Capital Gains Tax in India 2025: Rates, STCG, LTCG & Indexation
16 Jun, 2025
By Online Legal India
Published On 05 Mar 2022
Updated On 30 May 2025
Category Nidhi Company
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Nidhi Company registration is a popular choice for those looking to start a mutual benefit society focused on lending and borrowing among members. Regulated under the Companies Act, 2013 and governed by the Nidhi Rules, 2014, it offers a simple and cost-effective way to promote savings within a community. This guide covers everything about Nidhi Company: the registration process, required documents, and key benefits for aspiring entrepreneurs.
A Nidhi company is a unique type of Non-Banking Financial Company (NBFC) in India that is created to encourage savings and mutual financial support among its members. It is a member-only financial company, which means it can accept deposits and give loans, but only to its registered members. Unlike regular banks, it doesn’t deal with the public or large-scale financial operations. Nidhi companies are regulated by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013, and the Nidhi Rules, 2014. They are popular in small communities for offering easy, trustworthy financial support.
Nidhi companies are governed by a distinct legal framework that ensures that the operations are aligned with the principles of mutual benefits and community development.
Nidhi Companies are incorporated under Section 406 of the Companies Act, 2013, which defines them as public companies formed to cultivate the habit of thrift and savings among their members. These companies must adhere to the provisions applicable to public companies, which include those related to incorporation, governance, and compliance.
The Nidhi Rules, 2014, issued under the Companies Act, provide detailed guidelines for the functioning of Nidhi Companies. These rules outline the requirements for incorporation, membership, capital, and operations, which ensure that Nidhi operates within a structured and regulated environment.
While Nidhi Companies are a category of Non-Banking Financial Companies (NBFCs), they are not directly regulated by the Reserve Bank of India (RBI). The RBI has the authority to issue directions to Nidhi concerning their deposit acceptance activities, as they are considered financial institutions under the RBI Act. This oversight ensures that Nidhi maintains financial discipline and protects the interests of their members.
Recognising the unique nature of Nidhi Companies, certain exemptions have been granted under the Companies Act, 2013. Nidhi companies are exempted from provisions related to the registration of NBFCs with the RBI, provided they adhere to the specific requirements outlined in the Nidhi Rules.
Let us discuss the features of a Nidhi company:
Membership-Based Operations
Nidhi Companies function exclusively for the mutual benefit of their members. They accept deposits and provide loans solely to individuals who are part of the company, which fosters a community-centric financial environment. This model ensures that the benefits are retained within the group, which promotes financial inclusion among members.
Limited Scope of Activities
These companies are restricted to specific financial activities. They cannot engage in businesses like chit funds, hire purchase, leasing, finance, or insurance. Their operations are confined to borrowing and lending among members, which ensures a focused and regulated approach to financial services.
Capital and Membership Requirements
To be incorporated as a Nidhi Company, certain criteria must be met, which are mentioned in the following details:
Loan and Deposit Facilities
Nidhi Companies offer various deposit schemes like fixed deposits (FD), recurring deposits (RD), and savings accounts to their members. Loans are provided against collateral such as gold, immovable property, or fixed deposits, which ensures security for both the lender and borrower.
Simplified Compliance and Operations
Compared to other financial companies, Nidhi Companies benefit from simplified regulatory compliance. They are exempt from certain requirements that apply to other NBFCs, which makes the process of formation and operation more accessible.
Community-Centric Financial Support
By focusing on the financial needs of their members, Nidhi Companies play an important role in community development. They provide easy access to credit and encourage savings, which contributes to the economic empowerment of individuals within the community.
The following details include how to register a Nidhi company in India:
Step 1: Obtain a DIN and DSC
Before initiating Nidhi Company Registration, the proposed directors must acquire a DSC (Digital Signature Certificate), which is essential for signing electronic documents during the registration process and all other related services after Nidhi incorporation. You may also need a DIN (Director’s Identification Number), which is a unique identification number issued by the MCA for each director. If the directors already possess valid DSC and DIN, this step can be skipped.
Step 2: Draft Memorandum and Articles of Association
Prepare the following documents, such as the Memorandum of Association (MoA), which outlines the company’s objectives and scope of activities. And the Articles of Association (AoA) detail the rules and regulations that govern the company’s internal management. These documents must be signed by all the subscribers and filed with the RoC.
Step 3: Name Reservation
To reserve a name for a Nidhi Company, applicants must use either the RUN (Reserve Unique Name) service or the SPICe+ Part A form on the MCA portal. The proposed name must end with "Nidhi Limited" and must not resemble any existing company or trademark. Only one name can be submitted per RUN application, while SPICe+ is part of the full incorporation process.
The government fee for name reservation is ?1,000, and the approved name is reserved for 20 days. If not used within this period, the name expires. A fresh application and fee are required for resubmission.
Step 4: File Incorporation Application
Submit the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form on the MCA portal, along with the MoA, AoA, and other required documents. This integrated form facilitates the incorporation process, which includes PAN and TAN applications.
Step 5: Obtain Certificate of Incorporation
Upon verification of the submitted documents, the RoC will issue the Certificate of Incorporation, which includes the Company's Identification Number (CIN). This certificate legally recognizes the company as a Nidhi Company.
Step 6: Apply for PAN and TAN
Apply for the company's Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) through the SPICe+ form along with the incorporation application. These are essential for tax-related transactions.
Step 7: Open a Bank Account
With the Certificate of Incorporation, PAN, and TAN, open a bank account in the company's name. This account will be used for all financial transactions of the Nidhi Company.
Here is the list of documents required for registering a Nidhi Company:
The registration process involves several steps, which include acquiring DSC, DIN, name reservation, filing of SPICe+ Form, which includes MoA, AoA, and PAN with Certificate of Incorporation issuance. The entire process, from DSC to CIN issuance, typically takes around 10 to 20 working days. This procedure usually depends on the smoothness of document submission and government processing times.
The cost of registering a Nidhi Company in India typically includes government fees, professional charges, and miscellaneous expenses. The government filing fee for name approval (RUN or SPICe+ Part A) is around ?1,000. The incorporation fee varies based on the company’s authorized capital but generally starts from ?7,000 to ?10,000. Additionally, you may incur fees for obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN), which can cost around ?1,000 to ?2,000 each. Professional charges for company secretaries or consultants may vary.
Let us discuss the key of a Nidhi company:
Nidhi companies are designed to introduce a culture of saving money among their members. By encouraging regular deposits, they help individuals, especially from lower and middle-income groups, to develop financial discipline and build a safety net for future needs.
Registering a Nidhi company is very straightforward compared to other NBFCs. It requires a minimum of 7 members, which includes three directors and paid-up equity share capital of Rs. 5 lakh but must touch Rs. 10 lakh in a year. The documentation and compliance requirements are less demanding, which makes it accessible for small groups aiming to promote mutual financial support.
Unlike other NBFCs, Nidhi companies do not need to obtain a license from the RBI to commence operations. This exemption simplifies the regulatory process, which allows these companies to focus on serving their members without the complexities of RBI compliance.
Nidhi companies operate exclusively for the benefit of their member. They accept deposits and provide loans only to their members, which fosters a sense of community and mutual trust. This closed-loop system reduces the risk of defaults and ensures that financial resources are circulated within the group.
Members of Nidhi companies can avail loans at interest rates lower than those offered by traditional banks. This affordability makes it easier for members to meet personal or business financial needs without the burden of high-interest repayments.
Deposits made in Nidhi companies are considered safe as they are governed by specific rules under the Companies Act 2013, and Nidhi Rules, 2014. The risk of loan defaults is minimized due to the member-only policy, which ensures the security of the invested funds.
By operating within a specific community or group, Nidhi companies strengthen social bonds and mutual support. Members are more likely to be responsible borrowers and savers by knowing that their financial activities directly impact their community.
Members may be eligible for tax deductions on the interest earned from their deposits that are subject to prevailing income tax laws. Nidhi companies are exempt from dividend distribution tax (DDT), which shifts tax liability on dividends to individual recipients.
Operating a Nidhi company is cost-effective due to lower compliance costs and the absence of RBI licensing fees. This efficiency allows more resources to be directed towards member services and financial products.
Being registered under the Companies Act provides Nidhi companies with a formal legal structure. This recognition enhances credibility and ensures transparency in operations, which builds trust among members and stakeholders.
A Nidhi Company may operate on a small scale, but its impact is significant. Rooted in community trust and mutual financial support, it offers a low-risk way for members to save and borrow. When managed ethically and in compliance with regulations, it can become a strong foundation for financial growth. This article covered the Nidhi company registration process, documents, costs, and benefits. Contact Online Legal India for expert assistance in registering your Nidhi Company.
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