Written by : Rajiv Singh
A Chartered Accountant in UK with 15+ years of experience in FinTech Consulting, Accounting & International Taxation. I enjoy being a Social, Foodie and Father of two young children, reachable at linktr.ee/RajivSingh.
Nidhi means treasure. In India, a Nidhi company represents the central government's initiative that was started to augment the savings of its members. It is regulated by Section 406 of the Indian Companies Act of 2013, the Companies Rules of 2014 and the Chapter XXVI of the Companies Rules 2014. The main feature of the Nidhi framework is that only its shareholders can benefit from it. Thus, it collects deposits and provides loans for the mutual benefit of its members.
There are numerous organisations that are attached to a Nidhi Company. Collectively, we can call them Benefit Funds, Mutual Benefit Funds, Nidhi, Permanent Funds or Mutual Benefit Companies. It is an establishment with at least seven members, and among these three will act as the director of the company. Because of its thrifting feature, it accumulated immense popularity in South India. Along with this, it centres around individual benefits, so it is subjected to certain tax exemptions. In this blog article, we shall take a deep dive into the key features and pivotal things you need to know about Nidhi Company.
Nidhi belongs to a category of an NBFC (Non-Banking Finance Corporation). Even though it does not come directly under RBI, the reserve bank does intervene in its activities by issuing directives about deposits and financial handlings. The main features of such a type of company are mentioned as follows:
Before starting the registration process, let's take a look at the documents that are necessary to complete Nidhi incorporation.
For this, you need;
Once you complete the required verification, you will receive a certificate within 15-25 days, approving the Nidhi company. The certificate also comes with your Corporate Identity Number.
Online payment options are available for Nidhi registration, and the fee involves multiple sections. Hence, the fee changes depending on your authorised capital. Furthermore, an additional fee of Rs. 500 per director is necessary for completing the DIN registration. At the time of name approval, you will pay Rs. 1000 and you also need to pay for the state stamp duty.
As this is a central government initiative, Nidhi company offers several benefits to its members. Unlike other banks, the company's liability is less as there is no risk of losing properties of directors in case of losses. Additionally, when compared to other NGO financial settings, Nidhi stands unique with credible solutions and a resilient structure. One of the crucial functions of the company is to amplify the savings of its members. Hence, the Nidhi platform offers an effective way of generating income and thrifting money. Moreover, access to public funds and the cheaper loan rate make it an attractive option for stakeholders. As the regulatory controls of RBI are limited, it facilitates customised loan services which are far more convenient than other lending services. Moreover, it proves as a safe and secure way of handling money. The closed network only allows stakeholders to benefit from this initiative.
To conclude, we can confidently say that Nidhi is one of the best financial networks to receive loans easily and without hassles. This mutual benefit scheme will support local communities and encourage the savings of its members. However, complying with tax and registration can be arduous for a newcomer. This is where Gotaxfile can lend a hand! We can assist you with all the fundamentals of Nidhi incorporation and help you comply with the tax regulations. Contact us for faster incorporation and file your tax returns!
India Co. Reg. 132121 / UK Co. 10827411
UK GDPR ICO Registration ZA787002, India GSTIN 09AAHCT9946J1ZI