diff --git a/src/contracts/SavingCircles.sol b/src/contracts/SavingCircles.sol
index 27257ae..e34f4a3 100644
--- a/src/contracts/SavingCircles.sol
+++ b/src/contracts/SavingCircles.sol
@@ -422,18 +422,22 @@ contract SavingCircles is ISavingCircles, ReentrancyGuardUpgradeable, OwnableUpg
       }
     }
 
+    // Use balance-before / balance-after to support fee-on-transfer tokens (#122).
+    // Only the net amount actually received is credited to the depositor.
+    uint256 balBefore = IERC20(_circle.token).balanceOf(address(this));
+    IERC20(_circle.token).safeTransferFrom(msg.sender, address(this), _value);
+    uint256 received = IERC20(_circle.token).balanceOf(address(this)) - balBefore;
+
     uint256 depositedSoFar = roundDeposits[_id][currentRound][_member];
-    if (depositedSoFar + _value > _circle.depositAmount) revert ExceedsDepositAmount();
+    if (depositedSoFar + received > _circle.depositAmount) revert ExceedsDepositAmount();
 
-    uint256 newTotal = depositedSoFar + _value;
+    uint256 newTotal = depositedSoFar + received;
     roundDeposits[_id][currentRound][_member] = newTotal;
 
     _memberStates[_id][_member].lastDepositRound = currentRound;
     balances[_id][_member] = newTotal;
 
-    IERC20(_circle.token).safeTransferFrom(msg.sender, address(this), _value);
-
-    emit FundsDeposited(_id, _member, _value);
+    emit FundsDeposited(_id, _member, received);
   }
 
   /**
diff --git a/test/mocks/MockFeeOnTransferERC20.sol b/test/mocks/MockFeeOnTransferERC20.sol
new file mode 100644
index 0000000..4764444
--- /dev/null
+++ b/test/mocks/MockFeeOnTransferERC20.sol
@@ -0,0 +1,36 @@
+// SPDX-License-Identifier: MIT
+pragma solidity ^0.8.28;
+
+import {ERC20} from '@openzeppelin/contracts/token/ERC20/ERC20.sol';
+
+/// @dev Mock ERC20 that takes a fee on every transfer, simulating deflationary tokens
+contract MockFeeOnTransferERC20 is ERC20 {
+  uint256 public feeBps; // fee in basis points (e.g. 100 = 1%)
+
+  constructor(string memory name, string memory symbol, uint256 _feeBps) ERC20(name, symbol) {
+    feeBps = _feeBps;
+  }
+
+  function mint(address to, uint256 amount) external {
+    _mint(to, amount);
+  }
+
+  function transfer(address to, uint256 amount) public override returns (bool) {
+    uint256 fee = (amount * feeBps) / 10_000;
+    uint256 net = amount - fee;
+    // Burn the fee (simulates deflationary mechanic)
+    _burn(msg.sender, fee);
+    return super.transfer(to, net);
+  }
+
+  function transferFrom(address from, address to, uint256 amount) public override returns (bool) {
+    uint256 fee = (amount * feeBps) / 10_000;
+    uint256 net = amount - fee;
+    // Burn the fee
+    _burn(from, fee);
+    // Spend allowance on full amount, transfer net
+    _spendAllowance(from, msg.sender, amount);
+    _transfer(from, to, net);
+    return true;
+  }
+}
diff --git a/test/unit/SavingCirclesUnit.t.sol b/test/unit/SavingCirclesUnit.t.sol
index f582ed8..0e1739a 100644
--- a/test/unit/SavingCirclesUnit.t.sol
+++ b/test/unit/SavingCirclesUnit.t.sol
@@ -9,6 +9,7 @@ import {IERC20} from '@openzeppelin/contracts/token/ERC20/IERC20.sol';
 import {SavingCircles} from 'src/contracts/SavingCircles.sol';
 import {ISavingCircles} from 'src/interfaces/ISavingCircles.sol';
 import {MockERC20} from 'test/mocks/MockERC20.sol';
+import {MockFeeOnTransferERC20} from 'test/mocks/MockFeeOnTransferERC20.sol';
 import {SavingCirclesTestBase} from 'test/utils/SavingCirclesTestBase.t.sol';
 
 contract SavingCirclesUnit is SavingCirclesTestBase {
@@ -177,10 +178,11 @@ contract SavingCirclesUnit is SavingCirclesTestBase {
   }
 
   function test_DepositWhenParametersAreValid() external {
-    vm.startPrank(alice);
+    // Use real token transfers to work with balance-before/after pattern
+    token.mint(alice, DEPOSIT_AMOUNT);
 
-    // Mock token transfer
-    vm.mockCall(address(token), abi.encodeWithSelector(IERC20.transferFrom.selector), abi.encode(true));
+    vm.startPrank(alice);
+    token.approve(address(savingCircles), DEPOSIT_AMOUNT);
 
     // Expect deposit event
     vm.expectEmit(true, true, true, true);
@@ -195,6 +197,33 @@ contract SavingCirclesUnit is SavingCirclesTestBase {
     vm.stopPrank();
   }
 
+  function test_DepositFeeOnTransferTokenCreditsNetAmount() external {
+    // Deploy a fee-on-transfer token (1% fee)
+    MockFeeOnTransferERC20 feeToken = new MockFeeOnTransferERC20('Fee Token', 'FEE', 100);
+
+    // Create a circle with the fee token
+    vm.prank(owner);
+    savingCircles.setTokenAllowed(address(feeToken), true);
+
+    ISavingCircles.Circle memory feeCircle = _defaultCircle(alice, DEPOSIT_AMOUNT, DEPOSIT_INTERVAL, address(feeToken));
+    uint256 feeCircleId = _createCircleWithMembers(savingCircles, feeCircle, members, _alicePrivateKey);
+
+    // Mint enough tokens (need extra to cover the fee)
+    uint256 sendAmount = DEPOSIT_AMOUNT; // 1 ether, but 1% fee means only 0.99 ether received
+    feeToken.mint(alice, sendAmount);
+
+    vm.startPrank(alice);
+    feeToken.approve(address(savingCircles), sendAmount);
+    savingCircles.deposit(feeCircleId, sendAmount);
+    vm.stopPrank();
+
+    // The contract should credit only the net received amount (99% of 1 ether)
+    uint256 expectedNet = sendAmount - (sendAmount * 100 / 10_000); // 0.99 ether
+    uint256 balance = savingCircles.balances(feeCircleId, alice);
+    assertEq(balance, expectedNet, 'Balance should reflect net received after fee');
+    assertLt(balance, DEPOSIT_AMOUNT, 'Balance should be less than nominal deposit for fee tokens');
+  }
+
   function test_DepositWhenDepositPeriodHasPassed() external {
     // Move time past deposit period
     vm.warp(block.timestamp + DEPOSIT_INTERVAL + 1);
@@ -487,18 +516,23 @@ contract SavingCirclesUnit is SavingCirclesTestBase {
   }
 
   function test_WithdrawWhenUserHasAlreadyClaimed() external {
-    // Complete deposits
-    vm.mockCall(address(token), abi.encodeWithSelector(IERC20.transferFrom.selector), abi.encode(true));
+    // Complete deposits with real token transfers
+    token.mint(alice, DEPOSIT_AMOUNT);
+    token.mint(bob, DEPOSIT_AMOUNT);
+    token.mint(carol, DEPOSIT_AMOUNT);
 
     vm.startPrank(alice);
+    token.approve(address(savingCircles), DEPOSIT_AMOUNT);
     savingCircles.deposit(baseCircleId, DEPOSIT_AMOUNT);
     vm.stopPrank();
 
     vm.startPrank(bob);
+    token.approve(address(savingCircles), DEPOSIT_AMOUNT);
     savingCircles.deposit(baseCircleId, DEPOSIT_AMOUNT);
     vm.stopPrank();
 
     vm.startPrank(carol);
+    token.approve(address(savingCircles), DEPOSIT_AMOUNT);
     savingCircles.deposit(baseCircleId, DEPOSIT_AMOUNT);
     vm.stopPrank();