Nidhi Company Compliance – NDH Returns & Rules

Overview

Nidhi companies exist for one purpose: to cultivate thrift and savings among members by accepting deposits from them and lending to them, for their mutual benefit. Section 406 of the Companies Act, 2013 recognises them, and the Nidhi Rules, 2014 — substantially rewritten by the Nidhi (Amendment) Rules, 2022 — prescribe how they must operate.

The compliance burden has two layers. The first is the Nidhi-specific layer: the NDH series of forms, the membership and net-owned-funds thresholds, the deposit and lending restrictions, the interest-rate caps. The second is the ordinary company layer: board meetings, AGM, AOC-4, MGT-7, statutory audit, income tax return. A Nidhi that files its AOC-4 and MGT-7 perfectly but ignores its NDH-3 is still non-compliant — and it is usually the Nidhi-specific layer that catches directors out, because it has no equivalent in ordinary company practice.

The 2022 amendment changed the character of Nidhi regulation. Before it, a company could incorporate with "Nidhi" in its name and start taking deposits while working toward compliance. Now, no deposit can be accepted until the Central Government issues the NDH-4 declaration — and the declaration requires the company to already meet the 200-member and Rs.20 lakh net-owned-funds thresholds. The gate moved from the end of the first year to the beginning of operations.

---

Is this compliance package right for your company?

You need Nidhi compliance management if:

• Your company is declared or operates as a Nidhi and accepts deposits from members.
• You incorporated a Nidhi recently and need to reach 200 members and Rs.20 lakh net owned funds within the first year.
• Your NDH-3 filings have slipped and you need to regularise half-yearly returns.
• You are unsure whether your deposit-to-net-owned-funds ratio is within 1:20.
• Your directors want a clear calendar so nothing falls through the cracks.

You may need a different service if:

• You only want to incorporate a Nidhi — that is our Nidhi company registration service; this page covers life after incorporation.
• Your company takes deposits from the public but is not a Nidhi — that is a different and far more serious regulatory question (NBFC registration or deposit-taking violations), and you should speak to us urgently.
• You run a chit fund, microfinance or lending business — those are separate regimes with their own licensing.

---

What must be in place before we take over your compliance

Current compliance status. We begin with a health check: which NDH returns have been filed, which are pending, whether the 200-member and Rs.20 lakh thresholds are met, and whether the deposit ratio is within limits. Most Nidhis that come to us have at least one gap — the health check finds it before the regulator does.

Member and deposit registers. NDH-1 and NDH-3 are built from your registers — members, deposits, loans. If the registers are incomplete or maintained in loose spreadsheets, we reconstruct them first. Returns filed from bad registers are worse than late returns.

Statutory auditor. A Nidhi needs its annual accounts audited. If you do not have an auditor, or the auditor is unfamiliar with Nidhi-specific reporting, we coordinate the audit alongside the filing calendar.

Board and member data. Director DINs and KYC status, member counts with admission dates, shareholding and deposit ledgers. The NDH-4 declaration, where still pending, needs all of this in order.

---

The Nidhi compliance calendar — every filing, every due date

This is the heart of Nidhi compliance. Pin this calendar to the wall.

NDH-3 — half-yearly return (twice a year). Filed with the Registrar of Companies within 30 days of the end of each half year: by 30 April (for October–March) and 30 October (for April–September). It reports membership, deposits, loans, net owned funds, unencumbered deposits and compliance with the Rules, and must be certified by a practising professional (CA, CS or CMA). This is the filing Nidhis miss most often — and each missed half year is a separate default.

NDH-1 — annual return of statutory compliances. Filed within 90 days of the close of the financial year — by 30 June — reporting the full year's position on members, deposits, loans, reserves and compliance with every applicable Rule. Certified by a practising professional.

NDH-2 — application for extension of time. If the company cannot meet the 200-member, net-owned-funds or ratio requirements within the first year, it applies to the Regional Director in Form NDH-2 for more time. File within 30 days of the close of the financial year (30 April). [NEEDS VERIFICATION — some secondary sources state 90 days; the conservative practice is to file within 30 days.]

NDH-4 — declaration as Nidhi (once). Under the 2022 amendment, the company must apply to the Central Government for a declaration that it is a Nidhi, within 120 days of completing one year from incorporation — and no deposits may be accepted until the declaration is received. This is not a formality: the application is scrutinised, and promoter loans, inflated membership or encumbered deposits are common grounds for rejection.

AOC-4 — financial statements. Within 30 days of the AGM, like any company.

MGT-7 — annual return. Within 60 days of the AGM, like any company.

ITR-6 — income tax return. By 31 October (for companies whose accounts require audit).

AGM. Within six months of the financial year end — by 30 September.

Board meetings. At least four in the year, with no more than 120 days between consecutive meetings.

---

Advantages of staying compliant — what good Nidhi hygiene buys you

The NDH-4 declaration opens the door to deposit-taking

Since the 2022 amendment, the declaration is the legal permission to do the business. A compliant Nidhi with its declaration in hand takes deposits with confidence; one without it is operating on borrowed time. Getting and keeping the declaration is the single highest-value compliance outcome.

The 1:20 ratio becomes a growth lever, not a ceiling

Net owned funds of Rs.20 lakh support Rs.4 crore in deposits. Every rupee of retained profit added to net owned funds supports twenty rupees of additional deposit capacity. Compliant Nidhis that track this ratio monthly can plan growth deliberately instead of discovering a breach at year end.

Clean NDH-3 filings build member trust

Members can see regulatory filings. A Nidhi whose half-yearly returns are filed on time, every time, signals institutional seriousness — and in a business built entirely on member trust, that signal has direct commercial value.

Directors stay out of personal penalty exposure

Officers in default face individual penalties under Section 450 of the Companies Act for Nidhi Rule violations. Compliance is not just the company's problem — it is each director's personal liability. A managed calendar is the cheapest director-protection available.

Fundraising and banking get easier

Banks, auditors and any future investor or lender ask for the compliance record first. A Nidhi with clean NDH filings, filed AOC-4/MGT-7 and a valid declaration passes diligence; one with gaps does not get past the first question.

No forced refunds

Breaching the 1:20 ratio or the deposit limits triggers a mandatory refund of the excess — operationally painful and reputationally damaging. Monitoring the ratio as part of routine compliance prevents the breach from happening.

---

The thresholds that define Nidhi life — NDH-1, NDH-2, NDH-3 and Rs.20 lakh net owned funds

Prospects searching for "NDH-1", "NDH-3 due date" or "Nidhi net owned funds" land here — this section answers those searches directly.

Net owned funds: Rs.20 lakh minimum. Net owned funds means paid-up equity share capital plus free reserves, minus accumulated losses and intangible assets (including deferred expenditure and preliminary expenses). The floor is Rs.20 lakh, excluding the proceeds of any preference share capital. The 2022 amendment raised this from Rs.10 lakh; Nidhis existing on 19 April 2022 were given 18 months to comply. Preference share capital does not count — a common planning mistake.

200 members within one year. Every Nidhi must have at least 200 members within one year of incorporation. Membership means genuine members holding equity shares — not names on a list. If the threshold cannot be met, Form NDH-2 to the Regional Director is the legal route, not quiet non-compliance.

Unencumbered term deposits: 10% of outstanding deposits. The Nidhi must keep term deposits, free of any charge or lien, of at least 10% of its outstanding deposits, with a scheduled commercial bank. Encumbered fixed deposits — pledged against a loan, for instance — do not count. This is the liquidity buffer the Rules insist on, and inspectors check it.

The 1:20 ratio. Deposits outstanding must not exceed twenty times the net owned funds. At the minimum Rs.20 lakh NOF, the deposit ceiling is Rs.4 crore. Grow deposits beyond the ratio and the excess must be refunded — there is no discretion here.

NDH-1 in practice. The annual return of statutory compliances, filed within 90 days of the financial year end (30 June). It is a compliance checklist in return form — members, deposits, loans, reserves, unencumbered deposits, ratio, interest rates — certified by a practising CA, CS or CMA. Think of it as the Nidhi's annual self-audit, filed with the Registrar.

NDH-2 in practice. The extension application to the Regional Director when the first-year thresholds are missed. It buys time legally. What it does not do is excuse the underlying shortfall indefinitely — the Regional Director grants extension, not exemption.

NDH-3 in practice. The half-yearly return, due 30 April and 30 October, certified by a practising professional. It is the most frequent Nidhi-specific filing and therefore the one most often missed. Two missed NDH-3s in a row is the classic profile of a Nidhi sliding into default.

---

Documents and data we need from you

For the compliance health check: Certificate of incorporation, memorandum and articles, NDH-4 declaration (if received), all previously filed NDH returns, member register with admission dates, shareholding ledger, deposit and loan ledgers, latest audited financials, board meeting minutes for the year.

For ongoing filings: Monthly or quarterly member/deposit/loan movements, bank statements showing unencumbered term deposits, board resolutions, auditor details, director DIN and KYC status.

For NDH-4 (if pending): Proof of 200 members, net-owned-funds computation with auditor certification, unencumbered deposit evidence, details of the company's business plan and compliance systems.

---

The compliance process — step by step

1. Health check and gap analysis

We map every Nidhi-specific and general filing against its due date, verify the 200-member count, compute net owned funds from the latest financials, test the 1:20 ratio and the 10% unencumbered-deposit requirement, and list every gap with its penalty exposure.

2. Register reconstruction (if needed)

Where member, deposit or loan registers are incomplete, we rebuild them from bank statements, share certificates, deposit receipts and loan documentation — because every NDH return is only as good as the registers behind it.

3. The filing calendar goes live

We set up the full calendar — NDH-3 (April and October), NDH-1 (June), AOC-4, MGT-7, ITR-6, AGM, board meetings — with advance alerts so each filing is prepared before its due date, not after.

4. NDH-3 preparation and filing (each half year)

We compile the half-year position, reconcile deposits and loans, verify the ratio and unencumbered deposits, get the return certified by a practising professional, and file with the Registrar within the 30-day window.

5. NDH-1 preparation and filing (annually)

The annual statutory-compliance return, prepared from the audited financials and the year's registers, certified and filed by 30 June.

6. General company filings

AOC-4 within 30 days of the AGM, MGT-7 within 60 days, ITR-6 by 31 October, AGM by 30 September, board meetings through the year — run on the same calendar so nothing is orphaned.

7. NDH-2 or NDH-4 (as applicable)

If thresholds are missed, the NDH-2 extension application to the Regional Director. If the declaration is still pending, the NDH-4 application to the Central Government with the full evidentiary file.

8. Ongoing monitoring

Monthly ratio and threshold tracking, so the 1:20 ceiling and the 10% deposit requirement are managed continuously rather than discovered at filing time.

---

How long does it take?

Health check: 7–10 working days from receipt of complete records. Register reconstruction: 2–4 weeks depending on volume and record quality. Regularisation of pending NDH returns: 3–6 weeks per return, depending on how many half years are in arrears and whether professional certification requires re-verification. NDH-4 declaration: the Central Government's processing timeline is not fixed — expect 3–6 months from a complete application, longer if queries are raised. Steady-state compliance (all filings current): the calendar runs itself with our quarterly check-ins.

---

How ComplyKart helps in this entire process

Compliance health check. A complete diagnostic of your Nidhi's position against every Rule — members, net owned funds, unencumbered deposits, ratio, filings — with a gap list and penalty exposure for each item.

Register reconstruction. We rebuild member, deposit and loan registers from source documents where records are incomplete, so every return stands on verifiable data.

The full filing calendar. NDH-1, NDH-3 (both halves), AOC-4, MGT-7, ITR-6, AGM, board meetings — prepared, certified where required, and filed on time, every time.

Threshold monitoring. Monthly tracking of the 1:20 ratio, the 10% unencumbered-deposit requirement and the member count, with alerts before a breach rather than after.

NDH-2 and NDH-4 applications. Drafting and filing the extension application to the Regional Director or the declaration application to the Central Government, with the evidentiary file each authority expects.

What we do not do: we cannot fabricate members, inflate net owned funds, or certify returns on registers we know to be false — the practising professional's certification is a personal liability, and we will not ask anyone to carry it on fiction. We also cannot guarantee the Central Government's timeline on NDH-4.

---

What happens after the filings are current

In the first 30 days: every pending return is filed, the calendar is live, and the board receives a compliance dashboard — thresholds, ratios, upcoming due dates — in plain language. The directors know exactly where the company stands for the first time.

In the first 6 months: the first NDH-3 under our management is filed on time, the ratio monitoring catches any drift, and the AGM cycle runs without the usual last-minute scramble. If an NDH-2 extension was needed, its outcome is known and the remediation plan is underway.

---

The recurring compliance you are signing up for

Every half year: NDH-3 by 30 April and 30 October, certified by a practising professional. Every year: NDH-1 by 30 June; AGM by 30 September; AOC-4 within 30 days of the AGM; MGT-7 within 60 days of the AGM; ITR-6 by 31 October; at least four board meetings. Continuously: 200 members minimum, Rs.20 lakh net owned funds minimum, 10% unencumbered term deposits, 1:20 deposit ratio, and the prohibitions — no non-member business, no current accounts, no deposit advertisements, no brokerage.

---

Common mistakes and how to avoid them

Treating NDH-3 as optional. It is the most-missed Nidhi filing and each missed half year is a separate default. Calendar it like a tax deadline.

Counting encumbered deposits toward the 10%. A fixed deposit pledged against a bank loan is not unencumbered. Inspectors ask for the lien-free confirmation — have it ready.

Including preference capital in net owned funds. The Rules expressly exclude preference share proceeds. Companies that raised preference capital and counted it toward Rs.20 lakh discover the shortfall at the worst moment.

Growing deposits past the 1:20 ratio. Enthusiastic deposit mobilisation without tracking the ratio ends in mandatory refunds. Monitor monthly.

Accepting deposits before the NDH-4 declaration. Since the 2022 amendment, this is not a technical lapse — it is operating without the legal permission to do the business.

Paying brokerage to mobilise deposits. Expressly prohibited. Even informal "referral incentives" to agents fall within this prohibition.

---

Prohibitions every Nidhi director must know

A Nidhi company shall not: carry on the business of chit fund, hire-purchase finance, leasing finance, insurance, or acquisition of securities; accept deposits from or lend to anyone other than members; open current accounts for members; take deposits from or lend to any body corporate; issue advertisements soliciting deposits in any form; or pay brokerage for mobilising deposits or deploying funds. It also cannot carry on any business other than borrowing and lending in its own name. These are not guidelines — they are prohibitions, and breach puts the directors in default.

---

Penalties that actually bite

Contravention of the Nidhi Rules exposes the company and every officer in default to penalties under the Companies Act. Officers in default face individual penalties under Section 450 — there is no shelter behind the company for compliance failures that are a director's personal responsibility. Persistent default on filings also feeds into the general consequences every company faces: additional fees of Rs.100 per day of delay on MCA filings, director disqualification under Section 164(2) after three years of missed financial-statement or annual-return filings, and strike-off proceedings under Section 248 for sustained non-compliance.

---

Sources

This page is built on Section 406 of the Companies Act, 2013, the Nidhi Rules, 2014 as amended by the Nidhi (Amendment) Rules, 2022 (G.S.R. 235(E) dated 19 April 2022), MCA filing guidance for forms NDH-1 through NDH-4, and the standard company-filing framework (AOC-4, MGT-7, ITR-6). Threshold figures and due dates are verified against the amended Rules; where secondary sources disagreed (notably the NDH-2 filing window), the conservative position is stated and the discrepancy flagged. We re-verify thresholds against the MCA portal at the time of engagement. Where a claim could not be verified against a primary source, it is marked [NEEDS VERIFICATION].

---