What does a Post Dated Cheque mean?
Wondering what is the post dated cheque meaning? It is a chequethat carries a future date. The payer/drawer (the individual or business responsible for making the payment) in such cheques writes a date that is later than the day the cheque is issued. This ensures that the payee can present the cheque for payment only on or after the specified date.
The future date on a post dated cheque can be set as per the issuer’s or recipient’s convenience. Banks can clear the cheque on or after the mentioned date (not before).
Why are Post Dated Cheques Issued?
There are several situations where you might need to issue a post dated cheque to a recipient.
1. Keeping a Proper Schedule for the Payment
A common reason is to set a payment for a later date. Suppose you need to clear the annual property tax on a property where you do not reside full-time. You can give the building secretary a post dated cheque since you may only visit the place once or twice a year. This will only be cleared once the new financial year begins.
2. Pre Arranging the Payment
Such cheques are also widely used in business arrangements. You can issue post dated cheques as part of that agreement if you & your business partner agree on a payment plan that extends over a period. This ensures your partner that the payment will be made on the specific dates outlined in the particular schedule.
3. Repaying Loan EMIs
Lenders may ask for advance cheques dated as per the loan term when you borrow money. For instance, you may be required to issue 36 post dated cheques if you take a loan with a tenure of 3 years. The lender then deposits one every month to recover the EMI. The cheques thus become a guarantee for future installments.
4. Insufficient Funds
Your account may not have enough balance to cover immediate payments at certain times. You can issue a post dated cheque if you expect money to be credited at a later date. This lets you avoid late fees or penalties since the cheque will only be processed when funds are available.
How to Issue a Post Dated Cheque?
Now you know what is post dated cheque. It is time to understand how to issue it. Writing a post dated cheque is almost the same as issuing a regular cheque. The process is simple. However, you need to follow some steps carefully to ensure it is done correctly.
1. Mention the Date -Make sure the date you mention on the cheque is set for a future day.
2. Fill up the Amount Section -Write the amount both in numbers & in words, just like you would while writing a normal cheque.
3. Include the Payee’s Name -Clearly mention the name of the individual or organisation who is supposed to receive the payment.
4. Give Your Signature -Sign the cheque in the usual way, as you do with any other cheque.
Still wondering how to give post dated cheque? Note that post dated cheques are commonly used for significant or scheduled payments. Thus, you should keep a personal record of the cheque alongside its details for future reference.
How does a Post Dated Cheque work?
A post dated cheque operates much like a regular cheque. The only difference is that it cannot be deposited before the date mentioned on it. How do post dated cheques work? Know more here.
1. Issuance - The issuer of the cheque fills in the amount along with a future date and then gives it to the payee (the person entitled to receive the funds).
2. Bank Presentation -The payee is allowed to present or deposit the cheque only on or after the date specified on it.
3. Bank Processing -The bank verifies the date written on the cheque once submitted. The bank won’t process the payment if the cheque is deposited before the mentioned date.
4. Payment - The bank clears the cheque and releases the payment on the due date (provided all details are correct).
Use of Post Dated Cheque
Post dated cheques are widely used in different financial dealings. They are more specifically used for scheduled payments or when the amount has to be paid in installments. Here are more uses.
1. Repaying the Loan - Borrowers are often required to offer a set of PDCs or post dated cheques covering the upcoming installment payments in loan agreements.
2. Business Purpose -Vendors may request post dated cheques from businesses to settle payments that are due at a later date.
3. Paying the Rent -A landlord may ask the tenant to issue post dated cheques in advance to cover rent obligations for the future.
4. Security for Debts - These cheques are security for loans or debts. They let the lender deposit them on an agreed future date.
Benefits of a Post Dated Cheque
Here are the benefits of post dated cheques:
1. Utmost Convenience -It offers an easy way to arrange payments in advance – whether for rent, installments or other recurring expenses.
2. Extreme Safety - The issuer does not have to worry about the funds being withdrawn from their account right away since the cheque is dated for a later time.
3. Future Payments -They enable both parties to fix a future date for payment. This way, they help maintain a planned & structured schedule.
4. Proof of Commitment -A post dated cheque also works as proof of commitment for a future payment. This makes it a dependable assurance for the payee.
Why Do People Use Post Dated Cheques in India?
You might wonder why someone chooses a post-dated cheque instead of paying directly in cash or online. Here are some common situations where PDCs are used:
1. Business Transactions - Suppliers and vendors may rely on post-dated cheques to confirm payments scheduled for a future date.
2. Monthly Rent Payments -Landlords often ask tenants to provide a set of post-dated cheques in advance to cover upcoming rent.
3. Security Deposit -A cheque may be issued as security, to be used only if certain agreed conditions are not fulfilled.
4. EMIs or Installments -Businesses sometimes collect post-dated cheques for loan repayments or large purchases made on installments.
How to Write a Post Dated Cheque?
How to write a post dated cheque? Writing a post dated cheque is almost the same as filling out a regular cheque. The only difference is that you enter a future date instead of the current one. Here’s the process:
1. Write the payee’s name.
2. Enter the amount in both words and figures.
3. Give your original signature properly.
4. Mention a future date instead of today’s date.
Let’s take one post dated cheque example into consideration. Suppose today is the 5th and your salary is due on the 10th. You can issue a post dated cheque for the 10th. This way, the cheque cannot be encashed before that date. So you get time & ensure the payee receives the payment as agreed.
Rules to Write a Post Dated Cheque
Here are a few simple guidelines you should follow when issuing a post-dated cheque (PDC):
1. Give a Forthcoming Date -Never put the current date. Always write a date in the future, preferably the one on which you want the cheque to be cleared.
2. Fill up the Details -Enter the payee’s name, the amount in both words and numbers, and sign the cheque as you normally would.
3. Inform Your Bank - Provide written instructions to your bank about the date of encashment. This ensures the cheque is not processed before the intended time.
4. Follow Instructions to Avoid Penalties -Clear instructions help prevent accidental clearance. That may otherwise result in overdraft charges or penalties.
What is the Post Dated Cheque Validity?
Here are some important points you should know about the validity of post-dated cheques:
1. A cheque issued for a future date also carries a specific validity period as per banking rules.
2. Generally, the validity of such cheques is 3 months from the issuing date.
3. Suppose a cheque is dated 1 January 2024; it will stay valid until 31 March the same year.
4. The bank may decline to process the cheque if it is deposited either before or after this period.
Penalties of Dishonouring the Post Dated Cheque
Post dated cheques are treated as valid legal instruments as per Section 138 of the Negotiable Instruments Act. The issuer may face legal consequences if such a cheque is dishonoured. This can include the following-
1. A fine equal to or up to twice the cheque amount.
2. Imprisonment for a minimum of 1 year and up to 2 years.
The penalties depend on the nature of the case.
Things to Keep in Mind When Writing a Post Dated Cheque
Consider the following key points if you plan to make a payment using post-dated cheques:
Be aware of the legal implications of issuing a post-dated cheque.
Provide written instructions to your bank regarding the payment date.
Ensure your account has sufficient funds before the cheque is presented.
Fill in all details accurately and double-check before handing it over.
Confirm that the cheque is deposited only on or after the mentioned date.
Verify with your bank that such cheques are accepted for processing.
Ensure the entry is recorded in the company’s books of accounts for cheques issued on behalf of a company.
Keeping these points in mind helps minimise errors while avoiding payment issues with post dated cheques. You can opt for a short-term instant personal loan if maintaining sufficient funds is a concern. This type of loan helps you cover the required amount in time.
Alternatives to a Post Dated Cheque
Post dated cheques are used but there are several modern alternatives for scheduling future payments:
1. SI or Standing Instructions -You can set your bank account to automatically deduct a fixed amount on a specific date with standing instructions. That is commonly used for recurring payments such as – EMIs, utility bills, subscriptions.
2. EFT or Electronic Fund Transfer - EFTs can also be scheduled in advance. This makes them a convenient & faster option for transferring funds securely.
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Conclusion
As you have seen, a post dated cheque is convenient for scheduling future payments – whether for loans, rent or business transactions. However, you must carefully issue it considering the banking rules. This way, you can avoid penalties or rejection. Select the option that best suits your financial needs for a convenient experience ahead.
Frequently Asked Questions (FAQs)
Q.1. What is a post dated cheque and why is it called that?
A post dated cheque is a cheque that carries a future date instead of the date it is issued. It is called “post dated” because it cannot be encashed until the date written on it. This ensures the payment is made only at the scheduled time.
Q.2. How is a post dated cheque different from a regular cheque?
The main difference lies in the date. A regular cheque can be encashed immediately upon presentation, while a post dated cheque is valid only from the future date written on it. The bank will not process or release the payment to the recipient until that date.
Q.3. How do I write or fill out a post dated cheque?
Writing a post dated cheque is simple. Enter the payee’s name, write the amount in words and numbers, and sign as usual. The only difference is the date – mention a future date instead of the current one. Ensure all details are accurate to avoid rejection or delay.
Q.4. Can I give a post dated cheque for any future date?
You may issue a post dated cheque for any future date within the standard validity period, which is three months from the date written on it. The cheque will no longer remain valid & the bank may reject it if you mention a date beyond this limit.
Q.5. Can I deposit a post dated cheque before its date?
A post dated cheque cannot be deposited before the date mentioned on it. Banks will not process or clear the payment if presented early. The cheque will only become valid for deposit or encashment once the date printed on it is reached (not before).
Q.6. What happens if I try to cash a post dated cheque early?
The bank will refuse to process the post dated cheque when you attempt to deposit or encash it before the mentioned date. The cheque is legally valid only from the stated date. So, presenting it earlier will result in rejection.
Q.7. Is a post dated cheque legally valid?
This cheque is considered legally valid under the Negotiable Instruments Act. However, it becomes payable only on or after the future date mentioned. Legal action can be taken against the issuer under Section 138 if dishonoured.
Q.8. Is a post dated cheque a type of financial instrument?
A post dated cheque qualifies as a negotiable financial instrument. It promises to pay the specified amount to a payee on a given future date. It has the same legal value but comes into effect only from the mentioned date.
Q.9. Can I cancel a post dated cheque after giving it?
Wondering can I cancel post dated cheques? A post dated cheque can be cancelled by issuing a “stop payment” instruction to your bank before it is presented for clearance. However, you must inform the bank in writing. Cancelling it may not be possible if the cheque is already deposited – besides, penalties may also apply.
Q.10. What happens if a post dated cheque bounces?
A post dated cheque can be dishonoured because the signature does not match. Or it happens due to insufficient funds. In such cases, the issuer may face legal consequences. Penalties may include fines or imprisonment under Section 138 of the Negotiable Instruments Act.
Q.11. Is there a time limit for using a post dated cheque?
Post dated cheques come with a validity period. They remain valid for three months from the date mentioned. Suppose a cheque is dated 1 January. It will be valid until 31 March. Banks after this time will not honour it.
