A cheque is a banking instrument that orders a bank to pay the person for whom the cheque has been issued a specific amount of money as referred to in the cheque. A cheque refers to an exchange bill that includes an unconditional order from your bank account to pay the specified amount.
The maker of a cheque is referred to as the 'drawer' and the 'drawee' is the one directed to pay. The 'payee' is called the individual named in the instrument, to whom it is paid by the instrument. A cheque is a negotiable instrument that, by endorsement, maybe further exchanged and is payable on demand.
There are different types of cheques that can be issued for different purposes and different uses of the drawer.
We sometimes get confused between words and it may lead to problems that might happen because of a misunderstanding.
There are two types of cheques that are widely misunderstood - stale and post-dated cheques. Let's discuss this in simple words.
What is Post Dated Cheque?
It is a type of cheque drawn with a date written on it for the future. It is a form of crossed payee cheque or account payee cheque, except it is post-dated to satisfy the duty at a future date. It is used primarily to make a deposit at a later date.
Suppose a Cheque was issued on 5 February 2021, but the date stated on that check is 25 February 2021. Such a search may be encased on or after April 25, 2021, and not before that. These forms of cheques are called post-dated cheques.
Posted dated cheques are best when you may not have ample funds available on the day of issuance of the check, but you are confident that the funds will be available on the future date or deadline stated on the check.
The validity of a post-dated cheque in India is 3 months from the date specified on the cheque. Likewise, each nation has unique laws about the issuance and authenticity of a post-dated cheque.
What is a Stale Cheque?
When an individual hands it to the bank for payment after it has expired, a cheque is considered to become stale. The validity of the cheque is three months from the date of the issuance. When the period of validity ends, the check becomes Stale.
Such cheques cannot be submitted to the bank for payment. And if they are submitted for payment, they will be dishonoured by the bank. Banks don't support these cheques due to the validity set by the Reserve Bank of India.
When a cheque is issued and is dated 20/01/2020, it is valid until 20/04/2020, which is exactly three months after the date of issue which is referred to by the bank as the final date of payment. After the 20/04/2020 date, it will be considered as a stale cheque and it will not be honoured by the banks.
When you write a date on a cheque that is older than the date on which it is delivered to the bank, a cheque is considered an Ante dated cheque. For clearance or deposit, any cheque with a previous date that is not exceeding 3 months may be presented to the bank.
Stale cheques are outdated cheques issued to the bank after the date of payment has expired. While Post-dated cheques are dated in such a form that they can only be cashed in in the future.
After three months from the issuance date, cheques become stale. Post-dated cheques may be dated in the future, it may be months or years from the date of issue.