Every society collects maintenance. The good ones also collect a sinking fund: money set aside every month so that when the lift needs replacement in year 12 or the building needs structural repair in year 20, the society is not passing a panicked special levy of ₹80,000 per flat. This guide explains what the fund is, how much societies typically collect, what it can be spent on, and how to keep it clean in your books.
What a sinking fund actually is
A sinking fund is a long-term reserve for the replacement and major repair of the building and its heavy assets: lifts, structural work, waterproofing, rewiring, pumps, generators. It is not a rainy-day account for routine expenses, and it is not the same as a repair fund, which covers ongoing upkeep. Think of it as the building's retirement savings.
How much should a society collect?
Most registered bye-laws in India specify a minimum. A widely used formula (from the model bye-laws many states adopted) is a percentage of the construction cost of each flat, commonly around 0.25% per year, collected monthly. Some societies simplify this into a per sq ft rate; others fix a flat monthly amount per unit. Three things matter more than the exact formula:
- It must come from your registered bye-laws, not from memory. Committees change; the registered document is what an auditor and a general body will hold you to.
- It should be shown as its own line on the invoice, so members can see maintenance, sinking fund and repair fund separately instead of one opaque total.
- The general body can raise it: the bye-law figure is a floor. Older buildings often resolve a higher rate as major replacements approach.
What the money can and cannot be used for
| Allowed (typical bye-laws) | Not from the sinking fund |
|---|---|
| Structural repairs and reconstruction | Salaries, security, housekeeping |
| Lift replacement and major overhaul | Routine AMC payments |
| Heavy waterproofing, rewiring, plumbing renewal | Festivals, events, landscaping |
| Major equipment replacement (pumps, DG sets) | Covering a maintenance deficit |
Most bye-laws require a general body resolution before spending from the fund, and many require the money to be kept in a separate account or fixed deposits rather than mixed with the operating float. Both habits protect the committee as much as the corpus.
The bookkeeping that keeps auditors happy
- Collect it as a distinct head on every invoice, never inside a lump sum.
- Park it separately: a dedicated bank account or FDs earmarked to the fund.
- Show it as a liability/reserve in the balance sheet, growing month on month, with interest credited to the fund rather than to general income.
- Spend only against a resolution, and record the resolution reference on the payment voucher.
In Basaira, the sinking fund is a charge head defined by your society's own bye-law values: fixed or per sq ft, shown as its own line on every invoice, posted to its own account in the books, and visible to every member. When the auditor asks for the fund's history, it is one report, not a spreadsheet hunt.
Common questions
Can we skip the sinking fund if the building is new?
The fund exists precisely because the building is new: a 15-year corpus built from year one is painless; the same corpus started in year 12 is a special levy. If your bye-laws specify it, collecting it is not optional.
Owner or tenant: who pays?
The sinking fund attaches to ownership of the flat, so it is the owner's obligation, even when the maintenance bill is forwarded to a tenant by private arrangement.
What happens to the fund when a flat is sold?
Contributions stay with the society; they are not refundable to a departing owner. The incoming owner simply continues contributing.