WebSoftOSHow it works
Contracts commonly set retention at 5–10% of each running bill. Some agreements also take a security deposit at award, so read yours and track each separately.
Retention adds up. At 5% on a ₹50 lakh monthly bill, ₹2.5 lakh is held each month, which is ₹30 lakh after twelve months, before any release. That is why cash profit on a project is lower than book profit until retention comes back.
Example
₹50,00,000 × 5% = ₹2,50,000 a month; × 12 months = ₹30,00,000 held.
Frequently asked questions
When is retention money released?
After the defect liability period in the contract ends, or in the stages the contract sets, subject to a release request and any rectification of defects.