October 7, 2026 · Guides

Nidhi Company Under the Companies Act 2013 (Section 406)

A Nidhi company under the Companies Act 2013 is still a company first. Section 406 gives it a special status and the Nidhi Rules, 2014 supply the special conditions, but audit, AGMs and annual filings work much as they do for any public company. This is how those pieces fit together.

In this guide

What Section 406 does
A public company with conditions
Ordinary Companies Act duties still apply
What the Nidhi Rules add
Who regulates a Nidhi
FAQs

What Section 406 does

Section 406 is the provision on Nidhi and mutual benefit companies. In plain terms, it lets the Central Government treat a company that meets the Rules as a Nidhi, which is why the final step after incorporation is the NDH-4 declaration. It is also the legal anchor for the Nidhi Rules, 2014. A Nidhi is a mutual benefit company that takes deposits from and lends to its own members only, to cultivate thrift and savings.

For the meaning of the term itself, see Nidhi mutual benefit company, and for the Rules in detail, Nidhi Act and Nidhi Rules 2014 explained.

A public company with conditions

The Nidhi Rules require the company to be a public company, with a name ending in “Nidhi Limited”. At incorporation you need 7 members and at least 3 directors, and the minimum paid-up equity capital is Rs 10 lakh. Preference shares are not allowed. These sit on top of the usual Companies Act requirements for public company incorporation, so the MOA and AOA have to meet both. Our guide to how a Nidhi works gives the background.

Ordinary Companies Act duties still apply

The declaration does not release a Nidhi from standard company compliance. The usual calendar applies:

Requirement	Time limit
Auditor appointment (ADT-1)	Within 15 days of appointment
AGM	Within 6 months of year end (30 September for a 31 March year end)
AOC-4 (financial statements)	Within 30 days of AGM
MGT-7 or MGT-7A (annual return)	Within 60 days of AGM
DIR-3 KYC	By 30 September each year
INC-20A (commencement of business)	Within 180 days of incorporation

Always check current due dates on the MCA portal before you diarise them.

What the Nidhi Rules add

On top of those, a Nidhi files NDH-1 (return of statutory compliances) and the half-yearly NDH-3, with NDH-2 available when the member, NOF or ratio conditions are not met in time. It must maintain NOF to deposits within 1:20 and keep unencumbered term deposits of at least 10% of deposits with a scheduled commercial bank. DPT-3 is a point to confirm with your CA: member deposits of a Nidhi are exempt from the deposit chapter of the Act, but commentators say the return may still need to report exempted amounts.

Who regulates a Nidhi

Not the RBI. A Nidhi is not an NBFC. It sits under the Ministry of Corporate Affairs, and the Registrar, Regional Director and Central Government are the authorities you deal with. That also means any “licence” talk is about the NDH-4 declaration, not an RBI licence, which is the subject of our Nidhi licence and RBI post. To set one up, see our Nidhi company registration service and the main registration guide.

Need help with your Nidhi company? See our Nidhi company registration service, call +91 93117 95484, or write to mail@taxhint.in.

FAQs

Which section of the Companies Act 2013 covers Nidhi companies?

Section 406, read with the Nidhi Rules, 2014 as amended in 2019 and 2022.

Does a Nidhi have to follow normal company compliance?

Yes. Audit, AGM, AOC-4, MGT-7 or MGT-7A and director KYC apply as they do to other companies, along with the Nidhi returns NDH-1 and NDH-3.

Is a Nidhi company regulated by RBI?

No, it is not an NBFC registered with RBI. The MCA, through the Registrar, Regional Director and Central Government, oversees it.

Can a private limited company become a Nidhi?

The Rules require a public company with a name ending in Nidhi Limited, so the structure would need to change. Speak to your CA before attempting this, as it needs separate planning.