-company relaxations exist because closely-held businesses raise less systemic risk. The holding–subsidiary carve-outs exist because genuine group support is not the mischief the law is chasing. And the verdict device — ✓, ✗, ⚠ — works because, at bottom, every question here resolves to one of three answers.
Keep this guide close, but keep the bare Act closer. Thresholds move, forms are revised, and notifications refine the edges. The map in these pages will orient you quickly; the territory itself is the statute.
Two corners of the Companies Act, 2013 quietly govern the answer — the annual deposit return, Form DPT‑3, and the rules on loans to directors, Section 185. Most practitioners know them in fragments. This pocket guide assembles the fragments into a single, usable map.
Three answers run through every page: Allowed, Prohibited, or Allowed-on-conditions.
Inside you will find:
Written for Chartered Accountants, Company Secretaries, finance teams, founders, and students — in plain, practice-ready language.