Chapter X - Agency
Section 217
Section 217: Retaining due sums from receipts
An agent may deduct the specified sums due from money received for the principal in the agency business.
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This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
An agent may retain, out of any sums received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent.
Rule and business relevance
The retention categories are advances, properly incurred business expenses and payable remuneration. The amounts must actually be due to the agent in the stated connection.
Limits and related provisions
Do not treat custody of the principal’s money as permission to deduct unsupported or unrelated claims. Keep a transparent reconciliation with the section 218 balance.
Hypothetical business example
Hypothetical example: A collection agent receives sale proceeds, deducts documented due advances and proper expenses, and accounts for the balance to the principal.
Practical decision flow
Identify sums received on the principal’s account.
Substantiate due advances, proper expenses and payable remuneration.
Prepare an itemised deduction and balance statement.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Identify sums received on the principal’s account.
- Substantiate due advances, proper expenses and payable remuneration.
- Prepare an itemised deduction and balance statement.
Avoid
- Do not treat custody of the principal’s money as permission to deduct unsupported or unrelated claims. Keep a transparent reconciliation with the section 218 balance.
Glossary
- Retainer from sums
- The right to retain the specified due amounts from received money.
- Properly incurred expense
- An expense properly incurred in conducting the agency business.
Frequently asked questions
Can unrelated debts be deducted automatically?
The section identifies the categories and agency connection; unsupported claims do not qualify merely because funds are held.
May remuneration be included?
Yes, to the extent payable.
What happens to the remaining balance?
Section 218 requires payment to the principal subject to the permitted deductions.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026