Form DPT-3 is the annual return of deposits (and of transactions that are not deposits but fall within prescribed particulars) that every company other than a government company is required to file with the Registrar, and an auditor's job before filing is to independently classify each receipt of money by the company, such as loans from directors, inter-corporate deposits, advances against supply of goods or services, and share application money, against the deposit rules to confirm whether it is an exempted deposit, a deposit, or outside the definition entirely, rather than accepting management's classification, and the exact exemption categories and prescribed particulars should be confirmed against the current deposit rules.
Why classification is the real work
The Companies (Acceptance of Deposits) Rules define deposit broadly, then carve out a long list of exemptions: amounts received from directors (where the director funds it from own sources and declares so in writing), inter-corporate loans, amounts received as security deposit, advance against supply of goods or services adjusted within a prescribed period, and several others. A company's own treasury team often defaults a borrowing to one of these exemption categories without testing whether the conditions attached to that exemption, such as the director's declaration or the adjustment timeline on an advance, were actually met.
Testing approach
- 01List every inward receipt of money that is not revenue or a capital contributionPull director loans, inter-corporate deposits, advances from customers, security deposits received, and any other borrowing or advance from the ledgers, for the full year, not just the balances outstanding at year end.
- 02Test the conditions attached to each claimed exemptionFor a director's loan claimed as exempt, confirm a written declaration exists stating the funds are not borrowed by the director; for an advance against supply, confirm it was adjusted against actual delivery within the prescribed period, and was not refunded instead, which can change its classification retrospectively.
- 03Check advances outstanding beyond the adjustment periodAn advance against supply of goods or services that remains unadjusted beyond the period prescribed under the rules is reclassified as a deposit from the date it was received, which can also trigger a breach of the deposit acceptance conditions the company never intended to be subject to.
- 04Reconcile the DPT-3 figures to the loans and advances ledgers and the financial statement notesThe amounts reported in DPT-3 as outstanding deposits and exempted deposits should tie to the corresponding note disclosures in the financial statements; a mismatch between the two filings is itself a red flag worth investigating before either is finalised.
- 05Confirm the company was eligible to accept deposits if any genuine deposit was takenDeposit acceptance from the public is restricted to companies meeting prescribed net worth and turnover criteria, with a credit rating and deposit insurance in place where required; confirm these conditions were met if the company accepted any deposit that does not fall within an exemption.
A loan from a relative of a director, as opposed to the director personally, generally does not qualify for the director's-loan exemption; this distinction is missed often enough to be worth checking specifically rather than assuming family loans are covered the same way.
Regulatory requirement
The exact definition of deposit, the full list of exemptions and their conditions, the adjustment period for advances against supply, and the eligibility criteria for deposit acceptance are set out in the Companies Act and the deposit rules as currently in force. Confirm all of these against current source material before concluding on classification.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Bank, cash & treasuryLoans and borrowings audit checklistSanction letter checks, charge verification against ROC filings, covenant compliance, interest testing, and current/non-current classification.
- CARO & Companies ActBooks of account compliance under the Companies ActWhat proper books of account require under the Companies Act, the audit-trail-software requirement, and how to test whether it is actually switched on.
- CARO & Companies ActCARO default in repayment of loans: audit testingTesting repayment schedules against actual payment dates, using bank confirmations as the independent check, and where the line sits between a minor delay and a reportable default.
- CARO & Companies ActSecretarial compliance checklist for a statutory auditorBoard meeting frequency, statutory registers and ROC filing timeliness, read as evidence of compliance culture rather than a secretarial checklist in its own right.
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