1059
Editorial
THE CHARTERED ACCOUNTANT
Aligning the
profession with the
vision of Viksit Bharat
A
s we approach the dawn of a new the Indian
economy and accounting profession chapter
in through recent advancements, it’s crucial to
contemplate the significant progressions and
changes that have characterized what some refer to
as a highly esteemed phase in the profession’s
history. This period is marked by unprecedented
technological innovations, evolving regulatory
landscapes, and shifting client expectations, all of
which present both challenges and opportunities for
professionals in the accounting domain.
One of the primary drivers behind this phase is the
rapid advancement of technology. Automation,
artificial intelligence, and data analytics have
revolutionized the way accountants work. Mundane
tasks that once consumed hours of manual labour can
now be accomplished in a fraction of the time, thanks
to sophisticated software and algorithms. An
Independent Auditor can leverage this technology for
sampling and other audit-related tasks. The built-in AI
can promptly alert the Auditor about any system
exceptions, which can then be addressed promptly.
By utilizing these technologies, a more thorough audit
can be conducted, thereby enhancing stakeholder
trust. Within organizations, numerous tasks can be
completed accurately and efficiently within time. For
tasks that cannot be fully automated, these
technologies can assist in minimizing the time
required to complete them. This shift has not only
increased efficiency but has also elevated the role of
accountants as strategic advisors. The ICAI has been
at the forefront of embracing technological
advancements, offering training programs, and
certifications to equip its members with the skills
needed to thrive in the digital age.
Due to the globalization, the economies have
become increasingly interconnected, leading to a
surge in complexity across financial landscapes. As
businesses expand their operations internationally,
they face a challenge related to compliance,
regulatory frameworks, and cross-border
MARCH 2024
transactions. In such a landscape, the expertise of
accountants becomes indispensable. The ICAI has
played a crucial role in preparing its members to
navigate this complex terrain through specialized
training programs, workshops, and seminars focused on
international accounting standards, taxation laws, and
global business practices. This period for the accounting
profession has also witnessed a diversification of
services offered by accounting firms. Beyond traditional
audit and tax services, firms are increasingly expanding
into areas such as consulting, advisory, and technology
solutions. This diversification allows professionals to
provide holistic solutions to clients, addressing a wide
range of business challenges. The ICAI has recognized
this trend and has adapted its curriculum and
certification programs to encompass emerging areas
such as forensic accounting, risk management, and
information technology audit, thus enabling its members
to capitalize on new opportunities. In an era marked by
heightened scrutiny and accountability, ethical conduct
has taken centre stage in the accounting profession.
Frauds and corporate malfeasance have underscored
the importance of integrity and transparency in financial
reporting. As guardians of financial integrity, accountants
play a pivotal role in upholding ethical standards and
maintaining public trust. The ICAI has been proactive in
promoting ethical conduct among its members through
the formulation of a robust code of ethics, disciplinary
mechanisms, and continuing professional education
programs focused on ethics and integrity.
As we pursue our vision of “Viksit Bharat,” representing a
flourishing period for India’s accounting sector, we initiate
a transformative path focused on achieving excellence,
transparency, and global acclaim. This vision underscores
our dedication to enhancing international accounting
standards while honoring India’s distinct cultural and
economic identity. It emphasizes ongoing professional
growth, ethical behavior, and the cultivation of trust
among all stakeholders making India as vishwaguru.
Through the adoption of cutting-edge technology,
encouragement of innovation, and promotion of inclusive
development, Viksit Bharat aspires to elevate the Indian
accounting field to unprecedented levels of
professionalism and integrity. It acts as a guiding light for
professionals, motivating them to uphold the utmost
standards of quality and accountability in contributing to
the nation’s economic progress. ICAI envisions India
emerging as a global center for finance and accounting,
promoting collaboration, innovation, and excellence in
the field on a global level.
-Editorial Board ICAI:
Partner in Nation Building
3 www.icai.org
1060

VOICE

1059 EDITORIAL
Aligning the profession with the vision of Viksit Bharat

1062 PROFILE: OUR NEW PRESIDENT

1063

IN THIS ISSUE...
PROFILE: OUR NEW VICE-PRESIDENT

1064 FROM THE PRESIDENT

MEMBERS
MARCH 2024

1068 COUNCIL PHOTO

1069 PHOTOGRAPHS

1073 OATH-TAKING CEREMONY

1074 INTERVIEW

1173 OPINION

1168 KNOW YOUR ETHICS

1179 CLASSIFIEDS
VOLUME 72 NO. 9 PAGES 132 MARCH 2024

UPDATES

1080 74TH ANNUAL FUNCTION OF ICAI

1170 NATIONAL AND INTERNATIONAL UPDATES

The Chartered Accountant

ANNOUNCEMENT
1171 Issuance of CPE Statement, 2023

1172 CROSSWORD

1179 ACCOUNTANT’S BROWSER

FEATURE
` 100

1083
THEME
Digital Evolution: Charting the Future of Chartered Accountancy
in the Age of Technology
– Pranay Chauhan

TAXATION
1087 Subject to Tax Rule - An Analysis
– CA. Simpy Rajpal & CA. Gagandeep Kaur

1091 TAXATION
A Statistical Study of Impact of e-initiatives on Direct Tax
Collection
– CA. Deepti Taneja & Dr. Monika Goel
TAXATION
1100 Cost Contribution Arrangements – Transfer Pricing implications
– CA. Suresh Nagabathula

BANKING
1106 Impact of RBI’s New Guidelines on Investment Portfolios of the
Commercial Banks
– Vijay Prakash Srivastava

MARCH 2024 4 www.icai.org

 1061

Contents
THE CHARTERED ACCOUNTANT

EDITOR-IN-CHIEF CA. RANJEET KUMAR AGARWAL

VOLUME 72 NO. 9 PAGES 132 MARCH 2024 `100

Editor-In-Chief
JOINT EDITOR CA. CHARANJOT SINGH NANDA
Joint Editor
MEMBERS CA. VISHAL DOSHI
CA. MANGESH PANDURANG KINARE
CA. PRITI SAVLA
CA. ANIKET SUNIL TALATI
CA. RAJENDRA KUMAR P

1111
TECHNOLOGY
Embracing Technological Transformation in CA. SRIPRIYA KUMAR
Accounting: Navigating Opportunities and CA. (DR.) DEBASHIS MITRA
Challenges CA. ABHAY CHHAJED
– CA. Ramesh Chandra Jha CA. (DR.) ANUJ GOYAL

AUDIT CA. KEMISHA SONI

1117 Mandatory Audit Trail – Step towards greater CA. (DR.) RAJ CHAWLA
transparency CA. HANS RAJ CHUGH
– CA. Shraddha Khivasara CA. (DR.) SANJEEV KUMAR SINGHAL
DR. P. C. JAIN
ACCOUNTING STANDARDS
1121 BEPS Pillar Two Rules Background,
Accounting, Tax and Other Key Considerations ICAI EDITORIAL TEAM: KUNAL SHARMA, SECRETARY, EDITORIAL BOARD
– CA. Anjani Khetan DR. NEETU SINGH, ASSISTANT SECRETARY

ACCOUNTING STANDARDS MS. SHIKHA SHARMA BHARDWAJ,

1129 Ind AS 116 - Leases
SR. EXECUTIVE OFFICER

– CA. Paras Chadha

FINANCIAL MARKET THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
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in Indian Context
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CLASSIFIEDS:
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ECONOMY
1158 Transforming India into a Developed
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Plot No. 8 Udyog Vihar, Greater Noida,Uttar Pradesh,
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ICAI RESERVES THE RIGHT TO REJECT ADVERTISEMENTS.
Printed and published by Jai Kumar Batra on behalf of
COMMERCIAL LAWS
1163 The Crucial Role of Intellectual Property in The Institute of Chartered Accountants of India (ICAI)
Editor – CA. Ranjeet Kumar Agarwal
Modern Business Practices
– CS Prashant Kumar Published at The Institute of Chartered Accountants of India, I. P. Marg,
New Delhi - 110002 and printed at Druck Media Private Limited, Plot No.8,
ICAI NEWS Udyog Vihar, Greater Noida, Uttar Pradesh, India- 201306

1180
Invitation for empanelment as Examiners for
Chartered Accountants Examinations The views and opinions expressed or implied in THE CHARTERED
ACCOUNTANT are those of the authors and do not necessarily reflect those of
Composition of Standing and Non-Standing ICAI. Unsolicited articles and transparencies are sent in at the owner’s risk and
Committees for the Year 2024-25 the publisher accepts no liability for loss or damage. Material in this publication
may not be reproduced, whether in part or in whole, without the consent of ICAI.
Results of Chartered Accountants
DISCLAIMER: The ICAI is not in any way responsible for the result of any action
Foundation Examination Held in taken on the basis of the advertisements published in the Journal. The members,
December – 2023 however, may bear in mind the provisions of the Code of Ethics while responding
to the advertisements.
Launches and Releases
Total Circulation: 73,964
ANNOUNCEMENT
1186 Survey for seeking preference for learning a
Total No. of Pages: 132 including Covers
E-Journal circulation (Soft copy): 3,97,935
foreign language through virtual modefrom
ICAI Members and Students

MARCH 2024 5 www.icai.org

1062

Profile
THE CHARTERED ACCOUNTANT

Our New President

A
seasoned professional with strong organizational skills, a
penchant for excellence, and academic acumen, CA. Ranjeet
Kumar Agarwal ascends to the esteemed position of the 72nd
President of the Institute of Chartered Accountants of India for the year
2024-25. His longstanding affiliation with the Institute spans epochs,
having been chosen for three consecutive Council terms i.e., 23rd, 24th,
and 25th, preceded by two consecutive terms in the Regional Council.
Demonstrating enthusiasm and commitment to keeping pace with
technological advancements, he actively engages in the integration
of Artificial Intelligence & Automation to build a futuristic workplace
and workforce by emphasizing continuous training, upskilling,
and reskilling. CA. Ranjeet Kumar Agarwal’s proactive approach,
commitment to innovation, and adept use of modern technologies
make him a guiding force and inspiration for all.
Envisioning a future with tremendous prospects and growth of the
profession, infrastructure is being strengthened across the country.
During his tenure as the Vice-President of the Institute in 2023-24,
he guided the Legal Directorate with a dedicated commitment
to legal compliance, advancing the organization’s objectives of
fostering integrity and excellence. His strong commitment and skillful
management are clear in his supervision of different departments
CA. Ranjeet Kumar Agarwal resulting in notable enhancements of the Institute’s internal
President, ICAI (2024-2025) operations. Furthermore, the Policy of Centre of Excellence (COE)
was approved, planning 9 more COEs across India taking the total to
11 and aiming to maximize the utilization of COEs.
While serving as the Central Council Member since 2016, he has led the profession from the front and shown his
unwavering commitment to the profession. During his Chairmanship, EIRC received the coveted award for being the
Best Regional Council. His approach and guiding principle are to keep the Nation First and the profession first in all his
endeavors. In all his stints, he has led initiatives to build trust, confidence, and leadership. As the erstwhile Chairman of
the Professional Development Committee, he played a pivotal role in the successful implementation of initiatives such
as UDIN and Bank Branch Audit Allocation Software, marking significant milestones for the Institute. Furthermore, his
instrumental role in extending UDIN implementation to SAARC countries underscores the profession’s global impact.
Mr. Agarwal’s tenure as the Chairman of the Ethical Standards Board saw the formulation of a new ‘Code of Ethics’ after
a decade, a testament to his expertise and commitment to upholding ethical standards within the profession.
With a view to propel India ahead, he initiated the CA Business Leaders 40 under 40 campaign (Seasons 1 & 2) to build
leaders for tomorrow, recognizing and celebrating the achievements of 40 young CA professionals under the age of 40,
highlighting his commitment to fostering excellence and innovation within the industry.
As the President of ICAI, CA. Ranjeet Kumar Agarwal is now, by virtue of his post, the Chairman of all the Standing
Committees, i.e., the Executive, Finance, Disciplinary and Examination Committees, Ex-officio member of all the Non-
standing Committees, and the Editor-in-chief of the ICAI Journal, The Chartered Accountant. He also Chairs the ICAI
research wing - Accounting Research Foundation (ICAI ARF), Extensible Business Reporting Language (XBRL) India, and
three funds for the welfare of the CA fraternity such as the Chartered Accountants Benevolent Fund (CABF), Chartered
Accountants Students Benevolent Fund (CASBF), and S. Vaidyanath Aiyar Memorial Fund. He is also the Director on the
Board of the Institute of Social Auditors of India (ISAI).
Continuing to advance the role of the Institute of Chartered Accountants of India as a partner in the nation’s development,
while serving as the President of ICAI, CA. Ranjeet Kumar Agarwal is supporting the Government and Regulators as a
Member of the Government Accounting Standards Advisory Board (GASAB) and Audit Advisory Board, both formed by
the C&AG of India, Insurance Advisory Committee, Board of Insurance Regulatory and Development Authority of India
(IRDAI), and SEBI’s Primary Market Advisory Committee.
CA. Ranjeet Kumar Agarwal has been passionately representing India and the profession on various international forums,
striving to position India as a Global Accounting Hub. Currently, he is a member of the International Panel on Accountancy
Education (IPAE) Group of IFAC, besides being a Board member of SAFA (South Asian Federation of Accountants). Also,
he represents ICAI on the Integrated Reporting and Connectivity Council (IRCC) and Board meetings of the Pan African
Federation of Accountants (PAFA) and ASEAN Federation of Accountants (AFA).
CA. Ranjeet Kumar Agarwal, a graduate of Calcutta University, has attained exceptional heights through his remarkable
actions. He now strides forward, assuming charge as the President of ICAI, adorned with his accomplishments and
propelled by the vision of manifesting the aspirations encapsulated in India@2047. In this pursuit, he endeavors to
further elevate India’s stature on the global stage, envisaging its ascent to becoming an eminent economy, thereby
illuminating the world with its brilliance.

MARCH 2024 6 www.icai.org

 1063

Profile
THE CHARTERED ACCOUNTANT

Our New Vice-President

A
n ardent wordsmith and eloquent orator with the thought
process of a societal benefactor, CA. Charanjot Singh
Nanda, FCA, has been elected as the Vice-President of
the Institute of Chartered Accountants of India for the term
2024-25.
CA. Charanjot Singh Nanda has been a practising Chartered
Accountant for the last 33 years. Exhibiting outstanding academic
acumen, he obtained his Bachelor of Commerce degree from
M.L.N. College in 1987, consistently securing a position on the
Merit List at Kurukshetra University throughout his undergraduate
studies. Furthermore, he secured the 35th rank in the CA Inter
Examination and obtained his Chartered Accountancy qualification
in 1991. A distinguished Fellow Member of ICAI, serving the
profession for the three decades, CA. Charanjot Singh Nanda
was elected to the Central Council of ICAI in 2004, securing four
consecutive terms, and again in 2019. He was also the Chairman
of the Northern India Regional Council (NIRC) of ICAI for the years
2002-2003.
Throughout his illustrious tenure, he has been the Chairman of
many committees and has garnered notable achievements. With
CA. Charanjot Singh Nanda the vision to build the thought leadership of Internal Audit, he
served as the Chairman of the Internal Audit Standards Board
Vice President, ICAI (2024-2025) for several years. The Committee has issued New Standards on
Internal Audit and various Technical Guides/ Studies/ Manuals
constituting an important tool towards helping the internal auditors for performing efficient and effective internal audit.
With his guidance, knowledge, expertise, and skills, he has promoted the exchange of ideas and dialogue between
the Institute and the Chartered Accountants in industries while he served as Chairman of the Committee for Members
in Industry.
During his tenure as the first Chairman of the Women Members Empowerment Committee, he encouraged innumerable
women CAs to achieve their goals, who are now setting an example in the Chartered Accountancy Profession. He also
chaired the Committee for Co-operatives & NPO Sectors and has been one of the forces behind AML Compliance
which will be of great help for Chartered Accountants. Under his chairmanship of the Digital Accounting and Assurance
Board, the Forensic Accounting and Investigation Standards (FAIS) have become mandatory since July 1st, 2023. During
his tenure as the Chairman of the Committee on Financial Markets & Investors Protection, suggestions on various
Bills/Regulations/Notifications/Circulars and other documents related to the Financial Market were provided to the
Government/Regulatory bodies.
CA. Charanjot Singh Nanda also served as the Chairman of the Continuing Professional Education Committee where
he motivated the CA professionals to stay updated on the latest advancements within their primary domains. As the
Chairman of the Public Relations Committee, he also bolstered ICAI’s reputation as a leading accountancy institution,
both nationally and internationally. CA. Nanda also served as the Chairman of the Research Committee during which
the committee crafted authoritative Guidance Notes on numerous accounting facets.
CA. Charanjot Singh Nanda advocates holistic growth of the institution and represented ICAI at various national
and international platforms. He has represented the Institute as a member of various committees constituted by the
Govt. and regulatory bodies like the Quality Review Board, SEBI Advisory Committee on Primary Market (2007-2010)
& Committee on Mutual Funds (2007-2010), SEBI Committee on Disclosures and Accounting Standards (SCODA),
Expert Committee of SEBI to facilitate ease of doing business and harmonization of the provisions of ICDR and LODR
Regulations, Convener of the Expert Group constituted by the Ministry of Corporate Affairs on Investor Protection, a
member of the Associated Chambers of Commerce and Industry of India (ASSOCHAM) National Council on Capital
Market.
Representing ICAI on the global stage, CA. Charanjot Singh Nanda also served as the Chairman of the South Asian
Federation of Accountants (SAFA) Committee on Information Technology. He has also been a Member of the Southern
Asian Federation of Accountants (SAFA) on the Committee on Professional Accountants in Business (PAIB) and
Committee on Improvements in Transparency, Accountability & Governance.
CA. Charanjot Singh Nanda is an individual who embraces imperative change. His extensive tenure with the institute
underscores his adeptness in management and strategy. Serving as the Chairman across multiple ICAI committees and
as a prominent representative in Government Bodies and Regulatory Agencies, he has elevated the institution’s stature.
He ardently champions holistic progress and endeavors to fortify the nation’s economy.

MARCH 2024 7 www.icai.org

1064
From the President
CA. Ranjeet Kumar Agarwal
President, ICAI
Dear Professional Colleagues,
It is with great humility and honour that I assume the role as
the 72nd President of our esteemed Institute, with the vision
to catalyse a transformative change through the enabling
role of the accountancy profession for our nation. As I turn a
new leaf in my journey and accept the mantle of presidency
stepping into this position of leadership, it fills me with
an overwhelming sense of gratitude and elation, yet I’m
aware of the responsibility that accompanies it, which I
wholeheartedly accept with sincerity and determination.
I pray to the Almighty to grant me with the strength and
fortitude to elevate our esteemed profession to an even
higher pedestal and demonstrate my worthiness of the
trust bestowed upon me.
As I step into this role, I am deeply appreciative of
the outstanding leadership provided by our outgoing
President, CA. Aniket Sunil Talati, in spearheading the
profession and solidifying the Institute’s foundation.
I extend a warm welcome to the new Vice President
CA. Charanjot Singh Nanda. I am sure that his incisive
knowledge, experience, and professional expertise will
significantly help the Council in ushering the profession
towards the golden era fueling ambitions, forging
legacies, powering India’s rise in every aspiration and
achievement, taking the profession to unprecedented
2024-49: The Golden Period of Profession
MARCH 2024 8 www.icai.org
heights. I also take opportunity to thank the
Past President CA.(Dr.) Debashis Mitra for his
guidance and contribution in development
of the profession. Together, we shall forge a
new path that leads to new heights for ICAI
and bring to fruition our collective vision of
Profession@2049.
As I reflect upon the rich history and
profound vision that led to the establishment
of our eminent Institute, I recognize the
foresightedness of our forefathers who
identified the crucial need for professional
standards, financial discipline, and revenue
augmentation in post-independence India.
This Institute, born out of their vision and
determination, was formally recognized by
an Act of Parliament on 1st July 1949 as the
Institute of Chartered Accountants of India.
Over the span of 75 years, the Institute has
flourished under the steadfast leadership
of my distinguished predecessors whose
resilience, astuteness, and commitment
have paved the way for the profession to
achieve its current standing. Their invaluable
contributions have been instrumental
in establishing the eminence of ICAI,
leading to its phenomenal growth from its
modest beginnings with just a few hundred
members, and evolving as the world’s
largest accounting body.
ICAI has not only played a pivotal role in
shaping the financial landscape of our nation
but has also been a beacon of excellence
on the global stage. Since our formation,
it was our foresight to work towards
building global accounting profession,
as a developed accounting profession
supports and nurtures the economic
development of a nation. Recognizing
the interconnectedness of economies and
globalization of businesses, over the years
the institute has built the foundation for the
global accountancy profession as founding
members of IFAC, CAPA, SAFA and other

From the President
THE CHARTERED ACCOUNTANT
global forums to elevate the standing of the
accounting profession worldwide, contributing
to the growth and integrity of global financial
markets. Since establishment of Doha Chapter in
1981, the institute has strived to build the Indian
Chartered Accountancy into a global brand and
now we are present in 81cities across 47 countries
as well as by entering into 24 MRAs/MoUs with
leading global accounting bodies and institutions.
Today our influence reaches far beyond borders,
and our members are recognized for their integrity
and competence in the international business
community.
Today Indian economy is ascending on global
landscape and as per IMF India will be the fastest
growing economy for the coming year and will lead
the recovery of global economy. As per ICRIER,
we are the third largest digital economy, our
Digital Physical infrastructure is being applauded
globally for its ability to extend the healthcare
and financial services promoting inclusivity and
societal development. Today due to the economic
and structural reforms like GST and Insolvency
and Bankruptcy Code our economy is now moving
from informal to formal sector leading to robust
economic growth, as also strengthening the
Indian banking sector respectively. Similarly, we
are the youngest country globally fuelling our
entrepreneurial spirit, intellectual talent, markets
coupled with Govt. schemes like Digital India,
Startup India, Skill India and Make in India, leading
India to become the third-largest global start-up
ecosystem and rising star in global manufacturing
chain. With all these economic advancements,
India is taking all necessary measures towards
making sustainability reporting mainstream as
India move towards its commitment of becoming
carbon neutral by 2070. In this journey of India to
emerge as a developed and self-reliant economy
the role of our profession will be critical in
navigating the path of reforms driven growth as
also building the models and frameworks for the
New India.
As reflected in the words of Shri Jagadeep
Dhankhar, Hon’ble Vice-President of India “As
we collectively shape India’s destiny for 2047,
you (Chartered Accountants) are nerve centre,
epicentre of big change, your efforts, your
farsighted approach, your commitment will
2024-49: The Golden Period of Profession
MARCH 2024
1065
make Bharat the most developed nation on this
planet. While institutions are vital for democratic
governance and nurturing of democratic values,
ICAI has been playing a stellar role in building,
standardising, and sustaining the financial
framework of the nation.”
Our profession has always been at the forefront
of promoting public interest and now is the
catalyst for balanced growth. As a profession and
as an institution it is our strength to support the
aspirations and expectations of each stakeholder
from a common man to industry and government
across the financial value chain. The profession is
reimaging and reinventing itself to the demands
and drivers of the market and working to put
in place new financial reporting frameworks
and standards with impetus on technology and
sustainability reporting and at the same time
unlocking value creation. We are constantly
endeavouring to unlock the technology driven
value creation at the same time steering the policy
and practices towards protecting data privacy
and protection in the interest of society. We are
striving to inspire and fuel the innovational spirit of
our youth to be job creator, as well as support our
Industry & MSMEs become worldclass while being
sustainable.
Our commitment to progress is unwavering,
deeply rooted in the ethos of a “Viksit Bharat.”
India’s trajectory towards technological progress
also stands as the cornerstone of societal
advancements. ICAI is committed to realising
the vision of a developed nation, working
collaboratively to advance the economic
landscape of the nation by seamlessly integrating
technological prowess and fostering sustainable
reporting and practices. We shall continue to
work and support the Government in its journey
of progress and reforms steering the economic
progress.
As we work towards achieving our collective vision
of India’s ascent as a developed nation in the next
25 years, the role of the Institute as well as its
members becomes paramount. In this era of digital
revolution wherein every piece of data carries the
stamp of a Chartered Accountant’s certification,
our responsibility is immense to ensure the firm
affirmation of honesty and fairness, supported
9 www.icai.org
1066
From the President
THE CHARTERED ACCOUNTANT
by the highest standards of integrity. In view of
the advancements in the domain of technology
and to adeptly navigate this evolving terrain,
the Institute is taking all essential measures to
imbibe the necessary technological skills amongst
the members and students to excel as global
professionals by embracing artificial intelligence,
block chain technology and leveraging
advancements to our competitive advantage.
As we pause to reflect upon our journey of progress
and envision the path ahead, it is essential to
recognize the role of our nation’s women and in
shaping our destiny and it fills me with pride to
share the significant strides as a profession we
have made towards gender equality as our 29%
members are women and 43% are students. The
escalating participation of women is noteworthy,
and I’m confident that with their skills and
capabilities, they are poised to lead our profession
in the next 25 years. On the upcoming International
Women’s Day, I am reminded of the profound
words of Mr. Kofi Annan, “There is no tool for
development more effective than empowerment
of women.” Let’s honour their resilience, strength,
unwavering spirit, and reaffirm our commitment to
foster an inclusive environment.
With a resolute commitment to put India first, led us
forge ahead, guided by the principles of service to
our nation, profession as well as ourselves. Together,
we can lay the groundwork where excellence and
national progress go hand in hand by embodying
the tenets of ‘TRUST’ - Technology, Research, Union
development, Sustainability, and Transparency, as
we move ahead to achieve the vision of $30 trillion
economy. The roadmap for this year is envisioned in
‘DRISHTI’ signifying D- Digitalisation; R- Research;
I- Integrity; S- Skills, H- Handholding; T- Transparency
and I- Independence. Details about same are coming
separately inside the journal.
Conclusion
Reflecting on the ethos of our Institute, I am
reminded of the paramount importance of ethical
conduct as was noted by our Past President CA.
(Dr.) R.C. Cooper in the preface to the first edition
of ICAI’s Code of Ethics, “No booklet of this nature
can achieve the object of outlining every possible
act which may or may not constitute sound ethical
conduct because the practice of professional
2024-49: The Golden Period of Profession
MARCH 2024
ethics is largely a matter of conscience and
the determination of members to distinguish
between what is right and wrong. Ethics provides
an understanding to differentiate between our
right to do and what is right to do. Very rightly,
the Institute urges its members to search their
hearts and conscience whenever in doubt, and
thereby assist towards the maintenance of high
principles of professional conduct, as is expected
of the constitution of a regulated profession.”
Since 1964, the unwavering commitment of our
members to uphold the Code of Ethics has earned
us the title of trustees of Public Interest. Our
dedication to ethical practices sets us apart and
reinforces our credibility in the eyes of the nation.
The emblem of the Garuda bestowed upon us by
Sri Aurobindo Ghosh represents not just a keen
vision and soaring heights, but also a profound
sense of responsibility. We are entrusted with
safeguarding the fiscal integrity and our tireless
efforts over the past 75 years have fortified the
financial discipline of our country.
As we continue our journey of the next 25
years, I assure to steer the Institute towards
unprecedented heights of success, fostering a
culture of collaboration and empowerment. With
resolute commitment, let us carry this responsibility
with pride and dedication, pioneering innovation,
fostering excellence, driving sustainable growth,
and ensuring that our efforts contribute to the
enduring prosperity of our beloved nation.
Together, Let’s chart a course for the future,
leveraging our glorious past to propel ICAI into an
even more inspiring and impactful era.
Best Wishes,
CA. Ranjeet Kumar Agarwal
President, ICAI
Delhi, 29th February, 2024
10 www.icai.org

Recent Developments
THE CHARTERED ACCOUNTANT
Meeting with Stakeholders
 The ICAI leadership CA. Ranjeet Kumar Agarwal,
President, ICAI and CA. Charanjot Singh Nanda,
Vice President, ICAI met Shri (Dr.) Manoj Govil,
Secretary, MCA, Smt. Kamini Chauhan Ratan,
Additional Secretary & Financial Advisor, MCA
& Ministry of Petroleum & Natural Gas, Shri
Manoj Pandey, Additional Secretary, MCA and
Shri Inder Deep Singh Dhariwal, Joint Secretary,
MCA on 14th February, 2024 wherein discussions
were held regarding role of ICAI in various
initiatives of ministries.
 The ICAI leadership CA. Ranjeet Kumar Agarwal,
President, ICAI and CA. Charanjot Singh Nanda,
Vice President, ICAI met Shri Girish Chandra
Murmu, Hon’ble Comptroller & Auditor General
of India & other senior officials in C&AG on 15th
February, 2024 and discussed about partnering
with the office of C&AG of India on various
initiatives towards enhanced contribution in
Nation Building.
 The ICAI leadership CA. Ranjeet Kumar Agarwal,
President, ICAI and CA. Mangesh P. Kinare,
Central Council Member, ICAI met Prof.
Mamidala Jagadesh Kumar, Chairman-University
Grants Commission (UGC) wherein deliberations
were held around streamlining the commerce
education in the country with support from ICAI.
International Panel on Accountancy
Education (IPAE), IFAC Meeting
The meeting of the International Panel on
Accountancy Education (IPAE) of IFAC was held on
5th February 2024 through virtual mode. The Panel
under the leadership of Ms. Anne-Marie Vitale,
Chair, IPAE discussed the important matters on how
to best assist professional accountancy organizations
in preparing future-ready accountants through better
education aligned to international benchmarks and
market expectations.
Interim Budget - 2024
The Interim Budget 2024-25 elucidated India’s
developmental trajectory since 2014, highlighting
governmental initiatives geared towards
transforming India into Viksit Bharat by 2047.
The upcoming five-year vision emphasizes crucial
aspects such as rural and middle-class housing, the
promotion of renewable solar energy for widespread
benefit, the enhancement of healthcare facilities,
substantial infrastructure development, and a
MARCH 2024
1067
strong focus on research and innovation. The ICAI
commends the interim budget, emphasizing a
transparent, accountable, people-centric, and
trust-based administration.
Augmenting Financial Reporting Ecosystem
The ICAI is working incessantly to augment the
economic reporting system by keeping its members
abreast of new knowledge in the form of standards
and guidance notes.
 Guidance Note on Audit of Banks (2024
Edition)
The banking sector, a fundamental pillar of any
economy, is essential for sustainable socio-economic
development. The annual statutory audit of banks
significantly ensures the credibility of their financial
statements, contributing to economic robustness.
The ICAI actively supports members in maintaining
the quality of bank audits through the annual
release of the “Guidance Note on Audit of Banks.”
This publication provides comprehensive, updated
guidance to align with the latest developments and
amendments in the banking landscape.
 Issuance of SA 800 (Revised), SA 805 (Revised),
SA 810 (Revised)
ICAI has been playing a pivotal role in ensuring
the integrity, reliability, and consistency of financial
audits with the implementation of Auditing
Standards that provide a common framework that
auditors must follow while conducting audits.
Recently, the ICAI has issued Revised Auditing
Standards SA 800, SA 805, and SA 810, which will
be applicable to the audits/engagements for the
financial year beginning on or after 1st April 2024,
i.e., the FY 2024-25 and onwards.
Inauguration of Infrastructure Projects
The infrastructure been playing a pivotal role
in realizing ICAI’s objectives, ensuring the
comprehensive development and welfare of the
accounting profession throughout India. During
the period, various infrastructure projects were
inaugurated namely new building of Ahmedabad
branch, foundation of new branch building was laid
in Jamnagar and also Bhoomi pujan ceremony was
conducted of Gorakhpur Branch. Further, on 9th
February 2024, CA Circle in Dhule and a Rooftop
Solar system in Jalgaon were also inaugurated.
11 www.icai.org
 1068

Members of Twenty-Fifth Council [as on 12th February, 2024 ]

MARCH 2024
12
Council Photo
THE CHARTERED ACCOUNTANT

www.icai.org
1st Row [L to R] : Shri Rakesh Jain (Govt. Nominee), CA.(Dr.) Jai Kumar Batra (Secretary, ICAI), CA. Aniket Sunil Talati (Immediate Past President), CA. Ranjeet Kumar Agarwal
(President), CA. Charanjot Singh Nanda (Vice President), CA.(Dr.) Debashis Mitra(Past President), Dr. P. C. Jain (Govt. Nominee), Adv. Vijay Kumar Jhalani
(Govt. Nominee)
2nd Row [L to R] : CA. (Dr.) Sanjeev Kumar Singhal, CA. Sushil Kumar Goyal, CA.(Dr.) Anuj Goyal, CA. Sanjay Kumar Agarwal, CA. Kemisha Soni, CA. Prakash Sharma,
CA. Dheeraj Kumar Khandelwal, CA. (Dr.) Rajkumar S. Adukia
3rd Row [L to R] : CA. Dayaniwas Sharma, CA. Mangesh P. Kinare, CA. Durgesh Kumar Kabra, CA. Hans Raj Chugh, CA. Chandrashekhar Vasant Chitale, CA. K Sripriya,
CA. Rajendra Kumar P., CA. Prasanna Kumar D., CA. Pramod Jain
4th Row [L to R] : CA. Vishal Doshi, CA. Abhay Chhajed, CA. Piyush Chhajed, CA.(Dr.) Raj Chawla, CA. Rohit Ruwatia Agarwal, CA. Priti Paras Savla
5th Row [L to R] : CA. Srinivas Cotha S, CA. Umesh R. Sharma, CA. Purushottamlal H. Khandelwal, CA. Gyan Chandra Misra, CA. Muppala Sridhar
Not in Photograph : Govt. Nominees Shri Manoj Pandey, Shri Sanjay Kumar, Shri Ritvik Ranjanam Pandey, Shri Deepak Kapoor and Shri Chandra Wadhwa
 1069

Photographs
THE CHARTERED ACCOUNTANT

CA. Ranjeet Kumar Agarwal, President, ICAI and CA. Aniket S.
Talati, the then President, ICAI presented memento to Shri Om Birla,
Hon’ble Speaker, Lok Sabha during the 74th Annual Function of ICAI
held in Delhi. (8th February, 2024)
CA. Ranjeet Kumar Agarwal, President, ICAI and CA. Charanjot Singh
Nanda, Vice-President, ICAI presented a bouquet to Shri Girish Chandra
Murmu, Hon’ble Comptroller & Auditor General of India during meeting
held to discuss ICAI partnering with the office of C&AG for enhanced
contribution in Nation Building Initiatives. (15th February, 2024)

CA. Ranjeet Kumar Agarwal, President, ICAI & CA. Charanjot Singh Nanda, Vice-President,
ICAI honouring the First ICAI President CA. G. P. Kapadia on the occasion of taking over leadership.
(12th February, 2024)

CA. Ranjeet Kumar Agarwal,

CA. Ranjeet Kumar Agarwal anointed with President, ICAI and
the Presidential Collar as the newly elected CA. Charanjot Singh Nanda,
ICAI President in the 429th Council Meeting. Vice-President, ICAI seen
Seen in the picture is CA. (Dr.) Jai Kumar with CA. Aniket S. Talati,
Batra, Secretary, ICAI. (12th February, 2024) Immediate Past President,
ICAI, CA. (Dr.) Debashis Mitra,
Past President, ICAI and
CA.(Dr.) Jai Kumar Batra,
Secretary, ICAI at the
Oath-taking ceremony of
new leadership.
(12th February, 2024)

CA. Ranjeet Kumar Agarwal,

President, ICAI and
Central Council Member
CA. Mangesh P. Kinare met
Prof. M. Jagadesh Kumar,
Chairman-University Grants
Commission (UGC) wherein
CA. Ranjeet Kumar Agarwal, President,
deliberations were held to
ICAI and CA. Charanjot Singh Nanda,
streamline the commerce
Vice-President, ICAI had a meeting with
education in the country with
Dr. Manoj Govil, IAS, Secretary, Ministry
support from ICAI.
of Corporate Affairs and discussed various
(26th February, 2024)
matters related to CA Profession & offered
ICAI’s continuous support in various
initiatives of MCA. (14th February, 2024)

MARCH 2024 13 www.icai.org

1070

Photographs
THE CHARTERED ACCOUNTANT

CA. Ranjeet Kumar

Agarwal, President, ICAI
and CA. Charanjot Singh
Nanda, Vice-President,
ICAI met Shri R. G.
Viswanathan, Deputy
Comptroller & Auditor
General and discussed on
ICAI partnering with the
office of C&AG of India for
enhanced contribution in
Nation Building Initiatives.
(20th February, 2024)

CA. Ranjeet Kumar Agarwal, President, ICAI met CA. Ranjeet Kumar Agarwal,
Dr. Ajay Bhushan Prasad Pandey, Chairperson, President, ICAI and
National Financial Reporting Authority and discussed CA. Charanjot Singh Nanda,
matters related to the profession. (20th February, 2024) Vice-President, ICAI had a
meeting with Ms. Kamini
Chauhan Ratan, IAS,
Additional Secretary and
Financial Advisor, MCA and
MoPNG and discussed role
of Chartered Accountants
in various initiatives of
Ministries. Also seen in the
picture is Shri Tharvinder
Singh, Deputy Secretary,
MCA. (14th February, 2024)

CA. Ranjeet Kumar Agarwal, President, ICAI and CA.

Charanjot Singh Nanda, Vice-President, ICAI had a
meeting with Shri Inder Deep Singh Dhariwal, Joint
Secretary, MCA and Shri Tharvinder Singh, Deputy
Secretary, MCA and discussed role of Chartered
Accountants in various initiatives of MCA. (14th
February, 2024)

CA. Aniket S. Talati, the then President, ICAI during One Day Seminar held in Jabalpur
Branch of CIRC. Also seen in the picture are ICAI Central Council Members CA. (Dr.) Anuj
Goyal, CA. Abhay Chhajed and Management Committee Members of Jabalpur Branch.
(3rd February, 2024)

CA. Ranjeet Kumar Agarwal, President, ICAI and CA. Aniket S. Talati, the then President,
ICAI during inauguration of Satna Branch of CIRC. Also seen in the picture are ICAI Central
Council Members CA. (Dr.) Anuj Goyal, CA. Abhay Chhajed and Managing Committee
Members of Satna Branch. (3rd February, 2024)

MARCH 2024 14 www.icai.org

 1071

Photographs
THE CHARTERED ACCOUNTANT

CA. Ranjeet Kumar Agarwal, President, ICAI and CA. Aniket

S. Talati, the then President, ICAI during Bhoomi Pujan of
CA. Ranjeet Kumar Agarwal, President, ICAI and CA. Aniket S. Talati, the then Gorakhpur Branch of CIRC. Also seen in the picture are Central
President, ICAI during inauguration of Ahmedabad Branch of WIRC. Also seen in Council Members CA. (Dr.) Anuj Goyal and CA. Gyan Chandra
the picture are Central Council Members and WIRC Members. (6th February, 2024) Misra. (4th February, 2024)

CA. Ranjeet Kumar Agarwal, President, ICAI and CA. Charanjot

CA. Aniket S. Talati, the then President, ICAI during inauguration of CA Circle in Singh Nanda Vice-President, ICAI interacting with the Media
Dhule. Also seen in the picture are Central Council Members CA. Umesh Sharma, in the Press Meet held in Kolkata. Also seen in the photograph
CA. Purushottamlal Khandelwal & Management Committee Members of Dhule are Central Council Member CA. Sushil Kumar Goyal and EIRC
Branch. (9th February, 2024) Members. (24th February, 2024)

CA. Ranjeet Kumar Agarwal,

President, ICAI and
CA. Aniket S. Talati, the
then President, ICAI during
Foundation Stone Laying
ceremony of Jamnagar
Branch of WIRC. Also seen
in the picture are Central
Council Members
CA. Vishal Doshi,
CA. Purushottamlal
Khandelwal and Managing
Committee Members of
Jamnagar Branch.
(10th February, 2024)

MARCH 2024 15 www.icai.org

1072

Photographs
THE CHARTERED ACCOUNTANT

CA. Ranjeet Kumar Agarwal, President,

ICAI and CA. Aniket S. Talati, the then
President, ICAI lighting lamp during
Inauguration of Egypt (Cairo) Chapter of
ICAI. (29th January, 2024)

CA. Ranjeet Kumar Agarwal, President, ICAI and CA. Charanjot

Singh Nanda, Vice-President, ICAI along with CA.(Dr.) Debashis
CA. Ranjeet Kumar Agarwal, President, ICAI and CA. Aniket S. Talati, the Mitra, Past President, ICAI, Central Council Member CA. Sushil
then President, ICAI meeting with the leadership of Egyptian Society of Kumar Goyal & EIRC Members attended the Felicitation Program
Accountants and Auditors. (30th January, 2024) organized by EIRC, ICAI in Kolkata. (24th February, 2024)

CA. Ranjeet Kumar Agarwal, President, ICAI and

CA. Charanjot Singh Nanda, Vice-President, ICAI
inaugurating Seminar organized by AASB-ICAI held in
Amritsar. Seen in the photograph are Central Council
Members, NIRC Members & Managing Committee
Members of Amritsar Branch. (18th February, 2024)
CA. Ranjeet Kumar Agarwal, President, ICAI, CA. Charanjot Singh Nanda, Vice-
President, ICAI and CA.(Dr.) Jai Kumar Batra, Secretary, ICAI interacting with the media
representatives during the Press Conference held at ICAI Head office, New Delhi.
(21st February, 2024)

CA. Ranjeet Kumar Agarwal,

President, ICAI addressing
the members in the
presence of CA. Charanjot
S. Nanda, Vice-President,
ICAI at the Annual Program
organized by Faridabad
Branch of NIRC. The event
was graced by Central
Council Members, NIRC
Members & Managing
Committee Members of
Faridabad Branch.
(25th February, 2024)

MARCH 2024 16 www.icai.org

 1073

Oath-Taking Ceremony
THE CHARTERED ACCOUNTANT

Welcoming the new torchbearers of ICAI, poised to pave the path towards
a Golden Era in the Accountancy Profession!

Oath Text
“I do swear in the name of
God, solemnly affirm, that
I will bear true faith and
allegiance to the profession of
Chartered Accountancy under
the Chartered Accountants Act,
1949, as established by law.
Further, I pledge to uphold
the integrity of functions as
prescribed in the said Act and
the Chartered Accountants
Regulations, 1988 and rules

T
he solemn oath, a time- framed thereunder for the benefit for an economically resilient ‘Viksit
honored ceremony, of the Chartered Accountancy Bharat@2047’.
epitomizes a sentiment far profession, and I will faithfully
beyond mere verbal expression; ICAI Torchbearers CA. Ranjeet
and conscientiously discharge Kumar Agarwal, President, ICAI and
it is an affirmation to preserve and
my role as the President/Vice- CA. Charanjot Singh Nanda, Vice
uphold the integrity of the Institute.
President of ICAI for the Council President, ICAI, took a pledge to
It emblematizes a profound
Year 2024-25, without fear or
dedication to the sacred principles, uphold the basic structure of the
values, and responsibilities of a favor, affection or ill-will.” Institute by imbibing the principles
revered profession, transcending of Excellence, Ethics & Integrity
personal interests and ambitions in service for a and guiding the accountancy profession toward
greater cause. On the dawn of February 12th, 2024, the nation’s economic development. Acting as the
ICAI marked the beginning of the new Council leading lights of the Institute, they will not only
Year blossoming with hope, trust, and boundless uphold the legacy of those who have come before
opportunities. The Institute bestowed its mantle upon them but also pave the way for a brighter, more
a cadre of newly elected torchbearers, the President, prosperous future for all, by pursuing excellence with
and the Vice President, who avowed to render their unyielding dedication. This profound moment
their service to the nation and lead the esteemed underscores the significance of the occasion in
Members of the Institute toward realizing the vision setting the tone for the journey ahead.

This is the time to revive and relive the promise that the Indian CA profession will lead the resurgent India.

MARCH 2024 17 www.icai.org

1074

Strengthening the Role and Relevance of INTERVIEW

ICAI in the National and International Arena
IN A FORTHRIGHT CONVERSATION with Mr. Agarwal is
CA. Ranjeet Kumar Agarwal, a very down marching ahead with
to earth person who has reached pinnacle passion & envisioning
in many aspects, and will be leading the the period 2024-2049
as “Golden Period of
profession ahead in the “Amritkaal”
the Profession”. He
firmly believes that
“Performance on
integrity measures
has increased and so
has the importance
of Chartered
Accountants in
driving Transparency
& Trust.”

While getting to know

about his action plan
for the Accountancy
profession, a quick
We had the privilege of interacting with CA. Ranjeet Kumar recap of his visionary
Agarwal, the 72nd President of the Institute of Chartered dream to bring “ICAI”
Accountants of India, world’s largest accounting body. What at the universal
stood out were his character, simplicity, family values, and
pedestal with precise
dedication to the nation.
imagination and
Q. Can you tell us a little about your childhood and where you were
born & what was the driving force to be a Chartered Accountant?
fruitful outcomes.

Reply: “Ambition and Tenacity” helped me forge a path forward, towards Mr. Agarwal shared a
new breakthroughs in the field of Chartered Accountancy. I am a graduate
from Calcutta University, born and brought up in Bihar and was always
very old yet influential
attracted to the numbers- Number “1” being the closest to my heart. Like and inclusive
colors, numbers have their own meaning to them.
Sanskrit shlokas i.e.
Since childhood, I have a deep passion for learning and exploring numbers Þ;Fkk –f"V rFkk 'k`f"Vß
which attracted me towards calculations, accounts and finally lead me to pursue
Chartered Accountancy. I passed CA examination in the year 1999 and has which means “As
been in practice since then. is one’s vision, so is
My family values and guiding principle to put in your best in all your one’s experience.”
endeavours played an important role in building my career and helped me
reach the position, where today I represent the fraternity of about 4 lakh
Chartered Accountants & 8.5 lakh students.

MARCH 2024 18 www.icai.org

 1075

Interview
THE CHARTERED ACCOUNTANT

Q. Were you always sure of your destiny to be a Chartered

Accountant and then to be President of ICAI?
Reply: When I stepped on the very first stair to climb the path of
Chartered Accountancy and thereafter got engaged in various aspects of
this noble profession-the way CAs were instrumental in building resurgent
India, their involvement in building the taxation system of the country,
the requirements of a student for conducive environment for studies and
related things, at that very moment, I decided and promised myself that I
will be a Chartered Accountant and for that I would strive do my best, so
that I can get directly involved in the growth of economy and profession.

I am humbled with the blessings of all to be able to reach this position

and will strive to make an impact in the development of nation and
profession.

Without hesitating and to get deeper insights about his

vision for the profession, we jumped onto innumerable
questions hovering around our mind.

Q. Artificial Intelligence have revolutionized the world of

accountancy. The impact of AI on workflow in accounting is
massive & it has been learnt that a new Committee “AI in ICAI” The “DRISHTI” vision,
has been constituted this year. What are your plans to embrace foresight… plays a very
these technologies to stay ahead of the curve? important role in our daily
Reply: In today’s fast-paced business world, technology cannot be lives, as we see the world,
overlooked and the field of accountancy is not an exception. Artificial the world will appear to you
Intelligence (AI) has become a game-changer, helping streamline
processes, improve accuracy, and deliver more value. In fact, AI-enabled
in the same way. His –f"V for
finance and accounting systems are the way for enterprises to stay strong the profession reflects his far
contenders in an increasingly competitive market because they save time sightedness, in building the
and provide deep insights.
profession for the new era.
The future of accounting is here, and it’s powered by AI. ICAI, being the
frontrunner in adopting the newer technologies is working relentlessly to
make the future torchbearers as well as current generation to be tech- CA. Ranjeet Kumar Agarwal
savvy and ahead of the time. To achieve this plan of making “AI” part connecting the past to future
of our professional life, we have constituted a committee namely “AI
in ICAI”. All constituents of the Institute namely Members, Students & shared his Vision for the
Employees shall be working cohesively towards implementation of AI and next one year i.e. “DRISHTI”
we shall soon come up with a roadmap. signifying
It’s clear that AI is here to stay and instead of casting it aside, we need
to embrace it, and leverage its capabilities to increase efficiency in the
workplace. It is myth to say that technology will replace human beings
and create unemployment. It will automate the processes providing more Digitalisation
time for the logical and creative thinking and consultancy services for
D
professionals. At ICAI, we will work and make use of the latest technology, R Research
to keep Chartered Accountants ready for the evolving future. I Integrity
Moreover, Inspired by the government’s “E-office” initiative, ICAI is S Skills
gearing up to implement this forward-thinking concept to move electronic
mode, marking a significant stride towards a greener and more eco- H Handholding
friendly workplace as well as better governance. T Transparency
I Independence

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1076
Interview
THE CHARTERED ACCOUNTANT
Q. Despite ongoing efforts, there is a
surprising gap in research being carried
out by professional accounting organizations. Is
ICAI working on “Research projects” that would
help the Government?
Reply: Research in ICAI is an important pillar and
since 1955, ICAI is actively driving economic progress
through strategic research initiatives. For this year we
have our three focus areas. Firstly, we will be conducting
study exploring the correlation between increased
GDP and improved tax payments aiming to unveil
insights into the economic impact for improving the tax
compliance. Secondly, we will be undertaking study to
compile a “List of Redundant Laws” for supporting the
govt. in building a contemporary legal framework that
unlocks value creation across the economy. Lastly, we
plan to leverage and build upon our UDIN** system
that strengthens authenticity of documents to the next
level. We will be sharing the study on the geographical
distribution of UDIN generation, highlighting ICAI’s
forward-thinking approach, providing the government
with tools to assess district development based on
economic & commercial activity. This can help to plan
customised economic development in the region. e.g.
the Aspirational Districts program of govt. with these
data insight of UDIN can help the govt. in fostering
economic development through research-driven
insights, leading to informed decision-making.
** Unique Document Identification Number (UDIN) was made mandatory with effect from February 1, 2019 as per the Council
decision taken at its 379th Meeting held on December 17-18, 2018.
MARCH 2024
Q. Embarking on the transformative journey
of becoming a Chartered Accountant
(CA) is an ardent pursuit of excellence. ICAI,
being the sole regulatory authority of Chartered
Accountancy profession- How it is preparing
Chartered Accountants to be “Future Ready”?
Reply: ICAI recognizes the imperative of preparing
Chartered Accountants to be “Future Ready’. Our
approach aligns with Darwin’s evolutionary theory,
adapting to the changing professional landscape
to ensure the survival and success of our members
in the dynamic business environment. Technology
& Sustainability are the driving forces for the global
economy.
To be future-ready and being relevant, the CA
profession has been re-inventing and upgrading itself
in tune with the challenges of the dynamic economy
of the country as well as that of the globe. ICAI
already has revamped its “New Scheme of Education
& Training” with impetus on technology & ethics and
is benchmarked to the best in the world. After the
implementation of the new scheme there is rise in
registration across the levels which shows the faith of
the youth in the power of this profession.
Our course is totally merit driven promoting tenets
on excellence, ethics and integrity. The Chartered
Accountancy course is empowering the mind
& career of different strata of the society. As an
educator it’s our endeavour to build a conducive
educational environment for students and we ensure
that students get all requisite support in form of
Smart Classes, live digital learning, Mega Counselling
programmes, additional reading rooms and need-
cum merit-based scholarship.
After successfully completing Chartered Accountancy
(CA) qualification, there are plethora of exciting
career paths to explore in the field of Audit,
Taxation, Advisory, Consultancy, M&A, Social Audit,
Sustainability Reporting, Insolvency,Valuations,
Forensic Accounting & others. One can establish own
CA firm, start their own practice , be in service or can
be an Entrepreneur. Our Articleship training is real-
time wherein the CA students are being groomed
by practicing CAs, which gives them an upper hand
when they land in high level jobs. During last campus
placement organised by the Institute, the highest
domestic salary offered is Rs. 28 lakh per annum
and the average salary package is Rs. 12.50 lakh per
annum. The highest international salary package is
Rs. 49.20 lakh per annum.
20 www.icai.org

Interview
THE CHARTERED ACCOUNTANT
Remember that each path has its unique challenges
and rewards. Consider your interests, strengths, and
long-term goals when choosing your career after CA.
Chartered Accountants in India are the gatekeepers
of financial integrity, playing a vital role in the
economic development of the country. Their
expertise in auditing, taxation, financial planning,
and business advisory services is indispensable
for individuals and organizations alike.With the
advancement of technology and changing economic
imperatives, enhancing the skillset of Chartered
Accountants is our paramount priority and for that we
are in the process of establishing 9 more Centres of
Excellence, wherein Residential Programmes shall be
arranged for augmenting customised skill sets and
making CAs rise from functional leader to strategic
business leaders as “Leaders of Tomorrow”.
“Green Finance & Accounting” is another area that
is the need of hour, not only financially but morally
as well. As it will provide environmental benefits in
the broader context of environmentally sustainable
development. It is our profession which will be an
important changemaker by virtue of working across
the value chain and varied stakeholders to lead this
Green Finance movement. The Institute shall be
working on the Standards/Guidelines/ Courses that
would help finance professionals and business to
move towards Green Finance.
Q. The services of certified Chartered
Accountants (CA) are in high demand,
fuelled by economic growth and the need for
companies to remain compliant with regulatory
environment. What do you think that how
the profession of Chartered Accountants will
progress during this phase of economic growth?
Reply: Chartered Accountancy has emerged as a
unique profession of considerable importance in view of
the integrated scenario of the globalization. The rise of
technology has allowed Chartered Accountants to take
their data analysis skills to new heights. With the use of
advanced tools and software, CAs can now analyse vast
amounts of data in a matter of minutes, providing them
with valuable insights and trends.
The CAs are also working closely as decision-makers
to mitigate risks, add value and develop sustainable
financing strategies, to help drive positive change
and build a more sustainable future. There is an
immense future in “ forensic accounting” as a distinct
“specialised/specialist area” of consulting. The Institute
is moving ahead strategically and equipping its
members with every specialised skill that would be the
need of the hour/future.
MARCH 2024
1077
Changes in regulations, listing requirements, need for
better corporate governance, convergence with IFRS,
implementation of GST, Direct Tax Code, Insolvency
and Bankruptcy Code, Valuation, Corporate Laws and
new initiatives have also necessitated the need of
Chartered Accountants in all sectors of the industry.
There has been a remarkable growth in the economy
and business over the years. The service sector is the
most rapidly expanding sector and Accountancy is one
of its most significant segments. The experience and
expertise of CAs are now being utilized to a greater
extent in several newer areas such as Insurance Sector, IT
Sector, Public Finance, Risk and Assurance Services etc.
India is entering an exciting, but also uniquely
challenging phase in its history. The Hon’ble Prime
Minister said that “In the life of any nation, history
provides a time period when the nation can make
exponential strides in its development journey. For
India, “This Amrit Kaal is ongoing” and “this is the
period in the history of India when the country is
going to take a quantum leap”. The Prime Minister
further added “Today, every institution and every
individual should move with a resolution that every
effort and act will be for Viksit Bharat. The aim of
your goals, your resolutions should be only one –
Developed India”.
The Institute has always been on the front foot
to work in tandem with Government’s mission.
A Chartered Accountant is an important pillar in
economic growth of nation and being termed as
“Partner in Nation Building”, it is the duty of every
single Chartered Accountant to fulfil duties towards
the Nation.
With an army of over 4 lakh Chartered Accountants
(as on date) serving all across the country, it is
predicted that when India is estimated to be a $30
trillion economy by 2047, our nation would be
requiring the services of around 30 lakh Chartered
Accountants.
The Chartered Accountancy profession will live up
to its name of being one of the noblest professions
in India.
Q.
Chartered Accountants are the gladiators/
comrades that lead the charge in creating
societal change and pushing the country
to newer heights. Being a partner in nation
building, what are your plans to work towards
“National Development”?
Reply: Being a Chartered Accountant and firstly an
Indian at heart, my strong desire is to support the
Government in fulfilling the vision of India being
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1078
Interview
THE CHARTERED ACCOUNTANT
the third-largest economy in the world, with a GDP
of $30 trillion by 2047. The ICAI through its various
Committees has been working relentlessly to promote
& propagate various schemes and initiatives of the
Government.
I would like to reiterate the words of Hon’ble Prime
Minister Shri Narendra Modi ji shared during 68th
Foundation day celebrations of ICAI i.e. “Chartered
Accountants are big pillars of Indian Economy... they
are like saints and sages of Indian economic world...
they are like doctors of the domain of economy...
the name of a CA must be equated with Compliance
and Accuracy...,”. Today the growing collections
and increasing formalization of economy, is itself a
testimony to Government’s faith on ICAI & Chartered
Accountants fraternity.
The Institute of Chartered Accountants of India (ICAI)
is playing a pivotal role in national development
by focusing on the Micro, Small, and Medium
Enterprises (MSME) and Startup Sector, recognizing
them as the largest employment generators in the
country. The institute is aspiring to change the
mindset of the youth from being a job seeker to job
creator. The Institute is undertaking capacity-building
measures to strengthen these sectors through
initiatives like the ICAI Start Up Yatra and ICAI MSME
Connect programme, reaching 140 cities across India.
These programs serve as a comprehensive “One Stop
Solution” for addressing financial and other related
issues, and has also resulted in significantly boosting
UDYAM registrations.
ICAI is also contributing to the government’s mission
on financial literacy through its “Vitiya Gyan ICAI ka
Abhiyaan,” educating citizens on tax laws, accounting,
financial systems, and personal finance management, to
support societal upliftment and ease of living through
inclusive development.
The Institute will leave no stone unturned to achieve the
mission of the Government and will always be upfront in
taking on responsibilities assigned to it.
Q. It takes strategic planning to make sure
that international expansion efforts pay
off. ICAI has expanded its reach to over 81
cities of the world, that’s a tremendous leap
by an Institution. Can you please guide that
what’s your future plans for this expansion
internationally.
Reply: With presence of 50 Global Chapters
internationally, ICAI’s strong overseas Membership
has been Ambassador of Brand India and earned
laurels and respect for the quality of Indian Chartered
Accountants globally. This process of setting up 50
MARCH 2024
chapters has been a long journey of struggle and
triumph. In 1981, the first International Chapter of
the Institute was set up in Doha and today ICAI has
presence with 13 chapters in North America, 4 chapters
in Europe, 21 chapters in Africa & Middle East and
6 chapters each in Asia & Australia. Today, ICAI has
expanded its footprints to 81 cities across the world.
ICAI is taking all necessary measures to build the global
relevance of profession by entering into MoU/MRAs
with leading accounting bodies and institutions. The
endeavour would be to have more MoUs for enhancing
brighter prospects for Indian Chartered Accountants
and leading the Membership Pathway Arrangements,
which would facilitate mutually recognizing the
Qualification of each other’s and admit the Members
in good standing by prescribing a bridging mechanism
between the two Institutes.
Our members abroad are working at strategic positions
and working closely with local Governments there, to
establish linkages and to further establish International
Chapters to promote accountancy qualification
abroad. We are in the process of connecting our global
members through a common platform to steer ahead
the profession ahead globally.
Two years ago, the Council of ICAI has also approved
market access of UK & Canada in accounting,
bookkeeping, and auditing services on reciprocity
basis after fulfilling certain conditions under FTA
negotiations. This would open new avenues for Indian
Chartered Accountants in UK & Canada and facilitate
the movement of Indian Chartered Accountants across
borders, contributing to the export of professional
services and solidifying ICAI’s position as a global
leader.
Q. The progress of a nation greatly depends
on its people. “Social responsibility” is an
ethical framework in which a person works and
cooperates with other people and organizations
for the benefit of the community. So, how your
vision of “Handholding” would lead Chartered
Accountants to play their role of as social citizen
of the country.
Reply: Social responsibility is a moral obligation.
The essence of social responsibility is not in books,
it cannot be taught by anyone, an effort has to be
made to learn it.
Social responsibility refers to the business practices
of engaging in ethical behaviour and in taking actions
aimed at benefiting and developing the society.
During the year, I have envisioned each Chartered
Accountant to be socially responsible and introduced
the idea of “Each One, Teach One”.
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THE CHARTERED ACCOUNTANT

Today, with a membership of 4 lakh, if each CA would Deeply impressed by his ideas, we requested
adopt a student, around 4 lakh students would be
adopted. This would help and empower the students
his views for the upcoming generation.

to pursue his/her career dream and in totality uplift the
society as a whole.
A portal shall soon be developed wherein the Chartered
Accountants will upload the details of the adopted
students. The stories of the students shall also be
published, that would help other aspirants to work hard,
towards achieving their dream career/job.
The Institute through Chartered Accountants
Benevolent Fund (CABF), which was established in
1962 has been providing financial assistance to needy
members of ICAI and their dependents. I would request
members to generously make voluntary contribution to
the CABF to enable us to extend maximum grant to the
Members and their dependents.
ICAI, since its establishment has been a front runner in
fulfilling its duties towards society and shall continue
to play its role towards empowerment of the citizens
of the country.
Q.
What advice would you give to the future
generations who see you as their Mentor?
Reply: I want everyone to follow their Inner Voice, their
zeal to reach their target. I believe in the saying “It
is very easy to defeat someone. But it is very hard to
win someone”, said the man who won the hearts of an
entire nation with his simplicity and humble aura. He
was our very own Missile Man, Dr. APJ Abdul Kalam.
I would encourage the young CAs and students
to think creatively, explore new ideas, and push
the boundaries of knowledge. Learning is a never-
ending journey & should be emphasized upon to
stay relevant in an ever-changing world. From setting
goals and embracing challenges to being humble
and improving knowledge, these are important
lessons that one should learn. By implementing these
qualities in our own lives, we can achieve success,
develop leadership qualities, and contribute towards
the betterment of our society.

Q. “Integrity, Excellence & Independence”

are the virtues of a Chartered Accountant.
We have seen times wherein the Chartered
Accountants have kept the flag of the Institute
flying high despite problems & hardships.
Please share your views on the inbuilt assets
that a CA possess, thanks to the Institute, being
a Prudent regulator.
Reply: Ethics plays a fundamental role in the
accounting profession, ensuring integrity, credibility,
and public trust. Integrity and honesty are at
the core of ethical behaviour in accounting and
enforced amongst its members, as enshrined in
“Code of Ethics”. The idea of independence is
instilled in the minds of Chartered Accountants from
the commencement of their training. It has to be
applied in their day-to-day work and their success is
dependent entirely upon their integrity, competence
and independence of approach.

The Institute has been fulfilling its role as “Regulator

of CA Profession” and encouraged its members to be
ethically responsible, transparent in their deeds and
work independently to fulfil their responsibilities in an
unbiased manner.

ICAI vigorously and constructively endeavoured to

make its Regulatory and Disciplinary mechanisms
more robust and responsive together with its
Disciplinary Directorate, Financial Reporting Review
Board, Peer Review Board, Quality Review Board,
Taxation Audits Quality Review Board etc.

MARCH 2024 23 www.icai.org

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74th Annual Function of ICAI

THE CHARTERED ACCOUNTANT

CAs would be major contributors in achieving the vision of Viksit Bharat@2047

- Hon’ble Lok Sabha Speaker

W ith an enduring commitment to foster rapid growth of the Indian economy and serve as a formidable regulatory authority,
the Institute of Chartered Accountants of India (ICAI) was established in 1949 by an Act of Parliament. Its primary
aim remains upholding Integrity, Reliability, and Credibility across all stakeholders within the Indian financial sector.
The Institute commemorated its Annual Day on 8th February 2024 at Vigyan Bhawan, New Delhi, highlighting all the significant
achievements and landmarks achieved during the year 2023-2024 in the presence and capable guidance of the outgoing President
of ICAI, CA. Aniket Sunil Talati. The distinguished speaker, CA. (Dr.) Girish Ahuja, delivered a session on specific provisions of
taxation and succession. The event was graced by the esteemed presence of the Chief Guest Shri Om Birla, Hon’ble Speaker of Lok
Sabha, accompanied by the Past President ICAI, CA. (Dr.) Debashis Mitra, the outgoing President ICAI, CA. Aniket Sunil Talati,
now President and the then Vice President ICAI, CA. Ranjeet Kumar Agarwal, Secretary ICAI, CA. (Dr.) Jai Kumar Batra, the
Chairman of NIRC, CA. Gaurav Garg, office bearers of several Branches and Overseas Chapters, Members, and Senior officials of
ICAI. During the event, CA students as well as exceptional Regional Councils, Branches, and Overseas Chapters were felicitated for
their remarkable achievements. Several publications and MoUs were also launched in the electronic format.

Welcome Address by CA. (Dr.) Jai Kumar Batra, self-reliant (Atma Nirbhar Bharat) and a global
leader (Vishwaguru).
Secretary, ICAI
The ICAI Secretary, CA. (Dr.) He wished for global unity and collaboration
Jai Kumar Batra, extended a within the accountancy profession to drive
warm welcome to the Chief economic development worldwide, and hoped
Guest, distinguished dignitaries, for ICAI and CA India to emerge as the ‘Vishwa
esteemed guests, and members Accounting Guru’ in the future.
of the accountancy profession,
marking the commencement
Session by CA. (Dr.) Girish Ahuja
of the grand celebration of the CA. (Dr.) Girish Ahuja, a
74th Annual Function. He started renowned tax expert, conducted
his speech with a Sanskrit shlok – “Sarve Bhavantu an enlightening discourse on
Sukhinah, Sarve Santu Nir-Aamayaah, Sarve pivotal topics including Section
Bhadraanni Pashyantu, Maa Kashcid-Duhkha-Bhaag- 43B(h) of the Income Tax Act,
Bhavet”, which emphasizes unity, brotherhood, the Hindu Succession Act, 1956,
collective growth, well-being of the family, society, and the Indian Succession Act,
country, and the whole world. 1925. His interactive session
provided invaluable insights,
CA. (Dr.) Jai Kumar Batra emphasized the elucidating complexities, and resolving queries of
Institute’s support towards the theme of India’s numerous fellow CAs.
G20 Presidency, ‘Vasudeva Kutumbakam’ (One
Earth, One Family, One Future), and its vision for He also emphasized adherence to timelines
a prosperous, inclusive, and developed society, under the MSME Development Act, 2006 and
while also highlighting India’s vision of being highlighted the transformative impact of legal

MARCH 2024 24 www.icai.org


74th Annual Function of ICAI
THE CHARTERED ACCOUNTANT
frameworks on gender parity and equitable asset
distribution. CA. (Dr.) Girish Ahuja concluded by
encouraging CAs to continue their dedication
towards bolstering India’s economy, fostering
optimism for a brighter fiscal future.
Address by CA. (Dr.) Debashis Mitra,
Past President, ICAI
CA. (Dr.) Debashis Mitra
reflected upon the evolution
of the profession, emphasizing
the remarkable growth of ICAI
which stands as a testament to
its enduring legacy and global
influence. He extended a warm
welcome to the esteemed
Chief Guest Shri Om Birla,
Hon’ble Speaker of Lok Sabha, highlighting his
longstanding relationship with ICAI, reinforcing
the Institute’s reputation.
He concluded by reaffirming ICAI’s undying
commitment to Excellence, Independence,
and Integrity, and reiterating the importance of
prioritizing the nation’s interests above all else.
Address by CA. Aniket Sunil Talati, Outgoing
President, ICAI
CA. Aniket Sunil Talati,
the Outgoing President,
expressed gratitude at
the annual function, and
highlighted the Institute’s
achievements, and the
profession’s trustworthiness
and determination to excel.
Reflecting upon the success
of the World Congress of
Accountants (WCOA) and India’s global ascent,
ICAI hosted the inaugural Global Professional
Accountants Convention and demonstrated
global engagement by drawing inspiration from
the Hon’ble Prime Minister’s words, “Yahi wakt
hai, Sahi Wakt Hai.”
With ‘Trust’ as the cornerstone, he
acknowledged the profession’s backing from
the nation, government, as well as stakeholders.
He focused on the effective collaboration with
the government, through an MoU entered
into with the O/o C&AG for a New Certificate
Course for Panchayat Accountants, as well as
a Statement of Intent (SOI) signed with NITI
Aayog to support Women Entrepreneurship
Program. He also underscored the training
being provided to new IAS officers joining
the Commerce Ministry. He further lauded the
MARCH 2024
1081
Disciplinary Committee and Board’s efficiency,
highlighting the resolution of 420 prima facie
opinions and disposal of 329 cases, including
numerous miscellaneous applications. These
accomplishments highlight ICAI’s crucial role in
regulatory adherence, professional growth, and
financial policy shaping.
The Outgoing President reminisced about the
75th CA Day where the Hon’ble President of
India, Smt. Droupadi Murmu, launched the new
course curriculum. He praised ICAI’s examination
system, citing Supreme Court’s commendations.
Reforms in examination greatly aided by
digitalization expedited the result release,
benefiting students.
ICAI’s pillars—Students, Articles, Members, And
Firms—were emphasized. The Student Skill
Enrichment Board introduced Smart Classes,
aligning with technological advancements. He
further mentioned about the Hon’ble Finance
Minister who recognized the widespread presence
of CA students across India, with plans to expand
ICAI’s reach to all major districts. The placement
drive organized by the Committee for Members
in Industry and Business provided over 9,200
jobs. CA. Aniket Sunil Talati also highlighted
the facilitation of mutual recognition with The
Institute of Singapore Chartered Accountants and
announced Indian CAs’ eligibility for membership
as associate members of ISCA after residing in the
country for six months.
To further bolster student support, the
Institute’s Career Counseling Committee
ensures nationwide career guidance programs.
The Institute was inducted in the Guinness
Book of World Records for hosting the largest
Accounting Lesson. NESCA, a collaborative
effort with nationwide universities, aimed
to standardize commerce and accounting
education. Additionally, MoUs with 56
universities were signed to facilitate dual
education pathways for CA students. These
initiatives underscore ICAI’s commitment to
education, professional standards, and national
development.
He expressed hope that the theme ‘Being
Noble, Think Global, Being Vocal for Local’
which was followed throughout the Council year
continues, and ICAI is able to build large-scale
global firms emanating from India. He concluded
by saying, “I am the I in ICAI. Shuruat bhi aapse,
ant bhi aapse, Institute bhi aap, India bhi aap”.
25 www.icai.org
1082
74th Annual Function of ICAI
THE CHARTERED ACCOUNTANT
Address by Chief Guest Shri Om Birla,
Hon’ble Speaker of Lok Sabha
The Hon’ble Lok Sabha
Speaker, Shri Om Birla,
delivered a poignant address
at the 74th Annual function.
Commencing with accolades
for ICAI, its venerable Past
Presidents, and its esteemed
members, he praised the
working of the Institute,
emphasizing transparency and accountability.
Highlighting the rigorous examination regimen
upheld by ICAI, Shri Om Birla contrasted it with
the examinations conducted by other entities,
affirming the Institute’s untainted integrity.
He commended ICAI’s legislative initiatives,
showcasing its proactive engagement with
parliamentary proceedings. He recognized
ICAI’s global credibility, having encountered its
members both nationally and internationally.
Acknowledging their contributions to financial
acumen and corporate governance, he praised
their role in enhancing India’s global prestige.
He highlighted ICAI’s contributions to investment
banking, capital markets, and economic growth
along with its role in fortifying the nation’s
economy by adding, “ICAI’s impact extends
beyond numbers; it influences the banking
system, businesses, and industries. CAs serve as
advisors during budget deliberations, playing
a critical role in our economy. New companies
thrive under the guidance of CAs, adopting
technological advancements. As we dream of
a developed India, I firmly believe that ICAI’s
greatest contribution lies in empowering these
aspirations, steering the nation towards progress
and prosperity”.
Additionally, he applauded ICAI’s social
responsibility endeavors, including environmental
campaigns and rural development initiatives,
foreseeing its continued pivotal role in India’s
development. Looking ahead, Shri Om Birla
envisioned ICAI setting new benchmarks and
standards for future generations, contributing
significantly to India’s economic evolution and
global recognition. In conclusion, he reflected
on ICAI’s remarkable 75-year journey, reiterating,
“India shall be a developed nation by 2047, and
Chartered Accountants will play a great role in it.
CAs would be major contributors in achieving the
vision of Viksit Bharat@2047”.
Refer to ICAI News for Recent Publications and Awards on Page 128.
MARCH 2024
Address by CA. Ranjeet Kumar Agarwal, now
President and the then Vice President, ICAI
CA. Ranjeet Kumar Agarwal,
now President and the then
Vice President, commenced
the address by acknowledging
the noteworthy milestones
both nationally and
internationally over the past
year. He commemorated
the achievements of the 25th
Council of ICAI led by the esteemed outgoing
President, CA. Aniket Sunil Talati, as well as
lauded the successful execution of the World
Congress of Accountants in Mumbai under the
abled leadership of CA. (Dr.) Debashis Mitra.
Expressing his gratitude towards the stalwart
leadership and contributions of his predecessors,
CA. Ranjeet Kumar Agarwal underscored the
need to maintain a similar spirit within the Institute
to align with India’s trajectory of monumental
achievements. The incoming President
emphasized the remarkable 75 years of existence
of ICAI, highlighting the significant potential within
its youthful demographic, with more than 65% of
the members under the age of 40. Emphasizing
the forthcoming 25 years, he reiterated the
vision of India evolving into a developed nation
by 2047, being a 30 trillion-dollar economy, and
emphasized its reliance on young CAs in shaping
the future of the profession.
The imperative of empowering women was
underscored, citing research indicating their
proficiency in financial management. Expressing
confidence in their capability, he commended
the escalating participation of women, noting
that they account for 29% of total CAs and more
than 43% of CA Students, poised to lead the
profession in the next 25 years. Highlighting
their leadership roles within Branches, Chapters,
and Regional Councils, the incoming President
emphasized the collective effort of various
segments within the Institute.
He also highlighted the inspirational aspect of
awards and reiterated that they are not merely
individual accolades but a reflection of the
collaborative endeavor of the entire Institute and
encouraged recipients to serve as role models
for the younger generation, thus contributing
to India’s pride as part of the largest accounting
body globally.
Lastly, he expressed his gratitude to the Hon’ble
Chief Guest, Shri Om Birla, on behalf of the
entire profession for his unrelenting support to
ICAI in its various initiatives.
26 www.icai.org
 1083

Theme
THE CHARTERED ACCOUNTANT

Digital Evolution:
Charting the Future of
Chartered Accountancy in the
Age of Technology
The future of accounting is undergoing a profound
transformation driven by rapid technological
advancements. This transformation is reshaping
traditional practices and redefining the roles and
responsibilities of accounting professionals. Professionals
must prioritize continuous learning and upskilling
to stay abreast of technological advancements and
maintain competitiveness in a swiftly evolving landscape.
By embracing the digital revolution and harnessing
Pranay Chauhan
technology to elevate client service delivery, professionals
Technology Professional
can position themselves for success in the dynamic and
ever-evolving realm of modern finance.

Introduction

I
n the realm of finance and
accounting, the winds of
change are blowing stronger
than ever, driven by the
relentless march of technology.
Professionals, once confined to
spreadsheets and ledgers, now
find themselves at the forefront
of a digital revolution that
promises to reshape their roles
and redefine the profession.
This paper researches into
the transformative impact of
technology on the future of
accounting, exploring how
advancements in automation, data
analytics, and artificial intelligence
(AI) will revolutionize traditional
practices and redefine the roles
and responsibilities of accountants
in the years to come.[1]
The Advent of Automation
The rise of automation stands
as one of the defining trends
shaping the future of accounting.
Tasks that were once manual
and time-consuming, such as
data entry, reconciliation, and
compliance reporting, are now
being streamlined and accelerated
through the power of automation
tools and software solutions. This
shift not only enhances efficiency
and accuracy but also frees up
valuable time for professional
accountants to focus on higher-
value activities.
As automation becomes
more pervasive, the roles of
accounting professionals will
evolve from data processors

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1084

Theme
THE CHARTERED ACCOUNTANT

to data analysts and strategic advisors.[2] Rather
than spending hours poring over spreadsheets
and reconciling figures, accountants will leverage
automation tools to extract insights from vast
amounts of data, identify trends, and make data-
driven recommendations to clients. This shift
towards data-driven decision-making will require
accountants to develop proficiency in data analytics
and interpretation, enabling them to provide greater
value to their clients and stakeholders.
Power of Data Analytics
The propagation of digital data presents both
challenges and opportunities for accounting
professionals. On one hand, the sheer volume and
complexity of data generated by businesses require
advanced tools and techniques for analysis and
interpretation. On the other hand, harnessing the
power of data analytics can provide valuable insights
into financial performance, risk management, and
strategic decision-making.
With the advent of big data and analytics platforms,
accounting professionals can access real-time
information and perform complex analyses with ease.
Predictive analytics, for example, enables firms to
forecast future trends, identify potential risks, and
optimize resource allocation. By leveraging data
visualization tools, accountants can communicate their
findings more effectively and empower stakeholders to
make informed decisions.
As the demand for data-driven insights grows,
accounting professionals will increasingly be called
upon to serve as strategic advisors, helping clients
navigate complex business challenges and capitalize
on emerging opportunities. By leveraging their
expertise in financial analysis and risk management,
accountants can provide valuable guidance on
investment strategies, growth initiatives, and
regulatory compliance.[3]
The Rise of Artificial Intelligence
Artificial intelligence (AI) is poised to revolutionize
the future of accounting professionals, automating
routine tasks, and augmenting human decision-making
capabilities. From machine learning algorithms that
can detect anomalies in financial data to natural
language processing (NLP) tools that can automate
document review and analysis, AI holds the potential
to transform every aspect of the accounting
profession.[4]
As AI technologies become more sophisticated,
the roles of accounting professionals will evolve
to encompass a blend of human judgment and
machine intelligence. Rather than being replaced by
AI, accountants will leverage these technologies to
enhance their capabilities and deliver more value to
their clients. For example, AI-powered chatbots can
provide instant support to clients, answering common
questions and guiding them through complex financial
processes. Below table 1 indicate the AI powered
accounting tools.

Table 1: Indicate the Commonly used AI powered accounting tools.

List of AI Powered Accounting tools

Botkeeper: it is an AI-powered platform

Receipt Bank: It uses AI and OCR (Optical Character Recognition) technology

MindBridge AI: is an AI-powered auditing tool that detects anomalies and errors in financial
data
Commonly IBM Watson Financial Services: It mainly offers AI-powered solutions for risk management,
used tools regulatory compliance, and financial planning
AI powered
tools in Plooto : Plooto utilizes AI to streamline payment processing and cash flow management.
accounting Xero Advisor: offers AI-powered: features such as cash flow forecasting, invoice reminders, and
profession expense categorization
Sage Intacct Intelligent GL: It is an AI-powered general ledger that automates journal entries
and reconciliations.

Aero Workflow: It uses AI to automate project management and workflow processes for
accounting firms

MARCH 2024 28 www.icai.org


Theme
THE CHARTERED ACCOUNTANT
Moreover, AI can assist accounting professionals
in identifying patterns and trends in financial data,
flagging potential risks and opportunities that may
have gone unnoticed. By harnessing the power of AI,
chartered accountants can gain deeper insights into
their clients’ businesses, enabling them to provide
more proactive and strategic advice.
Impact of Cloud Computing
Cloud computing has emerged as a game-changer
in the field of accounting professionals, offering
Table 2: Cloud based software for accounting purpose
List of Cloud Based Software’s for Accounting purpose
Zoho Books India
Tally prime cloud
Marg ERP 9 Cloud
Reach Accountant cloud
Commonly Used Cloud Based
Accounting Software’s in India HostBooks
ProfitBooks
QuickBooks Online
Cleartax GST
Furthermore, cloud computing enables firms to
leverage advanced analytics and AI capabilities,
such as machine learning and predictive modeling,
without the need for significant upfront investment in
hardware or infrastructure. By harnessing the power
of the cloud, chartered accountants can unlock new
insights and opportunities for their clients, driving
greater efficiency and innovation in the accounting
process.
MARCH 2024
1085
scalable and cost-effective solutions for data
storage, collaboration, and software deployment.
With cloud-based accounting software, firms
can access financial data from anywhere at any
time, enabling greater flexibility and remote work
opportunities. This not only enhances productivity
but also improves client service delivery, as
accountants can collaborate with clients in real-time
and provide timely support and advice. Below table
2 indicates the cloud-based accounting software’s in
Indian market.
Cybersecurity and Data Privacy
As technology becomes more integrated into
accounting processes, cybersecurity and data privacy
emerge as top concerns for accounting professionals.
With the increasing frequency and sophistication of
cyberattacks, firms must implement robust security
measures to protect sensitive financial information and
client data. This includes encryption protocols, multi-
factor authentication, and regular security audits to
detect and mitigate vulnerabilities.
Moreover, compliance with data privacy regulations,
such as the General Data Protection Regulation
(GDPR) in Europe and the California Consumer Privacy
Act (CCPA) in the United States, poses additional
challenges for firms operating in a globalized
economy. Chartered accountants must ensure that
they have adequate controls and procedures in place
to safeguard client data and comply with regulatory
requirements, or risk facing severe penalties and
reputational damage.
Evolution of Client Relationships
Technology is also reshaping the way-chartered
accountants interact with their clients, fostering
deeper and more collaborative relationships.
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Theme
THE CHARTERED ACCOUNTANT

With the advent of client accounting Conclusion

platforms and collaborative tools, The future of chartered accounting
firms can engage with clients in is being shaped by rapid
new and innovative ways, offering
personalized advice and support With the increasing technological advancements that
are transforming traditional
tailored to their specific needs frequency and practices and redefining the
and preferences. sophistication of roles and responsibilities of
For example, client portals cyberattacks, firms accountants. From automation
and data analytics to artificial
allow accounting professionals must implement robust intelligence and cloud
to share documents securely,
communicate with clients
security measures computing, technology offers
in real-time, and provide to protect sensitive unprecedented opportunities
access to financial reports and financial information for firms to innovate, drive
efficiency, and deliver added
analysis. This not only enhances and client data. value to their clients. However,
transparency and communication
realizing the full potential of
but also strengthens trust and loyalty
technology requires a willingness to
between clients and their accountants.
embrace change and adapt to new ways
By leveraging technology to deliver a
of working.
more personalized and proactive service experience,
accounting professionals can differentiate themselves
in a crowded marketplace and attract and retain high-
References
value clients.  Importance of technology in accounting
profession available at https://accounting.uworld.
Challenges and Opportunities com/blog/cpa-review/the-future-of-technology-in-
accounting accessed on 14 feb 2024
While technology holds immense promise for the
future of chartered accounting, it also presents  Role of technology in accounting profession
challenges that must be addressed. One such available https://www.lsbf.org.uk/blog/online-
challenge is the need for continuous learning learning/how-will-technology-change-accounting-
and upskilling to keep pace with technological in-the-future
advancements. Accounting professionals must
 How technology has impacted accounting—from
embrace lifelong learning and stay abreast of
compliance to strategy availabe at https://tax.
emerging trends and best practices to remain
thomsonreuters.com/blog/how-technology-has-
competitive in a rapidly changing landscape.
impacted-accounting-from-compliance-to-strategy/
Furthermore, the adoption of new technologies may  Online mason.wm.edu/blog/the-role-of-
require firms to rethink their business models and technology-in-modern-accounting
organizational structures. Firms that fail to adapt to
the digital age risk being left behind by more agile  Changing the Accounting profession https://
and tech-savvy competitors. Therefore, it is essential fullyaccountable.com/how-is-technology-shaping-
for firms to invest in training and development the-future-of-accounting/
programs to equip their staff with the skills and  AI Powered tools used in the accouting
knowledge needed to thrive in a technology-driven professions avaiable at IJESR Journal
environment.
 Data science and machine learning in accounting
Despite these challenges, the future of chartered professions at IJESI Journal
accounting is filled with opportunities for innovation
and growth. By embracing technology and 
leveraging data-driven insights, firms can enhance
their value proposition, expand their service
offerings, and drive greater efficiencies across the
organization. accounting professionals who embrace
the digital evolution and position themselves as Author may be reached at
trusted advisors will not only survive but thrive in the Pranay.iet@gmail.com and
dynamic landscape of modern finance. eboard@icai.in

MARCH 2024 30 www.icai.org

 1087

Taxation
THE CHARTERED ACCOUNTANT

Subject to Tax Rule -

An Analysis
The growth of Digitalization and Globalization has
multifarious impact on the economies. These changes
have created ample challenges to the international tax
rules which prevailed over the century. This also created
opportunities for Base Erosion and Profit Shifting (‘BEPS’)
to the jurisdictions with the lower or nil rate.
Large Multinational Enterprises (‘MNE’s’) take advantage
of various aggressive Tax planning strategies in a way that
developing countries lose out their fair share of taxes. To
CA. Simpy Rajpal address the concern of developing countries and to ensure
Member of the Institute
that MNE’s pay a minimum level of tax on the income
arising in each jurisdiction in which they operate, OECD
proposed the introduction of Global Anti – Base Erosion
Rules (‘GLoBE Rules’). It comprises of two interlocking
domestic rules namely the Income Inclusion Rule (‘IIR’)
and Under Tax Payment Rule (‘UTPR’) and a Treaty based
Rule namely Subject to Tax Rule (‘STTR’). The mechanism
that flows is that payer jurisdiction collects the top up
withholding tax if recipient country is not taxed adequately
which is STTR.

CA. Gagandeep Kaur

U
nder IIR the country of
Member of the Institute
ultimate parent entity collects
the top up tax if overseas
group countries are not adequately
tax. IIR further works with UTPR
wherein deduction for related party
payments is denied if country of
ultimate parent entity does not
collect top up tax under IIR. Thereby
the rules are interlocking and
interrelated. The Pillar 2 mechanism
is designed to ensure that a MNE’s
pays a minimum level of Tax on
the income arising in each of the
jurisdiction in which they operate.
This article focuses on STTR, which
specifically targets risk exposure to
source jurisdictions posed by BEPS
structures, which take advantage of
low nominal rates of taxation in the
other contracting jurisdiction (that
is, the jurisdiction of the payee).
Subject to Tax Rules - An
understanding
STTR is one of the key components
of the GLoBE Rules. It is a model
treaty provision that allows
jurisdictions to impose additional
tax on certain defined cross-border
payments between connected
persons, where the recipient is
subject to a nominal corporate
income tax rate below 9% in its
jurisdiction. STTRs covers specific
Intra group service payments
(discussed in detail in the forgoing
paras) whereby the payor jurisdiction
can impose additional tax on the
gross amount of Covered Income

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1088

Taxation
THE CHARTERED ACCOUNTANT

up to 9% of the income. Hence, STTR would not  STTR will not apply where the recipient is an
apply if the source country can already sufficiently tax individual, a non-profit organization, a State, or
this payment (over and above 9%) under the normal part of a State, an international organization, an
allocation rules of the Tax Treaty or domestic law. investment fund that meets certain conditions
(including pension funds), an entity wholly, or
Coverage almost wholly, owned by an excluded recipient.
As mentioned above, STTR covers payments between  STTR only applies to Covered Income (other
Connected Persons. So, the first point to understand is than interest and royalties) where the amount
who are considered as ‘Connected persons’. of Covered Income exceeds the costs incurred
in earning that income plus a mark-up of 8.5%.
Two persons are considered connected, if one is
The mark-up threshold does not apply where
directly or indirectly controlled by another or both are
the targeted anti-avoidance rule under the STTR
under the control of the same person through legal
applies to the covered income.
or beneficial ownership of more than 50% or based
on facts and circumstances. Further an additional  STTR only applies if the aggregate sum of Covered
measure, the targeted anti avoidance rule has also Income paid in a fiscal year exceeds EUR 1 million
been introduced to prevent abuse on account of or EUR 250,000 for jurisdictions with GDP below
routing the covered payments through interposition of EUR 40 billion.
an unconnected intermediary.
It is worth noting that in executive summary1 of
OECD India has expressed its reservation on the
Covered Income mark-up percentage and considers the same to
STTR is applicable only on specified items of covered be too high and finds the guardrails ineffective.
income. India, however, has not objected to the approval
and subsequent publication of Inclusive Framework
Seven categories of income that constitute “covered
(‘IF’) on Base Erosion and Profit Sharing (‘BEPS’) to
income” are mentioned in the rules, which are (1)
enable jurisdictions to join the Multilateral instrument
interest; (2) royalties; (3) payments for distribution rights
(‘MLI’) on STTR/incorporating STTR in their tax
for a product or service; (4) insurance or reinsurance
treaties2. The MLI adopted by the IF on BEPS in
premiums; (5) payments of guarantee or financing
September 2023 will facilitate the implementation
fees; (6) rental payments for industrial, commercial, or
to Pillar-2 STTR in existing bilateral tax treaties. As
scientific equipment; and (7) payments for services.
a result, the STTR MLI will introduce the STTR in all
Having said that, STTR only applies when the taxing “Covered payments” without the need for bilateral
right of the source state is limited under Article 7 amendments3.
(Business Profits), Article 11 (Interest), Article 12
(Royalties) and Article 21 (Other Income). Article 8 How to compute?
(International shipping and air transport income) is not STTR is designed in a way to expand the taxing rights
within the scope of the STTR. of the source state where residence state exercises its
taxing rights at a rate below 9% and will apply with or
Provisions of the Article 7, instead of STTR, would without Treaty application.
apply where the covered income is effectively
connected with or attributable to a Permanent As such the STTR is calculated as the gross amount of
Establishment in the source state via which the payee covered income multiplied by the ‘specified rate’.
carries on business in that state.
Specified rate to be arrived as 9% less the tax rate
Pertinent to note that there are several exclusions applicable4 in the resident State less withholding tax
based on recipient, amount, and materiality rate in the source state allowed under applicable tax
thresholds. The exclusions are: treaty5.
1
Executive summary | Tax Challenges Arising from the Digitalisation of the Economy – Subject to Tax Rule (Pillar Two):
Inclusive Framework on BEPS | OECD iLibrary (oecd-ilibrary.org).
2
Tax Challenges arising from the digitalization of the Economy-Subject to Tax Rule @ OECD 2023 – Jul 2023.
3
Tax Challenges arising from the digitalization of the Economy-Subject to Tax Rule @ OECD 2023 – Oct 2023.
4
Applicable tax rate in the residence state is either the statutory corporate tax rate or the reduced statutory rate (if the
covered income or the recipient is subject to a special reduced rate) subject to any preferential adjustment.
5
In case where the Treaty Withholding rate is higher than the domestic Withholding rate, STTR, does not call for a
comparison between the two rates and accordingly, the specified rate shall be reduced by the WHT rate provided in the
relevant Treaty, even though higher than the domestic withholding rate.

MARCH 2024 32 www.icai.org


Taxation
THE CHARTERED ACCOUNTANT
If the tax rate on income of 1mn was 5% in the
residence state, the source state could levy tax up to
4% (9%-5%) of 1mn i.e. 40,000. Note that the source
state isn’t required to tax this full amount but it cannot
exceed it.
Taking it further, if the payor jurisdiction can impose a
5% withholding tax on a payment of Covered income
and the recipient is subject to 2% nominal tax rate, the
payor jurisdiction retains a 5% withholding right but
can impose an additional tax under STTR equal to
2% of the Covered income amount (9%-5%-2%).
Key takeaways on STTR provisions
 Dividends - Covered income does not include in
its purview dividend payments however, interest is
covered. Thereby, it implies that STTR promotes
intra-group financing by equity rather than debt
and focuses on broad spectrum of payments that
erode the Tax base.
 Royalty/Interest - Payments treated as Royalty/
Interest under the Income-tax Act but not under the
relevant tax treaty may not be impacted. Generally,
tax treaty rate for Royalty/Interest payments by Indian
residents exceeds 10% except in few treaties like UAE
and Mauritius. Hence, the applicability of STTR may
need to be evaluated in such low taxed jurisdictions.
It may be noted that definition of Royalty/ Interest
shall be based on the relevant Treaty.
 Inclusion of Services - Covered payments include
“Payment of services”. The word ”services” is a
very broad term and this could include a wide
spectrum of services like software as a service,
platform as a service, infrastructure as a service,
automated digital services, telecom connectivity
etc. Considering the word “Services” is not
defined, thereby this could possibly open a lot
many litigations. Hence, we suggest that OECD
should categorically define the word “Services” in
its publication.
 Bundled payments - Applicability of STTR rules
on bundled payments or single fee charged for
combination of services and intangibles (example
royalty +payment for a service) will need analysis.
In such cases, the payment needs to be broken
down to determine the applicability of STTR rules
on each constituent.
 Equipment Royalty - There are few treaties like
treaty with Israel, Netherlands, Belgium etc. wherein
equipment royalty is not covered and therefore
detailed analysis is to be done in such cases, as to
whether STTR shall apply to such payments.
 No relief for double taxation - As purpose of levy
of STTR is to restore to the source State a limited
MARCH 2024
1089
taxing right, or in some cases supplement an
existing limited taxing right retained by the source
state and not to achieve any allocation of taxing
rights; no additional credit shall be granted by the
residence state for the STTR paid in the Source
state. In other words, no double tax relief would
be available for any STTR tax paid. To give effect
to this, STTR document contains model provisions
to be added to the Article on Elimination of
Double Taxation in a tax treaty.
 The payer can face possible practical and
administrative challenges while ascertaining if
the payment is subject to tax above the minimum
threshold rate or not. While in certain cases it may
be relatively simple for a payer to know whether
the payee is subject to a nominal rate of tax on a
payment, there are likely to be several situations
where the nominal rate of taxation on a payment
not obvious owing to applicability of special tax
rate/ preferential tax treatment or due to different
characterization of the income in the jurisdiction
of the payee. Unless some mechanism/suggestive
documentation is introduced for reliable exchange
of information, these may pose significant challenge
for application and compliance of STTR rules.
 STTR taxes will be levied after the end of the fiscal
year in which they arise. It operates by way of
self-assessment and the payee is only required to
submit a tax return in the source state if it has a
liability to tax under the STTR.
Way forward
STTR is an important part of BEPS Pillar Two Project
providing taxing rights to source countries, mostly
developing countries. However, such benefits to
developing countries come with the cost of complexity
of tax treaties for taxpayers and tax authorities. Now,
there is a need for MNEs to analyze all the direct and
indirect intra-group cross border payment as some
were earlier subject to exclusive residence taxation
(e.g., services) will now be covered under both
residence and source taxation.
Also, Pillar Two is going ahead with the ambitious
timelines and thereby the Companies should start
the process to evaluate their international operating
structures specially in low taxed jurisdictions wherein
the tax rate on income is received is expected to be
less than 9%.

Authors may be reached at
rajpalsimpy@gmail.com, gagan.121@gmail.com and
eboard@icai.in
33 www.icai.org
 CHARTERED ACCOUNTANTS’
BENEVOLENT FUND [CABF]
The Institute of Chartered
Accountants of India
(Set up by an Act of Parliament)
JOIN HANDS TO STRENGTHEN
CABF : SPECIAL DRIVE
The Chartered Accountants’ Benevolent Fund (CABF) was established in December, 1962
with the main objective to provide financial assistance for maintenance, and other similar The Contribution is eligible for tax exemption
purposes to needy members of the Institute, their wives, widows, children and dependent under Section 80G of the Income Tax Act
parent(s).
A dedicated CABF Portal (cabf.icai.org) is functioning as One Stop solution for making Link for Contribution as Life Member:
CABF Contribution and grant of Financial Assistance. https://cabf.icai.org/lifeMember
During Covid pandemic, hundreds of ICAI members had lost their battle and many others
were struggling hard to pass through that difficult time. The impact was deep and had Link for Voluntary Contribution:
certainly shattered their dreams. The Institute through the CABF had tried to help the https://cabf.icai.org/voluntaryMember
members or their dependents in distress.
With an objective to augment funds to provide requisite support to members, it has been
decided to launch special drive and to recognise the contributors. Details of the same are Contribution can also be made
given below. by scanning the QR code or
directly through NEFT/RTGS
The Financial Assistance disbursed along with number of beneficiaries during the last five
financial years has been produced below:- Name of A/C : Chartered
Accountants
S No. Particulars Benevolent Fund
(Years) 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 Name of Bank
1. Number of 111 88 280 877 221 & Branch : Axis Bank Ltd.,
beneficiaries Swasthya Vihar Branch
A/C No. : 913010046844303
2. Financial 1.12 Crore 0.94 Crore 3.97 Crore 11.92 Crore 3.67 Crore
assistance IFS code : UTIB0000055
disbursed (in `)

SPECIAL DRIVE FOR CONTRIBUTION TO THE CHARTERED ACCOUNTANTS BENEVOLENT FUND (CABF)
The contributions/donations are accepted from the following:

Members of ICAI CA Firms

The donors will be recognized as under: (All contributors exceeding `10,000 to receive congratulatory letter from the President, ICAI)

Category of Amount Not Acknowledgement/Recognition

Contribution Less Than

Special Bronze Shield – Along with Congratulatory Letter from the President to be sent by
CABF-Bronze ` 1 Lakh Post/Courier

Special Silver plated Shield – Along with Congratulatory Letter from the President to be handed
CABF-Silver ` 5 Lakh over by Regional Chairman in Regional Council Meeting (Acknowledgement to be published in
Regional Newsletter and quarterly list to be published in ICAI Journal)

` 11 Lakh Special Gold plated Shield – Along with Congratulatory Letter from the President to be handed
CABF-Gold over at ICAI Head Office. (Acknowledgement to be published in ICAI Journal)

Special Platinum plated Shield – Along with Congratulatory Letter from the President to be
CABF-Platinum ` 51 Lakh handed over by President & Vice President at ICAI Council Meeting. (Acknowledgement to be
published in ICAI Journal with photograph taken during Council Meeting)

LET’S BE A PART OF THIS NOBLE MISSION FOR EXTENDING HELPING HAND TO MORE AND MORE PROFESSIONAL COLLEAGUES DURING
UNFORTUNATE CIRCUMSTANCES
 1091

Taxation
THE CHARTERED ACCOUNTANT

A Statistical Study of
Impact of e-initiatives on
Direct Tax Collection
The Direct Tax System in India underwent several reforms
in the last four decades. Numerous e-initiatives have
been taken to enhance voluntary compliance, improve
tax administrative efficiency, and simplify the tax filing
processes. The tax administration has become highly
sophisticated with state-of-the-art technology. To ensure
wider publicity of the initiatives, the administration issues
advertisements and carry-out awareness campaigns.
CA. Deepti Taneja

I
Research Scholar n the last few years, the pace on expanding the tax base and
of increase in the tax base has improving the percentage share
started becoming visible. It has of direct tax to total tax revenue
almost doubled from 3.68 crore1 in during the last forty years. It
2014-15 to 7.3 crore in 2021-22.2 examines reasons for the lower tax
The contribution of direct taxes base despite a large population
to total tax collection went from and proposes measures to increase
24.29% in FY 1992-93 to 52.20% the tax base and reduce the
in FY 2021-22. However, the ratio personal tax rate in India.
of direct taxes to indirect taxes is
still lower, as the OECD suggests One of the possible reasons for
that a ratio of 67:33 should be in lower tax collection is higher
tax rates. Since AY 2013-14, the
favour of direct tax for enhancing
maximum slab of the tax rate in
economic growth.3
India has stagnated at 30% of the
Dr. Monika Goel The present study examine total income above Rs.10 lakhs (in
Academician issues that impact the tax base the existing tax regime).
and provides a resolution for
increasing direct tax collection. Introduction
It uses a time series analysis with Reforms under direct tax in India
regression modeling to compare have been brought every year since
the short-term, medium-term, and the inception of the Income tax
long-term impact of e-initiatives regulations. The thought process
1
I crore = 10 million
2
Annual CAG Reports
3
https://www.livemint.com/Opinion/brbD6Tw1akpGS3um0t3CaM/India-is-an-
outlier-in-its-tax-policy.html wherein the article mentions that “India’s direct to
indirect tax ratio is roughly 35:65. This is in contrast to most OECD economies
where the ratio is the exact opposite, 67:33 in favour of direct taxes. In the 50-
year period of our analysis, India’s direct-to-indirect tax ratio has swung from a
low of 13:87 to its current high of 35:65. For the OECD nations, throughout this
50-year period, the direct-to-indirect tax ratio has remained roughly constant in
the range of 65:35.”

MARCH 2024 35 www.icai.org

1092

Taxation
THE CHARTERED ACCOUNTANT

of structural tax reforms started in the 1980s when the
then Finance Minister V. P. Singh launched tax reforms
to enhance tax collection and the taxpayer’s base by
gradually reducing tax rates. He addressed reforms
in direct and indirect taxes in an integrated manner
during 1985-86. However, the impact of reforms on tax
collection was minimal.
The Direct Tax to GDP ratio slowly started crawling
up from an average of 5.5% in the FY 2012 to
5.97% in the FY 2022 and 6.08% in the last fiscal
financial year 2023. As the tax base continued
to be abysmally small compared to the rise in
population, even with the high economic growth,
the tax-to-GDP ratio has struggled around 6%.4
The predominant reasons for this low tax-to-GDP
ratio include existence of a large informal sector,
disproportionately wide-scale tax evasion, and tax
exemption for the agriculture sector. Out of the total
population of India of 140 crores, approximately
75% of it consist of children, household women,
the elderly, and the destitute; factoring these, in
effect, the tax base should be 36 crores.5 Apart
from these, a dominant portion of the workforce is
employed in the agriculture sector. Since agricultural
income is exempted, this resulted in non-filing of tax
returns by agriculturists. The estimated population
of agriculturists in India varies from 9 crore to 15
crore. If agriculturists are excluded from the count,
approximately 25 crores of the population should be
under the ambit of taxability, whereas the actual tax
base is around seven crores. It’s a myth that in India,
just 5% of the overall population files ITR; the fact
is that approximately 37% of the formal labor force,
which is around 8.5 crore, will be under the tax net
by 2023-24, with the result that one in every three
formal sectors is paying tax.6
The number of income tax returns filed for the AY
2023-24 till July 31, 2023, was about 6.77 crore for
salaried taxpayers and other non-tax audit cases,
which is 116.1% of those filed for the AY 2022-23,
i.e., 5.83 crores till July 31, 2022. Also, for AY 2023-
24, there were 53.67 lakh new ITR filers, which has
widened the tax base. However, 70% of the filers filed
nil tax returns.7
4
https://www.pib.gov.in/PressReleasePage.aspx?PRID=1916262
5
https://www.hindustantimes.com/analysis/incentivise-to-widen-direct-tax-base-as-less-than-6-of-population-filed-itrs-in-
fy23-101690471855496.html
6
https://www.drishtiias.com/daily-updates/daily-news-editorials/boosting-india-s-tax-base
7
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1944821#:~:text=The%20total%20number%20of%20ITRs,till%20
31st%20July%202022.
8
https://www.imf.org/en/Publications/fandd/issues/2018/03/akitoby
9
https://www.worldbank.org/en/news/feature/2022/01/06/filling-the-gap-by-filing-taxes-how-technology-can-aid-
governments-in-tax-collection
International Experience
In most developing countries, the major challenge
before the government is lower revenue collection
due to non-compliance and tax evasion. Research
has proved that the tax collection of a developing
economy is less than 15% of the GDP compared
to 40% for a developed country.8 For example, the
government of Georgia has made it easy to capture
the maximum population to the tax net by adopting
an e-tax filing system. Georgia automated most of the
tax processes between 2004 and 2011. It instituted
a system for information-sharing amongst various
tax authorities and banks and a one-stop internet
portal, resulting in a sharp reduction of tax rates and
a double GDP ratio of 25%. According to Okunogbe,
the reasons behind low tax collection in developing
countries includes large informal sectors about
which minimal information is available with the tax
authorities, manual recordkeeping systems in the tax
administration which hinders tax collection, and the
weak legal system which can impair the administrators
to collect the taxes. To overcome these limitations
or weaknesses, many developing economies have
eagerly adopted advanced technologies to support
the tax system in the best way possible.
Recent research from Liberia and Tajikistan has
demonstrated the impact of e-initiatives on the tax
base, which led to a rise in tax collection. Cambodia,
Guyana, and Liberia have also adopted e-initiatives in
administrating their taxes, which enhanced the tax base
and, thereby, revenue collection. Guyana implemented
a unique system of Taxpayer Identification Number (TIN)
and streamlined its process. Looking for a long-term
perspective, Okunogbe stressed that new technologies
and e-initiatives are the only tools that governments can
use to enhance their tax base and, accordingly, increase
tax collection.9
Description of the Problem
As evident from the data above, 28 crore of the
population in India should be filing income tax returns.
However, only about 7 crores of ITRs are filed. Table 1
shows that since the initiation of the reform process,
this taxpayer’s number has grown almost twice in the
last ten years.

MARCH 2024 36 www.icai.org

 1093

Taxation
THE CHARTERED ACCOUNTANT

Table 1
Individual Taxpayer’s Growth Analysis

Individual Tax Base Population of India

Year Tax Base %
(In Crore) (In Crore)
1980-81 0.45 69.68 0.65%
1985-86 0.54 78.02 0.70%
1990-91 0.74 87.05 0.85%
1995-96 1.05 96.43 1.09%
2000-01 2.27 105.96 2.14%
2005-06 2.94 115.46 2.55%
2010-11 3.32 124.06 2.68%
2014-15 3.61 130.72 2.76%
2015-16 3.98 132.29 3.01%
2016-17 4.37 133.86 3.26%
2017-18 5.38 135.42 3.97%
2018-19 6.20 136.90 4.53%
2019-20 6.39 138.31 4.62%
2020-21 6.63 139.64 4.75%
2021-22 7.30 140.76 5.19%

Source: CAG Annual Reports, Tax Policy Research Unit Interview for 2021-22, and Macrotrends.net

Tax base increased from 0.65% in 1980-81 to 5.19%
in 2021-22, which means against 69.68 crores
population, the taxpayers were 0.45 crore, which
increased to 7.30 crores as against the population
of 140.76 crores. This implies that the tax base has
increased almost 18 times over the last forty years,
whereas the population has increased twice.
Further, it can be seen from the table 1 that until
the financial year 2014-15, there was a slow growth
in the tax base. It took fifteen years to double the
percentage of the tax base from 1980-81, whereas,
from the financial year 2014-15 onwards, the
percentage of the tax base has almost doubled
in just seven years. One possible reason for the
growth could be the increased focus on digitalization
under the income tax, as so many direct tax reforms
have been initiated. It also shows that the impact
of reforms can’t be seen immediately but can be
observed over a long period. The growth in the tax
base started increasing from 2015-16 onwards, which
implies that whatever reforms were initiated in the
last five years, the effect started coming from 2015-
16 onwards. If the reform process goes on, we may
expect that by the end of 2037, India’s tax base will
be around 26%.
Objectives of the Study
The study compiled policy initiatives as a part of tax
reforms during the last fifteen years to study the long-
term effect of reforms. The impact of the reforms has
been compared on both absolute and proportional
revenue from various sources of direct taxes in the
short, medium, and long term. The trends related
to indirect taxes are also studied to understand and
compare the measures from a broader perspective.
The objective of the Paper is to examine the effect of
tax policies on revenue productivity, corporate and
personal taxes.
The study also examines the impact of e-initiatives on
the tax base and collection in four phases. It evaluates
if the e-initiatives taken by the Income Tax Department
successfully achieve the objective of growth in direct
tax revenue through enhancing the tax base.
Phases of e-initiatives and Impact on Share
of Direct Taxes
The digitalization drive for direct tax collection has
been to keep the share of direct tax revenue higher
in the total tax revenue of the Government of India.
For the sake of understanding the impact of the

MARCH 2024 37 www.icai.org

1094

Taxation
THE CHARTERED ACCOUNTANT

Table 1

% Contribution of % of Taxpayers/
Stage of
Sr No Period Phase of E-Reforms Direct Tax to Total Tax Base to Total
Impact
Tax Revenue Population

0. Up to 1997-98 Pre-e-initiatives 34.67% 1.29% Base

PAN Systematization
1. 1998-99 to 2003-04 41.42% 2.58% Short term
process
e-filing of Income Tax
2. 2004-05 to 2011-12 Return, TDS return, and 55.82% 2.84% Medium-term
CPC Bangalore
TRACES, GST, MCA and
Income Tax Integration,
3. 2012-13 to 2021-22 52.20% 5.19% Long term
AIS, Non-Filers
Monitoring System

journey during the short, medium, and long term, it
can be divided into four phases, and the percentage
contribution of direct tax to total tax revenue can be
seen in Table 1 as above:
It can be seen from the above analysis that there is a
growth in the direct tax percentage collection due to
progressive digitalization. The average percentage of
direct tax share to the total revenue has decreased in
the 3rd phase because the digitalization drive is also in
the indirect taxes. Therefore, the percentage collection
of direct and indirect tax collection is almost equal.
Methodology
The study has used the regression model to analyze
the impact of e-initiatives on the overall growth of
personal and corporation taxes in the short, medium,
and long term.
Regression analysis is a reliable method to evaluate
if a significant relationship exists between the two
variables. In this analysis, the e-initiatives over some
time are taken as independent variables, and the
personal and corporation taxes are dependent
variables to study the impact of e-initiatives on the
growth of taxes.
Assumptions
The study assumes that the impact of other factors like
population increase, economic growth, liberalization
policies, and employment levels has been consistent
and constant during the analysis.
Hypothesis
H0: Digitalization of the tax system does not
significantly impact the personal and corporate tax.

Phase 0- Tax Collection before PAN Systematization

Table 2
(In Rs. Crores)
Personal
Direct Tax Total Taxes
Year Income Tax Corporation Tax (B) Indirect Tax (C)
(A+B) (A+B+C)
(A)
1992-93 9,232 8,899 18,131 56,505 74,636
1993-94 10,238 10,060 20,298 55,445 75,743
1994-95 13,144 13,822 26,966 65,328 92,294
1995-96 17,076 16,487 33,563 77,661 1,11,224
1996-97 20,324 18,567 38,891 89,871 1,28,762
1997-98 28,258 20,016 48,274 90,946 1,39,220

Source: CAG Annual Reports, Department of Revenue (DOE) annual reports, RBI Publications and CBDT
Statistics

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 1095

Taxation
THE CHARTERED ACCOUNTANT

The impact of the Regression analysis Figure 2

has been shown below in Phase-0, Revenue Growth 1992-93 to 1997-98
Phase-1 (Short Term), Phase-2 (Medium 1,60,000

Taxes in Crore Rs.

Term), Phase-3 (Long-Term): 1,40,000
1,20,000
1,00,000
To understand the growth in direct taxes 80,000
60,000
before e-initiatives, the study has utilized 40,000
bivariate regression analysis further to 20,000
-
identify the growth indicators in personal 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98
and corporation taxes. Year

Regression analysis of average growth of Personal Income Tax Corporation Tax Direct Tax Indirect Tax Total Taxes

personal and corporate taxes from 2004-

05 to 2011-12 (Phase O) Figure 2a
Personal Income Tax & Corporate Tax Revenue from 1992-93 to 1997-98
Analysis
From the above model, the impact of 30,000
Taxes in Crore Rs.

25,000 y = 3694.9x + 3446.7

the time period on the personal tax and 20,000
R2 = 0.9317

corporation tax is positive. The regression 15,000 y = 2393.5x + 6264.7

R2 = 0.9796
coefficients of 3,694.9 and 2,393.5 indicate 10,000
5,000
that the individual tax and corporation tax
-
revenue have had a slow but upward trend 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98

from 1992-93 to 1997-98. Year

Linear (Personal Income Tax) Linear (Corporation Tax)

Tax Collection after PAN
Systematization (Phase 1 - Short regression coefficient of 3,607.1 indicates that the personal tax
Term Impact) revenue is a slower upward trend from 1998-99 to 2003-04.
The first phase of digitalization was PAN Figure 3
systematization, which was initiated in
Revenue Growth 1998-99 to 2003-04
1998, and the short-term impact of that
3,00,000
can be seen in the table 3:
2,50,000
Taxes in Crore Rs.

Analysis 2,00,000

1,50,000
From Table 3, the total direct tax revenue
from 1998-99 to 2003-04 is calculated 1,00,000

by fitting a linear regression line to total 50,000

personal and corporation tax. -
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04
During this period, the personal tax Year
and corporation tax are favorable. The
Personal Income Tax & other Direct Tax Corporation Tax Direct Tax Indirect Tax Total Taxes

Table 3
(In crores)
Personal Income
Corporation Total Taxes
Year Tax & other Direct Tax (A+B) Indirect Tax(C)
Tax (B) (A+B+C)
Direct Tax (A)
1998-99 22,062 24,529 46,591 97,197 1,43,788
1999-00 27,266 30,692 57,958 1,13,794 1,71,752
2000-01 32,609 35,696 68,305 1,19,814 1,88,119
2001-02 32,589 36,609 69,198 1,17,318 1,86,516
2002-03 36,916 46,172 83,088 1,32,608 2,15,696
2003-04 41,526 63,562 1,05,088 1,48,608 2,53,696

Source: CAG Annual Reports and CBDT Statistics

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1096

Taxation
THE CHARTERED ACCOUNTANT

Table 4
(In Rs. crores)
Personal Income
Year Tax & other Corporation Tax Direct Tax Indirect Tax Total Taxes
Direct Tax
2004-05 50,091 82,680 1,32,771 1,70,936 3,03,707
2005-06 63,939 1,01,277 1,65,216 1,99,348 3,64,564
2006-07 85,863 1,44,318 2,30,181 2,41,538 4,71,719
2007-08 1,20,769 1,93,561 3,14,330 2,79,031 5,93,361
2008-09 1,20,423 2,13,395 3,33,818 2,69,433 6,03,251
2009-10 1,33,338 2,44,725 3,78,063 2,43,939 6,22,002
2010-11 1,47,307 2,98,688 4,45,995 3,43,716 7,89,711
2011-12 1,71,171 3,22,816 4,93,987 3,90,953 8,84,940

Source: CAG Annual Reports and CBDT Statistics

However, the regression coefficient of Regression analysis of average growth of personal and corporate
6,929.1 suggests that the corporation tax taxes in Phase 1 (Short Term)
has a faster upward trend.
Figure 3a
Tax Collection after PAN Personal Income Tax & Corporate Tax Revenue from 1998-99 to
2003-04
systematization, e-filing of
70,000
Income tax, TDS return, and CPC y = 6929.1x + 15292
Taxes in Crore Rs.

60,000 R2 = 0.8863

Bangalore (Phase 2 Medium Term) 50,000

40,000

A significant effect of tax reforms can be 30,000

y = 3607.1x + 19536
seen only after 2004-05 when e-filing 20,000

10,000
R2 = 0.9622

initiatives were introduced to encourage -

2000-01 2001-02 2002-03 2003-04
24*7 voluntary compliance. CPC was 1998-99 1999-00
Year
launched for faster returns processing;
further AIR (Annual Information Return)
Linear (Personal Income Tax) & Other Direct tax) Linear (Corporation Tax)
was also introduced in this phase. The
medium-term impact of reforms can be
seen in the years 2004-05 to 2011-12: Figure 4
Revenue Growth 2004-05 to 2011-12
From the above analysis, the impact of
10,00,000
the time period on the personal and 9,00,000
corporation tax is significantly positive. 8,00,000
Taxes in Crore Rs.

7,00,000
The regression coefficients of 16,743.79 6,00,000
5,00,000
and 35,584 indicate that the personal 4,00,000
and corporation tax revenue has had a 3,00,000
2,00,000
very high upward trend from 1,00,000
-
2004-05 to 2011-12. 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Year
Tax effect in the long-term considering
the impact of all the tax reforms in Personal Income Tax & other Direct Tax Corporation Tax Direct Tax Indirect Tax Total Taxes

Table 5 (In Rs. crores)

Personal Income Tax &
Year Corporation Tax Direct Tax Indirect Tax Total Taxes
other Direct Tax
2012-13 2,02,663 3,56,326 5,58,989 4,72,915 10,31,904
2013-14 2,43,918 3,94,678 6,38,596 4,95,347 11,33,943
2014-15 2,66,867 4,28,925 6,95,792 5,43,215 12,39,007

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 1097

Taxation
THE CHARTERED ACCOUNTANT

(In Rs. crores)

Personal Income Tax &
Year Corporation Tax Direct Tax Indirect Tax Total Taxes
other Direct Tax
2015-16 2,89,067 4,53,228 7,42,295 7,11,885 14,54,180
2016-17 3,64,789 4,84,924 8,49,713 8,61,625 17,11,338
2017-18 4,30,835 5,71,202 10,02,037 9,13,456 19,15,493
2018-19 4,73,044 6,63,571 11,36,615 9,42,050 20,78,665
2019-20 4,93,805 5,56,876 10,50,681 9,53,513 20,04,194
2020-21 4,88,329 4,57,050 9,45,379 10,74,809 20,20,188
2021-22 6,86,641 7,23,000 14,09,641 12,90,000 26,99,641
Source: CAG Annual Reports and CBDT Statistics

Regression analysis of average growth of personal and corporate the journey of tax reforms, i.e., PAN
taxes in Phase 2 (Middle Term Impact) Systematization, E-filing of TDS and
Income tax returns, TRACES, Integration
Figure 4a
Projects, Annual Information Statement
Personal Income Tax & Corporate Tax Revenue from 2004-05 to 2011-12 (AIS), Project Non-Filers Monitoring
3,50,000 System Pilot Project, etc.
3,00,000
The below table shows that there is
Taxes in Crore Rs.

2,50,000

2,00,000 y = 35584x + 40054 a continuous increase in direct tax

R2 = 0.9912
1,50,000 collection due to the e-initiatives but
1,00,000 y = 16744x + 36266
R2 = 0.9671
in the year 2019-20 and 2020-21, there
50,000
was fall in the collection of direct taxes,
-
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 this was mainly due to the impact of
Year Covid-19 pandemic. Also, the other
Personal Income Tax & other Direct tax Corporation Tax reason for the fall was a reduction in
TDS rates such as interest on securities,
dividend income, rent payment,
The long-term effect of direct tax reforms is depicted in the Table 5:

Average Growth Average Growth

of Personal Tax of Corporation
Phase No. Reforms Analysis
Collection per Tax collection per
annum (In Crores) annum (In Crores)
Pre-e-initiatives
0. Rs. 3,694.90 Rs. 2,393.5 Base growth rate
(Up to 1997-98)
PAN Growth of corporation tax from 2,393.5
(Short Term Systematization crores to 6,929.1 crores in the short
Rs. 3,607.1 Rs. 6,929.1
Impact) process (1998-99 to term, but no effect on the growth of
2003-04) personal income tax.
e-filing of Income Collective effect of digital reforms in
(Medium Tax Return, TDS the medium term resulted in significant
Term return, and CPC Rs. 16,744 Rs. 35,584 growth of both personal income tax
Impact) Bangalore (2004-05 and corporation tax, but the impact on
to 2011-12) corporation tax is much higher,
TRACES, GST, Cumulative impact of e-initiatives led
MCA and Income to higher growth in personal income
Tax Integration, tax than corporation tax. The average
(Long Term
AIS, Non-Filers Rs. 47,390 crores Rs. 30,871 crores growth of corporation tax per annum
Impact)
Monitoring System has fallen from Rs. 35,584 crores to Rs.
(2012-13 to 30,871 crores due to the reduction of
2021-22) corporate tax rates.

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1098

Taxation
THE CHARTERED ACCOUNTANT

Figure 5 commission payment, etc., due to the

Revenue Growth 2012-13 to 2021-22
pandemic. Further, there was a decline in
30,00,000
the corporate tax rate during the financial
year 2019-20.
25,00,000
Taxes in Crore Rs.

20,00,000 Suggestions for further

15,00,000 e-initiatives to be taken by the
10,00,000
Government:
5,00,000
The study has examined the impact
-
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 of e-initiatives from pre-reform to
Year post-reform, considering the short-
Personal Income Tax & other Direct Tax Corporation Tax Direct Tax Indirect Tax Total Taxes
term, medium-term, and long-term
effects on direct tax revenue growth.
The above figure shows the long-term effect of direct tax The implications of e-initiatives on the
collection from 2012-13 to 2021. growth of direct tax revenue- personal
Regression analysis of average growth of personal and corporate and corporation tax is clear, but more
taxes in Phase 3 (Long-term effect) is to be done. Steps need to be taken
to increase the tax base, which is
Figure 5a approximately 5.19%, significantly lower
Personal Income Tax & Corporate Tax Revenue from 2004-05 to 2011-12 compared to developed countries like
3,50,000 the U.S., which is 59.9%.10
3,00,000
Taxes in Crore Rs.

2,50,000 The 360-degree income profile of

2,00,000 y = 35584x + 40054
R2 = 0.9912
taxpayers in AIS in the last two years has
1,50,000 enhanced the tax base significantly. AIS
1,00,000 y = 16744x + 36266
R2 = 0.9671
could be further extended to include
50,000
family income details, which could be
-
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
compared with the family expenditures,
Year to bring more people into the tax
brackets.
Personal Income Tax & other Direct tax Corporation Tax

Summary of Analysis of Impact of e-initiatives on Personal and Corporation Tax in Short, Medium and
Long-Term Using Regression Model:
Table 6

Average Average Average

Personal Average Average Average Average Direct tax Indirect
Year Income Tax & Corporation Direct Tax Indirect Total Taxes as a % tax as a
other Direct Tax (In Cr.) (In Cr.) Tax (In Cr.) (In Cr.) of Total % of Total
Tax (In Cr.) Taxes Taxes
Pre-Tax Reforms
1992-93 to 1997-98 16,379 14,642 31,021 72,626 1,03,647 29% 71%
Post-Tax Reforms
Short-term effect (Introduction of PAN Systematization)
1998-99 to 2003-04 27,567 33,894 61,461 1,04,191 1,65,652 37 % 63%
Medium-term effect (e-filing of TDS/Income tax returns, Annual Information Return, CPC Bangalore)
2004-05 to 2011-12 1,11,613 2,00,183 3,11,795 2,67,362 5,79,157 52% 48%
Long-term effect (TRACES, AIS, Non-filers monitoring system)
2012-13 to 2021-22 3,93,996 5,08,978 9,02,974 8,25,882 17,28,855 53% 47%

Source: CAG Annual Reports, Department of Revenue (DOE) annual reports and CBDT Statistics
10
https://www.statista.com/statistics/242138/percentages-of-us-households-that-pay-no-income-tax-by-income-
level/#:~:text=In%20total%2C%20about%2059.9%20percent,paid%20no%20individual%20income%20tax

MARCH 2024 42 www.icai.org


Taxation
THE CHARTERED ACCOUNTANT
To enhance the transparency of income of
the individual, it is hereby suggested that the
Government of India may build an automated system
wherein the income of the taxpayers together with
the family members should be captured along
with the expenditure incurred by the family in the
360-degree income profile of the taxpayers in AIS, so
that the necessary comparison can be made between
the income and expenditure.
Additionally, the formal sector needs to be increased
to enhance the tax base so that the maximum
number of businesses and workers can be brought
under the tax net.
It is time to review the policies and re-design them,
considering the tax buoyancy estimates, i.e., the
percentage change in tax revenue per unit change
in the tax rate. To increase compliance, the personal
tax rates must be affordable, the tax burden on
salaried taxpayers should be minimal, and audit,
search and seizure methods for businesses should
be well defined.
In light of the regression analysis above, it is
recommended that the government should now
consider reducing personal income tax rates. A
general measure could be increasing the 30% tax slab
from Rs. 10 lakhs to Rs. 12 lakhs, though there can be
specific reliefs in different heads of income. The loss
in revenue can be compensated with an increased tax
base and personal tax collection, keeping in mind the
elasticity of income and setting tax rates at levels that
maximize revenue by increasing the tax base.
Conclusion
It can be inferred from the model that e-initiatives
significantly impacted the collection of personal tax
in the long run. Though in the short to medium term,
the reforms have significantly impacted corporate
taxes also. The Null Hypothesis is rejected if we see
the overall impact on direct tax revenue. Another
improvement is that 13.6% of tax filers filing the
Income tax return below the Rs. 5,00,000 tax slab have
moved on to higher tax slabs.11
Comparative analysis of pre-and post-impact of
e-initiatives on the Direct Tax Collection over the
short term to long term (from 1992-93 to 2021-22)
vis-a-vis Indirect Tax Collection.
The table below examines the short-term, long-term,
and medium-term effects of e-initiatives on the share
of direct tax revenue and the indirect tax revenue from
1992-93 to 2021-22:
11
https://economictimes.indiatimes.com/markets/expert-view/we-need-to-do-incremental-reforms-13-6-taxpayers-migrated-
to-higher-tax-bucket-in-10-yrs-sk-ghosh-sbi/articleshow/102800260.cms?from=mdr
MARCH 2024
1099
From the table, it can be inferred that digitalization
has resulted in an increase in the average collection
of personal tax from Rs.16,279 crores to Rs. 3,93,996
crores and corporate taxes from an average of
Rs.14,642 crores to Rs. 5,08,978 crores. The initial
impact of tax reforms was on corporate tax and later,
on personal tax; the corporate tax rate was reduced to
22% for domestic companies in the Finance Act 2019.
The impact of the e-initiatives on personal income
tax collection is now visible. In the third phase of
e-initiatives, the growth is higher in personal income
tax than corporation tax.
References
 https://www.rbi.org.in/scripts/PublicationsView.
aspx?id=19827
 https://www.unescap.org/sites/default/files/apdj-7-2-
3-rao.pdf
 https://www.hindustantimes.com/analysis/incentivise-
to-widen-direct-tax-base-as-less-than-6-of-
population-filed-itrs-in-fy23-101690471855496.html
 https://www.drishtiias.com/daily-updates/daily-news-
editorials/boosting-india-s-tax-base
 https://pib.gov.in/PressReleaseIframePage.
aspx?PRID=1944821#:~:text=The%20total%20
number%20of%20ITRs,till%2031st%20July%202022.
 https://www.researchgate.net/
publication/301764440_Transforming_the_Income_
Tax_Department_in_India_through_IT
 https://www.macrotrends.net/countries/IND/india/
population
 https://cag.gov.in/en/audit-report
 https://shodhganga.inflibnet.ac.in/
handle/10603/376586
 https://www.imf.org/en/Publications/fandd/
issues/2018/03/akitoby
 https://www.worldbank.org/en/news/
feature/2022/01/06/filling-the-gap-by-filing-taxes-
how-technology-can-aid-governments-in-tax-
collection

Authors may be reached at
eboard@icai.in
43 www.icai.org
1100

Taxation
THE CHARTERED ACCOUNTANT

Cost Contribution
Arrangements – Transfer
Pricing implications
The presence of multinational group companies across
the globe has created the need for Cost Contribution
Arrangements (“CCAs”). wherein the cost associated
with the development of intangibles or tangible assets
or services is shared among the group members based
on the contributions and the risks borne by each of the
participants. In this article, the author has tried to cover
the concept of CCAs and other evolving notions connected
with CCAs and their implications from a transfer pricing
CA. Suresh Nagabathula
perspective.
Member of the Institute

CCA

A
t the outset, let us first
understand the meaning
of CCAs. A CCA is a
contractual arrangement among
Multi-National Enterprises (“MNE”)
to share the contributions and risks
involved, which arise as a result
of joint development, production
or obtaining of intangibles or
tangible assets or services, with the
mutual understanding that such
assets or services are expected to
create benefits for the individual
business operations of each of
the participants. In simple terms,
CCAs are contractual agreements
between the associated enterprises
within the MNE group through
which the participants share certain
costs and risks in return for having
a proportionate interest in the
expected benefits arising from
the CCAs.
One of the key components of
the CCA is that there shall be
some sort of contribution from
each of the participants. Further,
it is important to note that CCAs
are not only restricted to the
creation of intangible assets, but
contributions can also be for the
development of tangible assets
and rendering of services.
Types of CCAs1
There can be two types of CCAs:
CCAs can be classified based on
the nature of transactions. Key
differences between these two
types of CCAs are generally that
Development CCAs are expected
to create recurring and future
benefits for the participants, while
Services CCAs create present
benefits only.

1
Reference: Section 8.10 on Page no. 340 of the OECD Transfer Pricing Guidelines
for Multinational Enterprises and Tax Administrations - January 2022 edition (“OECD
Guidelines”)

MARCH 2024 44 www.icai.org

 1101

Taxation
THE CHARTERED ACCOUNTANT

Furthermore, considering the recent

Type of CCAs
Development CCA
Development CCAs are
entered for the joint
development production or
obtaining of (a) Intangible
Assets or (b) Tangible
Assets
Transfer pricing implications on CCAs
In the background of the definition of international
transactions, as defined under section 92B of
the Income-tax Act, 1962 (“the Act”),
CCAs are considered as international
transaction, wherein it is stated that
the international transactions shall
include ‘a mutual agreement
or arrangements between
two or more associated
enterprises for the allocation
or apportionment of, or any
contribution to, any cost or
expense incurred or to be
incurred in connection with
a benefit, service or facility
provided or to be provided
to any one or more of such
enterprises’
In light of the above definition, CCAs
shall adhere to the arm’s length principle as
required under section 92 of the Act and the same
shall be reported separately under Clause 17 of Form
No. 3CEB.
developments in inter-governmental
arrangements in the background of
the G20 Inclusive Framework on Base
Services CCA Erosion and Profit Shifting (“BEPS”)
initiatives, there is more transparency
concerning functions performed and
risks borne by each of the participants.
CCAs shall be appropriately reported
in the Master File.
Services CCA are basically
for obtaining services One of the key features of a CCA
is the sharing of contributions. In
accordance with the requirement
of the arm’s length principle, at the
time of entering a CCA, each participant’s share of the
overall contributions to the CCA must be consistent
with its proportionate share of overall expected
benefits to be received under the CCA2.
Since the existence of mutual benefit
is the key requirement under a
CCA, it is pertinent to note
One of the key that the participant may not
components of the be considered a participant
if the party does not have a
CCA is that there reasonable expectation that
it will benefit from the CCA.
shall be some sort of Participants must be assigned
contribution from each an interest or rights in the
intangibles or tangible assets or
of the participants. services that are part of CCAs.
Accordingly, a CCA will satisfy the
arm’s length principle if a participant’s
share of contributions to the CCA is in
proportion to its share of expected benefits
derived under the CCA. Under the arm’s length
principle, a participant in a CCA must be capable of
using those tangible and intangible assets or services.

Further, reference is made to the Master File
compliance requirement under Rule 10DA(1)(g) of the
Income-tax Rules, 1962 read with section 92D of the
Act, wherein there isa specific requirement to provide
a list and brief description of important agreement
among members of the international group related
to intangible property, including cost contribution
arrangements, principal research service agreements
and license agreements.
Based on the above requirement, there is a need to
identify CCAs and report the same as per the Master
File compliance requirement.
The participant must have a specific interest in the
tangible or intangible assets or services of the CCA
activity and should be capable of using those tangible
and intangible assets or services.
In case, there exist CCAs among the group companies
and a certain portion of the cost is re-charged to
the associated enterprises, who are a participant in
CCA, the said transactions in such a situation cannot
be considered as mere reimbursement or recovery
of expenses from the associated enterprises. Such
reimbursements need a more thorough analysis to be
considered as cost-sharing arrangements.

2
Reference: Section 8.5 on page no. 338 of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax
Administrations - January 2022 edition

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1102
Taxation
THE CHARTERED ACCOUNTANT
Company Z
Company A
Existing participant to the CCA,
contributes around 10% of its cost Intangible
and other efforts required for the
development of intangible assets
Under reimbursement of expenses, in most cases,
there will be a third-party cost involved which is
charged back at a cost to the associated enterprises
on behalf of whom the said expenses were incurred by
the MNE.
When can CCAs be considered as not
adhering to the arm’s length principle?
A CCA may not satisfy the arm’s length principle if the
participant’s contributions are inconsistent with their
share of the expected benefits. Let us understand the
same in detail with an example.
In the above example, Company A has contributed
around 10% of its time and cost for the development
of an intangible asset and Company B has
contributed around 90% of its time and cost for
the development of the same intangible. In return,
Company A is receiving about 80% of the benefit
associated with the developed intangible. Therefore,
there is inconsistency in the share of the benefits in
this scenario since Company A’s contribution to the
development of intangibles is very minimal compared
to Company B.
In this example, the other participant i.e. Company A is
receiving an excessive share of the benefits which is not
in proportion to the contributions made by Company
A. Accordingly, appropriate adjustments based on the
facts and circumstances of the case may be required.
The tax authorities may make the probable
adjustments in case participants fail to comply with
the arm’s length principle i.e., to either modify the
cost allocation or disregard the terms of the CCA itself
and conclude that there are no effective contributions
made by Company A.
CCAs will satisfy the arm’s length principle if the value
of all the participant’s proportionate share of the total
contributions is reflected in the participant’s share of
the expected benefits. If a participant’s share of overall
contributions is inconsistent with the participant’s
share of the expected benefits, the contributions
of at least one of the participants are excessive and
MARCH 2024
New participant to the CCA
for the development of
Intangible Assets
Company B
Existing participant to the CCA,
contributes around 90% of its cost
Asset and other efforts required for the
development of intangible assets
correspondingly the contributions of at least one of
the other participants will be inadequate.
Substance over form
Another important factor to be considered under
CCA is the actual nature of transactions and the
conduct of the participants. It is pertinent to note
that, if an analysis of a CCA discloses that the terms
of the CCA differ from the actual economic functions
performed by each of the participants, the tax
authorities may disregard the terms of the CCA itself.
Accordingly, there is a need for accurate delineation
of the transaction or arrangements identifying the
economically significant functions performed and
risks assumed by each of the participants. In the
above example, actual functions and risks assumed
by Company A and Company B shall be appropriately
delineated and the same shall be documented along
with supporting computations for sharing the cost.
In case, there is a lack of clarity on the functions
performed by each of the participants or the company
fails to demonstrate the benefit derived from the CCAs
and the actual functions performed and risks borne by
the participants, then the tax authorities may conclude
that the participants are unlikely to be benefited from
a CCA or that any expected benefits is insignificant.
In this case, the tax authority may conclude that the
CCAs fail to adhere to the arm’s length principle since
in a third-party scenario an independent enterprise
would not be a participant to such an arrangement.
Balancing Payment
In the background of the above example, a balancing
payment is required by the participants under the
arm’s length principle whose contributions are
inadequate. The balancing payment will increase the
value of contributions of the payer.
Taking the same example as illustrated above, Company
A shall make balancing payment to compensate
Company B’s contributions for the development of an
intangible asset. In order to ascertain the contributions
made by Company B, there will be a need to evaluate
46 www.icai.org
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Taxation
THE CHARTERED ACCOUNTANT

Company B’s contribution, and this aspect
needs professional judgment and other
data points from the company to
value the contributions made by
Company B.
in the reverse case, one of the participants
intends to exit a CCA. In this scenario, a
buy-out occurs, wherein the departing
participants sell their interest in the
The participant must tangible or intangible assets or

Participants may also make have a specific interest in any other rights under the CCA
to the remaining participants.
an additional contribution the tangible or intangible At this stage, there will be a
to CCA if the participant’s assets or services of the need for a valuation of the
proportionate contributions
are too low when compared CCA activity and should contributions made by the
departing participant.
to its expected benefits. be capable of using those
Adjustments may be needed
based on periodic review of the
tangible and intangible Taking the above example, say
Company A decides to exit the
participant’s contributions and assets or services. CCA. In such a situation, Company
its relative share of the expected A will sell its contributions in the
benefits. In some cases, the need intangible assets to Company B and
for periodic adjustment is anticipated at Company Z who will continue to be a part
the commencement of the CCA itself. of the CCA. At this phase, it is very crucial to
determine the value of contributions made by Company
Buy-in Payment A which shall adhere to the arm’s length principle.
It is very common in the MNE group, wherein new
In some situations, the CCA’s outcome may not have
entities will be incorporated in various jurisdictions,
resulted in any realised benefits and consequently, the
to expand their presence across the globe. In this
payment of consideration to the departing participant
scenario, there might be a situation wherein the
may not be necessary.
associated enterprise of the MNE group may intend
to join a CCA as a new participant after the CCA has The treatment of a buy-out payment for tax purposes
been already in operation or developed. should be determined under the domestic laws and
tax treaties of the participant’s countries. The payment
The associated enterprise may obtain an interest in
should be treated as a payment from an independent
the contributions of the pre-existing value created by
enterprise to acquire an interest in intangibles, rights,
other participants or in the realised benefits of the
or work-in-progress.
CCA created by such participants. This may include
intangibles, other rights, or work-in-progress.
Valuing CCA contributions
Since the new participant acquires an interest in To determine if a CCA satisfies the arm’s length
the benefits, the arm’s length principle requires the principle, it is necessary to determine the value of
participant to make an arm’s length payment for a each participant’s contributions. All contributions
transfer from the other participants who have created must be identified and valued generally at the time
the pre-existing value. The sum payable for the pre- when the contributions are made. Participant’s
existing benefits by a new participant on entering the contributions may be in the form of funds, tangible
CCA is known as the buy-in payment. or intangible assets or services. For instance, one can
consider employee costs and other overhead costs
Taking example as stated earlier, say Company Z of incurred by one company for rendering services or
the MNE group wants to join the CCA, then in this for the development of intangible or tangible assets.
case Company Z is required to make an arm’s length Contribution to the CCA may take many forms,
payment to other participants who have created the therefore, there is a need to identify the nature of the
pre-existing value. arrangements and identify the contributory factors
that are crucial for the development of intangible or
The buy-in payment should be based on the arm’s
tangible assets or rendering of services.
length value of the rights that the new participants are
acquiring and their interest in the expected benefits of All contributions made by the participants to the
the CCA. CCA must be recognised. Further contributions to
be considered include contributions used exclusively
Buy-out amount for the CCA and the routine services’ cost shall not
In the above scenario, there was a situation wherein be clubbed for evaluating the contributions made for
a new participant intended to join the CCAs, but now the CCA.

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Taxation
THE CHARTERED ACCOUNTANT
For instance, in case an entity is providing specific
services to the associated enterprises and charges an
arm’s length remuneration, then the cost associated with
such services shall not be considered for the CCA. As
discussed above, there is a need for accurate delineation
of the transactions in order to identify appropriate costs
and contributions associated with CCAs.
CCAs and Cost Sharing Arrangements
It is pertinent to note that the guidelines on CCA and
other recommendations/concepts on CCA reference
are often drawn to the OECD Guidelines, and the Cost
Sharing Arrangements (“CSA”) is the term used in the
United States (U.S.) tax laws which are an equivalent
reference to the CCAs referred in the OECD guidelines
on transfer pricing. In case corporates based out of the
U.S. want to enter into CCAs, they will be referred toas
CSAs. The U.S. tax laws have detailed guidelines with
respect to CSAs wherein companies must adhere to
the U.S laws on CSAs.
In the Indian context, there are no detailed guidelines
on CCAs, neither under the Income Tax Act, nor under
the Income Tax rules. Considering the Indian transfer
pricing regulations are broadly in line with the OECD
transfer pricing guidelines, accordingly, CCAs referred
under the OECD guidelines can be relied upon from
an Indian standpoint. However, if one of the parties to
the CCA is based out of the U.S. then the arrangement
needs to be analysed under the U.S. regulations.
Furthermore, it may be noted that in case of a CSA, as
per the U.S. regulations, reference is made to the joint
development of intangibles, and as per the OECD
guidelines, reference is made for joint development,
production or obtaining of intangibles or tangible
assets or services. On this aspect, it is understood that
in the U.S., CSAs are very specific to intangibles alone
and not for tangible assets or any other services.
Interlink of Royalty with CCAs
In most cases, ownership of the Intangible Property
(“IP”) is held by one of the entities of the MNE group
and in return other entities exploiting or using the IP
pay royalty to the owner of the IP.
In case there is a joint development of a particular IP
by various group affiliates of the same MNE group
under CCAs and the said IP is being exploited or
used by each of the participants, then considering the
concept of CCAs in this scenario, other entities need
not pay royalty since they are one of the participants
in the development of the IP. The benefit derived
from the development of IP is shared by other
participants in return for their contributions towards
the development of the IP.
MARCH 2024
In case no royalty is being paid, considering the IP
is developed under CCAs, it is very crucial that the
participants receiving the benefit from the IP is in
proportion to their contributions. These kinds of
arrangements need detailed analysis of the contributions
and benefits derived by the participants and such
arrangements may not be applied for all the entities
of the MNE group, since some of the entities may not
be part of the CCAs for developing the IP. In such a
situation, an arm’s length royalty shall be paid to the
owner of the IP by those entities who are not participants
in the joint development of the IP under CCAs.
Further, considering the concept of Development,
Enhancement, Maintenance, Protection and
Exploitation (“DEMPE”) functions performed by the
group with respect to the IP, another alternative is
to pay the arm’s length remuneration to each of the
participants who perform key DEMPE functions. This
topic needs a more detailed analysis separately.
Conclusion
Considering the recent developments in transfer
pricing laws and other aspects of international
taxation in the background of BEPS initiatives, it is
most important to identify CCAs among the MNEs
and evaluate the benefits derived by the participants.
Cross charges based on reimbursement of expenses
may not always meet the arm’s length principle.
It is pertinent to verify whether CCAs are reported in
Form No. 3CEB under a separate clause and are not
clubbed with any other international transactions.
Further, with the development of intergovernmental
forums and global arrangements among various
countries, there is more tax transparency, wherein
various jurisdictions have access to the transactions
entered by the MNE group. It is of significant
importance to accurately delineate the actual
transactions and appropriately identify the transactions
or arrangements from a transfer pricing perspective
and ensure that such transactions or arrangements
adhere to the arm’s length principle and same is
appropriately documented along with supporting
computations and agreements.
Companies shall evaluate the expected benefits
derived by the participants from the contributions made
by them and ensure that the benefits are aligned with
the contributions made by each participant.

Author may be reached at
suresh.n6186@gmail.com and
eboard@icai.in
48 www.icai.org
1106

Banking
THE CHARTERED ACCOUNTANT

Impact of RBI’s New Guidelines

on Investment Portfolios of the
Commercial Banks
Vijay Prakash Srivastava
General Manager
Financial Mgmt. & Accts Dept.,
Bank of Maharashtra
Treasury functions (Investment portfolio) is one of key
functions of the commercial Banks. Not only the investment
portfolio provides Assets and Liability Management(AIM)
support but also crucial source of income for the Banks.
Treasury function are largely governed by RBI directions. In
view of significant developments in the global standards on
classification, measurement and valuation of investments.
RBI issued revised regulatory guidelines on investment
classification and valuation - the Master Directions –
Classification, Valuation and Operations of Investment
Portfolio of Commercial Banks (Directions), 2023 (2023
guidelines) on 12 September 2023.

T
he guidelines of the RBI
are more or less in the line
of IND AS /IFRS in respect
of classification, valuation and
accounting of the same. It has
significant impact on operation
of the Investment portfolio of
the Banks considering change
in classification, valuation and
operation of the investment.
The key changes introduced in
these guidelines have profound
implications for the operation of
investment portfolio in Commercial
Banks.
Classification of investment
At present, the Banks have been
classifying its investment in
three categories i.e. 1. Held to
maturity (HTM), 2. Available for
sale (AFS) and 3. Held for trading
(HFT). As per new guidelines a
new category, fair value through
profit and loss accounts (FVTPL) is
added. The HFT portfolio would
be sub category of FVTPL. Besides
investment in subsidiary, joint
venture and associates will be
classified separately. The revised
classification would be as under:
a. Held to Maturity (HTM)
b. Available for Sale (AFS)
c. Fair value Through Profit and
loss Accounts (FVTPL)
d. Held for Trading (Being sub
category of FVTPL)
e. Investment in Subsidiary
Associates and Joint Ventures
HTM (Held to Maturity)
Under HTM, the security which is
acquired with the intention and
objective to hold till maturity
in order to collect contractual
cash flow, will be part of HTM.
Further such security shall meet
SPPI criteria i.e. the security gives
rise to cash flow that are solely
payment of principal and interest
thereon. The security which does
not meet aforesaid terms will not
be part of HTM.

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Banking
THE CHARTERED ACCOUNTANT

At present, one time shifting from /to HTM/ contractual cash flow as well as to sell
AFS is allowed in a year. However the before maturity. However, equity
same option would not be available instrument which is not held with
in normal circumstances. the objective of trading may also

The Banks are allowed to sell

Under AFS, securities be classified under AFS as an

securities not exceeding 5% of shall be fair valued irrevocable option at the time of
initial recognition.
opening carrying value of HTM periodically at least on
portfolio. Further selling will quarterly basis. Any Impact
require prior approval of RBI.
discount or premium Some of the securities which

Impact on acquisition of at present are part of AFS

a. The trading income from debt security shall be
shifting of securities would amortized.
not be available to Banks
which form significant part of
treasury income.
b. Further Banks have to rethink in view of
liquidity and risk management while classifying
its securities under HTM looking to limited option
available for sale.
c. At present large chunk of investment of the Banks
comprises HTM securities. Looking to the limited
option available for sale, the Banks may not carry
such large HTM portfolio in future.
d. Under new guidelines, there is no cap for eligible
securities including Non SLR securities meeting
SPPI criteria to be classified under HTM portfolio,
which may result in increased Interest Rate risk in
banking book.
AFS (Available for Sale)
Under AFS, generally securities meeting SPPI criteria
are eligible under AFS category where such securities
are acquired with the objective to hold for collecting
may no longer continue under
AFS such as equity for trading
purpose, Tier I and II bonds and
investment in mutual fund required
to be reclassified under FVPTL.
FVPTL (Fair Value through Profit
and Loss Account)
It is a new classification of securities under RBI
guidelines. Generally the securities which do not
qualify for inclusion in HTM or AFS will be classified
under above head. The following securities may be
part of FVPTL.
a. Equity shares other than related to subsidiaries /
associates /Joint ventures.
b. Investment in mutual fund, AIF, Real estate
investment trust, infrastructure investment trust.
c. Tier I and Tier II bonds issued under BASEL III
capital regulation.
d. Securities which do not meet SPPI criteria.
HFT (Held for Trading)
HFT is sub category of FVPTL and following
instrument / securities will be part of HFT.
a. Short term resale
b. Profiting from short term price movement.
c. Locking in arbitrage profit
d. Hedging risk of above instruments.
e. Listed equity shares.
f. Net short credit or equity position
Generally the securities purchased for the purpose of
trading only will be part of HFT.

A. Initial Recognition
All the investment shall be measured at fair value
on initial recognition or at the time of acquisition.
Generally the acquisition cost of security will be
presumed as fair value.

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Banking
THE CHARTERED ACCOUNTANT

B. Subsequent Measurement Unrealized gain on L3 Securities shall also

be deducted from Common Equity
HTM (Held till Maturity) Tier 1 (CET1).
Securities under HTM shall be
carried at amortized cost and Under new 5. In case of equity instrument, the
gain or loss on such instrument
shall not be marked to market.
guidelines Banks will will be transferred from AFS
At present discount on not be able to reclassify reserve to capital reserve
securities is not amortized
however new guidelines
its investment between instead to Profit and Loss
Account. It is not clear whether
talks about amortization of categories without the gain or loss over and above
discount from the date of approval of its board gain or loss transferred to AFS
will be credited or debited to
acquisition of securities. Banks
which are following weighted
of Directors and prior P& L Account or it will be directly
average cost method would find approval of RBI transferred to Capital reserve
difficult to amortize the discount account.
from the date of acquisition of 6. Securities under AFS are not
securities i.e. retrospectively. It is subject to amortization under the
suggested that in such cases the Banks existing guidlines. However, under new
may be allowed to amortize the discount on security regime, it will be amortized over remaining life
prospectively on average cost. of the instrument. It will streamline the impact of
redemption loss or gain in profit and loss account.
AFS
Under AFS, securities shall be fair valued periodically FVTPL (Fair Value through Profit and Loss
at least on quarterly basis. Any discount or premium Account)
on acquisition of debt security shall be amortized. The securities held under FVPTL shall be fair valued
and gain or loss on valuation of such securities shall
Impact be credited or debited to profit and Loss account. It
1. At present the Banks are following basket wise is the departure from extant guidelines where loss on
approach for accounting Mark to Mark (MTM) valuation is debited to Profit and loss account and gain
depreciation on AFS. The basket wise approach is ignored. The valuation under FVPTL will be made
would no longer be valid under new guidelines at least on quarterly basis whereas in case of HFT it
and securities will be fair valued on individual would be on daily basis. Further the securities under
basis. The cumulative gain or loss of performing FVPTL or HFT is subject to amortization of premium
investment shall be credited or debited to a and discount over remaining life of instrument.
reserve i.e. AFS reserve without giving its impact
in profit and loss account. At the time of sale
of securities, respective gain or loss shall be
transferred from reserve to Profit and loss account.
2. Under existing RBI guidelines, net depreciation
(basket wise) is debited to profit and loss account
and net appreciation (basket wise) is ignored. As
per new guidelines cumulative gain or loss will be
transferred to AFS-Reserve. Hence new guidelines
allows recognition of appreciation /gain on
securities in the books of account without routing
through profit and loss account.
3. Going forward the profit and loss of the Banks
would not be affected by any un- favorable
movement in yield however the equity capital will
be impacted.
4. As per new guidelines unrealized gain transferred
to AFS reserve shall not be available for payment
of dividend and coupon on additional Tier I.

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Banking
THE CHARTERED ACCOUNTANT

Impact approval of its board of Directors and prior approval

Unrealized gain will increase the profit of the Banks
which have tax impact without selling the securities.
Securities under HFT are not subject to amortization,
however under new regime, it will be amortized over
remaining life of the instrument. It will streamline the
impact of redemption loss or gain in profit and loss
account at the time of maturity of the instrument.
Investment in subsidiaries / associates and
Joint venture
All the investments (debt and equity) in above shall be
held at acquisition cost and any discount on premium
on acquisition of debt shall be amortized over life of
instrument.
Re-classification of the investment
Under new guidelines Banks will not be able to
reclassify its investment between categories without
of RBI
Impact
The Banks have to be more cautious while classifying
its investment under various categories depending
upon its ALM position as one time shifting in a year as
well as transfer from HFT to AFS will not be available.
The reclassification of securities shall be based on fair
value of securities having positive / negative impact on
profit and loss account as well as capital adequacy.
Transition and Repeal provisions
At the time of transition to new guidelines, the Banks
shall reclassify their investment portfolio as on 31st
March 2024 as per the categories mentioned below
i.e. HTM, AFS, FVPTL (sub category HFT), investment
in subsidiaries, associates or joint venture. The specific
treatment for transition from existing to revised
framework is given as under:

Previous Revised
Opening Accounting Adjustments on April 1, 2024
Framework Framework
The acquisition cost adjusted for any premium/ discount amortised between date of
acquisition and March 31, 2024, shall be the revised carrying value.
HTM
The difference between the revised carrying value and the previous carrying value
shall be adjusted in any Revenue/General Reserve.
The fair value as at March 31, 2024 shall be the revised carrying value.
HTM
AFS* The difference between the revised carrying value and the previous carrying value
shall be adjusted in AFS- Reserve.
The fair value as at March 31, 2024 shall be the revised carrying value.
FVTPL The difference between the revised carrying value and the previous carrying value
shall be adjusted in any Revenue/ General Reserves.
The acquisition cost adjusted for any premium/ discount amortised between date of
acquisition and March 31, 2024 shall be the revised carrying value.
HTM
The difference between the revised carrying value and the previous carrying value
shall be adjusted in Revenue/ General Reserve.
The fair value of the investment as at March 31, 2024 shall be the revised carrying
AFS value.
AFS
The difference between the revised carrying value and the previous carrying value
shall be adjusted in AFS- Reserve.
The fair value as at March 31, 2024 shall be the revised carrying value.
FVTPL The difference between the revised carrying value and the previous carrying value
shall be adjusted in any Revenue/ General Reserves.

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Banking
THE CHARTERED ACCOUNTANT

Previous Revised
Opening Accounting Adjustments on April 1, 2024
Framework Framework
The acquisition cost adjusted for any premium/ discount amortised between date of
acquisition and March 31, 2024 shall be the revised carrying value.
HTM
The difference between the revised carrying value and the previous carrying value
shall be adjusted in Revenue/ General Reserve.
The fair value as at March 31, 2024 shall be the revised carrying value.
HFT
AFS The difference between the revised carrying value and the previous carrying value
shall be adjusted in AFS- Reserve.
The fair value as at March 31, 2024 shall be the revised carrying value.
FVTPL The difference between the revised carrying value and the previous carrying shall be
adjusted in Revenue/General Reserve.

*As per FAQs published by FIMMDA, it is now suggested that the difference between the revised and previous carrying value
shall be adjusted in Revenue/General Reserve rather than AFS-Reserve. However, in the case of equity instruments designated
under AFS difference between the revised and previous carrying value shall be adjusted in AFS-Reserve.

Impact iii. Securities meeting SPPI criteria, shall be amortised

Any appreciation / depreciation on valuation of
securities on date of transition will not be routed to
profit & loss account at the time of subsequent sales.
Conclusion
i. There is no cap on eligible securities to be
classified under HTM Portfolio which may result in
increased Interest rate risk on banking book. The
Non SLR securities meeting SPPI criteria may also
be classified under HTM.
ii. Unrealised gain /loss in AFS/HFT shall be
accounted in AFS Reserve/ General Reserve /Profit
& loss, which shall result in reduction of volatility in
profit & loss account due to yield movement & its
impact on MTM depreciation.
over residual life of security irrespective of portfolio.
It will streamline the impact of redemption gain/
loss or gain in profit and loss account in respect of
AFS & HFT portfolio.
iv. Banks need to invest in system, process and
training to ensure compliance of new direction /
guidelines.
v. The 2023 guidelines have prescribed robust
disclosures which would be required to be made in
the financial statement for the year ended 31 March
2025 onwards.
The revised guidelines issued by RBI, are poised to
significantly impact the commercial Banks. It may lead
more stringent criteria for classifying the valuation
of investment portfolio. Commercial Banks need to
ensure that their investment portfolio adhere to new
guidelines, which would require adjustment to their
existing investment strategies with implication on
profitability & operational efficiencies.

Overall the alignment with global standards &

practices will foster greater confidence among investor
& stakeholder and counterparties in the Indian
Banking system.



Author may be reached at

eboard@icai.in

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 1111

Technology
THE CHARTERED ACCOUNTANT

Embracing Technological
Transformation in
Accounting: Navigating
Opportunities and Challenges
In the digital age, technology's influence on accounting
is profound. Automation, Artificial Intelligence (AI),
Data Analytics, and Cloud Computing are redefining the
profession. This article dives into the impact of technology,
offering insights for professionals. The digital shift radically
changes accounting by replacing manual tasks with digital
systems. This boosts efficiency, reduces errors, and empowers
accountants to focus on making strategy. AI and data
analytics are indispensable, unlocking insights from vast
CA. Ramesh Chandra Jha datasets. Cloud computing revolutionizes collaboration and
Member of the Institute accessibility, enabling real-time sharing. Accountants progress
from data input operators to translators who provide direction
for decisions. Transparency is introduced by Blockchain, and
cybersecurity becomes more prominent. Digital assets and
cryptocurrency are changing accounting and necessitating
adjustment. The integration of technology redefines auditing.
Finally, to successfully navigate the changing terrain, never
stop learning. This technological transformation presents
both challenges and immense potential, revolutionizing the
accounting profession for the better.

Introduction

I
n the rapidly evolving digital
era, the significance of
technology’s role in reshaping
the accounting profession has
reached unprecedented levels.
The intersection of automation,
artificial intelligence (AI), data
analytics, and cloud computing
has initiated a profound revolution,
altering the very essence of
the manner of engagement
of Accountants and allied
professionals with their tasks. This
article delves comprehensively
into the immense impact of
technology on the landscape
of accounting, unravelling its
multifaceted implications and
unveiling crucial insights.
The Digital Transformation: A
Paradigm Shift in Accounting
The digital transformation
is reshaping the accounting
landscape by replacing manual

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1112
Technology
THE CHARTERED ACCOUNTANT
record-keeping methods with sophisticated digital
systems. This shift represents a significant paradigm
change in the field, propelled by technology-driven
tools and software. Several cutting-edge accounting
software tools have emerged, spearheading the digital
transformation by replacing traditional manual record-
keeping with sophisticated digital systems. Some
notable examples include:
 QuickBooks: A widely used accounting software,
QuickBooks streamlines various accounting tasks
such as invoicing, expense tracking, and financial
reporting. It automates processes, reduces manual
data entry, and provides real-time insights into
financial performance.
 Xero: Like QuickBooks, Xero offers cloud-based
accounting software that allows businesses to
manage finances from anywhere. It automates
reconciliations, offers real-time collaboration with
advisors, and integrates with various third-party
applications.
 Sage Intacct: Geared towards medium to large
businesses, Sage Intacct provides advanced
financial management and accounting solutions. It
automates complex financial processes, enhances
visibility into financial data, and offers scalability for
growing organizations.
 Zoho Books: Designed for small businesses,
Zoho Books automates various accounting tasks
such as invoicing, expense tracking, and bank
reconciliation. It offers integration with other Zoho
applications for a seamless workflow.
 SAP Hana Cloud and Business One: SAP HANA
Cloud is a comprehensive cloud-based platform
that empowers large businesses to leverage
the full potential of their data. With its real-
time analytics, advanced data processing, and
MARCH 2024
application development capabilities, it equips
organizations with the tools needed to make
agile and informed decisions in today’s fast-
paced business landscape. Similarly, designed for
small to medium-sized businesses, SAP Business
One integrates financial management with sales,
customer relationship management, and inventory
management, providing a comprehensive solution
for business operations.
 Odoo: An open-source ERP system, Odoo covers
various business functions such as accounting,
inventory, CRM, and e-commerce. It automates
processes, enhances collaboration, and supports
customization based on business needs.
 Oracle NetSuite: A cloud-based ERP platform,
Oracle NetSuite offers financial management,
CRM, and e-commerce functionalities. It automates
processes, offers real-time insights, and supports
businesses across different industries.
These software tools exemplify the digital
transformation initiated in accounting, replacing
manual record-keeping with efficient, automated,
and integrated digital systems that enhance accuracy,
reduce errors, and provide real-time insights into
financial operations. The digital transformation is thus
empowering Accountants to evolve from transaction
processors to strategic consultants, bolstering their
role in driving business growth and financial stability.
Harnessing the Power of AI and Data
Analytics
AI has emerged as a transformative force in the realm
of accounting, reshaping traditional practices and
offering a paradigm shift in how accountants approach
their tasks. Through advanced algorithms and data
analysis capabilities, AI empowers accountants to
automate routine processes, uncover hidden insights
within complex financial data, and enhance decision-
making. Here are some prominent cases where AI can
be used in accounting processes:
 Automated Data Entry: AI-powered Optical
Character Recognition (OCR) technology can
quickly scan and extract data from invoices,
receipts, and other financial documents. This
automation reduces the need for manual data
entry, minimizes errors and saves significant time.
 Expense Management: AI-driven expense
management tools can automatically categorize
and reconcile expenses based on historical data
and patterns. These tools can identify duplicate
or erroneous entries, improving expense
reporting accuracy.
56 www.icai.org
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Technology
THE CHARTERED ACCOUNTANT

 Invoice Processing: AI can automate invoice
approval workflows by analyzing invoice details,
comparing them with predefined rules, and
flagging any discrepancies or anomalies for further
 Customer Interaction: AI-powered chatbots can
review. This speeds up the invoice approval process
and reduces the risk of errors.
 Financial Statement Analysis: AI-powered tools
can analyze financial statements and identify
trends, anomalies, and potential risks in real time.
This assists accountants in making more accurate
financial assessments and strategic decisions.
 Auditing: AI-driven audit tools can analyze large
volumes of financial data to detect irregularities,
patterns, and anomalies that might indicate
fraudulent activities or errors. This accelerates the
audit process and enhances accuracy.
 Tax Compliance: AI-powered tax software can track
changes in tax regulations, update tax codes, and
automatically classify transactions based on tax
rules. It reduces the likelihood of non-compliance
and errors in tax reporting.
 Personalized Financial Advice: AI-driven
 Financial Reporting: AI can generate
customized, automated financial
reports by extracting relevant
data from various sources and
formats. This reduces the AI-powered tools can
time spent on compiling analyze financial
statements and identify
reports and ensures
consistency.
 Cash Flow
trends, anomalies,
Management: AI-driven and potential risks in
predictive analytics real time. This assists
not only detects fraud more accurately but also
minimizes false positives that could occur with
rule-based systems.
assist customers with basic accounting queries,
freeing up accountants’ time while providing
timely responses to clients’ inquiries. Imagine
a scenario where a company’s AP department
receives numerous inquiries from vendors and
internal stakeholders about invoice status, payment
schedules, and documentation requirements.
Instead of overwhelming the AP team with
repetitive queries, an AI-powered chatbot can be
implemented. The AI-powered chatbot not only
improves the vendor experience but also enhances
the efficiency of the AP department. By handling
routine inquiries, the chatbot allows human
accountants to focus on more strategic tasks, such
as analyzing financial data, identifying opportunities
for cost savings, and providing insights for financial
decision-making.
algorithms can analyze a client’s financial
data to provide personalized
financial advice, investment
recommendations, and tax
strategies.
These AI use cases are
revolutionizing accounting
processes by enhancing
efficiency, reducing
errors, and enabling
accountants to focus on

accountants in making
can forecast cash flow higher-value tasks. As AI
trends by considering continues to advance, its
historical data, market more accurate financial integration into accounting
conditions, and other assessments and is poised to create even more
opportunities for innovation
strategic decisions.
variables. This enables
organizations to make and improved financial
informed decisions about management. At the heart of this
investments, expenses, and transformation lies the prowess of
financial planning. AI-powered algorithms, which possess
a remarkable ability to navigate through vast
 Fraud Detection: AI can identify unusual patterns, datasets with unprecedented precision. This capability
behaviors, or transactions that may indicate empowers professionals to unveil concealed insights,
fraudulent activities. It can continuously monitor recognize intricate trends that might elude traditional
transactions and generate alerts for potential methods of analysis, and meticulously identify
fraud, enhancing security. For instance, a financial anomalies that would often escape notice.
institution using AI-driven data analytics can swiftly
identify unusual spending patterns, geographical
Embracing Cloud Computing for
disparities, or uncommon transaction frequencies
associated with a particular account. If a series of Collaboration and Accessibility
transactions fall outside the established norms, Cloud computing has brought a revolutionary change
the AI system can automatically trigger alerts for in collaboration and accessibility within the accounting
further investigation. This proactive approach sphere. Real-time sharing of financial data across

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1114
Technology
THE CHARTERED ACCOUNTANT
teams has become seamless, enabling efficient remote
work, and fostering improved client collaboration.
With cloud-based accounting systems, data can be
accessed effortlessly from any location, ensuring
professionals remain nimble and capable of swiftly
addressing changing client requirements. This shift
towards cloud-based solutions amplifies productivity,
enhances communication, and bolsters adaptability,
ultimately empowering Accountants to deliver higher
levels of service in an increasingly dynamic and
interconnected business landscape.
Rethinking the Role of Accountants: From
Data Entry to Data Interpretation
The rapid infusion of technology necessitates
a profound re-evaluation of Accountants’ roles.
As routine tasks are automated, the profession
is undergoing a transformative shift towards
strategic data interpretation. In this new landscape,
Accountants play a pivotal role in translating intricate
financial data into actionable insights that drive
business expansion. The professional accountants
have evolved into advisors, having a comprehensive
grasp of the numbers to navigate clients through
complex financial choices. Beyond number crunching,
they contribute a strategic perspective that fosters
well-informed decision-making. This transition
signifies a departure from the traditional role of
data entry to a dynamic position as interpreters
and strategic consultants, cementing Accountants’
position as indispensable partners in driving
sustainable growth and financial success.
Noteworthy examples of this transition include
Accountants utilizing advanced data analytics tools to
MARCH 2024
unravel intricate financial patterns, AI-assisted analysis
to anticipate market trends and strategic planning
software to develop data-driven growth strategies.
Cybersecurity and Data Privacy: Critical
Concerns
With the increasing integration of technology,
the significance of cybersecurity and data privacy
intensifies within the accounting domain. Accountants
deal with sensitive financial data, rendering them
alluring targets for cyberattacks. Thus, implementing
stringent security measures becomes imperative
to shield client information and preserve trust.
Professionals must establish robust protocols,
including encryption, multi-factor authentication, and
secure networks, to fortify against potential breaches.
Staying updated through continuous training and
remaining vigilant about evolving cybersecurity threats
is pivotal. By maintaining a proactive stance and
embracing best practices, Accountants can ensure
the utmost integrity and security of their services,
safeguarding the confidentiality and trust that
underpin their client relationships.
The Emergence of Blockchain Technology
The rise of blockchain technology brings
transformative possibilities for the accounting
domain. By its inherent transparency and tamper-
proof nature, blockchain has the potential to reshape
how transactions are recorded and reported. This
technology ensures a secure and immutable ledger,
mitigating the risk of fraudulent activities and
augmenting transparency in financial reporting. As
blockchain gains momentum, Accountants must
equip themselves to harness its advantages. This
involves comprehending its capacity to revolutionize
critical areas such as auditing, transaction verification,
and supply chain finance. By understanding and
integrating blockchain into their practices, Accountants
can not only enhance the accuracy and security of
financial records but also contribute to shaping a more
efficient and trustworthy financial ecosystem.
Exploring New Frontiers
The emergence of digital assets has undeniably
ushered in a new era in accounting. This paradigm
shift necessitates that professionals not only adapt but
also delve into uncharted territory. The complexities
arise from the unique nature of these assets,
demanding Accountants to grapple with intricate
matters of classification, recording, and reporting.
This entails a thorough understanding of blockchain
technology, digital wallets, and the nuanced
transactional landscape that digital assets bring.
58 www.icai.org

Technology
THE CHARTERED ACCOUNTANT
The dynamic and evolving nature of
the digital assets market poses an
exceptional challenge. Accountants
must be vigilant in staying attuned
to ever-changing regulatory
developments that govern
this evolving landscape.
Automated compliance
As governments and tools have taken center
regulatory bodies refine
their stance on digital
stage, streamlining
assets , professionals must complex procedures
be proactive in navigating
these shifts to ensure
and dramatically
compliance and integrity in reducing the potential
financial reporting.
for oversight errors.
In this unexplored realm,
knowledge is paramount.
Accountants must immerse
themselves in this evolving area,
continuously expanding their expertise
to effectively tackle the accounting intricacies that
digital assets introduce. By remaining abreast of
regulatory dynamics, technological advancements,
and emerging best practices, professionals can
not only meet the challenges but also harness the
opportunities that these new frontiers bring to the
field of accounting.
Enhanced Reporting and Visualization Tools
In the digital age, sophisticated reporting and
visualization tools have emerged, providing
Accountants with powerful means to convey
intricate financial data with enhanced effectiveness.
Employing infographics, interactive dashboards,
and visual representations of financial performance
enables Accountants to offer clients a clear grasp of
their financial well-being. This bridge between the
intricacies of accounting and clients’ comprehension
cultivates improved collaboration and informed
decision-making. As these tools facilitate the
translation of complex data into accessible formats,
Accountants can elevate their advisory role by
providing clients with actionable insights, resulting
in more fruitful discussions and strategic planning.
The utilization of enhanced tools for reporting and
visualization stands as a cornerstone in building
stronger client relationships and driving smarter
financial strategies.
The Changing Face of Audit and Compliance
The realm of audit and compliance has undergone
a profound transformation through the integration
of technology, ushering in a new era characterized
by unprecedented efficiency and accuracy. At the
forefront of this shift is the incorporation of AI-driven
MARCH 2024 59
1115
audit tools, which have revolutionized
the audit landscape. These tools
possess the remarkable ability
to meticulously scrutinize
vast datasets, identifying
irregularities, anomalies, and
discernible patterns with
remarkable precision. This
infusion of automation
has ushered in a new
level of audit efficiency,
accelerating data analysis
processes that were once
laboriously time-consuming.
Furthermore, technology has
emerged as a formidable ally in
ensuring adherence to intricate
regulatory frameworks. Automated
compliance tools have taken center
stage, streamlined complex procedures
and dramatically reduced the potential for oversight
errors. This technological advancement not only
expedites compliance processes but also bolsters the
integrity of financial reporting by minimizing the risk
of inaccuracies.
However, in the pursuit of automated audit and
compliance solutions, it is vital to tread cautiously.
While technology enhances efficiency, it must
operate in tandem with human judgment rather
than supplanting it entirely. The nuanced nature and
contextual intricacies of financial data often require
nuanced insights that only human expertise can
provide. The collaborative synergy of human acumen
and technological innovation is crucial in ensuring
that audit outcomes remain comprehensive, precise,
and reliable.
In navigating this evolving landscape, the harmonious
coexistence of technological prowess and human
wisdom emerges as the key to achieving audits that
are not only efficient but also steadfastly accurate.
By harnessing the strengths of technology while
preserving the indispensability of human insight,
professionals can confidently usher in a new era
of audit and compliance marked by unparalleled
efficiency, accuracy, and integrity.
Continuous Learning and Adaptation: A
Stride Towards a Brighter Future
In this era of a technological revolution,
the accounting profession faces a profound
transformation. Navigating this paradigm shift requires
a commitment to continuous learning and adaptation,
shaping professionals who can effectively harness the
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1116
Technology
THE CHARTERED ACCOUNTANT
power of technology for strategic advantage. Here’s
a breakdown of how to redefine the accounting
landscape by embracing the ethos:
 Continuous Learning in a Changing Landscape:
In a world of rapid technological advancement,
complex challenges arise. Continuous education
equips professionals with the skills to address
intricacies, ensuring accurate, reliable, and
insightful financial practices. Committing to
ongoing education is no longer a luxury but a
necessity to stay relevant.
 Beyond Technical Mastery: While technical
proficiency remains important, a broader skill set
is essential. Professionals must not only master
new tools but also develop the ability to integrate
technology into complex decision-making processes.
 Seizing Opportunities Amidst Challenges:
Embracing constant change as an opportunity
rather than a challenge is a mindset that can
set professionals apart. By adapting to new
technologies, Accountants can create efficiencies
and offer innovative solutions.
 Elevating the Role of Accountants: Technology
has automated routine tasks, allowing Accountants
to evolve from mere number crunchers to
strategic advisors. Continuous learning empowers
professionals to leverage data-driven insights for
better decision-making.
 Catalyzing Innovation: By staying ahead of
technological trends, Accountants are better
positioned to innovate within their field. The ability
to identify novel solutions drives efficiency, enabling
professionals to deliver superior value to clients.
 Adaptability as a Cornerstone: Adaptability is no
longer a soft skill but a cornerstone of success.
MARCH 2024
Professionals who embrace continuous learning
and remain agile are best equipped to flourish in a
rapidly evolving profession.
Conclusion
The ongoing technological revolution within the
accounting profession presents a dualistic landscape
of both opportunity and challenge. The integration
of automation, AI, data analytics, and other emerging
technologies holds a remarkable chance to elevate the
profession’s value proposition.
Yet, embarking on this transformational journey
requires more than just a passive adoption of
technology. It demands a proactive approach
characterized by ongoing learning, firm dedication
to embrace innovation and relentless cybersecurity
monitoring. Professionals must cultivate a culture of
perpetual education to stay updated on the rapidly
evolving technological landscape. Simultaneously,
safeguarding sensitive financial data against cyber
threats becomes paramount, due to the surge in
connectivity and digitization.
As the accounting industry adapts to this digital
age, it stands at the brink of transformative change,
ready to redefine its position within the wider
business ecosystem. This shift presents an incredible
opportunity to transcend traditional limitations,
providing strategic guidance and insights that drive
organizational growth.
To capitalize on this potential, collaboration is
imperative. By fostering open discussions, sharing
insightful perspectives, and collectively shaping
the future, Accountants can harness technological
capabilities. This concerted effort enables the
creation of a profession that thrives on agility,
insightfulness, and impact. It positions accountants
not just as mere service providers, but as trusted
advisors equipped with unparalleled expertise
to serve businesses and clients in an increasingly
complex and interconnected world.
In conclusion, the technological revolution is a
transformative force that necessitates a proactive,
educated, and innovative approach from accountants.
By embracing this transformation, the profession
stands to redefine its role, unlocking new levels of
value and playing an instrumental role in shaping the
future of businesses and economies.

Author may be reached at
Ca.r.c.jha@gmail.com and
eboard@icai.in
60 www.icai.org
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Audit
THE CHARTERED ACCOUNTANT

Mandatory Audit Trail – Step

towards greater transparency
In a move designed to increase accountability and enhance
transparency, the Ministry of Corporate Affairs (MCA) has
made it mandatory for all the companies, irrespective of
their size and complexity, to have an audit trail feature in
all accounting software. The new audit trail requirement
was initially made applicable for the financial year
commencing on or after the first day of April 2021.
However, the applicability was deferred twice and is now
made mandatory for all the companies w.e.f April 01,
CA. Shraddha Khivasara 2023. This is another step of MCA post Revised Schedule
Member of the Institute III and CARO 2020 towards greater transparency and
accountability. Though no such comparable requirements
exist in other parts of the world, MCA is ahead of its time in
mandating the maintenance of a detailed edited record of
all transactions which would help all stakeholders including
the auditor to unearth sources of financial irregularities
and help companies to improve financial reporting and
compliance framework. This article summarises the
requirements needed for the maintenance of the audit trail
along with the auditor’s reporting responsibility and the
challenges companies could face in implementing these.

So, what is an Audit Trail?

A
n audit trail is defined as
a step-by-step sequential
record that provides
evidence of the documented
history of financial transactions to
its source.
Audit trails are a chronological
record of the changes that have
been made to the data. Any
change to data including creating
new data, updating or deleting
existing data, must be recorded.
Records maintained as audit
trail may include the following
information:
 when changes were made i.e.
date and time (timestamp)
 Who made the changes i.e.
User Id
 What data was changed i.e.
data/transaction reference;
success/failure
What does the regulator ask
from Companies?
MCA has amended Companies
(Accounts) Rules, 2014 by
prescribing the following under the
proviso to Rule 3(1):

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Audit
THE CHARTERED ACCOUNTANT
“Provided that for the financial year
commencing on or after the 1st day of
April 2023, every company which
uses accounting software for
maintaining its books of account The auditor needs
to verify whether
shall use only such accounting
software which has a feature
of recording audit trail of management’s
every transaction, creating assessment of the list
an edit log of each change
made in the books of account
of software used in
along with the date when maintaining books of
such changes were made and account is appropriate
ensuring that the audit trail and complete.
cannot be disabled.’’
It can be noted that the requirement
of an audit trail applies to all
companies. Thus, LLP’s and partnership
firms are outside the purview of the audit trail.
Further, the above requirements apply to the extent
a company maintains its records in electronic form
by using accounting software. It also mandates
Companies to maintain a trail for every transaction
impacting the books of account. In the case of large
companies, where there are multiple softwareused for
accounting purposes, management should identify a
list of all such software that is used in maintaining the
books of account and ensure that it has an audit trail
feature that is enabled throughout the year. In the
case of companies who have outsourced their entire
accounting to a third party, management needs
to immediately ensure that the service provider is
using software having an audit trail feature and its
system auditor will have to comment on the internal
control related to the edit log. The audit trail should
also have the date and ID of the person who has
made the changes along with what was changed.
Though books of account are defined under the Act,
it would be challenging and at times would require
management to exercise judgment in assessing which
software is used in maintaining books of account.
Management is also responsible for ensuring that
the trail is not disabled and tampered with at any
MARCH 2024 62
point in time and hence should implement
appropriate controls around the access
of the audit trail.
What is the Auditor’s
reporting responsibility?
MCA has inserted Rule 11(g)
under ‘Companies (Audit and
Auditors) Amendment Rules,
2021’, requiring the auditor to
report on:
“Whether the company,
in respect of financial years
commencing on or after the 1st
April 2022, has used such accounting
software for maintaining its books of
account which has a feature of recording
audit trail (edit log) facility and the same has been
operated throughout the year for all transactions
recorded in the software and the audit trail feature
has not been tampered with and the audit trail has
been preserved by the company as per the statutory
requirements for record retention.”
The above reporting casts onerous responsibility on
the auditor in terms of reporting on the audit trail by
making a specific assertion in the audit report. Further,
it is pertinent to note that the auditor is required
to report for transactions on or after 1st April 2022.
However, as the amendment to maintain the audit
trail was made effective on April 01, 2023, the auditor
in the audit report for the financial year March 31,
2023, should mention the fact that reporting is not
applicable in the current year.
In addition, the auditor is required to comment on
whether the company is using accounting software
that has a feature of recording audit trail, by verifying
the following aspects:
 whether the audit trail feature configurable (i.e., if it
can be disabled or tampered with)?
 whether the audit trail feature enabled/operated
throughout the year?
 whether all transactions recorded in the software
covered in the audit trail feature?
 whether the audit trail been preserved as per
statutory requirements for record retention?
The auditor needs to verify whether management’s
assessment of the list of software used in maintaining
books of account is appropriate and complete. In case
multiple software is used, the auditor needs to assess
the completeness of the list of software identified
by management which would require audit trail
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Audit
THE CHARTERED ACCOUNTANT
maintenance. In the case of small companies wherein
a lot of records are maintained in Excel sheets, e.g.,
fixed assets register, consolidation entries/workings,
or deferred tax workings, the auditor needs to
assess whether the Excel sheet would form part of
accounting software and whether the audit trail can
be appropriately established. In case of processes
that are outsourced (eg payroll), the auditor needs to
consider the use of an independent auditor’s report of
a service organization which should specifically cover
the compliance with audit trail requirements.
The auditor also needs to verify whether the audit trail
feature was appropriately enabled throughout the
year. The auditor should consider assessing the control
environment around the access given by management
for maintenance of the trail and should verify that
the trail was appropriately enabled in all accounting
software throughout the year. The auditor may
consider the involvement of IT experts where complex
ERPs are used for maintaining books of accounts.
Auditors should ensure that 3W’s who, when, and
what changes were made to the trail are appropriately
logged in and should verify those as part of audit
procedures to mitigate the risk of fraud.
In case the audit trail is disabled or tampered with, the
auditor should consider its impact on the assessment
of the risk of material misstatement due to fraud and
accordingly devise an audit strategy and assess the
impact of it on the main audit report and internal
controls over financial reporting. Auditors should also
assess the impact, if any, due to non-compliance with
laws and regulations, in case the company fails to
maintain them. At a minimum, factual reporting would
be required by an auditor in the audit report regarding
disabling/ tampering with the audit trail.
The rule further requires an auditor to comment on
the retention of the audit trail. Though the Company
Account Rules do not specifically talk about the
retention of audit trail, it would be primarily the
responsibility of management to ensure that the trail
is retained and preserved for a statutory period i.e 8
years, and the auditor needs to comment on whether
management is preserving the trail as per statutory
requirements of record retention.
The auditors’ reporting responsibility arises both
in the case of standalone financial statements and
consolidated financial statements. However, while
reporting on consolidated financial statements, certain
components would be included in thesame. These are
(a) either not a company under the Companies Act, or
(b) some components are incorporated outside India.
The auditors of such components are not required to
report on these matters since the provisions of the Act
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1119
do not apply to them. In the case of components that
are companies situated in India, component auditors
will report in their standalone report which can be used
by the group auditor in line with the requirements of SA
600 while opining on consolidated financial statements.
Thus, the auditor should plan and perform procedures
around the audit trail in line with the Implementation
Guide on Reporting under rule 11(g) of the Companies
(Audit and Auditors) Rules, 2014 issued by the
Auditing and Assurance Standards Board of ICAI.
What are the benefits and Challenges in the
implementation of this requirement?
Undoubtedly, having an end-to-end log of all
transactions will bring a more systematic approach
towards bookkeeping and will be beneficial to trace
any financial irregularities noted before. The audit
trail can act as an excellent tool for management to
perform an internal risk assessment. By monitoring all
transactions, the audit trail can help identify potential
risks and mitigate them before they turn into real risks.
An audit trail will also bring more discipline to the
accounting function. In the case of small companies,
generally, accountants record a lot of backdated
entries. All such backdating of transactions would be
logged in and would come under audit scrutiny raising
red flags for auditors. Thus, an audit trail will act as a
catalyst in deterring management/accountants from
manipulating financial records. It would put more
responsibility and accountability on management for
their actions and would go a long way in promoting a
culture of transparency within the organization.
The audit trail will also help the auditor in having
deeper insights into the nature of the trial which in turn
can help him in assessing the risk much more effectively
and obtain greater audit comfort while providing a true
and fair view to the stakeholders. In short, audit trail
requirements will help in promoting good corporate
governance practices and will also help in building
trust and confidence among stakeholders, including
investors, creditors, and regulators.
However, the audit trail maintenance will have its own
set of challenges for the companies to implement as
well as for auditors to report on the same. Other than
the challenges which are already discussed above,
audit trail maintenance can lead to the generation of
voluminous data which would result in increased costs
for the companies to store and maintain the same.
Depending on the size of the organization and the
volume of transactions, the data generated by an audit
trail can quickly become overwhelming, making it
difficult to identify relevant information.
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Audit
THE CHARTERED ACCOUNTANT
Wherever companies are using multiple software, it
would be extremely time-consuming and tedious tasks
to analyze the audit trail generated by each software.
In the case of large MNCs operating worldwide
having legacy software that is not capable of logging
changes, it may be extremely difficult for them to
move to newer systems’ as it will result in very high
costs as well as time to implement new software.
At certain times, management in India may not be
able to implement new software as decisions are
driven by global headquarters where such regulatory
requirements do not exist.
For small companies with limited operations,
compliance with the above requirements would result
in an additional cost burden on companies. It requires
significant resources and expertise to establish and
maintain an effective audit trail system. Companies
may need to invest in new technologies, hire
additional staff, or seek external support to meet the
audit trail requirements in spirit.
Way Forward
Though, the requirement is now mandated w.e.f. April
01, 2023, after postponing it twice, however, a lot of
companies would still be grappling with how to deal
with such requirements. Thus management should
immediately focus on the following steps to ensure
compliance with the new requirements:
 Identify the list of all software used in maintaining
books of account.
 Ensure the audit trail feature is enabled in all such
software throughout the year.
 In case of software where such trail could not be
enabled, assess the implication and discuss with
the Board of Directors to implement new software
having required features.
 In case a few processes are outsourced, discuss
with a service provider to ensure the audit trail
feature is maintained at his end.
 Ensure that policies and procedures are in
place around the access to the audit trail and its
maintenance.
 Review and implement controls around the audit
trail and monitor the changes made to the books of
account.
As companies would be immediately implementing
these, considering there is a reporting responsibility on
the auditor and the trail needs to operate throughout
the year, auditors should also take the following
immediate steps:
MARCH 2024
 Inform and sensitize management including the
Board of Directors about the new requirements as
soon as possible.
 Perform preliminary discussions on how
management is ensuring compliance with the audit
trail.
 Identify issues/ challenges and timely communicate
with those charged with governance.
 Discuss with component auditors for companies
situated in India regarding specific procedures to
be performed for the audit trail.
 Analyze the audit trail and assess its impact on risk
assessment.
 In case the trail is not maintained, assess its impact
on the audit report and communicate with those
charged with governance.
Though, MCA issued this two years back, a lot of
companies will be implementing it in financial year
2023-24 and would face challenges in implementing
the same. As auditors would need to report on an
audit trail that is maintained for an entire year, we can
expect modified reporting on the audit trail in a lot
of companies in the coming year. Further, the most
important aspect of an auditor would be reviewing
the nature of changes in the trail. A lot of information
would be available with the audit trail, it would be
extremely critical that the auditor review the nature of
changes logged in the trail and assess its impact on
the risk assessment of the Company specifically on
fraud risk. Though the objective of the audit process
is not the detection of fraud, however with the trail
available, there would be more responsibility and
expectation of stakeholders from auditors to apply
judgment and raise timely red flags, if any.
Thus, the audit trail would act as a secret weapon for
regulators to identify irregularities and hence auditors
should be extremely diligent while auditing the audit
trails, especially in companies with voluminous data
of audit trail and multiple numbers of software. In a
nutshell, the mandatory trail is a very forward-looking
step towards a disciplined era of accounting.
Source: “Implementation Guide on Reporting under
Rule 11(g) of the Companies (Audit and Auditors)
Rules, 2014” issued by Auditing and Assurance
Standards Board of ICAI

Author may be reached at
cashraddha@yahoo.co.in and
eboard@icai.in
64 www.icai.org

Accounting Standards
THE CHARTERED ACCOUNTANT
BEPS Pillar Two Rules
Background, Accounting, Tax
and Other Key Considerations
Prelude and Overview
A
t the outset, it may
be recalled that the
Organisation for
Economic Co-operation and
Development’s (OECD) Inclusive
Framework1 on Base Erosion and
Profit Shifting (BEPS) has been
continuously evolving, with a
view to developing an agreement
on a two-pillar approach to
CA. Anjani Khetan help address key international
Member of the Institute tax issues like (a) tax avoidance
and (b) ensuring coherence of
international tax rules – eventually
leading to a more transparent tax
environment.
Accordingly, in December
2021, the OECD / G20 Inclusive
Framework (IF) on BEPS released
Model Global Anti-Base Erosion
(GloBE) rules (hereinafter called as
Model Rules or GloBE Rules) under
Pillar Two. These Model Rules
stipulate a “common approach”
for a Global Minimum Tax (GMT)
@ 15% on a country-by-country
basis for multinational enterprises
(MNEs) with a turnover of more
than Euro 750 million in the
Consolidated Financial Statements
of the Ultimate Parent Entity (UPE)
in at least two of the four Fiscal
Years immediately preceding the
tested Fiscal Year The underlying
objective is to have coordinated
global rules that ensure that large
MNEs pay effective tax rate of
1
The Inclusive Framework on Base Erosion and Profit Shifting (BEPS) is a global
initiative that aims to tackle tax avoidance practices used by multinational
enterprises (MNEs). It was established in 2016 by the Organisation for Economic
Co-operation and Development (OECD) and the G20, and currently has over
140 countries and jurisdictions as members.
MARCH 2024 65 www.icai.org
1121
at least 15% in every jurisdiction
in which they operate. This was
followed by additional guidance
on the Model Rules (including
Commentary, an Implementation
Framework, and Administrative
Guidance).
The GloBE Rules are designed
to ensure that large multinational
companies pay a minimum level of
tax on the income arising in each
jurisdiction where they operate,
irrespective of where they are
headquartered. Put differently,
Pillar Two Model Rules aims to
ensure that income is taxed at
an appropriate rate and has
several complicated calculation
mechanisms to ensure this tax
is paid. The rules are relatively
very complex and will require
substantial new forms of financial
data that tax departments may
not currently have access to (and
one school of thought indicate
that it may require up to 200+ new
data points for each legal entity to
comply with the Rules).
Key features of Model Rules
Some of the key features and the
requirements of the Model GloBE
Rules are as follows:
 The GloBE rules apply to
multinational groups (MNE
Groups) that have revenue of
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THE CHARTERED ACCOUNTANT

Euro 750 million or more in at least two out of the
last four years. For this purpose, “Revenue” means
the revenue reported in the Consolidated Financial
Statements of the Group for the Period prepared
in accordance with an Acceptable Financial
Accounting Standard and after adjustments thereto
as required by Globe Rules. Therefore, revenue
for the purposes of GloBE rules is not limited to
revenue recognised in accordance with IFRS 15
 Multinational groups in the scope of the rules will
be required to calculate their GloBE effective tax
rate for each jurisdiction where they operate.
 If the blended GloBE effective tax rate for all
companies in a specific jurisdiction is below the
15% minimum, then they will be liable to pay a top-
up tax for the difference.
 Put differently, the liability to pay a top-up tax is
equal to the difference between:
a. their GloBE effective tax rate for each
jurisdiction and
b. the 15% minimum rate
 Accordingly, in many cases, the group company
liable for the top-up tax (e.g. the ultimate parent
company) will differ from the group company that
triggered it (e.g. a company located in a low-tax
jurisdiction).
 Apart from the above, GloBE Rules also introduce
what is called as ‘Subject to Tax Rule’ (STTR).
This STTR is a tax treaty-based rule that allows
source jurisdictions to impose limited source
taxation on certain cross-border intercompany
transactions, that are not subject to a minimum
9% rate of tax. In other words, under STTR, the
payer country denies treaty benefits for covered
payments, to the extent they are not subject to
a tax rate of 9% or more. Of course, STTR is a
creditable tax under the GloBE Rules
 Also, while the framework for the proposed
GloBE Rules is global, these rules need to be
implemented through legislation enacted in
jurisdictions that adopt these rules.
 Applying the rules and determining the impact may
be challenging for many multinational groups.

 However, if the GloBE effective tax rate
domestically is 15% or more, no GloBE top-up tax
will be payable.
 Also, it is the ultimate parent entity of the
multinational enterprise that is primarily liable for
the GloBE top-up tax in its jurisdiction’s territory
(explained later in the write up).
Key Components and terminology under
Model GloBE Rules
The Model GloBE Rules contains two main inter-
locking components, viz. (1) the Income Inclusion
Rule (‘IIR’) and (2) the Undertaxed Payment Rule
(‘UTPR’) and is sought to be collected in one of the
three mechanisms mentioned in the below table:

Qualified Domestic
Minimum Top Up Tax
(QDMTT)
‘Local’ Country Measure
GloBE Rules
Income Inclusion Rule Undertaxed Payment Rule
(IIR) (UTPR)
‘Parent’ Country Measure ‘Backstop’ Measure

 QDMTT is a minimum 
tax that is incorporated
into the domestic law
of a country
 QDMTT allows the  Hence, under this rule, top-up tax
local jurisdiction to
collect any top up tax,
that would otherwise
be paid to another
jurisdiction under
Model Rules
Income Inclusion Rule (IIR) triggers  The UTPR is a backstop mechanism
and imposes top-up tax on a to IIR Rule
parent entity level, where income
 UTPR operates if there is low-taxed
of a constituent entity is taxed at
income from an entity (within
a rate less than 15% (being the
the group) that is not already
minimum tax rate under Pillar Two)
brought into charge under the IIR
mechanism
 It is worthwhile to note that UTPR
is imposed on a parent entity with operates - either by denying
an ownership interest in a low- deductions or by requiring an
taxed subsidiary equivalent adjustment – to the
extent the low-tax income of a
constituent entity is not subjected to
tax under Income Inclusion Rule (IIR)

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THE CHARTERED ACCOUNTANT

 Accordingly, Pillar  Further, top-up taxes calculated  Under this Rule, top-up tax is
Two rules provide for under the IIR are to be paid in the imposed in the jurisdiction that has
the possibility that jurisdiction of the parent entity of introduced the UTPR
jurisdictions might the MNE Group (rather than in the  Top-up taxes calculated under the
engage in domestic low-tax territory that triggers the UTPR are to be paid by the entity
tax policy reforms and payment)2 that operates in a jurisdiction that
introduce their own  Implementation of IIR is optional has enacted the UTPR
Qualified Domestic for a particular jurisdiction.  Implementation of UTPR is also
Minimum Top-up Tax However, if implemented, then it optional for a particular jurisdiction.
(‘QDMTT’) based on should be consistent with agreed However, if implemented, then it
the GloBE mechanics Model Rules and guidance should be consistent with agreed
to avoid any ‘tax
Model Rules and guidancet
leakage’

How BEPS Pillar Two Model Rules Operate? the jurisdiction where the low-tax profits have arisen
Consider the following scenario – wherein the group to impose an additional tax on the MNE Group’s
structure is as follows: excess profits in order to bring the ETR on those
profits up to the 15% minimum rate. In the present
 H Limited is the ultimate parent company of the
example, if Country C has imposed QDMTT in its
MNE group – located in Country A – and has two
jurisdiction, the top-up tax will be imposed on the
wholly owned subsidiaries, viz. S1 Ltd. and S2 Ltd. -
Subsidiary S2 Ltd. (located in Country C)
that located in Country B and Country C (as shown
in the below chart)
Next Preference
H Ltd. If Country C has not imposed QDMTT in its
Country A jurisdiction, the ultimate parent company of the
MNE group, viz. H Ltd. (located in Country A) shall
100%
be liable to pay the top-up tax related to Subsidiary
S1 Ltd.
S2 Ltd. – provided Country A has implemented
Country B Income Inclusion Rule (IIR) under the GloBE Rules3

Last Preference
100%
Country C
S2 Ltd. If neither Country C nor Country A has implemented
QDMTT or IIR respectively, but Country B has
Low Tax Jurisdiction
implemented UTPR under the GloBE Rules, then
Subsidiary S1 Ltd. (located in Country B) shall be
 Also assume that Country C is a low-tax jurisdiction liable to pay the jurisdictional top-up tax related to4
Subsidiary S2 Ltd. under UTPR mechanism of the
Given the above – the sequence in which Model
GloBE Rules will work will be as follows: GloBE Rules

First Preference Steps involved in calculating top-up taxes

As a starting point, the additional tax payable may be The key steps that an entity needs to follow in
collected through imposition of QDMTT which allows calculating top-up tax are as follows:

2
Under the IIR, the effective tax rate of each jurisdiction, calculated in accordance with specific global minimum tax rules, will
be determined based on all of the consolidated companies or branches in that jurisdiction. It will then be compared with the
minimum tax rate of at least 15%. Top-up tax will be charged to the head office to make up for any shortfall.
3
If the UPE is located in a jurisdiction that has not implemented a Qualified IIR, then the GloBE rules generally provide that the
top-up tax will be levied on the next highest entity in the ownership chain that is located in a jurisdiction with a Qualified IIR.
4
Where the IIR cannot be applied to a jurisdiction’s low-tax income, the top-up tax is collected by all jurisdictions that have
implemented a UTPR, often referred as the Under Taxed Profits Rule. The total amount of top-up tax as calculated under the
GloBE rules is allocated among jurisdictions by reference to a substance-based allocation key. On such an allocated part,
each jurisdiction collects the top-up tax by applying the UTPR as a denial of deduction under its existing corporate income
tax, or through an equivalent mechanism.

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THE CHARTERED ACCOUNTANT

Steps Involved Explanation

Step 1 The GloBE Income (or, Loss) is =
Calculate  The entity’s Profit or Loss
GloBE  as per the Consolidated Financial Statement (CFS)
Income (or, Loss)  of the Ultimate Parent Company
 in accordance with the applicable accounting framework (say, IFRS)
 subject to adjustments as per Globe Rules
Points to note:
 The calculation of GloBE income (for all the constituent entities of the group in a
particular jurisdiction) is based on the same accounting framework (say, IFRS), that is
used for the CFS
 However, the calculation of GloBE income will be subject to certain required
adjustments, such as excluded dividends, stick-based compensation, amount
allocated to Permanent Establishments (PEs) – thereby introducing complexities in
calculation of GloBE income
 Further, for the purposes of GloBE income or loss, an entity needs to add back intra-
group items (and not, eliminate such items)

Step 2 Covered taxes include all entity’s current income tax expense in the particular
Calculate jurisdiction.
Adjusted In this context, the following points are to be noted:
Covered Taxes  If the same group operates two different companies in the same jurisdiction, then,
covered taxes are sum of current income tax expenses of both the companies
 Non-income-based taxes are excluded. For example, property tax, payroll tax, value
added tax, etc.
 Current income tax expense is then adjusted for tax credits and deferred tax
adjustments. For example, Entity A might have to deduct tax credit from its current
tax expense, but it needs to add it back for the purpose of covered taxes calculation

Step 3 Effective Tax Rate (ETR) is calculated by dividing …

Calculate  Covered Taxed (as per Step 2 above)
Effective Tax Rate by
(ETR)  GloBE Income or Loss at jurisdictional level (as per Step 1 above)
@ Points to note:
Jurisdictional Level  ETR computation is to be done on the basis of jurisdictional blending
This means that if a MNE group has three constituent entities in a particular
jurisdiction, for the purposes of computing ETR, the profit or loss and taxes of all
the three constituent entities in that jurisdiction will be aggregated

Step 4 If ETR (as computed in Step 3) is lower than 15%, then Top-up tax is =
Calculate  15% (being the minimum tax rate)
Top-up Tax % minus
 ETR (as computed in Step 3)

Step 5 The top-tax tax rate % (computed in Step 4) is applied to what is called ‘Excess Profit’
Calculate which is the base on which top-up tax liability is computed.
Excess Profit (as mentioned above) is calculated by applying the following formula:
 GloBE Income (as computed in Step 1 above)

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Accounting Standards
THE CHARTERED ACCOUNTANT

Excess Profit less … following two downward adjustments for

Basis for Substance-based Income Exclusion (SBIE). viz.
computation of Payroll Carve out & Tangible asset Carve out
Top-up Tax
Points to note:
 As mentioned above, for the purpose of determining Excess Profit (which is the
‘base’ on which Top-up tax %age in step 4 above is applied) - the net GloBE
income for a particular jurisdiction is reduced by Substance-based Income
Exclusion (SBIE) for that particular jurisdiction
 As per Model GloBE Rules, such Substance-based Income Exclusion (SBIE) for that
particular jurisdiction is equal to:
10% of entity’s eligible payroll expenses within GloBE parameters +
8% of the carrying amount of tangible assets in that jurisdiction
(with both of them to be phased down to 5%, over 10-years)

Step 6  The GloBE Rules provide the mechanics for determining which entity (or, entities)
Calculate within a MNE group would apply the IIR, the UTPR, and/or the QDMT
Top-up Tax Liability  If top-up tax is payable, the charging provisions in Chapter 2 of the Model Rules
apply and these rules describe which entity within the MNE group will be liable to
and
pay top-up tax in respect of low-taxed income arising in a particular jurisdiction (as
Determine the explained earlier)
entities in the
 The top-tax tax liability for a particular jurisdiction is reduced by any applicable
Group that are
QDMTT
liable to Top-up
Tax

Quick Illustration – How Top-up tax is This has led to questions and concerns raised by
calculated?5 various stakeholders - seeking clarity from the
standard-setters on various accounting related
The following table simplistically illustrates how
considerations (including the following):
the top-up tax liability is calculated – in respect of
two of the constituent entities (say, S1 Limited and
S2 Limited) of a MNE group that are located in a
particular jurisdiction:

Accounting Issues arising out of BEPS Pillar

Two Model Rules
As jurisdictions prepare to amend their local tax laws
to introduce the global minimum top-up tax in line
with the GloBE Model Rules, stakeholders started
questioning how to account for the changes under
IFRS Accounting Standards. This is because ‘top-up
tax’ differs from income taxes per se that arise under
‘conventional’ tax regimes. Generally, income taxes are
based on an entity’s taxable profit. In contrast, top-up
tax may arise only if a MNE group pays insufficient
income tax at a jurisdictional level.

5
Considering that S1 Limited has ETR of 20%, top up tax is effectively applicable to S2 Limited. Further, the entities need not
necessarily be in low tax jurisdiction in the strict sense. However, top-tax tax liability will be triggered if the ETR is less than
15% in that jurisdiction (whether low-tax jurisdiction or not)

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Accounting Standards
THE CHARTERED ACCOUNTANT

Details S1 Limited S2 Limited Total

1. Profit for the year 20,000 20,00,000 20,20,000
2. Current income tax expense 4,000 76,800 80,800
3. Carrying amount of eligible tangible assets 16,00,000 3,00,000 19,00,000
4. Eligible payroll expenses 10,00,000 10,000 10,10,000
Given the above information and inputs, the relevant
Calculation are:
5. Covered Taxes = Sl # 2 above 80,800
6. GloBE Income = Sl # 1 above 20,20,000
7. Hence, ETR for the jurisdiction = (5/6) 4.00%
8. Therefore, Top Up Tax % age = (15% - 4% 11.00%
above)
9. Excess Profit will be calculated as follows:
GloBE Income = Sl # 1 above 20,20,000
Less: Payroll Carve - out under @ 10% of Sl # 4 1,01,000
Article 5.3.3 above
Less: Tangible Assets Carve - @ 8% of Sl # 3 1,52,000
out under Article 5.3.4 above
10. Excess Profit 17,67,000
11. Top- up Tax Liability under BEPS Pillar Two Model 1,94,370
Rule = (8 * 10)

 Whether top-up tax within the scope of IAS 12
Income Taxes
 If yes, then how to account for its deferred tax
impact?
 Whether the GloBE Model Rules create additional
temporary differences?
 Whether entities need to remeasure their existing
temporary differences in relation to deferred tax
recognised?
 How will entities determine the tax rate for
measuring the deferred tax impact of top-up tax?
Amendment to IAS 12 – Response to tackle
various accounting issues
What is the guidance in the Amended IAS 12?
To address these concerns, in May 2023, the
International Accounting Standards Board (IASB)
issued a narrow-scope amendment to IAS 12 Income
Taxes to introduce a temporary mandatory relief /
exception from accounting for deferred tax that
arises from legislation implementing the GloBE
model rules.

Accordingly, as required under newly inserted

paragraph 4A of the amended IAS 12 Income Taxes –
by way of exception - entities are mandatorily
exempted from (a) providing for and (b) disclosing -
deferred tax asset or liability related to top-up tax.
In other words, entities will neither recognize nor
disclose information about deferred tax asset or
liability related to top-up tax. However, as required

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Accounting Standards
THE CHARTERED ACCOUNTANT

under paragraph 88A of the amended IAS 12, entities
will be required to disclose that they have applied
the relief provided under the amended IAS 12
Income Taxes.
This amendment to IAS 12 is effective with immediate
effect and applies retrospectively in accordance with
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors.
Also, the IASB did not include a sunset date for the
temporary exception. Rather, it seeks to monitor
the implementation of the Pillar Two Model rules to
determine when to undertake further work. This means
that the temporary exception will continue to apply,
until the IASB decides either to remove it or to make
it permanent
The Amendment to IAS 12 Income Taxes also clarified
that the Standard applies:
 to income taxes arising from tax law enacted (or,
substantively enacted) to implement the Pillar Two
Model Rules published by the OECD; including
 to tax law that implements Qualified Domestic
Minimum Top-up Taxes (QDMTT)
Further, this narrow-scope amendment to IAS 12
Income Taxes requires affected entities to provide
new targeted disclosures in the notes to the accounts
in their financial statements of annual reporting
periods beginning on or after 1st January 2023 - to
compensate for the potential loss of information
resulting from the relief and to enable the users of
financial statements to understand the extent to
which an entity will be affected by the minimum
tax. However, no disclosures are required in interim
periods ending on or before 31 December 2023.
It is also pertinent to note that the disclosure
requirements under the amended IAS 12 will depend
on (a) the extent to which Pillar Two legislation has
been enacted in the jurisdictions, in which the group
operates and (b) whether Pillar Two legislation in
those jurisdictions is already in effect. Accordingly,
the following table depicts the new disclosure
requirements at the various stages under IAS 12 – both
before and after top-up tax is applicable:

Key Disclosure Requirements

Domestic Law In the period after domestic law is enacted or substantively enacted but is not yet
effective, an entity is required to disclose the following:
enacted
 Information that is known (or, can be reasonably estimated) - that helps users of its
or, financial statements to understand the entity’s exposure to Pillar Two income taxes at
the reporting date (as required under paragraph 88C & 88D)
substantively
enacted  However, the above information need not need to reflect ALL of the specific
requirements in the domestic legislation. Rather, an entity can provide an indicative
but range of the requirements
not yet effective  To comply with the disclosure requirements in paragraph 88C & 88D, an entity may
include both qualitative and quantitative information about its exposure to Pillar Two
income taxes at the end of the reporting period
 Qualitative Information

 How the company is affected by Pillar Two legislation and taxes

 In which jurisdictions the exposure arises (e.g. where the top-up tax is triggered
and where it will need to be paid)
 Quantitative Information:

 Indicative percentage of profits that may potentially be subjected to Pillar Two

income taxes and the average ETR applicable to those profits
 How average ETR would have changed if Pillar Two legislation had been effective

If information is not known (or, cannot be reasonably estimated) at the reporting date,
then an entity discloses a statement to that effect and information about its progress in
assessing its exposure

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Accounting Standards
THE CHARTERED ACCOUNTANT

Key Disclosure Requirements

After Only one disclosure is required under paragraph 88B, viz. disclose separately ….

‘top-up tax’ Current tax expense (or, income) related to top-up tax under Pillar Two Legislation

is effective This disclosure will help the users of financial statements better understand the relative
magnitude of those top-up taxes.

Of course, the entity will continue to disclose on the mandatory deferred tax accounting
relief under the amended IAS 12, Income Taxes.

Key Impact, takeaway and next steps - entity – inter alia – will depend on implementation
arising out of BEPS Pillar Two Rules at the jurisdictional level. Therefore, entities affected
by the Pillar Two model rules also need to
It is pertinent to note that many countries
monitor the developments on the
around the world are progressing
implementation, enactment and
towards implementing the
Many countries substantive enactment of Pillar Two
international tax reform under Pillar
Two model rules, that will subject
around the world are related rules in each relevant
large multinational enterprises progressing towards jurisdiction around the world.
(MNEs) to a global minimum implementing the international Entities will also need to
tax rate of 15% on their tax reform under Pillar Two get themselves ready to
profits in each jurisdiction, model rules, that will subject provide additional disclosures
starting 2024 (except UTPR). large multinational enterprises required under the Amended
Accordingly, current income IAS 12, which inter alia
(MNEs) to a global minimum
tax expenses in 2024 may requires that an entity
get impacted for an entity that tax rate of 15% on their profits in discloses known (or, reasonably
is affected by implementation each jurisdiction, starting estimable) information that
of the international tax reform 2024 (except UTPR). helps users of financial statements
and hence, affected entities will understand the entity’s exposure to
be required to establish appropriate Pillar Two income taxes. As such - for
processes and procedures to calculate periods in which the relevant legislation
the current income tax expense in the light of is enacted (or substantively enacted), but is not
yet effective - entities should be prepared to provide
the calculation mechanism expected under the BEPS
qualitative and quantitative information about its
Rules. However, deferred tax will not be impacted –
exposure to Pillar Two income taxes at the end of the
in view of the mandatory temporary exception issued
reporting period. This may require changes to the
by the IASB in May 2023. existing systems and processes on data gathering and
validation – to ensure that the required information
It also needs to be appreciated that Pillar Two model
is available on a timely manner in line with the newly
rules are complex and their overall impact on an
inserted disclosure requirements in the amended
IAS 12. To the extent that information is not known
(or, estimable) - entities will be required to make a
statement to that effect and describe their progress
in assessing their exposure. All of this may lead
to a situation wherein entities will be required to
allocate more time and resource for year-end financial
reporting.



Author may be reached at

anjanikhetan@gmail.com and
eboard@icai.in

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Accounting Standards
THE CHARTERED ACCOUNTANT

Ind AS 116 - Leases

Indian Accounting Standard (Ind AS) 116, is a financial
reporting standard that deals with accounting for leases.
It is a part of the Ind AS framework, which aligns with the
International Financial Reporting Standards (IFRS) 16.
Ind AS 116 replaces the previous standard, Ind AS 17, and
became effective for annual periods beginning on or after
April 1, 2019.
Ind AS 116 brings about significant changes in the
accounting treatment of leases, particularly for lessees, as it
CA. Paras Chadha eliminates the traditional operating lease off-balance-sheet
Member of the Institute treatment. The standard aims to provide more transparency
in financial reporting by recognizing leases on the balance
sheet and providing users of financial statements with
a more accurate representation of an entity’s financial
position and performance.

I
nd AS 116 eliminates the off-
balance-sheet treatment for
operating leases, requiring
lessees to recognize both lease
liabilities and right-of-use assets
on their balance sheet. This
provides a more accurate and
transparent depiction of an entity’s
financial position, helping users of
financial statements make more
informed decisions.
The adoption of Ind AS 116 can
have a significant impact on key
financial metrics such as leverage
ratios, return on assets, and
interest coverage ratios. Investors
and analysts need to be aware of
these changes to make accurate
assessments of a company’s financial
performance and risk profile.
Key Concepts
a) Definition of a Lease
An entity that obtains the right
to use an underlying asset for a
period of time in exchange for
consideration.
The arrangement can be
written, oral, or implied by the
parties’ actions. The agreement
must grant the lessee the
right to control the use of an
identified asset. The asset could
be tangible, such as property,
equipment, or vehicles, or
intangible, such as intellectual
property. The key is that the
lessee has the right to use (ROU)
the asset for a specified period.
The lease must pertain to a
specific, identifiable asset. The
asset may be explicitly identified
in the lease agreement, or it
may be implicitly specified by
being identified at the time the
asset is made available for use.
To comply with the above
definition following 4 conditions
must be satisfied:
Ind AS 116 eliminates the
distinction between finance
leases and operating leases for
lessees and introduces a single
accounting model for all leases.
However, the classification
criteria for lessors remain largely
consistent with the previous
standard, Ind AS 17.

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Accounting Standards
THE CHARTERED ACCOUNTANT

Leases

Indentified asset Customer has right to control the use

and
1 2 3 4

Explicitly/implicitly No substantive rights to Right to obtain substantially

Right to direct the use
specified substitute all economic benefits

b) Recognition and Measurement
At the commencement date, a lessee shall
recognize a right-of-use asset and a lease liability.
The lessee recognizes a lease liability at the
present value of the lease payments over the
lease term. This includes fixed payments, variable
payments based on an index or rate, amounts
expected to be payable for residual value
guarantees, and any exercise price of a purchase
option reasonably certain to be exercised by the
lessee.

Recognition and Measurement for the lessee can be understood with the help of the following table:

Lease liability-Initial & Subsequent Measurement

Initial Measurement (PV) Subsequent Measurement

Fixed Payments
(including in substance fixed) Initial Liability

Variable payments
Add: (linked to Index or rate) Add: Interest at EIR

Add: Exercise price of purchase option Add: Repayment of Lease Liability

Add: Penalities for terminating lease

Add: Residual value guarantees

Lessee cannot choose to measure lease liabilities
subsequently at fair value. This is consistent with the
Any upfront deposits are not measurement basic of finance lease liabilities under
included in the lease payments Ind AS 17.

ROU Assets-Initial & Subsequent Measurement

Initial Measurement Subsequent Measurement

PV of Lease liability Initial Cost

Add: Initial direct costs Add: Depreciation

Add: PV of Dismantling costs Add: Impairment

Add: Prepaid Lease Payments (e.g. Deposit)

The ROU is subsequently meaured using the cost
model. However, it may be revalued if it belongs to
Add: Lease incentive received a class of assets that are revalued as per Ind AS 16.

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Accounting Standards
THE CHARTERED ACCOUNTANT

Recognition and Measurement for lessor can be understood with the help of following table:

Particulars Finance Lease Operating Lease

Balance Sheet Derecognize the underlying asset. Continue to present the underlying asset.
Recognize a finance lease receivable (equal Add any initial direct costs incurred in
to the present value of the lease payments connection with obtaining the lease to the
to be received). carrying amount of the underlying asset.

Statement of Lessor will apportion the amount received
Profit & Loss between finance income and the reduction
in receivable.
Finance income will be computed to give a
constant periodic rate of return.
Recognize lease income over the lease
term, either on a straight-line basis or
another systematic basis. The lessor shall
apply another systematic basis if that
basis is more representative of the pattern
in which the benefit from the use of the
underlying asset is diminished.
Depreciation expense to be recognized
related to the underlying asset.

The ROU asset is initially measured at a cost that lease at each reporting date. If there is a
comprises an amount of the initial measurement significant event or change in circumstances,
of lease liability, adjusted for any prepaid or the lessee may need to revise its assessment.
accrued lease payments, initial direct costs, and any
d) Recognition and Measurement Exemption
restoration costs.
A lessee may elect not to recognize ROU assets
c) Lease Term and Implications
and lease liability to:
 Determining the lease term
(a) short-term leases; and
The determination of the lease term is a crucial
(b) leases for which the underlying asset is of low
aspect of applying Ind AS 116. The lease
value
term is the non-cancellable period for which a
lessee has the right to use an underlying asset, Key Presentation & Disclosure
including any periods covered by an option
a) For Lessee
to extend the lease if the lessee is reasonably
certain to exercise that option, or any periods Presentation
covered by an option to terminate the lease if
A lessee shall either present in the balance sheet,
the lessee is reasonably certain not to exercise
or disclose in the notes:
that option.
(a) right-of-use assets separately from other assets.
Reassessment at Each Reporting Date:
If a lessee does not present right-of-use assets
The lessee reassesses whether it is reasonably separately in the balance sheet, the lessee
certain to exercise an option to extend the shall:

Lease term can be understood with the help of following table:

Non-cancellable period (which includes the period covered by the option to terminate the
lease, if only a lessor has right to terminate a lease)
Lease term

Periods covered by an option by an option to extend the lease if the

lesseee is reasonably certain to exercise that option

Periods covered by an option to terminate the lease if the lessee is reasonably

certain not to exercise that option

 Lease term begins at the commencement date and include any rent free period.
 Termination options held by the lessor are not considered when determining the lease term.

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Accounting Standards
THE CHARTERED ACCOUNTANT

(i) include right-of-use assets within the
same line item as that within which the
corresponding underlying assets would be
presented if they were owned; and
(ii) disclose which line items in the balance
sheet include those right-of-use assets.
(b) lease liabilities separately from other liabilities.
If a lessee does not present lease
liabilities separately in the
balance sheet, the lessee shall
disclose which line items in
the balance sheet include
those liabilities. If a lessee does not
 Year-end carrying amount of right-of-use assets by
class of underlying asset;
 Maturity analysis for lease liabilities
Disclosure Related to Statement of Profit & Loss and
other comprehensive income
 Depreciation charge for right-of-use assets by class
of underlying asset;
 Interest expense on lease liabilities;
 Expense relating to short-term
leases for which the recognition
exemption is applied (leases

The requirement in present lease liabilities with a lease term of up

to one month can be
the above paragraph separately in the excluded);
does not apply
to right-of-use
balance sheet, the  Expense of low-value
assets that meet lessee shall disclose lease items for which the

which line items in the

recognition exemption is
the definition
applied;
balance sheet include
of investment
property, which shall  Expense relating to
be presented in the those liabilities. variable lease payments not
balance sheet as an included in lease liabilities;
investment property.
 Income from sub-leasing right-
In the statement of profit and of-use assets;
loss, a lessee shall present interest
 Gains or losses arising from sale-and-
expense on the lease liability separately
leaseback transactions.
from the depreciation charge for the right-of-use
asset. Interest expense on the lease liability is a Related to cash flow statement
component of finance costs, which paragraph
82(b) of Ind AS 1, Presentation of Financial  Total cash outflow for leases
Statements, requires to be presented separately b) For Lessor
in the statement of profit and loss.
For Finance lease
Disclosure Related to Statement of Balance Sheet
 Reconciliation between the gross investment
 Additions to right-of-use assets; in the lease at the end of the reporting period,

Following conditions should be considered while opting for exemption:

Low value assets Short-term leases

Lessee-canuse low-value asset’exemption:
Not to recognise ROU assets or lease
liabilities on the balance sheet.
Recognise lease expense on a straight-
line basic over the lease term or another
systematic basic.
Applies to assets that are not dependent on, or
highly interrelated with, other assets.
Intermediate lessor can not take low value
exemption.
Can be applied on a lease-by-lease basis.
Lessee-can use ‘short-term lease’ exemption
Not to recognise ROU assets or lease
liabilities on the balance sheet
Recognise lease experse on a straight-
line basis over the lease term or another
systematic basis.
Applies to leases with a lease term of 12 months
or less
A lease that contains a purchase option does not
qualify.
To be applied by class of underlying assets.

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Accounting Standards
THE CHARTERED ACCOUNTANT

and the present value of MLPs (≤ 1 year, > 1
year and ≤ 5 years, > 5 years)
 Unearned finance income
 Unguaranteed residual values accruing to the
benefit of the lessor
 The accumulated allowance for uncollectible
minimum lease payments receivable
Transition Challenges and Implementation
Issues
The transition from Ind AS 17 to Ind AS 116 involves
a significant change in the accounting treatment of
leases, particularly for lessees. The transition process
requires careful consideration of existing lease
agreements, financial reporting systems, and the
potential impact on financial statements.

For Operating leases Based on the experience of the listed companies

 Future minimum lease payments (≤ 1 year, >
1 year and ≤ 5 years, > 5 years)
General Disclosures
that have already transitioned to Ind AS 116 for their
quarterly reporting, following are the some of the
practical considerations that companies may consider
while evaluating the impact of the transition option:

 Contingent rents recognized as income in the Practical Application

period.
A) Accounting Treatment for Interest-Free Refundable
 A general description of the lessor’s material Security Deposits (SD) Paid/Payable in Instalments
leasing arrangements. for Assets Acquired under Leases

Transition Full retrospective Modified retrospective approach: Modified retrospective

options approach option A approach: option B
Approach Ind AS 116 mandates The lease liability is determined The determination of lease
its application for by computing the present value liability involves calculating
each period disclosed of remaining lease payments, the present value of remaining
in financial reports. discounted using the incremental lease payments, discounted
Calculations for lease borrowing rate (IBR) applicable at using the incremental
liability and Right of Use the date of initial application. borrowing rate (IBR) as of the
(ROU) asset should reflect The ROU asset is calculated as a date of transition.
the standard’s application carrying amount, reflecting the The ROU asset is derived by
from the commencement standard’s application since the adjusting the lease liability
of all lease agreements inception of lease contracts. This with any prepaid or accrued
presented in the financial calculation involves discounting lease payments associated
statements. using the incremental borrowing with leases recognized in the
rate (IBR) applicable at the date balance sheet immediately
of initial application. preceding the date of initial
application.

Data Requirement
Extensive To compute ROU, details For the computation of the
data of lease contract will be Right of Use (ROU) asset,
Collection required from the lease comprehensive details of
commencement date the lease contract from its
to the date of initial commencement date to the
application including, all date of initial application are
modifications thereof. necessary, encompassing all
modifications made during this
period. Additionally, several
practical expedients are available
for this transition approach,
such as excluding initial direct
costs and considering hindsight
in determining the lease term,
among others.
In order to compute the
ROU asset, it is necessary to
have detailed information
regarding the lease contract
from the transition date
onwards.
Various practical expedients
are available for this transition
approach, including but not
limited to, excluding initial
direct costs and considering
hindsight in determining the
lease term.

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Accounting Standards
THE CHARTERED ACCOUNTANT

Transition Full retrospective Modified retrospective approach: Modified retrospective

options approach
Non- At the start of each
availability of lease, certain details like
data the discount rate, initial
direct costs, discounted
dismantling costs, and
other related information
may not be readily
available.
option A approach: option B
Compared to the full Reduced efforts as compared
retrospective approach, there to all other transition options
is a reduction in effort since being prospective in nature.
determining the discount
rate is not required at the
commencement of the lease
but rather at the date of initial
application.

Quantification considerations
Complexity of The process has become
quantification more intricate because
any modifications to
leases necessitate the
remeasurement of the
lease liability each time a
modification occurs.
The process has become less As a prospective approach,
complex compared to the full there is no need for historical
retrospective approach because details on modifications and
adjustments to lease payments their subsequent adjustments.
resulting from modifications are
required, eliminating the need to
remeasure the lease liability with
each modification.

Other considerations
Impact on net The difference between ROU asset and lease liabilities along This transition approach
worth with adjustment of lease equalization reserve (i.e. LER) shall would be neutral for net worth
have impact on the net worth. as ROU and lease liability
would be the same.
Impact on Future charge to P&L will Generally, future charge to P&L Usually, future charge to
future Profit be lesser as compared to will be lesser as compared to profit & loss will be higher as
Before Tax the modified Option B modified Option B approach. compared to other transition
(PBT) approach options.

Impact on Improved EBITDA on account of savings in rental expenses. However, it will be neutral of the
EBITDA transition option selected.
Restatement Requires restatement of Restatement of previous year is Restatement of previous year
of previous previous years. not required. is not required.
year

Ind AS 116 does not provide specific guidance
on handling security deposits within lease
agreements. However, under Ind AS 109,
a refundable security deposit qualifies as a
financial asset. Consequently, if the time value of
money significantly impacts its value, it should
be discounted to its present value upon initial
recognition, typically at the lease commencement.
Determining the discount rate involves assessing
relevant guidance within Ind AS 109. In the
context of interest-free security deposits for non-
cancellable lease arrangements, the disparity
between the deposit’s present value and its actual
amount is treated as prepaid lease rental, thereby
contributing to the right-of-use (ROU) asset.
If the security deposit is paid in instalments, the
company will record the present value of the total
amount at fair value upon lease commencement
according to Ind AS 109. The variance between the
transaction amount and present value as calculated
above, will be recognized as part of the ROU asset
which will be depreciated over the lease term.
For deposit which is payable in tranches in future,
company will have to recognize a corresponding
other liability.
B) Is Goods and Services Tax (GST) paid by the
lessee to the lessor considered as part of the
consideration in the contract? GST is a tax based
on consumption, and it’s the responsibility of the
lessee to pay it to the government. Even though

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Accounting Standards
THE CHARTERED ACCOUNTANT

Comparison between Ind AS 116 and AS 19

Head Ind AS 116 AS 19

Lease model Single lease accounting model for Lessee.
Lease definition Control model has been introduced in the
lease definition.
Lease expense Lease expenses (interest) will be higher in
initial year and will be lower in later years.
Initial direct costs for Added to carrying amount of leased asset
lessors and recognised as expense over the lease
term.
ROU Concept of “Right to control the use” has
been introduced for Lessee.
Dual lease accounting model for Lessee
i.e. finance / operating lease.
No such control model exists.
Lease rental shall be recognised on
straight line basis over lease term
unless another systematic basis is more
representative of the time pattern in
which benefit from the use of the leased
asset is diminished.
Recognised as expense in the statement
of profit and loss in the period in which
incurred.
The Concept of “Right to use” does not
exist.

the lessee pays it to the lessor, it doesn’t count as
a lease payment because it’s ultimately directed
to the government, with the lessor acting as an
intermediary. Consequently, whether refundable
or not, GST shouldn’t be included in assessing the
lease liability or right-of-use asset. If refundable,
it should be noted under the balance with the
government authority; if not, it should be expensed
in the profit and loss statement.
C) Is Property Tax Paid by the Lessee Considered
as a Lease Payment According to Ind AS 116?
The reimbursement of property tax isn’t merely
the collection of tax by the lessor acting as an
intermediary for the tax authority. Instead, the
responsibility to pay property tax lies with the lessor
as the owner, regardless of whether the lessee pays
it directly to the tax authority or through the lessor.
In essence, property tax is a fundamental cost of
ownership, and the lessee’s payment to the lessor
compensates for the utilization of the asset, akin to
regular monthly payments. Therefore, reimbursing
property tax aligns with the definition of a lease
payment.
Lessor’s property tax payments are variable lease
payments, not contingent on an index or rate,
but rather on the property tax levied by the tax
authority, influenced by various factors and subject
to future changes.
Consequently, property tax expenses should be
recognized in the profit and loss statement as and
when they are incurred.
D) Accounting Treatment for Operating Lease Income
in the Books of Lessor with Escalations Aligned with
General Inflation Index Regardless of escalations
matching general inflation indexes, the lessor
should record lease income in a straight-line
manner.
Conclusion
Ind AS 116 is a comprehensive standard that brings
about a fundamental change in lease accounting,
aligning it more closely with economic reality. It
aims to enhance comparability and transparency in
financial reporting by requiring entities to recognize
and measure leases on the balance sheet. As with
any accounting change, entities need to carefully
navigate the transition, assess the impact on their
financial statements, and ensure compliance with the
standard’s requirements for accurate and transparent
reporting.
With a clearer picture of lease-related obligations and
assets, stakeholders, including investors, creditors, and
analysts, can make more informed decisions about
an entity’s financial health, risk exposure, and overall
performance.

Author may be reached at
paraschadha.ca@gmail.com and
eboard@icai.in

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1136

Financial Market
THE CHARTERED ACCOUNTANT

Indian Stock Market

Efficiency: Evidence from
Banking Sector
The Indian banking sector plays a vital role by fostering
economic growth. Evaluating the efficiency of this sector
is of paramount importance. This study investigated
the efficiency of the Indian stock market using the S&P
BSE BANKEX index as a sample. The analysis involved
studying the daily closing prices of this index from
January 2012 to July 2023. Several robustified tests were
employed to assess market efficiency, including the run
test, automatic portmanteau test, automatic variance ratio
Mallesha L test, and the R/S Hurst exponent. In conclusion, most
Research Scholar
of the tests confirm that the S&P BSE BANKEX returns
follow random walk behaviour indicating that the Indian
stock market is efficient. In this efficient market, gaining
abnormal profit is challenging. The study’s findings are
significant for investors, regulators, and policymakers.

Introduction

I
n recent years, the Indian stock
market has gained recognition
as a rapidly growing and
influential financial market on a
global scale (Mallesha & Archana,
Archana H.N.
2023). Consequently, researchers
Academician have turned their attention towards
examining the efficiency of the
Indian stock market. This study aims
to contribute to the existing body
of literature by analysing whether
the banking sector precisely follows
a random walk pattern. According
to the random walk hypothesis,
the stock prices reflect all the
available information and exhibit
a random pattern, rendering it
impossible to predict future price
movements based on historical
data (Fama, 1965, 1970). If the
banking sector aligns with this
hypothesis, it suggests that the
market is efficient, and any attempts
to outperform it through stock
selection or market timing would
be futile. On the other hand, if the
hypothesis is refuted, it indicates
the presence of predictable patterns
or inefficiencies in the market,
which presents opportunities for
investors to achieve superior returns
(Dsouza & Mallikarjunappa, 2015).
The S&P BSE BANKEX index,
a sectoral index of the Bombay
Stock Exchange (BSE) of India,
represents the performance of the
banking sector within the country.
The banking sector plays a critical
role in the Indian economy as a key
intermediary, facilitating economic
growth (Lodha & Kumawat, 2022).
Understanding the behaviour of
the S&P BSE BANKEX index holds
paramount importance for investors,

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Financial Market
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
THE CHARTERED ACCOUNTANT
policymakers, and market participants, as it provides
insights into the overall health and stability of the Indian
banking sector (Hossain & Maitra, 2020). This research’s
findings have significant implications for investors,
regulators, and policymakers in India, as they can inform
decision-making and market strategies.
The study builds upon prior research conducted
by Kalsie (2012) on weak form market efficiency
or random walk hypothesis for the National Stock
Exchange, which utilised run tests with 30-day average
prices from 2001 to 2007. Kushwah et al. (2013)
also examined the weak form of market efficiency
in the National Stock Exchange using run tests and
concluded that the Indian stock market is efficient in
its weak form. On the other hand, Kumar & Kumar
(2017) found that the real estate sector in India is not
functioning optimally in terms of weak-form efficiency.
Chavarkar and Nayak (2022) have investigated the
efficiency of the Indian pharmaceutical stocks in both
pre-pandemic and pandemic periods. By building on
these prior studies and focusing on whether the Indian
stock market follows a random walk hypothesis, this
research seeks to shed more light on the efficiency of
the Indian stock market.
Research Methodology
The study utilised secondary data as the basis of our
investigation. The sample comprised daily closing
prices of the S&P BSE BANKEX indices. The study was
conducted over a substantial period i.e., from April
2012 to July 2023, encompassing 2799 data points
obtained from www.bseindia.in. In order to evaluate
the efficiency of the Indian stock market, the study
applied several robustified statistical tests, namely
the runs test, automatic portmanteau test, automatic
variance ratio test, and the R/S Hurst exponent. It is
worth noting that the S&P BSE BANKEX prices were
transformed into log returns to facilitate our time
series analysis.
S&P BSE BANKEX
60,000
50,000
40,000
30,000
20,000
10,000
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Figure 1: Plot of S&P BSE BANKEX Market Price,
2012-2023 S&P BSE BANKEX Returns
.12
.08
MARCH 2024
.04
.00
30,000
20,000 1137
10,000
S&P BSE BANKEX Returns
.12
.08
.04
.00
-.04
-.08
-.12
-.16
-.20
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Figure 2: Plot of S&P BSE BANKEX Returns,
2012-2023
Runs Test
A runs test, commonly named the Wald–Wolfowitz
runs test, was developed in 1940 (Wald & Wolfowitz,
1940). The run test is a non-parametric test that
helps determine whether the consecutive price
change is independent (Kushwah et al., 2013).
If the actual number of runs is close to the
expected number, it indicates that the results
are generated by a random process (Roy, 2018).
The null hypothesis is that the price changes are
independent and move at random.
Automatic Portmanteau Test
The automatic portmanteau test, also known as
the robustified portmanteau test, is a statistical
technique employed to evaluate the adequacy
of a time series model (Escanciano & Lobato,
2009). Its primary purpose is to examine the null
hypothesisi.e., that the time series data are devoid
of serial correlation or autocorrelation. Unlike the
conventional portmanteau tests, this test offers a
robust alternative less susceptible to outliers or
heavy-tailed distributions.
Automatic Variance Ratio Test
The initial variance ratio test assumes that the price
movements follow a random walk pattern. It faces
challenges in determining suitable values for q and
p. An alternative, i.e., the automatic variance test
(AVR) by Choi (1999), addresses this concern. The
AVR uses a data-dependent procedure to determine
optimal q and p, enhancing reliability. The variance
ratio compares q periods’ variance to that of a single
period, expecting a ratio of 1 for a random walk
price process (Dias et al., 2020). The null hypothesis
suggests no autocorrelation in the series.
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Financial Market
THE CHARTERED ACCOUNTANT

Hurst Exponent Table 2: Result of Run Test

The Hurst exponent serves as a valuable metric for
assessing the efficiency of the financial market. It S&P BSE BANKEX
enables the identification of long-term memory within runs 1350
financial time series data, thus revealing their efficiency n1 1399
level. The concept of the Hurst exponent was initially
n2 1399
introduced by Hurst in 1951 to analyse long-range
dependence in the hydrological time series. By n 2798
calculating the Hurst exponent values, financial indices statistic -1.8908
can be categorised into three distinct groups based on P-value 0.0587
their specific characteristics: Source: Authors’ estimations
 0 ≤ H < 0.5: Market efficiency is not confirmed. Note: Significant @ 5 % level
The series shows a fat-tailed distribution, anti-
persistent behaviour, and negatively correlated Table 2 displays the p-value of 0.0587, which suggests
returns. an approximately 5.87% chance of observing the given
data if the null hypothesis (returns follow randomly)
 H = 0.5: Market efficiency is confirmed. The is true. This value is close to but slightly higher than
series exhibits random Brownian motion, with the conventional significance level of 0.05. The study
uncorrelated returns, no memory, and cannot indicates that the observed returns are independent
“beat” the market. and move at random.
 0.5 < H ≤ 1: Market efficiency is low. The series
maintains a fat-tailed distribution but now Table 3: Results of Autocorrelation Tests
demonstrates persistent behaviour with positively S&P BSE BANKEX Stat P-value
correlated returns, indicating the presence of a
market trend. Auto. Portmanteau Test 3.0656 0.0800
Auto. Variance Ratio Test 1.1567 0.2560
Results and Discussions Source: Authors’ estimations
The data analysis was conducted utilising the RStudio Note: Significant @ 5 % level
version 2023.06.1-524, a statistical software.
The analysis of returns’ autocorrelation was conducted,
Table 1: Descriptive Statistics of S&P BSE BANKEX shown in Table 3, which includes the results of both
the automatic portmanteau test and the automatic
Stats S&P BSE BANKEX variance ratio test. The p-value obtained from the
Mean 0.0005 automatic portmanteau test was 0.0800, while the
Standard. Deviation 0.0150 p-value from the automatic variance ratio test was
Skewness -0.6947 0.2560. These probability values exceed the 0.05
significance level, indicating that the observed series
Excess. Kurtosis 12.9016
are not autocorrelated. The null hypothesis of no
Minimum -0.1840
autocorrelation is rejected and suggests that the S&P
Maximum 0.1017 BSE BANKEX returns move randomly, making the
Jarque Bera Test 19672 generation of abnormal profits through autocorrelation
P-value 0.0000 somewhat challenging.
Observations 2799
Source: Authors’ estimations Table 4: Result of R/S Hurst exponent
Note: Significant @ 5 % level S&P BSE BANKEX

Before conducting data analysis, obtaining an R/S Hurst estimation 0.5044

overview of the fundamental statistical characteristics
of time series data is essential. Table 1 summarises the
descriptive statistics and normality tests performed
on the S&P BSE BANKEX dataset. Its distribution is
negatively skewed, indicating a longer left tail. The
high excess kurtosis suggests heavy tails and potential
outliers. The data is not normally distributed according
to the Jarque Bera test (p-value = 0.0000). It consists
of 2799 observations.
Source: Authors’ estimations
The results of the R/S Hurst exponent analysis are
presented in Table 3. The value of near 0.5 indicates
that the time series may not exhibit significant long-
term trends or persistent patterns. Instead, it displays a
more random or unpredictable behaviour, resembling
a random walk. A Hurst exponent close to 0.5 is
commonly linked to a random walk behaviour. These

MARCH 2024 82 www.icai.org


Financial Market
THE CHARTERED ACCOUNTANT
findings from the study confirm that the observed
returns index follows a random walk hypothesis or
behaves similarly to the Brownian motion.
Conclusion
The study investigated the efficiency of the Indian
stock market using the S&P BSE BANKEX index.
Various statistical tests were employed to conduct
the analysis, including the runs test, automatic
portmanteau test, automatic variance ratio test, and
the R/S Hurst exponent. The run test results indicated
that the index returns follow a random pattern.
Additionally, the automatic portmanteau and variance
ratio tests revealed that the S&P BSE BANKEX returns
did not display significant autocorrelation, implying
that abnormal returns are unlikely. Furthermore, the
R/S Hurst exponent confirmed that the observed
return series exhibit random behaviour. In conclusion,
the Indian stock market adheres to the random
walk model concerning the S&P BSE BANKEX. This
suggests that stock prices are unpredictable and
move randomly, making achieving abnormal profits
in this efficient market challenging. Nevertheless,
it is essential to acknowledge that this research has
limitations, primarily centred around its exclusive
focus on the banking sector index. While the study
provides valuable insights into the efficiency of the
Indian market, it also underscores the importance of
conducting further research encompassing a diverse
range of indices and stocks listed in the Indian stock
market. A more comprehensive understanding of
market efficiency can be achieved by doing so.
References
 Chavarkar, S. S., & Nayak, K. K. M. (2022).
Analysis of Randomness in the Pharmaceutical
Sector of Indian Stock Market: Pre- and During
Covid-19 Period. Orissa Journal of Commerce,
43(3), 160–175. https://doi.org/10.54063/
ojc.2022.v43i03.12
 Dsouza, J. J., & Mallikarjunappa, T. (2015).
Does the Indian Stock Market Exhibit Random
Walk? Paradigm, 19(1), 1–20. https://doi.
org/10.1177/0971890715585197
 Escanciano, J. C., & Lobato, I. N. (2009). An
automatic portmanteau test for serial correlation.
Journal of Econometrics, 151(2), 140–149
 Fama, E. F. (1965). The Behavior of Stock-Market
Prices. The Journal of Business, 38(1), 34–105
 Fama, E. F. (1970). Efficient CapitalMarkets:
A Review of Theory and Empirical Work. The
Journal of Finance, 25(2), 383. https://doi.
org/10.2307/2325486
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 Hossain, T., & Maitra, B. (2020). Monetary Policy,
Trade Openness and Economic Growth in India
Under Monetary-targeting and Multiple-indicator
Approach Regimes. Arthaniti: Journal of
Economic Theory and Practice, 19(1), 108–124.
https://doi.org/10.1177/0976747919852859
 Kalsie, A. (2012). Study of the Weak Form of
Market Efficiency: An Empirical Study of Indian
Stock Market. FIIB Business Review, 1(2), 37–45.
https://doi.org/10.1177/2455265820120208
 Kumar, S., & Kumar, L. (2017). Market
Efficiency in India: An Empirical Study of
Random Walk Hypothesis of Indian Stock
Market NSE Midcap. SSRN Electronic Journal.
https://doi.org/10.2139/ssrn.3078089
 Kushwah, S. V., Negi, P., & Sharma, A. (2013).
The Random Character of Stock Market Prices.
6(1), 10
 Lo, A. W., & MacKinlay, A. C. (1989). The size
and power of the variance ratio test in finite
samples: A Monte Carlo investigation. Journal of
Econometrics, 40(2), 203–238
 Lodha, S., & Kumawat, E. (2022). Impact of
Lockdown Announcement on Indian Banking
Sector: An Event Study Approach. Orissa
Journal of Commerce, 43(3), 29–40. https://doi.
org/10.54063/ojc.2022.v43i03.03
 Mallesha, L., & Archana, H. N. (2023). Impact of
Hindenburg Research Report on the Stock Prices
of Adani Group Companies: An Event Study.
Asia-Pacific Journal of Management Research
and Innovation, 19(1), 40–46
 Roy, S. (2018). Testing Random Walk and Market
Efficiency: A Cross-Stock Market Analysis.
Foreign Trade Review, 53(4), 225–238.
https://doi.org/10.1177/0015732518797183
 Wald, A., & Wolfowitz, J. (1940). On a Test
Whether Two Samples are from the Same
Population. The Annals of Mathematical
Statistics, 11(2), 147–162.
https://doi.org/10.1214/aoms/1177731909

Authors may be reached at
malleshnaikmalla@gmail.com and
eboard@icai.in
83 www.icai.org
1140

Sustainability
THE CHARTERED ACCOUNTANT

Green Finance-
The Emerging Future
In the ever-evolving landscape of the twenty-first century,
heightened environmental awareness has spawned a
new financial paradigm- green financing. Green finance
is a financial approach that supports environmentally
sustainable projects, aiming to protect the planet while
promoting economic growth. It’s like investing in a greener
future for both the environment and our future generation.
Its scope involves funding eco-friendly projects, from
clean energy to sustainable agriculture. The impact of
Arup Bramha Mohapatra
Research scholar
green finance is a cleaner, healthier planet with reduced
pollution and a brighter future for all. This conceptual
paper delves into the essence of green finance, addressing
its definition, challenges to implement, and its profound
implications on the economy and the environment. As we
navigate the complexities of our modern world, this paper
emphasizes the fundamental importance of green finance,
asserting that it is a pivotal instrument for realizing
sustainable development in the future.

I
n response to the pressing
Dr. Venkateswara Rao environmental challenges
Bhanotu confronting our planet today,
green finance has emerged as an
Academician
increasingly vital tool. The call for
a more sustainable and resilient
economy grows louder as people
throughout the world become more
conscious of the negative effects
that human activity has on the
environment. By aligning financial
flows with environmentally and
socially responsible behaviours,
green finance offers a possible
path to achieving this shift. Green
finance, at its core, refers to
financial instruments, goods, and
services that assist sustainable
development and climate change
mitigation. It includes a wide
range of activities such as green
bonds, green loans, sustainable
investment funds, and eco- friendly
insurance products. Green finance’s
fundamental premise is to direct
capital towards projects and
initiatives that create a low-carbon,
resource-efficient economy while
also delivering positive social and
environmental consequences.
The significance of green finance
extends beyond its capacity to
yield environmental benefits. It is
a powerful driver for mobilizing
substantial financial resources.
By advocating for the redirection
of capital away from ecologically
detrimental activities and towards
investments in clean technologies,
renewable energy, energy efficiency,
and sustainable infrastructure,
green finance plays a crucial role in
reshaping our financial landscape.
(Liu and Wu, 2023).[1]

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Sustainability
THE CHARTERED ACCOUNTANT

Green finance refers to a wide range of financial goods Green Microfinance: Green microfinance targets the
and services that encourage environmentally friendly provision of financial services to low-income individuals
activities and sustainable development. Some of the and small businesses engaged in ecologically sustainable
most important green financing products are: activities, offering services like loans and savings
accounts. It supports small-scale renewable energy
Green Bonds: Green bonds are fixed-income projects, eco-friendly agricultural practices, and other
instruments explicitly dedicated to fund initiatives green initiatives that benefit vulnerable populations.
with a positive environmental or climate impact. The
profits from these bonds are used solely to support Review of literature
projects such as renewable energy projects, energy-
In order to address critical issues regarding
efficient buildings, sustainable transportation, waste
sustainability and environmental preservation, green
management, and other environmentally beneficial
finance has emerged as a vital field of study. This
endeavours.
literature review aims to provide an overview
Green Loans: Green loans are specialist of the subject, highlight notable findings,
loans used to fund green projects address essential topics, and discuss
or investments. These loans the challenges it faces. The
are often used to finance evaluation is drawn from various
renewable energy installations, Green bonds are sources, including academic
energy-efficient building fixed-income instruments books and papers.
modifications, sustainable
agriculture practices, and explicitly dedicated to One significant study
conducted by Ozili (2022)[2]
other environmentally friendly
initiatives. Green loans fund initiatives with a explores the central themes
in green finance literature.
frequently offer favourable positive environmental or It delves into strategies
terms and conditions to
incentivize borrowers to climate impact. to enhance green finance,
initiatives for rendering green
adopt green technologies and
investments profitable, the role of
practices.
technology and policy in promoting
Sustainable Investment Funds: green financing, the functions of
Sustainable or green investment funds regulators and financial institutions, and
are investment vehicles that pool capital from the challenges associated with green finance.
investors to invest in companies, projects, or assets The findings underscore the substantial potential of
that adhere to Environmental, Social, and Governance green finance in influencing society, the environment,
(ESG) criteria. These funds focus on companies with and the battle against climate change. However, it also
strong ESG performance, such as those involved exposes a range of concerns that must be resolved,
in renewable energy, clean technology, sustainable such as a lack of knowledge, conflicting definitions,
agriculture, and responsible manufacturing. and policy coordination issues.

Green Insurance Products: Green insurance solutions
are designed to address the risks connected with
climate change and environmental degradation.
Renewable energy installations, sustainable
infrastructure projects, climate-related disasters (such
as floods or droughts), and other environmental
hazards are all covered by these products. They
promote risk management strategies that improve
long-term viability and resilience.
Carbon Markets: Carbon markets are financial
platforms for exchanging carbon credits or offsets.
They let businesses and organizations to invest in
emission-reduction initiatives or purchase carbon
credits to offset their own emissions. Carbon markets
are critical for motivating emission reductions and
easing the transition to a low-carbon economy.
Another study by Debrah (2002)[3] examines the
green financing gap and potential avenues for
future research. It underscores the challenges and
constraints faced by stakeholders in the adoption of
green financing. The study emphasizes the necessity
for governments, financial institutions, and regulators
to coordinate their efforts to foster green finance
and provide enticing incentives for sustainable
investments. This interdisciplinary field of “green
finance” is integral to global efforts to combat climate
change and its repercussions. The attainment of the
goals set by the Paris Agreement and the United
Nations’ Sustainable Development Goals (SDGs)
hinges on its progress. As a pivotal aspect of the
financial and investment industry’s future, green
financing demands a comprehensive understanding
and is an evolving interdisciplinary research field.

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Sustainability
THE CHARTERED ACCOUNTANT

Another study conducted by Mashari et al., investment decisions, it contributes to long-

2023[4] sought to review the literature
on green finance in connection
to carbon pricing and emission
control. In order to conduct
a bibliometric analysis on
the Scopus database, the
study used the VOS viewer
term economic stability and societal
advancement.
Green financing  Mitigating Climate
facilitates the raising Change: Green finance, by
mobilising investments in
of capital for long-term renewable energy, energy

projects, particularly in
framework, and it was able to efficiency, and sustainable
collect 506 publications from technologies, plays a critical
2014 to 2022 that dealt with industries where access to role in mitigating climate
various areas of sustainable change. It encourages the
finance and carbon trading. capital has traditionally development and deployment
The findings suggest that there been challenging. of sustainable energy sources,
thereby reducing greenhouse gas
is plenty of potential for further
investigation into the relationship emissions and supporting a more
between carbon trading and green sustainable energy system.
finance programs or financing, which
 Risk Mitigation: Green finance attempts
can increase the success of carbon trading
to manage the financial risks associated with
activities.
climate change and environmental deterioration.
Finally, an article by Pham et al., 2020[5] introduced The incorporation of ESG elements into
green finance, green banking, and green credit cards. investment analysis enables investors to identify
It also conducted an overview of the prior studies on and address risks linked to climatic impacts,
the subject, offering suggestions on how important it regulatory changes, and reputational harm. This
is for Vietnam’s national economy to develop through risk-aware approach enhances the resilience of
sustainable green finance and green banks. financial institutions and portfolios.

In summary, the literature reviewed highlights the
importance of green finance and its potential impact
on the overall economy. While the field is continuously
evolving, it has the capacity to play a pivotal role in
addressing environmental challenges and promoting
sustainable development.
Research Methodology: The study adopts a qualitative
research methodology, focusing on the concept of
green finance, its associated challenges, its impact,
and the rationale behind choosing green finance.
 Access to Capital: Green financing facilitates
the raising of capital for long-term projects,
particularly in industries where access to capital
has traditionally been challenging. It helps close
the funding gap for green initiatives, allowing for
the expansion of renewable energy installations,
sustainable infrastructure projects, and other
environmentally beneficial activities.
 Investor Demand and Reputation: Green
finance responds to the increasing demand

Need for Green finance: Green finance is very much

required due to the following reasons:

 Addressing Environmental Challenges: Green

finance serves as a valuable tool for tackling
pressing environmental issues such as climate
change, biodiversity loss, and pollution. It
promotes the shift towards a low-carbon,
resource-efficient economy by redirecting
financial flows towards environmentally friendly
enterprises and initiatives.

 Sustainable Development: Green financing is

consistent with the principles of sustainable
development, which attempt to balance economic
growth, social well-being, and environmental
protection. By integrating Environmental, Social,
and Governance (ESG) considerations into

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Sustainability
THE CHARTERED ACCOUNTANT
from investors for sustainable and responsible
investment options. Investors are increasingly
factoring in ESG considerations in their decision-
making, realising the long-term value and risk
management benefits of green investments.
Green finance can assist financial institutions and
businesses in enhancing their reputation and
desirability.
 Policy Alignment: Green financing is aligned with
both national and international policy goals, such
as the SDGs and the Paris Climate Agreement.
It offers a platform for governments and
policymakers to direct private sector investments
toward objectives for sustainable development,
strengthening policy efforts, and establishing
synergies between public and private funding.
How does Green Finance resolve issue: Green
finance addresses environmental issues by mobilising
capital for long-term projects, shifting investment
patterns toward environmentally friendly initiatives,
managing environmental risks, encouraging green
technology innovation, aligning with supportive
policies, and promoting stakeholder engagement.
It closes the financial gap for sustainable initiatives,
enabling the growth of renewable energy, energy
efficiency, and sustainable infrastructure. By diverting
funds from ecologically detrimental operations, it
encourages enterprises to adopt sustainable practices.
Additionally, green finance incorporates environmental
concerns into financial decision-making, allowing for
more effective risk management and financial stability.
It fosters innovation by providing resources for
green technology research and development, aligns
with policy objectives, and promotes stakeholder
participation in addressing environmental issues
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1143
collectively. Green financing plays a pivotal role in
these mechanisms.
Challenges for Green Finance: Green finance
confronts numerous obstacles that must be overcome
for effective implementation and widespread
adoption. These include:
 Lack of Standardization: Green finance currently
lacks standardized definitions, measurements,
and reporting mechanisms. This reduces green
investment transparency, comparability, and trust.
Developing uniform standards and rules is crucial
to establish consistent processes and provide
credible information for investors and stakeholders.
 Data Availability and Quality: The scarcity and
poor quality of environmental and sustainability
data makes it challenging to assess the
environmental impact of projects and businesses.
Access to reliable data on environmental
performance, carbon footprints, and other ESG
aspects is vital. Improvements are needed in
data collection, verification, and accessibility.
 Pricing and Valuation Challenges: Evaluating
the environmental and social impacts of green
initiatives can be difficult, as it’s challenging to
assign appropriate pricing to environmental
benefits and risks. Developing robust
methodologies and valuation frameworks is
essential to analyze the economic and financial
impacts of green projects accurately.
 Financial Viability and Cost-Effectiveness: Many
green projects have higher upfront costs or
longer payback periods compared to traditional
options, making them appear less financially
attractive. Dispelling the misconception that
green investments are riskier or less rewarding is
critical. Innovative finance channels, incentives,
and favourable regulatory regimes can contribute
to the financial viability and cost-effectiveness of
green projects.
 Capacity and Knowledge Gaps: Many financial
institutions and investors often lack the essential
information, skills, and capacity to evaluate and
integrate Environmental, Social, and Governance
(ESG) aspects into their investing processes.
Green finance techniques must be mainstreamed
by increasing capacity and awareness through
training programs and knowledge sharing efforts.
 Policy and Regulatory Uncertainty: Inconsistent or
weak policy frameworks and regulatory regimes
can create uncertainty for green investments.
Clear and stable policies, supportive laws,
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Sustainability
THE CHARTERED ACCOUNTANT

and long-term commitments from green bonds has now exceeded trillions
governments are necessary to of dollars, signifying a promising trend
create an environment conducive towards sustainable investments.
to the growth of green finance. Furthermore, sustainable

 Market Liquidity and Size:

Green finance has a investment funds and green

The market for green
finance products, such
as green bonds and
sustainable investment
significant effect on banking products have gained
traction, giving investors more
addressing environmental possibilities for supporting
challenges by directing ecologically responsible

funds, remains relatively investments towards enterprises.

small as compared to the projects that advance  Policy Support:

broader financial industry.
To scale up green finance
ecological
and meet sustainability sustainability.
goals, it’s essential to increase
market liquidity, diversify green
financial products, and attract a
broader investor base. Overcoming
these challenges requires collaborative efforts
from governments, financial institutions,
corporations, and civil society, working together
cohesively. Continuous research, policy
advancements, capacity building, and market
innovations are needed to unlock the full
potential of green finance in driving sustainable
development.
Progress in Green Finance field: In recent years,
green finance has witnessed substantial strides
forward, highlighting an amplified understanding of
its pivotal role in mitigating environmental challenges
and fostering sustainable development. Numerous
critical sectors have experienced noteworthy
accomplishments, some of which are mentioned
below:
 Market Growth: The realm of green finance
has experienced substantial growth in recent
years. One prominent area of expansion has
been the issuance of green bonds, which have
reached record highs. The global market for
Governments and regulatory
bodies around the world have
expanded their commitment to
green financing. Many governments
have set up rules and legislation in
place to encourage and enable green
investments. This includes the creation of
green finance norms, tax breaks, subsidies, and
mandated sustainability reporting. International
treaties such as the Paris Agreement have
bolstered the policy framework for green finance,
propelling global efforts toward a low-carbon
economy.
 Mainstream Integration: Green finance is
beginning to transition from a specialised
business to a more mainstream approach.
Environmental, Social, and Governance (ESG)
aspects are increasingly being considered by
financial institutions and asset managers when
making investment decisions. Investor demand
for sustainable investments, as well as the
identification of ESG risks and possibilities in
financial portfolios, are driving this integration.
To accommodate the increased interest in
green finance, many financial institutions have
established specialised sustainability divisions and
strategies.
 Innovation and Product Diversification:
Green finance has seen product diversity and
innovation, providing investors with a greater
range of possibilities. Aside from green
bonds, new financial products and services
such as green loans, green insurance, green
microfinance, and green investment funds have
seen substantial growth. These novel solutions
appeal to various industries, locations, and
investor preferences, making green finance more
accessible and inclusive.

 Enhanced Reporting and Disclosure: In the financial

sector, there has been an increasing emphasis
on environmental reporting and disclosure.
Companies are increasingly being compelled to

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Sustainability
THE CHARTERED ACCOUNTANT
report their environmental performance and risks
related to climate change. Reporting frameworks
like the Task Force on Climate-related Financial
Disclosures (TCFD) have gained traction, increasing
transparency and allowing investors to make more
informed judgments.
Collaboration and Partnerships: Collaborative efforts
involving diverse stakeholders are essential for
advancing green finance. The establishment of public-
private partnerships, industry collaborations, and
knowledge-sharing initiatives has been instrumental in
sharing best practices, promoting common standards,
and building capacity within green finance. These
alliances foster improved coordination and synergy
among stakeholders, leading to a more successful
execution of green finance initiatives.
Despite significant progress, challenges remain in
areas such as standardization, data quality, financial
sustainability, and regulatory consistency. Nevertheless,
the noteworthy advancements and successes observed
in the realm of green finance underscore its potential to
play a pivotal role in promoting a more sustainable and
resilient global economy. Looking ahead, the coming
years will undoubtedly witness continued dedication,
collaborative efforts, and innovative solutions aimed at
elevating the field of green finance.
Impact of Green finance: Green finance has a
significant effect on addressing environmental
challenges by directing investments towards projects
that advance ecological sustainability. In doing so, it not
only stimulates economic growth but also generates
eco-friendly job opportunities and enhances financial
stability. Moreover, green finance contributes to social
benefits by improving living conditions and supporting
human development goals. It enhances investor
confidence and reputation by prioritizing sustainability
and social considerations. Green finance aligns with
global frameworks, promoting international cooperation
and policy harmonization. The implementation of
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1145
the SDGs contributes to environmental sustainability,
economic prosperity, social well-being, and the
achievement of sustainable development objectives.
Conclusion
Finally, green financing has emerged as a significant
tool for tackling environmental concerns and
supporting sustainable development. Green finance
has achieved remarkable success through mobilising
resources, reshaping investment patterns, managing
risks, stimulating innovation, aligning with regulations,
and boosting stakeholder participation. It has
made significant contributions to environmental
sustainability, economic prosperity, and social well-
being. However, challenges such as standardisation,
data quality, and financial feasibility must still be
addressed. Green finance possesses the potential
to lead the transition toward a more sustainable and
resilient future, benefiting both the current and future
generations with ongoing efforts, collaboration, and
innovation. Beyond its financial rewards, it plays a
pivotal role in addressing significant global challenges
and promoting a greener, more inclusive economy.
References
 Liu, C. and Wu, S.S. (2023), “Green finance,
sustainability disclosure and economic
implications”, Fulbright Review of Economics
and Policy, Vol. 3 No. 1, pp. 1–24. https://doi.
org/10.1108/FREP-03-2022-0021
 Ozili, Peterson K, Green Finance Research
Around the World: A Review of Literature (2022).
International Journal of Green Economics,
Forthcoming, Available at SSRN: https://ssrn.
com/abstract=4066900
 Debrah, C., Darko, A., & Chan, A.P. (2022). A
bibliometric-qualitative literature review of green
finance gap and future research directions.
Climate and Development, 15, 432–455
 Mashari, D.P., Zagloel, T.Y., Soesilo, T.E.,
& Maftuchah, I. (2023). A Bibliometric and
Literature Review: Alignment of Green Finance
and Carbon Trading. Sustainability
 Pham, X.P., Khải, M., Trưng, H.B., Nội, H., &
Nguyen, T.H. (2020). Green Finance: Literature
Review

Authors may be reached at
eboard@icai.in
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THE CHARTERED ACCOUNTANT

The Role of Finance and

ESG Leaders in Indian Context
Implementing ESG practices is crucial for driving
sustainable and responsible business strategies. This
article explores the collaboration between Finance
and ESG leaders who have deep a understanding and
knowledge of sustainability and climate change. ESG
Leaders understands how business affects the world
from operations to value chains (not just optimise their
own businesses, but suppliers’ operations and customers
lives as well) and from communities to planet. They
CA. Suresh Jain
complement each other in their efforts to integrate
Member of the Institute
ESG principles into organizational decision-making. By
leveraging financial expertise and understanding the
broader ESG landscape, these leaders can collaborate
effectively, align financial goals with sustainable practices,
and create long-term value for stakeholders. This article
discusses the synergies between finance and ESG leaders,
highlighting the importance of their partnership in
achieving successful ESG implementation.

E
SG factors are increasingly
gaining traction in India as
organisations recognize the
importance of sustainable and
responsible business practices.
With a diverse and rapidly
developing economy, India faces
unique environmental and social
challenges, making the integration
of ESG principles crucial for
long-term success. In India,
regulatory bodies such as the
Securities and Exchange Board
of India (SEBI) and the Ministry of
Corporate Affairs have introduced
guidelines and regulations to
enhance corporate governance
practices. By adhering to these
guidelines and establishing strong
governance structures, companies
can inspire investor confidence
and attract sustainable capital.
The Business Responsibility and
Sustainability Reporting (BRSR)
framework is an initiative by
the Securities and Exchange
Board of India (SEBI) aimed at
promoting sustainability reporting
and disclosure among Indian
companies. The BRSR framework,
introduced by the SEBI in 2021,
mandates the top 1,000 listed
companies in India to disclose
their sustainability performance as
part of their annual reports. The
framework aligns with the globally
recognized reporting standards,

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Sustainability
THE CHARTERED ACCOUNTANT
including the Global Reporting Initiative (GRI) and
the Sustainable Development Goals (SDGs), enabling
companies to communicate their ESG practices
effectively. The applicability of BRSR in India signifies
the increasing recognition of ESG practices and
their impact on business sustainability
The BRSR framework requires
companies to report on a
range of sustainability-related Governance plays a
parameters, including
environmental, social, and critical role in building
governance factors. Some trust and maintaining the
of the key features of integrity of organizations.
Strong corporate
BRSR are:
Other than the threshold governance practices
of the top 1000 listed
companies, BRSR covers ensure accountability,
various aspects, including transparency, and
governance, environment,
social, and stakeholder
ethical conduct.
relationships. Companies are
required to disclose information
related to their policies, goals, and
performance in these areas.
The applicability of BRSR in India offers several
benefits for companies, investors, and other
stakeholders:
Enhanced Transparency: BRSR promotes transparency
by encouraging companies to disclose their
sustainability practices and performance. This
transparency enables stakeholders to make informed
decisions, assess risks and opportunities, and
understand the company’s overall ESG impact.
Improved Stakeholder Engagement: By reporting
on ESG parameters, companies can engage more
effectively with their stakeholders. This includes
shareholders i.e. customers, Value-chains, employees,
communities, and regulators, fostering trust and long-
term relationships.
Investor Confidence: BRSR reporting provides
investors with valuable insights into a company’s
sustainability practices and performance. This
information enables investors to assess the company’s
ESG risk profile, align their investments with their
values, and make more informed investment decisions.
Competitive Advantage: Companies that embrace
BRSR can gain a competitive edge by showcasing
their commitment to sustainable practices. It can
attract socially responsible investors, enhance brand
reputation, and potentially lead to an increased
market value.
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1147
Environmental Factors: The world, today, is facing
significant environmental challenges, including air and
water pollution, deforestation, and climate change.
India’s commitment to the Paris Agreement and
the United Nations Sustainable Development
Goals (SDGs) underscores the importance
of addressing these challenges
through sustainable practices.
Organizations are increasingly
realizing that incorporating
environmental considerations
into their operations not only
mitigates risks but also drives
innovation and efficiency.
Companies in India can focus
on reducing their carbon
footprint by adopting clean
energy sources, implementing
energy-efficient technologies,
and practicing responsible
waste management. Additionally,
initiatives like water conservation,
sustainable agriculture, and biodiversity
protection can contribute to the
preservation of India’s rich natural resources.
Social Factors: India’s social landscape is characterized
by diverse demographics, income disparities, and
social inequalities. ESG practices offer organizations
an opportunity to address social issues and positively
impact communities. Companies can prioritize
employee welfare by ensuring fair wages, safe working
conditions, and equal opportunities for all. Promoting
gender diversity, investing in employee training and
development, and supporting local communities
through social initiatives are other ways to foster
positive social impact.
Organizations can also contribute to social
development by engaging with stakeholders and
building strong relationships based on trust and
transparency. This includes consulting with local
communities, respecting indigenous rights, and
considering the social implications of business
decisions.
Governance and Ethics: Governance plays a critical
role in building trust and maintaining the integrity
of organizations. Strong corporate governance
practices ensure accountability, transparency, and
ethical conduct. Emphasizing board’s independence,
promoting responsible executive compensation, and
implementing robust risk management frameworks are
essential components of good governance.
Challenges and Opportunities: While the adoption of
ESG practices in India is growing, there are challenges
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Sustainability
THE CHARTERED ACCOUNTANT
that organizations face in their implementation.
Limited availability and quality of ESG data, lack
of awareness and understanding, and
resource constraints are common
hurdles. However, these challenges
also present opportunities for
organizations to lead the way
and drive change. Indian ESG leaders specialize
companies can leverage
technology and data
in understanding the
analytics to improve the environmental, social, and
collection and reporting of
ESG metrics. Collaborating governance landscape,
with industry associations,
non-governmental
as well as the evolving
organizations, and expectations of the
stakeholders.
sustainability experts can
help organizations enhance
their ESG capabilities.
Moreover, investors and financial
institutions are increasingly
considering ESG factors in their
decision-making, creating opportunities
for companies that prioritize sustainability to access
capital and gain a competitive advantage.
The integration of ESG factors into business strategies
has gained significant momentum in recent years.
ESG represents a framework that considers the
environmental, social, and governance aspects of
a company’s operations, guiding responsible and
sustainable decision-making. Finance and ESG leaders
play pivotal roles in driving ESG implementation,
leveraging their expertise to ensure the alignment
of financial goals with sustainable practices. This
article also examines how Finance and ESG leaders
complement each other, enabling organizations to
navigate the complexities of ESG and realize the
benefits of responsible business practices.
The Role of Finance Leaders: Finance leaders are
responsible for managing an organization’s financial
resources, optimizing capital allocation, and assessing
investment opportunities. Their role extends beyond
financial analysis and decision-making, as they
increasingly recognize the importance of incorporating
ESG considerations into their strategies. By integrating
ESG metrics into financial models, finance leaders
can evaluate the impact of environmental and social
factors on financial performance. This enables them to
make informed investment decisions, identify risks and
opportunities, and drive long-term value creation.
Finance leaders also play a crucial role in allocating
resources towards ESG initiatives. They can ensure
that ESG-related projects receive adequate funding
and support from the organization. By actively
MARCH 2024 92
engaging with ESG leaders, finance professionals can
assess the financial feasibility of ESG investments
and contribute to the development of
sustainable business models. A CFO’s
job has further expanded by
considering all the aspects of
ESG and also engaging with
the stakeholders. He has to
see that the data collected
from the stakeholders
meets the ESG goals of the
organisations.
The Role of ESG Leaders:
ESG leaders specialize
in understanding the
environmental, social, and
governance landscape, as well
as the evolving expectations of the
stakeholders. They play a crucial role
in developing ESG strategies, setting
goals, and monitoring performance against
relevant metrics. ESG leaders collaborate
with different departments to embed sustainability
principles throughout the organization and engage
with stakeholders to foster transparency and
accountability. By driving ESG initiatives, they ensure
that organizations address and mitigate ESG risks,
enhance their social and environmental impact, and
uphold good governance practices.
ESG leaders also provide critical insights into the
emerging ESG trends, best practices, and regulatory
developments. By staying informed about the
industry-specific ESG challenges and opportunities,
they can guide finance leaders in making informed
decisions that align with both financial and
ESG objectives. This collaboration ensures that
organizations consider a wide range of ESG factors
when formulating financial strategies.
The collaboration between finance and ESG leaders
goes beyond financial analysis and reporting. It
extends to fostering a culture of sustainability and
responsible business practices throughout the
organization. Finance leaders can work closely with
ESG leaders to embed ESG considerations into the
organization’s values, policies, and decision-making
processes. By integrating sustainability into the
corporate culture, organizations can ensure that ESG
practices are ingrained in the DNA of the company,
rather than being viewed as a mere compliance
exercise.
Furthermore, a collaboration between finance and
ESG leaders can drive innovation. The ESG leaders
often have a deep understanding of the emerging
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Sustainability
THE CHARTERED ACCOUNTANT

sustainability trends, technologies, and market
opportunities. By collaborating with the finance
leaders, they can identify innovative solutions that
not only address ESG challenges but also create new
business opportunities. Finance leaders can bring
their financial expertise to evaluate the feasibility
and financial viability of these initiatives, ensuring
that sustainability efforts align with the organization’s
strategic objectives.
Complementing Skill Sets: Finance and ESG
leaders possess complementary skill sets that,
when combined, enhance the effectiveness of ESG
implementation within organizations. Finance leaders
bring financial acumen, expertise in risk management,
and a deep understanding of the financial markets.
ESG leaders, on the other hand, bring knowledge
of sustainability issues, expertise in ESG reporting
frameworks, and an understanding of stakeholder
expectations. By working together, these leaders
can bridge the gap between financial goals and ESG
considerations, resulting in a more comprehensive
and sustainable decision-making.
Collaboration and Integration: Collaboration
between finance and ESG leaders is particularly
important when it comes to capital allocation
decisions. Finance and ESG leaders must collaborate
closely to integrate ESG factors into the financial
decision-making processes. This collaboration
involves leveraging financial expertise to quantify
the financial impact of ESG risks and opportunities,
and integrating ESG considerations into investment
analyses. By combining financial and ESG expertise,
leaders can identify synergies between financial
objectives and sustainable practices, leading to an
improved risk management, increased operational
efficiency, and enhanced stakeholder trust.
can identify opportunities for sustainable growth and
mitigate potential risks.
Integrating ESG into Risk Management: Finance
leaders are adept at managing financial risks, and
their collaboration with ESG leaders enables a more
comprehensive approach to risk management. ESG
leaders can provide insights into the emerging
ESG risks, such as regulatory changes, reputational
risks, or supply chain & value chain vulnerabilities.
By integrating ESG factors into risk assessment
frameworks, finance leaders can identify potential
risks and implement mitigation strategies,
safeguarding the organization’s financial performance
and reputation.
ESG Reporting and Disclosure: Effective ESG
reporting and disclosure are essential for
organizations to communicate their ESG performance
and progress to stakeholders. ESG leaders play a
pivotal role in developing robust ESG reporting
frameworks, ensuring data accuracy and transparency,
and aligning with global standards. Finance leaders
contribute by providing the financial data and
insights necessary to integrate ESG metrics into the
reporting processes. By collaborating closely, finance
and ESG leaders can enhance the credibility and
relevance of ESG reporting, enabling stakeholders to
make informed decisions and fostering accountability.
Addressing Challenges: Implementing ESG practices
is not without challenges. Finance and ESG leaders
may face resistance from within the organization,
encounter data limitations, and struggle with the
integration of ESG factors into financial models.
However, these challenges can be overcome through

ESG leaders can provide insights into the potential

risks and opportunities associated with different ESG-
related projects. By incorporating these insights into
financial models and analyses, finance leaders can
better evaluate the financial viability of ESG initiatives
and make informed decisions about resource
allocation.

Aligning Financial Goals with ESG Principles:

Finance leaders play a crucial role in ensuring that
financial goals align with the ESG principles. They
can integrate ESG metrics into financial models,
allowing for a more holistic evaluation of investment
opportunities. This integration enables finance
leaders to assess the long-term financial implications
of ESG factors, such as climate change, social impact,
and governance practices. By incorporating ESG
considerations into financial strategies, organizations

MARCH 2024 93 www.icai.org

1150
Sustainability
THE CHARTERED ACCOUNTANT
effective collaboration and communication between
the finance and ESG leaders.
Education and Awareness: Finance leaders can support
ESG leaders in raising awareness and providing
education about the importance of ESG integration.
By educating employees and stakeholders about
the business case for ESG, finance leaders can help
overcome resistance and build a shared understanding
of the benefits of responsible business practices.
Enhancing Data Collection and Analysis: Data
availability and quality remain challenges in ESG
integration. Finance leaders can collaborate with ESG
leaders to improve data collection processes, ensuring
that relevant ESG metrics are collected, analysed,
and reported accurately. They can also leverage their
financial expertise to develop sophisticated models
that incorporate ESG data, allowing for more accurate
financial analysis as well as decision-making.
Regulatory Compliance: Finance and ESG
leaders must stay informed about the evolving
ESG regulations and reporting requirements. By
collaborating, they can ensure that the organization
remains compliant with the existing and emerging
regulations. Finance leaders can provide the necessary
financial data and insights to support accurate ESG
reporting, ensuring transparency and accountability.
Opportunities for Finance and ESG Leaders:
The collaboration between finance and ESG
leaders presents significant opportunities for
professional growth and career development. As
ESG considerations become increasingly critical for
organizations, finance leaders who possess knowledge
and expertise in ESG integration are well-positioned
to drive positive change and contribute to the
long-term success of their organizations. By actively
engaging with ESG leaders, finance professionals can
expand their skill sets, deepen their understanding
of sustainability issues, and enhance their strategic
decision-making capabilities.
Similarly, ESG leaders who collaborate effectively
with finance leaders can enhance their financial
literacy and gain a broader perspective on financial
considerations. This collaboration allows ESG leaders
to communicate the financial implications of ESG
practices to stakeholders more effectively, bridging the
gap between sustainability and financial performance.
Furthermore, finance and ESG leaders who collaborate
successfully can become influential voices within their
organizations and industries. They can shape the
ESG agenda, drive industry-wide best practices, and
contribute to the development of global sustainability
MARCH 2024
standards. By leveraging their combined expertise,
these leaders can advocate for responsible investment
practices, influence capital markets, and contribute to
the transition towards a more sustainable and inclusive
economy.
Recent Regulatory Development
India’s Securities and Exchange Board (SEBI) has
mandated Business Responsibility & Sustainability
Reporting (BRSR) for the top 1,000 listed entities since
2021. An additional directive specifies assurance
requirements for these companies using a glide path
method, starting in 2024. Furthermore, 150 listed
entities must provide disclosures and reasonable
assurance on BRSR Core Key Performance Indicators.
This initiative aims to clarify the scope of applicable
BRSR Core disclosures and assurance within the
value chain. Effective from April 1, 2024, BRSR
assurance becomes a crucial component of corporate
governance, ensuring adherence to sustainable
practices as mandated by SEBI. This move enhances
transparency, accountability, and sustainable business
practices across the corporate sector.
I would like to conclude that the collaboration
between finance and ESG leaders is pivotal for
successful ESG implementation within organizations.
By leveraging their complementary skill sets, these
leaders can integrate ESG considerations into
financial analysis, risk management, and reporting
processes, align financial goals with sustainable
practices, and create long-term value for stakeholders.
The integration of ESG considerations into financial
analysis, risk management, and reporting processes
enables organizations to navigate the complexities of
ESG and seize opportunities for sustainable growth.
The partnership between finance and ESG leaders
extends beyond numbers and encompasses fostering
a culture of sustainability, driving innovation, and
addressing challenges. As organizations navigate the
complexities of the ESG landscape, the collaboration
between finance and ESG leaders will be instrumental
in driving positive change, ensuring responsible
business practices, and contributing to a more
sustainable future. The partnership between finance
and ESG leaders is essential for organizations to
thrive in a rapidly changing business landscape and
contribute positively to society and the environment.
Sources: BRSR & ESG Reporting

Author may be reached at
sjcabom@gmail.com and
eboard@icai.in
94 www.icai.org
 1151

MSME
THE CHARTERED ACCOUNTANT

Comparative Analysis of
MSME among QUAD Nations
In this era of globalization, MSMEs (SMEs) are the backbone
and the most flexible sector of every economy, especially for
developing nations like India. This paper finds out the inter-
comparative analysis of the MSME Sector among the Indo-
Pacific-based QUAD group which is a group of four nations
known as India, Australia, Japan, and the USA. Here, we take
secondary data for inter-comparative analysis which is based
on four parameters like the share of MSME sector out of the
total employment, GDP, export, and number of total MSMEs.
Sunil Kumar
The result of the paper is that India, with a high population
Academician
and a more informal economy, needs a more crucial role of
MSMEs in the growth of the economy and to improve its
share of MSMEs in employment and export.

Introduction

T
he Indo-Pacific region
has developed into a hub
for global politics and
economics. The importance of
India has increased tremendously
in the world politics and
economics. So, to increase
cooperation with India, three
Indo-Pacific countries have come
together and made the regional
block which is known as the Indo-
Pacific QUAD, a group of four-
nations known as India, Japan,
Australia, and the USA.
As is well known, MSMEs
complement major corporations
in any field during this period of
globalisation. Additionally, MSMEs
are the greatest employer and
contribute to the reduction of
regional disparities and inequities.
The comparison of MSMEs within
the QUAD is the main topic of this
article. India is the only developing
and fast-growing country in the
QUAD; the other members are
more established, developed
nations. To identify and categorise
MSMEs, different nations use
different standards and definitions.
The MSMEs are defined differently
by the QUAD members. These are
the many definitions that QUAD
nations adhere to.
India
In India, MSMEs are defined based
on the investment and revenue
of enterprises. Indian MSMEs
follow the MSME Development
Act 2006 with the 26 June 2020
Amendment. Below are the
defined categories of MSMEs:
(Government of India Gazette
Notification S.O. 2119 (E) Dated
June 26, 2020)

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1152

MSME
THE CHARTERED ACCOUNTANT

MSME–Classification based on Investment & Annual Turnover

Type of Entities Micro Small Medium

Manufacturing Investment of Investment of Investment of less than Rs. 50 Cr & Turnover up to Rs.
and Services less than Rs. 1 less than Rs. 10 250 Cr
Sector Cr & Turnover of Cr & Turnover up
less than Rs. 5 Cr to Rs. 50 Cr

Source: - Government of India Gazette Notification 26 June 2020

Australia The SME Basic Law in Japan defines SMEs. The

Small and Medium-sized (SME) businesses are referred definition is based on numerical factors including
to as MSMEs in Australia. Australia bases its definition capital amount and personnel count, according to the
of SME on the total number of employees and revenue. 1999 SME Basic Law. (Yoshimura & Kato, n.d.)

1) SMEs are classified by the Australian Bureau of

Definition of SME
Statistics according to the number of employees:
(Connolly et al., 2012) Sector Capital Size Staff
(in millions)
Size of Employees
Enterprise Manufacturing Less than equal Less than equal
& Others to 300 to 300
Micro 0-4
Wholesale Less than equal Less than equal
Small 5-19 to 100 to 100
Medium 20-199 Retail Less than equal Less than equal
Large 200+ to 50 to 50

Source: - Australian Bureau of Statistics Services Less than equal Less than equal
to 50 to 100
2) A person, business, trust, or partnership that runs an
Source: - SME Basic Law 1999
entity and brings in less than $2 million in revenue
annually is considered a small entity by the Australian
Taxation Office (ATO). A company with less than $2 United States of America (USA)
million in yearly revenue may have 20 employees The definition of an SME in USA also considers the
or more, but it should be emphasised that one with number of employees. Below are the categories of
less than 20 employees may have revenue beyond SMEs: (Berisha & Pula, 2015)
$2 million. A microbusiness generates less than $2
million in annual revenue, according to the ATO,
Enterprise Size Employees
whereas a small enterprise generates between $2
and $10 million. (Gilfillan, n.d.) Micro 1-9
Japan Small 10-99
In Japan, the number of employees employed by the
firm determines the categories of MSMEs. Below is the Medium 100-499
categorization of enterprises: (Berisha & Pula, 2015)
Large 500+
Size Employees Source: - Berisha & Pula, 2015
Micro 4-9
The US International Commission states that the
Small 10-49 average annual income and the number of employees
Medium 50-249 is used to define SMEs. Industry-specific requirements
for small business are set by the Small Business
Large 250 or More Administration (US International Trade Commission,
Source: - Berisha & Pula, 2015 2010). The grouping of SMEs is shown below.

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 1153

MSME
THE CHARTERED ACCOUNTANT

Methodology
Category Employees Annual Income
The geographical area of this research is based on
Small 250-1500 $750,000-$38.5 million four QUAD nations of the Indo-pacific region i.e.,
Business Japan, India, USA, and Australia. This paper is based
on secondary data that was taken from a variety of
Source: - US International Commission journals, Government papers and press releases,
working papers from reputable organisations, etc.
Literature Review
Analysis
It appears that the QUAD alliance is more concerned
with strategic collaboration, such as defence security, I. Present Status of MSMEs among the QUAD
than a trade pact. The analysis suggests that, in This section focuses on the role of MSMEs in the
comparison to Singapore, the EU, GCC, G-20, ASEAN nation’s economy or GDP, MSMEs’ contribution to
10, SCO, CP-TPP, RCEP, and other principal trading total employment, and the share of MSMEs in the total
partners, the Indo-Pacific alliance seems to provide export of the nation.
us with a higher relative welfare. The Quad members’
main priority should therefore be trade agreements . India
(Srivastava et al., 2022) MSMEs are recognised as the backbone of the Indian
economy and the largest bases, employing over
Instead of internal R&D, Indian SMEs are more reliant
110 million people and having 63.4 million units in
on foreign technologies to increase their exports. In
the world according to the 73rd round of the NSS
addition to strengthening infrastructure, state officials
(Government of India, 2022)1. MSMEs constitute over
can help SMEs that are more export-oriented by
90% of the total businesses (Biswas, 2015). In 2020,
establishing connections between MSMEs, and research
95% of the MSMEs existed out of total businesses.2
and development centres, making it simpler for them
Given below is some data which provides a detailed
to get information about global markets. As we know,
overview about the importance of MSMEs.
smaller enterprises generally need more help because
of their size disadvantage. (Prakash et al., 2012)
Number of MSMEs
The QUAD effort, according to the author, spans a
sizable portion of the globe, including constituent Sector Number of Share (Percent)
countries that are modern democracies, and Enterprises
represents a sizeable portion of the global population (In lakhs)
as well as a sizable economy. As a result, peace Manufacturing 196.65 31
would flourish if the QUAD is successful. Additionally,
QUAD should promote robust commerce and Trade 230.35 36
business agreements that permit a brisk exchange of
Other Services 206.88 33
commodities and merchandise among the allies to
support the economy. (Vemsani, 2020) Total 633.88 100

Objective Source: MSME Annual Report 2021-22 (GOI)

 To find out the Present status of MSMEs in GDP,
Export and Employment, and the number of Employment Distribution (In lakhs)
MSMEs out of the total businesses among the
QUAD Micro Small Medium Total
 To find out the inter-comparative analysis of MSMEs 1076.19 31.95 1.75 1109.89
among the QUAD
 To find out the challenges and provide suggestions MSMEs contribute a total of 40 %3 to the total
to improve the role of this sector in India employment4 and they also make the most GDP

1
MSME Annual Report (2021-22)
2
https://www.investindia.gov.in/team-india-blogs/growth-imperative-msme-sector
3
https://invest.telangana.gov.in/msme-full/
4
https://www.un.org/en/observances/micro-small-medium-businesses-day

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1154

MSME
THE CHARTERED ACCOUNTANT

contribution of any other sector. In the years 2020–21, More than half (59%) of all Australian entities are non-
MSMEs accounted for about 36% of all manufacturing employee entities (sole traders). 30% businesses have
output. Its share in export was 45.03%+ of total 1-4 employees, and 9% have between 5-19 workers.
exports (2021-22).5 Each of these businesses fits under the small business
category (0-19) as defined by the ABS. (ASBFEO
Report, 2020)
Percentage of Percentage of Export by
MSMEs in total GDP MSME in total export According to the Australian Taxation Office, SME is
defined as having a revenue of $10 million or less.
2018- 2019- 2020- 2020- 2022-23 (Up to
2021-22 Using this criterion, 98% of the enterprises in Australia
19 20 21 21 August 2022)
fall into the small business category. The great majority
(93%) of these companies have a turnover of less than
30.50 30.50 26.83 49.35 45.03 42.67
$2 million annually.
Source: PIB News (DG of Commercial Intelligence In 2020-21, small firms (0-19) continued to employ
& Statistics + Ministry of Statistics & Programme more than 5 million people, making up 42% of
Implementation) the workforce. They also accounted for the largest
Clearly, the above given data emphasises the employer and contributed over $438 billion in value or
position of MSMEs, and their relevance to the dream 33% of Australia’s total GDP.7 With more than 82% of
of becoming a 5 trillion-dollar economy cannot be employment in MSMEs, agriculture, fishing, forestry,
realised without increasing the MSMEs. rental, hiring, & real estate services hold a significant
proportion. (ASBFEO Report, 2022)
Australia Australian SMEs exported 88% of commodities and
According to the Australian Bureau of Statistics (ABS), 65% of services in 2014–15.8 The Australian Bureau
Small & Medium-sized businesses (SMEs) accounted of Statistics reported that in 2019–20, small (0–19)
for 2,418,037 businesses in Australia in 2019–20. In exporters accounted for 62% of the total exports9
2018–19, SMEs accounted for 7.6+ million jobs, or
roughly 66% of all private sector employment, and
Percentage of Exporters by Small Business (0-19)
represented 99.8% of all businesses. (OECD, 2022)6.
However, small firms made up more than 97% of all 2014-15 2015-16 2016-17 2017-18
businesses, as per a report by the Australian Small
Business and Family Enterprise Ombudsman from 58% 59% 59% 59%
June 2021 (ASBFEO).
Source: Australian Small Business & Family Enterprise
Distribution of firms in Australia Ombudsman (2020)9.1
Firms Size ASBFEO & ABS (June 2022)
MSMEs’ contribution to the total gross value added
(Employees) Number Percentage is 54% (ABS Australian Industry, 2020). Only 3.75% of
Non-Employing 2,341,840 97.5 58.7 the Australian SMEs contribute to the overall value of
(Sole Trader) merchandise exports (ABS, Characteristics of Australian
Micro (1-4) {Small (0-19)} 29.6 Exporters 2019-20). (APEC Economic Committee, 2022)
Small (5-19) 9.2
Medium (20-199) 56,046 2.3 USA
As per the US Small Business Administration in 2022,
Large (200+) 4,368 0.2
there are 33.2 million small businesses (0-499) with
SME (0-199) 2,397,886 99.8 99.9% of US businesses, and employment of 61.7 million
with a total of 46.4% of US employees (Administration,
Source: ABS, Counts of Australian Businesses, 2022). Out of the 33.2 million, around 27 million (or
Including Entries and Exits + ASBFEO
5
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1884734
6
https://read.oecd-ilibrary.org/industry-and-services/financing-smes-and-entrepreneurs-2022_4990a332-en#page1
7
https://www.asbfeo.gov.au/key-statistics
8
https://www.dfat.gov.au/sites/default/files/outcomes-smes.pdf
9
https://www.abs.gov.au/statistics/economy/international-trade/characteristics-australian-exporters/latest-release#data-
downloads
9.1
https://www.asbfeo.gov.au/sites/default/files/2021-11/ASBFEO%20Small%20Business%20Counts%20Dec%202020%20
v2_0.pdf

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 1155

MSME
THE CHARTERED ACCOUNTANT

Size Employment by size of business in 2020-21 Industry-specific value-added in 2020-21

Number (‘000) % %
Small (0-19) 5,019 42 32.7
Medium (20-199) 2,840 24 21.2
Large (200+) 4,026 34 46.1
Total 11,884 100 100
Source: ABS Australian Industry & ASBFEO. Financial and insurance services are not included in the data that the
ABS publishes for certain industries.

80%) are small firms, 5.4 million (16%) have less than 20
employees, and 650,000 have less than 500 workers.10
(Kelly Main and Cassie Bottorff, 2022)
Number of Small Businesses in the USA (in millions)
2020 2021 2022 2023
31.7 32.5 33.2 33.3
Source: Advocacy.sba.gov11 + oberlo.in12
In 2020, SMEs accounted for a total export value
of $413 billion. Out of the $413 billion, US SMEs
exported $131 billion from manufacturing, $178 billion
from wholesalers and $104 billion from others.
Small business exports: In 2020, 271,705 distinct
companies exported items from the USA totalling
$1.3 trillion. Out of those exporters, 264,366 or
97.3% were small (25.0% were manufacturers, 32.2%
were wholesalers, and 42.8% were other). Small
business exports totalled $413.3 billion, or 32.6% of
all exports by identifiable enterprises.13 (A Profile of
U.S. Importing and Exporting Companies, 2019-2020
Release Number: CB22-57 2020, 2022). According
to the U.S. Department of Commerce, more than
400,000 American SMEs traded goods in 2016,
making up 98% of the exporters and 33% of the value
of exports. (US International Trade Commission, 2019).
According to the Office of Advocacy, in 2019, SMEs
accounted for 44% of the U.S. economic activity14
In 2016, the Japanese SMEs made up 99.7% of all
enterprises and employed 32 million people or roughly
68.8% of the labour force in the private sector. Also,
SMEs’ added value was 53% of the total GDP in 2015.
Among the total GDP, Lager enterprises shared 47.1%,
Medium enterprises shared 38.9% and small enterprises
had 14.0%.16 (SME Agency, 2019) (OECD, 2022)
The share of SMEs in total export was 21% with 6.2
trillion Yen in 2015 (National Association of Small and
Medium Enterprise Promotion Organizations, 2018). The
share of businesses using direct export is 21.4% in 2019,
according to the White Paper on Small Enterprises in
Japan. (Small and Medium Enterprise Agency, 2019)
II. Inter comparative analysis of MSME among QUAD
Considering the insufficient information and many
definitional criteria given, we created 4 criterion for inter-
comparison. How many and how much of the country’s
GDP, employment, and exports are made up of MSMEs?
By analysing the above given inter-comparison bar
chart, we find that India has the largest number of

Japan
According to the Japan Finance Corporation, Small
and Medium-sized firms, which employed almost 70%
of the nation’s workforce in 2020, made up more than
99% of all enterprises in Japan.15
10
https://www.forbes.com/advisor/business/small-business-statistics/
11
https://advocacy.sba.gov/wp-content/uploads/2022/08/Small-Business-Economic-Profile-US.pdf
12
https://www.oberlo.in/statistics/number-of-small-business-in-the-us
13
https://www.oberlo.in/statistics/number-of-small-business-in-the-us
14
https://advocacy.sba.gov/2019/01/30/small-businesses-generate-44-percent-of-u-s-economic-activity/
15
https://www.jfc.go.jp/n/english/sme/features.html
16
https://www.chusho.meti.go.jp/pamflet/hakusyo/2019/PDF/2019hakusyosummary_eng.pdf

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1156

MSME
THE CHARTERED ACCOUNTANT

Distribution of MSMEs and Employment in MSMEs India’s efforts to achieve the mission of QUAD
in Japan 2016 Member Countries
Size Share of Share of  In recent times, India has been observing an
Firms (%) Employment (%) increase in opportunities for women seeking
Micro 84.9 22.3 participation in entrepreneurship and employment,
thereby ensuring equitable representation. Steps
Medium 14.8 46.5
are being taken to open doors of opportunities for
Large 0.3 31.2 women by harnessing their potential.
Total (%) 100 100  Sustainable Entrepreneurship is the need of the
Total MSME 3.5 32.0 hour for a developed India, and the nation is
(in million) strengthening its pillars by working on adequate
physical infrastructure and promoting the ease of
Source: METI, SME Agency, 2020 White Paper on doing business.
SMEs in Japan. Data are based on a 2016 government
survey + OECD17  Skill Development has always been in focus of
the government. In light of the same, constant
efforts are being made to upgrade product quality
MSMEs with 63.4 million in the absolute number of and branding by providing vocational skills to an
MSMEs criteria.. Also, India has a 95% MSME share increased number of individuals, thereby facilitating
out of total businesses or enterprises which is low trade in the country.
among all other QUAD nations. So, we can say that
India has more share of larger enterprises compared to Suggestions
other members of the QUAD nations. On the matter of
 The other QUAD members are more industrialised
employment, Indian MSMEs are the largest employers
than India. Hence, their MSMEs’ quality and
with 110 million people among all QUAD members.
branding are more favourable to industrialised
However, India has the lowest percentage, with 40%
nations, which puts Indian MSMEs up against
of MSMEs in total employment among all other
stiff competition in the global market. Making
members, and The USA is in the second place with
almost 46.4 % of the total. On the point of the share quality-assured produce with low-cost innovation
of export by MSMEs, Australia has the largest share is therefore necessary to promote export.
accounting 59% among all members. On the other Additionally, the quality, uniformity, and innovation
hand, India has 45.03%, and Japan has the lowest of MSMEs will assist to lessen the negative effects
share with 21.4%. On the last criteria of comparison on the environment and prevent the rejection of
i.e., the share of MSMEs in GDP, India has the lowest goods and services in the global market.
share in GDP with 35.5% while Australia (54%) and  Indian MSME should focus on and adopt
Japan (53%) have nearly the same as well as the environment-friendly methods in the process of
highest share of MSMEs in GDP with more than half of production and make sustainable development of
the total GDP.

III. Challenges and suggestions for India

With the above inter-comparative data, India has

the largest share of MSMEs in absolute number
but the lowest in terms of percentage among total
enterprises. So, India should focus on increasing the
share of MSMEs in total enterprises because they
are the largest employers among total employment
and provide a more regional and equitable level
of representation of people, which helps reduce
inequalities and poverty.

India should focus to achieve a greater share of

MSMEs’ export than any other country in the QUAD.
India should also work in the direction of increasing
the share of MSMEs in GDP.
17
https://www.oecd-ilibrary.org/sites/a4e7ef59-en/index.html?itemId=/content/component/a4e7ef59-en

MARCH 2024 100 www.icai.org

 1157

MSME
THE CHARTERED ACCOUNTANT

Chart 1 according to the Indian context. All QUAD members

must engage in exchanging their ideas and sharing
Share of MSME in Export and GDP their achievements and innovation, which can help all
India Australia USA Japan
members of the QUAD to improve their performance
and participation in their respective economies
including areas such as employment, and export,
59

54

53
45.03

while reducing regional disparities and inequalities.

44
Furthermore, this collaboration can help strengthen
32.6

30.5

the economic cooperation among members, and this

21.4

cooperation will impact positive externalities for the

people of this group.
Share of Export by MSME Out of Share of MSME (SME) in Total
Total Export (%) GDP (%)
References
Source: Compilation by the author from the above tables  Berisha, G., & Pula, J. S. (2015). Defining Small and
Medium Enterprises: a critical review. Academic
Chart 2
Journal of Business, Administration, Law and Social
India Sciences, 1(1)
Number of
 Biswas, M. A. (2015). Opportunities and Constraints
MSME and share
63.4

for Indian MSMEs. International Journal of

of employment
33.2

Research (IJR, 2(1))

3.58
2.4

 Connolly, E., Norman, D., & West, T. (2012). Small

Number of MSME Business: An Economic Overview
(SME )(In Million)
 Ghosh, N. (2021). Brass Tacks: Unpacking the Indo-
USA Japan
Pacific Template
110

 Gilfillan, G. (n.d.). Definitions and data sources for

68.8
61.7

46.4
66

small business in Australia: a quick guide How do

40

we define small business?

32
7.6

 Kelly Main and Cassie Bottorff. (2022). Small

Number of Employmentby Share of Employment By MSME
(SME) In Total Employment (%) Business Statistics Of 2023 – Forbes Advisor
MSME (SME) (In Million)
 Prakash, J., Prakash Pradhan, J., & Das, K. (2012).
Source: Compilation by the author from the above tables
Exports by Indian Manufacturing SMEs: Regional
Patterns and Determinants. Munich Personal
MSME cluster. This would encourage the use of ICT
REPEC Archive
in manufacturing to decrease waste and maximise the
use of natural resources, boost exports, lower carbon  Srivastava, A., Kumar, S., & De, M. P. (2022). Ex-ante
footprints, and create more green jobs in MSMEs. evaluation of India’s trade alliance with Indo-Pacific
region: A general equilibrium analysis (No. 211)
 Increase the number of ITIs and centres for skill
development, and foster innovation and skill growth  Vemsani, L. (2020). Connectivity and the Quad
to offer employees with high-quality, formal training. Powers Revisiting History and Thought

Conclusion  Yoshimura, T., & Kato, R. (n.d.). The Policy Environment

for Promoting SMEs in Japan the Policy Environment
Among all the members of QUAD, India has the 3rd
for Promoting SMEs in Japan Introduction: The
largest GDP in terms of nominal, but lowest in terms
Context of SME Development in Japan
of per capita. So, this data clearly describes that India
needs to cover a longer path to achieve the desired 
target. The importance of MSMEs, as demonstrated in
the above inter-comparative analysis clearly shows that
India should not only catch up but must surpass the
achievement of the other QUAD members, especially
by focusing on improving the share of MSMEs in Author may be reached at
GDP and increasing the share of exports out of total sunilsahu.sahu6@gmail.com and
export. India should collaborate with the other QUAD eboard@icai.in
members and adopt new and sustainable technology

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THE CHARTERED ACCOUNTANT

Transforming India into

a Developed Economy
India, currently being the fifth largest economy in
the world (in Nominal terms) and the third largest in
Purchasing Power Parity (PPP) terms, finds itself on the
cusp of a giant leap towards becoming a developed nation
in the coming decades. And while on this journey, it must
address certain challenges and overcome several hurdles
as they come. This article is an attempt to explores such
issue, with particular focus on the aspects of human
development and societal transformation, which the
CA. Joydeb Chatterjee author believes, holds the key to India’s journey towards
Member of the Institute becoming a developed nation.

The Indian economy - past, present, and

the potential for growth

I
ndia is a country with the
largest population of approx.
1.4 billion in the world., As per
the international market rates of
exchange in 2022-23, India stands
as the fifth largest economy of
approx. 3.38 billion US Dollars
(behind USA, China, Japan and
Germany), (and the third largest
in Purchasing Power Parity (PPP)
terms (approx. 13 trillion US
Dollars) and is on the path to
become an economic superpower
in the next few decades.

Selected economic and financial indicators of India 2018/19-2022/23

Indicator 18-19 19-20 20-21 21-22 22-23

GPD (USD trillion - 2.7 2.84 2.67 3.15 3.38

nominal

Real GPD growth (%) 6.5 3.9 -5.8 9.1 7.0

Population (billion) 1.37 1.38 1.4 1.41 1.42

GDP per capita (USD) 1974 2050 1913 2238 2389

Unemployment 7.7 6.5 10.2 7.7 7.3

rate (%)

World economic 3.6 3.2 -3.1 6.1 2.3

growth %

(Source: Data from World bank and IMF web sites)

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It can be seen from the above table that the Indian points out that HDI accounts for more than income
economy has over the course of the last few years and productivity. Unlike GDP per capita, the HDI
witnessed consistent growth, despite turbulences Index takes into account how income is “turned into
in the global economy. The year 2020-21 remains education and health opportunities, and therefore
the exception, when the economy shrank, as in the into higher levels of human development”. It may
rest of the world due to the effects of the COVID be worthwhile to note the Global ranking index of
19 pandemic. The key drivers of India’s growth are selected developed countries.
consumption expenditure, and government and
private spending on infrastructure (highways, airports, Country HDI score Rank
ports etc.), that are expected to propel the country (max 1.0)
going ahead. Further, a major boost to the economy
is in the area of digitization, which is expected to Switzerland 0.962 1
drive the economy forward. Barring circumstances Norway 0.961 2
such as supply chain shocks emanating from
geopolitical disturbances, (as has been witnessed Iceland 0.959 3
since the beginning of the Russia Ukraine conflict or Hongkong 0.952 4
the pandemics), which have had a major impact on
Australia 0.951 5
the world economy (through elevated commodity
and fuel prices), the Indian economy is expected India 0.633 132 out of 191
to continue to grow consistently, and become a nations
dominant economic power in the coming decade.
However, the issue that this article seeks to dwell (Source: United Nations report on HD index)
upon is how can India transform from a
developing/emerging economy to a Transforming India into a
developed one, in the league of developed economy:
USA, UK, Japan, Germany etc.,
with special focus on the aspect Skill development According to the author, the great
leap forward from a developing
of human development. contributes to structural /emerging economy to a
transformation and developed one (as described
Developed Economy - economic growth by earlier), rests upon three major
Characteristics enhancing employability flanks which are as follows:
When we talk of a developed
economy, we essentially mean
and labour productivity (a) Skill development and
a country with the following and helping the employment
characteristics: country to become more (b) Infrastructure and innovation
(a) High per capita income (i.e., competitive.
(c) Social inclusion and
GDP per head)
environmental sustainability
(b) Diverse industrial mix, including a
large services sector These are discussed in greater detail in the
ensuing paragraphs:
(c) Developed financial system
(d) Longer life expectancy at birth (a) Skill development and employment
(e) Well-developed educational system Skill development contributes to structural
transformation and economic growth by enhancing
Different definitions of a developed country are employability and labour productivity and helping the
provided by agencies such as the IMF, World Bank country to become more competitive. Investment in a
etc. Moreover, the HDI ranking is used to reflect high-quality workforce creates a virtuous cycle where
the composite index of life expectancy, education, relevant and quality skills facilitate productivity growth
and per capita income (points d, e, & a above). The and attract foreign direct investment into the country,
United Nations (UNO) HDI (Human Development resulting in more and better jobs for the current
Index ) is a statistical measure that gauges an workforce, and increases public and private investment
economy’s level of human development. While there in the sphere of education and training. This, in turn,
is a strong correlation between having a strong HDI increases the employability and productivity of the
score and being a prosperous economy, the UN current and future workforce.

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Skill development promotes innovation and
entrepreneurship which are the critical drivers of
economic growth. By providing individuals with the
relevant knowledge and expertise, they can develop
innovative ideas and products that can help create
new industries and jobs.
Skill development in the Indian context
Skill development plays a pivotal role in shaping
growth and social development in a country as
diverse and populous as India. As one of the
fastest developing countries globally, India has
to find resources to invest in skill development to
equip its citizens (the working age group) with the
competencies required for a gainful employment,
entrepreneurship and overall economic progress.
Significance of skill development:
 Addressing unemployment: India is home to
a massive population (approx. 1.4 billion) and
addressing unemployment is one of the most
critical challenges facing the nation. The present
unemployment rate in India is 7.3%. Skills
development programs enable job seekers to
acquire relevant competencies that align with the
demands of the job market, thus increasing the
chances of employability.
 Enhancing economic growth: A skilled workforce
contributes significantly to economic growth
by fostering innovation, productivity, and
competitiveness. Individuals possessing the
necessary skills help in the process of setting up
new industries, promoting individual development,
and bringing foreign investments into the country.
 Alleviating poverty: Skills development empowers
underprivileged individuals to break the cycle of
poverty. It enables them to secure higher paying
jobs or start their own business.
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 Fostering entrepreneurship: Skills development not
only prepares individuals for jobs but also nurtures
entrepreneurial talent.
Challenges of skills development in India
(i) Quality of education and training: The quality of
education and training programs remains a major
challenge in India. Outdated curricula, inadequate
infrastructure in schools (particularly in rural areas)
and colleges, and a lack of trained instructors can
hinder the effectiveness of skills development
initiative. The government has been taking
initiatives to make necessary changes in this regard.
(ii) Low Mismatch between skills and industry
demands: There often exists a significant
mismatch between skills acquired by job seekers
and the specific needs of the industry. Such gaps
arise due to insignificant industry collaboration in
designing curriculum and training programs.
(iii) Lack of awareness and participation: Despite
various government efforts, there is still a lack of
awareness and participation in skills development
programs, particularly in the rural areas. Many
individuals, especially from marginalized
communities, are often unaware of such
opportunities.
(iv) Gender disparity: Gender disparity is another
significant concern in skill development. Women,
in many cases face barriers in accessing education
and training, leading to lower participation in
the workforce. With initiatives being taken in this
direction, the picture in India has been changing
of late.
Government initiatives for skills development: The
Government of India has recognized the importance
of skills development and has implemented several
initiatives to bridge the skill gaps and promote
employability, such as:
(i) Pradhan Mantri Kaushal Vikas Yogana - started in
the year 2015
(ii) National skills development mission - launched in
2015. It aims to train over 400 million people by
2023 through various programs and schemes.
(iii) Skill India Mission
(iv) Start-up India
(b) Infrastructure and Innovation in India
Infrastructure and innovation are two areas which
play a vital role in a nations development. In the case
of India, a rapidly emerging economy, significant
strides have been made in both these areas over
the past few decades. As a country with a vast and
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THE CHARTERED ACCOUNTANT
diverse landscape, India’s infrastructure
development is crucial to support its
growing population and economy.
Simultaneously, fostering
innovation is essential to address
societal challenges and keep
pace with the dynamic global
landscape. In the lines that
Infrastructure and
follow, we explore the innovation are two areas
current state of innovation
and infrastructure in India, which play a vital role in
highlighting the progress a nations development.
made and the challenges that
lie ahead.
Infrastructure in India
1. Transportation: India has
made commendable progress in
its transportation infrastructure. The
development of modern highways, expressways,
new airports connecting smaller towns, and
the expansion of the railway network (with the
introduction of semi high-speed trains) has
significantly improved connectivity across the
country. The ambitious Bharatmala and Sagarmala
projects aim to enhance road and port connectivity
respectively and would give a fillip to trade and
economic growth.
2. Energy: India is focusing on both traditional
and renewable sources. The country has made
significant strides in renewable energy, particularly
solar and wind power.
3. Urban infrastructure: India has been witnessing
rapid urbanization and is working towards
developing modern infrastructure in cities. Smart
city projects are being undertaken to enhance
the quality of urban living through digitization,
improved waste management, efficient public
transportation, and metro corridors etc.
4. Digital infrastructure: India has witnessed a
digital revolution in recent years. The widespread
availability of mobile phones and increasing access
to the internet has transformed various sectors such
as finance, education, and healthcare.
Innovation in India
1. Information Technology and Software services:
India has emerged as a global IT hub, with its
software services and IT outsourcing industry
contributing significantly to the economy. The
country is home to a large pool of skilled IT
professionals, making it an attractive destination for
technology companies across the world.
2. Start-ups and entrepreneurship: India’s start-up
ecosystem has grown exponentially, fostering
MARCH 2024 105
1161
innovation and entrepreneurship. The
Government’s Startup INDIA initiative,
along with various incubators and
funding support, has nurtured a
thriving start-up culture in the
country.
3. Health care and
pharmaceuticals: India has
established itself as a leading
player in the global pharma
industry. The country is reputed
for producing affordable and
high-quality generic drugs,
making healthcare more accessible
to people.
4. Space Research and Technology:
India’s space agency, ISRO, has achieved
remarkable milestones in space research and
technology.
Challenges and the Way forward
While India has made significant progress in
infrastructure and innovation, several challenges
persist:
1. Infrastructure development gap: Despite
substantial progress, disparities in the infrastructure
development remain between urban and rural
areas. Bridging this gap is essential to ensure
inclusive growth and development.
2. Quality and sustainability: The quality and
sustainability of infrastructure projects are crucial
considerations. Ensuring that the projects are
designed for long term viability and environmental
sustainability is imperative.
3. Research and development: India’s innovation
landscape can benefit from increased investment
in research and development. Strengthening
academia-industry interface and providing more
funding for R&D activities will foster innovation in
various sectors.
4. Skilled workforce: To support innovation, India
needs a skilled and tech-savvy workforce.
Continued emphasis on education and skilling/
reskilling is necessary to meet the demands of
a rapidly evolving job market (more so in the
context of disruptive technologies such as Artificial
intelligence etc.)
(c) Social inclusion and environmental
sustainability
Social inclusion and environmental sustainability are
two interconnected concepts that form the foundation
of a more equitable and prosperous society. Social
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THE CHARTERED ACCOUNTANT
inclusion encompasses equal participation and
representation of all individuals, regardless of their
background or identity, in the social, economic, and
political spheres. On the other hand, environmental
sustainability refers to the responsible and balanced
management of natural resources to meet the needs
of the present generation without compromising
the ability of future generations to meet their own
needs. In the lines that follow, we shall attempt to
explore the relationship between social inclusion and
environmental sustainability, highlighting how these
principles can reinforce each other to foster a more
harmonious and resilient society.
How are social inclusion and environmental
sustainability related?
1. Equity and justice: Social inclusion promotes equity
and justice, ensuring that marginalized communities
and vulnerable populations have equal access to
resources, opportunities, and decision-making
processes. Similarly, environmental sustainability
recognizes that the burdens and benefits from
the use of resources should be shared equitably
across society, without disproportionately affecting
vulnerable groups.
2. Livelihoods and economic opportunities: A socially
inclusive approach to economic development
provides equal access to job opportunities and
livelihoods for all. Environmental sustainability
fosters growth of eco-friendly industries, contributing
to a more sustainable and inclusive economy.
3. Climate change and vulnerable population: Climate
change disproportionately affects marginalized
communities and low-income groups. Social
inclusion measures help ensure that these sections
of the populations are not left behind in climate
MARCH 2024
adaptation and mitigation efforts, and their voices
are heard in crafting resilient strategies.
4. Public health and environmental protection:
Environmental sustainability efforts, such as
reducing air pollution and improving water quality,
have a direct bearing on public health. Social
inclusion ensures that vulnerable communities,
who often bear the brunt of environmental hazards,
receive adequate protection and healthcare
services.
Challenges and the way forward
Despite the potential synergy between social inclusion
and environmental sustainability, several challenges
need to be addressed:
1. Inadequate policy integration: There is often
a disconnect between social inclusion and
environmental policies. Integrated policies that
consider both aspects are crucial for achieving
sustainable and inclusive development.
2. Capacity building: Strengthening the capacity
of institutions, communities, and individuals to
address social and environmental challenges is
vital.
3. Behavioral change: Changing societal attitudes
and behaviors is essential to support sustainable
practices. This requires education, awareness
campaigns, and targeted efforts to encourage
environmentally friendly behavior.
Conclusion
Transforming India into a developed economy is a
complex and multifaceted endeavor. The successful
implementation of the strategies discussed
above requires strong leadership, collaboration
between public and private sectors, and the active
participation of all stakeholders. By focusing on
economic diversification, human capital development,
innovation, and sustainable practices, India can create
a thriving economy that benefits all its citizens and
achieves the vision of becoming a developed nation.

Author may be reached at
chatterjoydeb5@gmail.com and
eboard@icai.in
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The Crucial Role of

Intellectual Property in
Modern Business Practices
In the rapidly evolving landscape of the global economy,
intellectual property (IP) has emerged as a cornerstone
of modern business practices. With the advent of
technology and the digital age, the value of intangible
assets has skyrocketed, leading to the recognition of IP
as a critical driver of innovation, competitiveness, and
economic growth. This article delves into the multifaceted
significance of intellectual property in contemporary
business environments, exploring its various forms, legal
CS Prashant Kumar
frameworks, and strategic implications.
Company Secretary

Understanding Intellectual Property

I
ntellectual property refers to
creations of the mind, such as
inventions, literary and artistic
works, designs, symbols, names,
and images used in commerce.
It encompasses a wide array of
intangible assets that can be
protected and monetized. The
primary forms of intellectual
property include patents,
copyrights, trademarks, and trade
secrets.
 Patents: Patents provide
inventors with exclusive rights
to their inventions for a specific
period, typically 20 years. This
protection encourages inventors
to disclose their innovations to
the public, fostering a culture
of knowledge-sharing and
technological advancement.
Patents play a crucial role in
industries like pharmaceuticals,
technology, and manufacturing,
as they incentivize research and
development by ensuring that
inventors can reap the rewards
of their efforts.
 Copyrights: Copyright
protection applies to original
works of authorship, such as
literary, artistic, and musical
creations. This protection
gives creators the exclusive
right to reproduce, distribute
their works. In the digital
age, copyrights have gained
immense importance due to
the ease of replication and
distribution of digital content.
Industries like entertainment,
publishing, and software
development heavily rely on
copyright protection.
 Trademarks: Trademarks
are symbols, names, and
slogans used to distinguish
goods and services in the
marketplace. They establish
brand identity and consumer
trust. Trademark protection
prevents unauthorized use of
these elements, safeguarding
a company’s reputation and
preventing consumer confusion.
Brands like Apple, Nike, and

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Coca-Cola owe much of their success to
strong trademark protection.
 Trade Secrets: Trade secrets
encompass confidential business
information that provides
a competitive advantage. Copyright
Unlike patents or copyrights,
trade secrets do not require
protection applies
formal registration, and to original works of
authorship, such as
protection lasts indefinitely
as long as the information
remains confidential. literary, artistic, and
musical creations.
Protecting trade secrets
involves implementing
robust security measures and
legal agreements to prevent
unauthorized disclosure. The
Indian Contract Act, 1872 (The Act),
plays a crucial role in establishing and
enforcing contracts to protect these trade secrets.
Businesses use confidential agreements to protect
trade secrets and proprietary information. These
agreements are contracts under The Act, where
parties agree not to disclose certain specific
information to third parties or the public. Although
The Act, does not explicitly define trade secrets,
the act recognizes the validity of contracts that
protect confidential information and trade secrets.
Parties can enter into agreements to define what
constitutes a trade secret and how it should be
handled. Businesses also control access to trade
secrets by granting access only to individuals
who need it for their specific roles. Examples of
trade secrets include Coca-Cola’s closely guarded
formula and Google’s search algorithm.
 Designs: Designs under intellectual property law
refers to the protection of the visual appearance
or ornamental aspects of a product or article. This
protection is aimed at safeguarding the unique
and original design elements that make a product
visually appealing or distinctive. There are typically
two main types of design protection recognized
in intellectual property law – design patents and
industrial designs.
 Geographical Indications (GIs): GIs are a type
of intellectual property right that identifies a
product as originating from a specific geographical
location, where a particular quality, reputation,
or characteristic of the product is essentially
attributable to its geographic origin. These
indications may include the name of a region, city,
country, or even a specific place, which has become
known for producing a certain type or quality of
product.
MARCH 2024 108
The Legal Framework of Intellectual
Property
Intellectual property protection is
governed by a complex web of
international treaties, national
laws, and regulations. Two
of the most significant
international agreements
are the World Intellectual
Property Organization
(WIPO) administered treaties:
The Berne Convention for
the Protection of Literary
and Artistic Works and the
Agreement on Trade-Related
Aspects of Intellectual Property
Rights (TRIPS).
 The Berne Convention for the
Protection of Literary and Artistic Works: The
Berne Convention, established in 1886 and
administered by the World Intellectual Property
Organization (WIPO), is a foundational treaty for
the protection of literary and artistic works. The
Berne Convention sets the minimum standards for
copyright protection among its member countries.
It ensures that creators of literary and artistic works
are granted automatic protection without the
need for formal registration. This harmonization of
copyright laws across countries facilitates the global
exchange of creative works.
 Paris Convention for the Protection of Industrial
Property: The Paris Convention, also administered
by WIPO, was established in 1883 and focuses
on the protection of industrial property, including
patents, trademarks, and industrial designs. It
provides principles such as the right of priority,
allowing an applicant to claim the filing date of an
earlier application in another member state, and
the principle of national treatment.
 Trade-Related Aspects of Intellectual Property
Rights (TRIPS): As a part of the World Trade
Organization (WTO) framework, the TRIPS
Agreement was established in 1995 to create
a more comprehensive and enforceable set of
standards for IPR protection. The TRIPS framework
establishes standards for the protection of various
forms of intellectual property. It aims to strike
a balance between promoting innovation and
safeguarding public interests. TRIPS obligates
member countries to provide minimum levels
of copyright, patents, trademarks, geographical
indications, trade secrets, and other form of
intellectual property protection, encouraging
global trade and investment. TRIPS also establishes
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mechanisms for dispute settlement to address IPR- and constantly evolving to meet the challenges
related conflicts between member states. of a rapidly changing global economy. The key
components of the legal framework of IPRs in India,
 Patent Cooperation Treaty (PCT): Administered
including patents, copyrights, trademarks, and trade
by WIPO, the PCT facilitates the filing, searching,
secrets are -
and examination of patent applications across
multiple member states. This treaty streamlines the  Patents: The Patents Act, 1970, is the cornerstone
international patent application process of India’s patent law regime. It provides for
and allows inventors to seek patent the grant of exclusive rights to inventors
protection in multiple countries over their novel and non-obvious
through a single application. inventions for a limited period,
 Madrid Agreement and typically 20 years. The Act
Protocol Concerning the Balancing IPR outlines the process of patent
International Registration of
Marks: These treaties, also
protection with access application, examination, and
grant, as well as the rights
administered by WIPO, to essential medicines and obligations of patent
provide a centralized
system for the international
in developing holders. India’s patent law
places a strong emphasis
registration of trademarks. countries has been a on balancing exclusivity with

prominent issue.
The Madrid system public interest, allowing for
simplifies the process of compulsory licensing in cases
trademark registration across of non-working, anti-competitive
multiple jurisdictions by allowing practices, and public health
a trademark owner to file a single emergencies.
application and manage protection in  Copyrights: The Copyright Act, 1957,
various member countries. safeguards original literary, artistic, and musical
 Access to Medicines and IPRs: Balancing IPR works, as well as cinematographic films and sound
protection with access to essential medicines in recordings. Copyright protection is automatic upon
developing countries has been a prominent issue. the creation of a work and lasts for the lifetime
The Doha Declaration on the TRIPS Agreement of the creator plus 50 years in those countries
and Public Health (2001) clarified that the TRIPS which are members of Berne Convention. The Act
Agreement should be interpreted in a way that outlines the rights of copyright owners, including
supports public health objectives. This declaration reproduction, adaptation, distribution, and
reinforced the importance of flexibility for countries public performance. It also provides exceptions
to issue compulsory licenses for pharmaceuticals to and limitations to copyright, such as fair use
address health crises.
 Hague Agreement Concerning the International
Registration of Industrial Designs (Hague System):
The Hague System allows for the international
registration of industrial designs in multiple
member countries through a single application
filed with the International Bureau of the World
Intellectual Property Organization (WIPO).
Applicants can designate member countries where
they seek protection, simplifying the registration
process.
In addition to international treaties and agreements,
individual countries have their legal systems for
intellectual property protection. These systems
outline the requirements for obtaining and enforcing
patents, copyrights, trademarks, and trade secrets.
Legal disputes involving IP are resolved through civil
litigation, where rights holders can seek injunctions,
damages, or other remedies against infringing parties.
In India, the legal framework governing IPRs is robust

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 Trade Secrets: While India lacks a specific

legislation solely dedicated to trade secrets, the
concept is protected under common law and
contractual agreements. The courts recognize
the importance of trade secrets and confidential
information, providing remedies against their
unauthorized acquisition, use, or disclosure through
injunctions and damages.
 Plant Varieties and Farmers’ Rights: The Protection
of Plant Varieties and Farmers’ Rights Act, 2001,
aims to protect plant breeders’ rights while
safeguarding the interests of farmers. It provides for
the registration of new plant varieties and ensures
fair compensation to farmers for their contributions
to plant breeding and conservation.
 Designs: In India, the Designs Act, 2000, is the
primary legislation that governs the registration and
protection of industrial designs in India. It provides
the legal basis for design registration, the rights
of design holders, the process of registration, and
and educational use. In India, in case of original other related matters.
literary, dramatic, musical, and artistic works the
time period of copyright is 60 years in addition to The Strategic Significance of Intellectual
the author’s lifespan. In case of multiple authors, Property
the term is 60 years after the death of last author. In the modern business landscape, intellectual
For cinematograph films, sound recordings, property is not just a legal concept; it is a strategic
photographs, posthumous publications, copyright asset that can influence a company’s success, growth,
protection subsists for a period of 60 years from and competitive advantage. Businesses recognize the
year of publication. importance of IP in various ways:
 Trademarks: The Trade Marks Act, 1999, governs
the registration and protection of trademarks  Innovation and R&D: Intellectual property
in India. A trademark is a distinctive sign that protection incentivizes companies to invest
identifies goods or services of a particular source. in research and development (R&D). Patents
The Act allows for the registration of trademarks, provide inventors with a limited monopoly on
which provides the owner with exclusive rights to their innovations, allowing them to recoup their
use the mark in connection with the designated investments and gain a competitive edge. This
goods or services. India follows the “first-to- drives technological progress and fuels innovation-
file” principle, and trademark protection driven economies.
can be renewed indefinitely.  Market Differentiation: Trademarks
 Geographical Indications: The and branding are integral to
Geographical Indications of market differentiation. A
Goods (Registration and strong brand identity built on
Protection) Act, 1999, Patents provide inventors trademarks enhances consumer
safeguards the unique with a limited monopoly recognition and loyalty.
qualities, reputation, on their innovations, Companies like McDonald’s
and Disney have built iconic
and origin of products
originating from specific
allowing them to recoup brands that resonate with
geographical locations their investments and consumers worldwide, largely
in India. Geographical gain a competitive edge. due to their effective use of
trademarks.
indications (GIs) help rural
communities and traditional  Monetization and Revenue
artisans protect and promote Generation: Intellectual property
their unique products, such as can be monetized through licensing,
Darjeeling tea and Kanchipuram silk. franchising, and selling rights. For

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Commercial Laws
THE CHARTERED ACCOUNTANT
instance, a software company can license
its technology to other businesses,
generating revenue without the
need for direct involvement in
manufacturing or distribution. Striking the right
Patent licensing deals and
copyright royalties are
balance between
common examples of IP protecting IP rights
monetization.
and ensuring public
 Attracting Investment and
Partnerships: Investors access to essential
and partners often evaluate goods and services is a
a company’s intellectual
property portfolio as part of constant challenge.
their due diligence. A robust
IP portfolio signals a company’s
commitment to innovation and
can enhance its appeal to potential
investors, collaborators, and strategic
partners.
 Defensive Strategy: Intellectual property also
serves as a defensive mechanism. Companies
strategically acquire patents and trademarks to
build a strong defensive position against potential
lawsuits or competitive threats. A solid IP portfolio
can deter infringement attempts and protect a
company’s market share.
 Global Expansion: Intellectual property protection
enables companies to expand internationally. As
businesses enter new markets, IP rights ensure
that their brand, products, and innovations are
safeguarded from unauthorized use. This fosters
confidence among customers and partners in
foreign markets.
Challenges and Controversies
While intellectual property offers significant benefits, it
also presents challenges and controversies that need
careful consideration.
 Balance between Protection and Access: Striking
the right balance between protecting IP rights
and ensuring public access to essential goods
and services is a constant challenge. For instance,
pharmaceutical patents have been criticized for
potentially limiting access to life-saving medications
in developing countries.
 Patent Trolls and Overlapping Claims: Some
entities, known as patent trolls, acquire patents
solely for litigation, hindering innovation and
burdening legitimate businesses with legal
disputes. Additionally, overlapping patent claims
can lead to patent thickets, complicating R&D and
potentially stifling innovation.
MARCH 2024
1167
 Digital Piracy and Copyright
Infringement: The rise of the digital
age has brought new challenges to
IPR protection. Issues like digital
piracy, online counterfeiting, and
the protection of software and
digital content have prompted
discussions on how to adapt
existing frameworks to the
rapidly evolving technological
landscape.
 Complexity and Cost of
IP Protection: Acquiring and
defending intellectual property
rights can be complex and costly.
The legal processes involved
in obtaining patents, registering
trademarks, and enforcing rights through
litigation can be daunting for smaller businesses
with limited resources.
Conclusion
Intellectual property has transformed from a legal
concept to a strategic cornerstone of modern
business practices. It fuels innovation, encourages
investment, and fosters healthy competition while
raising challenging questions about access, balance,
and fairness. As the global economy continues to
evolve, the role of intellectual property in shaping
industries and economies is likely to grow even more
pronounced. Businesses that recognize the strategic
significance of IP and navigate its complexities adeptly
will be well-positioned to thrive in this dynamic
landscape.
Further India’s legal framework for IPRs strikes a
delicate balance between incentivizing innovation and
protecting public interests. The Patents Act, Copyright
Act, Trademarks Act, and other relevant legislation
provide a comprehensive system for the protection
and enforcement of intellectual property rights.
As technology and creative industries continue to
advance, the Indian government and legal institutions
must adapt the framework to ensure continued
support for innovation, creativity, and economic
growth while addressing emerging challenges in the
digital age.

Author may be reached at
eboard@icai.in
111 www.icai.org
1168

Know Your Ethics

THE CHARTERED ACCOUNTANT

Fee Related issues

Q Can a Chartered Accountant in practice pay
to any person any share, commission or
brokerage in the fees or profits of his professional
business?
No, Clause (2) of Part-I of the First Schedule to
the Chartered Accountants Act, 1949 prohibits a
Chartered Accountant in practice from paying or
allowing any share, commission or brokerage in the
fees or profits of his professional business, to any
person other than a member of the Institute or a
partner or a retired partner or the legal representative
of the deceased partner or a member of any other
professional body or with such other persons having
such qualifications as may be prescribed, for the
purpose of rendering such professional services from
time to time in or outside India.
fees exist. As per paragraph 410.7 A2 of the Code,
examples of actions that might be safeguards to
address such a self-interest threat include:
 Obtaining partial payment of overdue fees.
 Having an appropriate reviewer who did not take
part in the audit engagement review the work
performed.
As per paragraph R410.8 of the Code, when a
significant part of fees due from an audit client remains
unpaid for a long time, the firm shall determine:
(a) Whether the overdue fees might be equivalent to
a loan to the client; and
(b) Whether it is appropriate for the firm to be re-
appointed or continue the audit engagement.

Q
There is however no bar in signing the financial
Can a Chartered Accountant in practice
statements in these circumstances.
share his fees with the Government in

respect of Government Audit?
The Institute came across certain Circulars/Orders
issued by the Registrar of various State Co-operative
Societies wherein it has been mentioned that certain
amount of audit fee is payable to the concerned State
Govt. and the auditor has to deposit a percentage
of his audit fee in the State Treasury by a prescribed
challan within a prescribed time of the receipt of Audit
fee. In view of the above, the Council considered the
issue and while noting that the Government is asking
auditors to deposit such percentage of their audit fee
for recovering the administrative and other expenses
incurred in the process, the Council decided that as
such there is no bar in the Code of Ethics to accept
such assignment wherein a percentage of professional
fees is deducted by the Government to meet the
administrative and other expenditure.
Q
Whether member in practice is permitted to
respond to announcement for empanelment
for allotment of audit and other professional work
and quote fees on enquiries being received?
It has been clarified by the Council under proviso
(ii) to clause (6) of the Part-I of the first schedule
to the Chartered Accountants Act, 1949 that if
announcements are made for empanelment by the
Government, Corporations, Courts, Cooperative
Societies, Banks and other similar institutions, the
members may respond to such announcements
provided the existence of panel is within their
knowledge. The Council has further clarified that
the quotations of fees can be sent, if enquiries are
received by the members in this regard. Attention
is also invited to Council Guidelines dated 7th April,

Q Is it permissible for an Auditor

to sign the Audit Report of any
assessee if there is any audit fee pending
for previous years on the date of signing
audit report?
As per paragraph 410.7 A1 of the Volume-I
of Code of Ethics, a self -interest threat might
be created if a significant part of fees is not
paid before the audit report for the following
year is issued. It is generally expected that the
firm will require payment of such fees before
such audit report is issued. The requirements
and application material set out in Section 511
with respect to loans and guarantees might
also apply to situations where such unpaid

MARCH 2024 112 www.icai.org


Know Your Ethics
THE CHARTERED ACCOUNTANT
2016 which are appearing at Appendix “J” of
Volume-II of Code of Ethics.
Q
Whether a Chartered Accountant or a
Firm of Chartered Accountants can charge
or offer to charge professional fees based on a
percentage of turnovers?
No, in terms of Clause (10) of Part-I of First
Schedule to the Chartered Accountants Act, 1949, it is
not permitted to a Chartered Accountant or a firm of
Chartered Accountant to charge fees on a percentage
of turnover, except in the circumstances provided
under Regulation 192 of the CA Regulations, 1988.
“192. Restriction on fees
No Chartered Accountant in practice shall charge or
offer to charge, accept or offer to accept, in respect
of any professional work, fees which are based on a
percentage of profits, or which are contingent upon
the findings, or results of such work:
Provided that:
(a) in the case of a receiver or a liquidator, the fees
may be based on a percentage of the realization
or disbursement of the assets;
(b) in the case of an auditor or a co-operative society,
the fees may be based on a percentage of the
paid up capital or the working capital or the gross
or net income or profits; and
(c) in the case of a valuer for the purposes of direct taxes
and duties, the fees may be based on a percentage
of the value of the property valued.
(d) in the case of certain management consultancy
services as may be decided by the resolution of the
Council from time to time, the fees may be based
on percentage basis which may be contingent
upon the findings, or results of such work;
(e) in the case of certain fund raising services, the
fees may be based on a percentage of the fund
raised;
(f) in the case of debt recovery services, the fees may
be based on a percentage of the debt recovered;
(g) in the case of services related to cost optimisation,
the fees may be based on a percentage of the
benefit derived; and
(h) any other service or audit as may be decided by
the Council.
Q
Whether a member in practice can become
Financial Advisor and receive fees/
commission from Financial Institutions such as
Mutual Funds, Insurance Companies, NBFCs.?
No, it is not permissible for a member in practice
to become Financial Advisor and receive fees/
commission from Financial Institutions.
MARCH 2024
1169
Q Can a Chartered Accountant in Service
accept or agree to accept any part of
fees, profits or gains from a lawyer, a chartered
accountant or broker engaged by such company,
firm or person or agent or customer of such
company, firm or person by way of commission or
gratification?
No, Clause (2) of Part-II of First Schedule to
the Chartered Accountants Act, 1949, prohibits a
member in service from accepting or agreeing to
accept any part of fees, profits or gains from a lawyer,
a Chartered Accountant or broker engaged by such
company, firm or person or agent or customer of such
company, firm or person by way of commission or
gratification.
Q
Whether a member in practice will be held
liable for failing to keep moneys of his client
in a separate banking account or to use such moneys
for purposes other than they are intended for.
Yes, as per Clause (10) of Part-I of Second Schedule
to the Chartered Accountants Act, 1949, a member in
practice shall be deemed to be guilty of professional
misconduct, if he fails to keep moneys of his client
other than fees or remuneration or money meant to be
expended in a separate banking account or uses such
moneys for purposes other than they are intended for.
Q
Can a Chartered Accountant receive his
professional fees in advance partly or in full?
Yes, as such there is no bar in the Act or in the CA
Regulations as well as Code of Ethics in taking the
fees in advance.
Q
Whether a Professional Accountant in Public
Practice may pay or receive a referral fees or
commission?
As per Paragraph 2.14.1.3(ii) under Clause (3) of
Part-I of First schedule to the Chartered Accountants
Act, 1949, appearing in Volume-II of Code of Ethics,
it is not prohibited for a member in practice to charge
Referral Fees, being the fees obtained by a member
in practice from another member in practice in relation
to referring a client to him. The above should be read
with the applicable provisions mentioned in Paragraph
330.5 A1 and A2 of Volume-I of Code of Ethics,
which provide that a self-interest threat to compliance
with the principles of objectivity and professional
competence and due care is created if a professional
accountant pays or receives a referral fee relating to a
client. Examples of actions that might be safeguards
to address such a self-interest threat include disclosing
to clients any referral fees paid to, or received from,
another professional accountant for recommending
services might address a self-interest threat.
113 www.icai.org
1170
National and International Updates
THE CHARTERED ACCOUNTANT
National Update
Reserve Bank bolsters oversight of fintech firms
with more inspections
From hiring analysts to scrutinise customer data to
holding frequent meetings with executives, India’s
financial regulator is bolstering oversight of fintech
firms in a signal of an end to years of light-handed
regulation of a key business sector.
Those steps from the Reserve Bank of India (RBI)
come after regular inspections over the past year
found a number of fintech firms have been lax in
following, for example, customer due diligence, five
sources with knowledge of the matter said. Fintech
firms and their investors were given a foretaste of
that stricter approach last month when the central
bank ordered sector giant Paytm to wind down its
banking unit due to, what it termed, persistent non-
compliance with regulations. Globally, fintech firms
provide a range of services - from payments to small
credit and deposits – and as their economic influence
increases, regulators are sharpening scrutiny of their
linkages with the broader financial system.
https://www.business-standard.com/finance/news/
reserve-bank-bolsters-oversight-of-fintech-firms-with-
more-inspections-124022100434_1.html
India’s debt to GDP ratio by 2030-31 will be much
lower than IMF’s projection: RBI paper
Indian government expenditure needs to be focused
on development given the growth needs and the
interim budget intentions signal that the general
government debt-GDP ratio could decline to 73.4 per
cent by 2030-31, around 5 percentage points lower
than the IMF’s projected trajectory of 78.2 per cent, a
research paper by RBI showed.
https://economictimes.indiatimes.com/news/
economy/indicators/indias-debt-to-gdp-ratio-by-2030-
31-will-be-much-lower-than-imfs-projection-rbi-paper/
articleshow/107856421.cms?from=mdr
MCA operationalises Central Processing Centre
(CPC) for Centralised Processing of Corporate Filings
On the lines of continuous endeavor to provide Ease
of Doing Business in pursuance to Union Budget
Announcement 2023-24, Central Processing Centre
(CPC) has been established to process forms filed
as part of various regulatory requirements under
Companies Act and Limited Liability Partnership Act
(LLP Act) in a centralised manner, requiring no physical
interaction with the stakeholders.
MARCH 2024
From 16.02.2024, 12 forms/applications shall be
processed at CPC, followed by other forms from
01.04.2024 onward. Later, forms/applications filed
under LLP Act are also proposed to be centralised.
Based on filing trends, it is expected that about 2.50
lakh forms will be processed through CPC annually,
once it is fully operational.
After the establishment of CPC, jurisdictional Registrar
of Companies (RoC), will have to focus more on their
core functions of inquiries, inspection and investigation
for ensuring robust corporate governance.
https://pib.gov.in/PressReleasePage.
aspx?PRID=2006537
Sebi takes steps to boost ease of doing biz,
compliance reporting
With an aim to promote ease of doing business and
compliance reporting, Sebi has came out with measures
for centralization of certifications under the Foreign
Account Tax Compliance Act (FATCA) and Common
Reporting Standard (CRS) at KYC Registration Agencies.
Under this, the regulator has directed intermediaries,
who are reporting to financial institutions (RFI), to
upload the certifications under FATCA and CRS
obtained from the clients in the system of KYC
Registration Agencies (KRAs) from July 1.
The existing certifications obtained from clients prior
to July 1, 2024 will be uploaded by the intermediaries
onto the systems of KRAs within a period of 90 days of
implementation of the new rule, Sebi said in its circular.
https://www.ptinews.com/story/business/sebi-
takes-steps-to-boost-ease-of-doing-biz-compliance-
reporting/1304466
CBDT sets Rs 1 lakh ceiling per assessee for
withdrawal of old tax demands
Pursuant to the Budget announcement about
withdrawal of direct tax demands, the Income Tax
department in an order has set a ceiling of Rs 1 lakh
per assessee for withdrawal of small tax demands till
Assessment Year 2015-16.
Finance Minister Nirmala Sitharaman in the Budget for
2024-25 had announced that tax demands for AY
2010-11 of up to Rs 25,000 and for AY 2011-12
to 2015-16 of up to Rs 10,000 will be withdrawn.
Tax demands totalling about Rs 3,500 crore will be
withdrawn following the announcement.
The tax department’s order said that such outstanding
demands pertaining to income tax, wealth tax and
114 www.icai.org
 1171

National and International Updates

THE CHARTERED ACCOUNTANT

gift tax as on January 31, 2024, shall be remitted and
extinguished “subject to the maximum ceiling of Rs 1
lakh for any specific taxpayer/assessee”.
Corporate Affairs Ministry Notifies Leniency Plus
Regime To Combat Cartels
The Ministry of Corporate Affairs has officially
introduced the leniency plus regime under the
Competition (Amendment) Act 2023. This initiative
incentivises businesses that are already under
investigation by one cartel to voluntarily disclose
information about other cartels. The Competition
Commission of India initially presented the proposal
for leniency plus in October 2023.
Under the “leniency plus” concept, businesses that have
exposed a cartel and applied for reduced penalties can
now submit a separate application, providing essential
information about another cartel in which they are
involved. To benefit from this leniency-plus provision,
companies must ensure “full, true, and vital disclosure.
By providing comprehensive and accurate information,
these companies may be eligible for reduced monetary
penalties in cases related to the disclosed cartels.
https://www.ndtvprofit.com/law-and-policy/corporate-
affairs-ministry-notifies-leniency-plus-regime-to-
combat-cartels
International Update
IAASB MOVES TO STRENGTHEN AUDITORS’
EFFORTS RELATED TO FRAUD
The International Auditing and Assurance
Standards Board (IAASB) has proposed a significant
strengthening of its standard on auditors’
responsibilities relating to fraud. Recent corporate
failures throughout the world have underscored
the benefits of clarifying and enhancing the role of
auditors in responding to fraud and suspected fraud
as a means of enhancing public trust in financial
reporting.
IAASB emphasized that the proposed revisions
define the expectations in relation to fraud, delineate
more robust procedures, and increase transparency
about the auditors’ responsibilities and fraud-related
procedures in the auditor’s report.
The IAASB invites all stakeholder to submit their
comments using the Response Template, designed
to facilitate a structured response and streamline
feedback collation and analysis. Respondents are
encouraged to share their insights by June 5, 2024.
https://www.iaasb.org/news-events/2024-02/iaasb-
moves-strengthen-auditors-efforts-related-fraud

Date: 30.01.2024
Announcement
Issuance of CPE Statement, 2023: Guidelines on Continuing Professional Education for undergoing CPE Activities by
Members of ICAI
The Continuing Professional Education Committee (CPEC) a non-standing committee of the Council of the ICAI is entrusted
with the task of setting strategic directions and overseeing CPE activities of Programme Organising Units (POUs), members, etc.
under the directions of the Council. CPEC has always been working with a constructive thought process and empowers members
through training and programmes with a very comprehensive CPE calendar.
With a view to enabling its members to maintain the requisite high quality standards in the professional services and the
professional competence, the ICAI identified CPE as a major area of focus for the members and accordingly, in the year 2003,
the ICAI had issued the Statement on Continuing Professional Education, 2003 prescribing the norms for undergoing CPE
activities by the members and the mechanism to implement the same by POUs. CPE Statement 2003 was amended from time
to time and is applicable till enforcement of CPE Statement, 2023.
To enable the members to remain in tandem with evolving requirements of business and economy; with contemporary
global practices and also help them in development of their professional base, skills, and expertise, the Council of
ICAI through CPE Committee regularly issues or amends CPE Advisories/Guidelines under Section 15 of the Chartered
Accountants Act 1949.
Further, in exercise of the powers conferred by the section 15(2) (fa) of the Chartered Accountants Act 1949 as amended by
the Chartered Accountants (Amendment) Act, 2022 (No. 12 of 22), the Council of ICAI at its 426th meeting had decided to
issue “Statement on Continuing Professional Education, 2023” for undergoing CPE activities by the members and the
mechanism to implement the same by POUs. This includes consequential provisions for non-compliance with CPE hours’
requirements applicable to various categories of members on yearly basis from Calendar Year 2024 onwards as decided by
the Council of ICAI. These consequential provisions are applicable w.e.f. 1st January, 2025 for non-compliance arising from
the Calendar Year 2024.
Detailed Statement on Continuing Professional Education, 2023 is hosted on ICAI portal and accessible at
https://www.icai.org/post/issuance-of-cpe-statement-2023.
Members are requested to go through the aforesaid Statement and ensure compliance as per Continuing Professional
Education Statement, 2023.
Regards
Chairman Vice-Chairman
CPE Committee of ICAI CPE Committee of ICAI

MARCH 2024 115 www.icai.org

1172

Crossword
THE CHARTERED ACCOUNTANT

CROSSWORD – 001 Downward

1 2 3 4 5 6
1. An excess of expenditure over income.
2. A software application that is programmed to do
7 8 certain tasks.
3. n international standard for a secure crypto
9 10 processor.
4. An interactive experience that combines the real
11 12 world and computer-generated content.
5. A method widely used to make millions to billions
13 14 15 16 of copies of a specific DNA.
6. elasticity is also defined as the elasticity
17 18 between two points on a curve.
10. A measure of the volatility.
19 12. A decision-making tool in capital budgeting.
14 is represented as the difference
20 21 22 23 24 between the total return to a factor of production.
15. Moving away and often down from.
25 26 27
16. The impact of demographic change on economic
growth.
28
20. The senior manager responsible for overseeing
the financial activities of an entire company.
21. It measures the number of infant deaths per
thousand live births.
Across
22. Improves agility of the entire network system.
1. A sum of money that is owed. 23. Abbre: receipt of goods.
4. An investment strategy’s ability to beat the 24. A multilateral development bank.
market.
26. A digital optical disc data storage format.
7. Enables employees to own part or all of the
company they work for.
8. The share of a bank’s total deposit to be FORM IV (SEE RULE 8)
maintained with the latter in the form liquid cash.
1. Place of Publication : New Delhi
9. has been in power in West Bengal since 2. Periodicity of its : Monthly
2011. publication
3. Printer’s Name : Jai Kumar Batra
11. A free graphical browser maintained by Microsoft. Nationality : Indian
Address : Journal Section
13. A tax levied on the carbon emissions required to Institute of Chartered Accountants of
produce goods and services. India, Indraprastha Marg,
Post Box 7100,
17. The solid state of water. New Delhi-110002.
4. Publisher’s Name : Jai Kumar Batra
18. An agreement, according to international law to Nationality : Indian
form a free-trade area between the cooperating Address : Journal Section
Institute of Chartered Accountants of
states. India, Indraprastha Marg,
Post Box 7100, New Delhi-110002.
19. A security’s intrinsic value by examining related 5. Editor’s Name : CA. Ranjeet Kumar Agarwal
economic and financial factors. Nationality : Indian
Address : Journal Section
20. Technology that allows computers and telephones Institute of Chartered Accountants of
to interact and exchange information. India, Indraprastha Marg, Post Box
7100, New Delhi-110002.
22. Creating a new breed of professional rural 6. Name and addresses : Council of the Institute of Chartered
managers with the appropriate ethos and values. of individuals who Accountants of India, constituted
own the newspaper under the Chartered Accountants
25. The change in total production cost that comes and partners Act, 1949 (Act XXXVIII of 1949).
or shareholders There is no share capital.
from making or producing one additional unit. holding more than
one per cent of the
27. refer to high-security debt instruments total capital
that enable an entity to raise funds and fulfil
capital requirements. I, Jai Kumar Batra hereby declare that the particulars given above are
true to the best of my knowledge and belief.
28. Purchase of large quantities of a commodity by a Date: sd/-
February 22, 2023 Jai Kumar Batra
speculator. Signature of publisher

MARCH 2024 116 www.icai.org

 1173

Opinion
THE CHARTERED ACCOUNTANT

Opinion

Accounting
treatment of A. Facts of the Case
pre-project 1. Union Cabinet, on 7th January 2004 decided to build and

expenses for
operate strategic crude oil reserves of 5 MMT capacity through
a special purpose vehicle, which would be 100% owned by one of
the oil public sector undertakings (PSUs). Accordingly, a company
which fund (hereinafter referred to as ‘the Company’) was incorporated on 16th
June 2004 as a subsidiary of I Ltd.

approval 2. Further, in line with Cabinet Committee on Economic Affairs

(CCEA) meeting held on 6th January 2006, the Company was made as
is pending subsidiary of Oil Industry Development Board (OIDB) by transferring
the entire shareholding held by I Ltd. to OIDB. The share transfer was

under Ind AS completed on 9th May 2006.

3. The Company constructed strategic crude oil storages at three
framework locations. Capital costs for construction of caverns were provided by
OIDB against which the shares were allotted to OIDB.
4. All these caverns were commissioned by the year 2019 and
currently are fully operational. Day-to-day expenditure for operation
and maintenance are incurred by the Company out of grants/
reimbursement given by the Ministry of Petroleum and Natural Gas
(MoPNG)/Government of India (GoI).
5. Vide Note dated July 2021, the Cabinet has approved partial
commercialisation of the Company in the following manner:
a. Leasing/Renting of 30% of overall storage capacity to
Indian or foreign companies (Refer Note 1),
b. Sale/Purchase of 20% of overall storage capacity of
crude oil to Indian companies (Refer Note 2).
Remaining 50% of overall storage capacity will remain strategic.

MARCH 2024 117 www.icai.org

1174
Opinion
THE CHARTERED ACCOUNTANT
Note 1: The Company has sold 30% sovereign crude
oil reserves during the financial Year (F.Y.) 2021-22 to
create space for leasing/renting and sale proceeds from
the same have been remitted back to the Government
of India (GOI).
Note 2: No transaction has been undertaken by the
Company till date.
6. The Company was mandated to construct
additional storage at other two locations in Phase-
II under public-private-partnership (PPP) mode with
viability gap funding (VGF) provisions through capital
grant. For study of suitability and feasibility of location
under Phase II project, the Company had to incur
some pre-project expenses. Initially, the Company
had estimated pre-project expenses on account of
environmental impact assessment, survey of offshore
and onshore pipeline for single point mooring and
owners’ activities including national and overseas
road shows etc. to Rs. 19 crore. As per direction from
the MoPNG vide letter dated 11th December 2018,
an amount of Rs. 19 crore was provided by parent
organisation, OIDB (100% shareholder of the Company)
during the period from March 2019 to March 2022. The
funds received from the OIDB were for expenses for
pre-project activity (which are revenue in nature).
7. However, during placement of order and execution
of pre-project activities, the cost got escalated to around
Rs. 23.20 crore against the sanctioned amount of Rs.
19 crore. Against the escalated cost of Rs. 23.20 crore,
bills for a value of Rs. 21.22 crore have been received till
the end of financial year 2021-22 but the disbursement
could be done for only Rs. 19 crore (approx.) i.e. to the
tune of fund sanction and disbursed by OIDB. Balance
payment for Rs. 2.22 crore for which bills are in hand,
could not be made in the absence of funds.
8. The Company requested additional funds from
the controlling ministry, MoPNG. In a subsequent
development, the parent company (i.e. OIDB) has
provided shortfall of funds on the directions of MoPNG
after the assurance given to the Comptroller and Auditor
General of India (CA&G) that an opinion will be obtained
from the Institute of Chartered Accountants of India
(ICAI) regarding depiction of liability.
Current accounting practice by the Company
9. The Company follows the below-mentioned
accounting policy with respect to shareholder grants:
“Grants received from Shareholder are recognised
in profit or loss on a systematic basis over the
periods in which the Company recognises as
expenses the related costs for which the grants
are intended to compensate”.
MARCH 2024
On the basis of same, grant received by the Company
from its shareholder (i.e. OIDB) is treated as income in
the Statement of Profit and Loss (income recognised
on accrual basis, i.e., to the extent of expenditure
incurred irrespective of actual amount of grant
receipt). Correspondingly, amount of expenditure
incurred out of that grant is shown as expenses in the
Statement of Profit and Loss. Accounting policy with
respect to revenue grant received from shareholders
was followed for the sanctioned and disbursed grant
of Rs. 19 crore from OIDB, however liability for the
unpaid invoices in hand to the tune of Rs. 2.22 crore
could not be provided in the books and financials in
the absence of sanction of funds from MoPNG/GoI.
10. C&AG in their Provisional comment No. 02 for
the F.Y. 2021-22 has stated that not providing of liability
in the books of account has resulted in understatement
of liabilities and understatement of loss to the extent.
11. As per the Company, no accounting was done for
the said transaction because of the following:
(i) There was no certainty regarding
source of funds, i.e., whether funds will
be provided by Ministry through Gross
Budgetary Support (GBS) or from the
grant of OIDB.
(ii) Due to uncertainty about receipt of funds
and source of funds, the Company was
not able to provide for liability in its books
of account, as grant from shareholder
(i.e. OIDB) and corresponding expenses
form part of income and expense in the
Statement of Profit and Loss; however
grant from MoPNG does not form part of
the Statement of Profit and Loss and the
expenses to the extent of grant received
are to be set off in the Statement of
Profit and Loss.
(iii) Any provision of expense will result in
depiction of expense in the Statement
of Profit and Loss, without recognising
corresponding income in the Statement
of Profit and Loss due to non-receipt of
grant/fund.
As the source of funds is now ascertained to the
Company, necessary income and expense can now
be shown by the Company in its financial statements
for F.Y. 2022-23. (Emphasis supplied by the querist.)
Considering the difference of opinion about the
depiction of transaction in the books of account of the
Company, assurance was given by the Company to
C&AG that the Company will obtain opinion from the
Expert Advisory Committee of the ICAI.
118 www.icai.org
 1175

Opinion
THE CHARTERED ACCOUNTANT

B. Query Statements’ and Ind AS 37, ‘Provisions, Contingent

Liabilities and Contingent Assets’, notified under the
12. In view of above, the querist has sought the
Companies (Indian Accounting Standards) Rules, 2015
opinion of the Expert Advisory Committee of the
and the Conceptual Framework for Financial Reporting
Institute of Chartered Accountants of India with respect
under Indian Accounting Standards (Ind AS), issued by
to transaction undertaken by the Company on the
the ICAI:
following issues:
Ind AS 1
(i) Whether or not the Company’s
accounting treatment for not making “88 An entity shall recognise all items of
provision for expenses incurred in the income and expense in a period in
books of account in the absence of fund profit or loss unless an Ind AS requires
source and not providing for liability for or permits otherwise.”
the same is books of account was in order.
Ind AS 37
(ii) If not, what accounting/disclosure
methodology would have been adopted “Provisions and other liabilities
by the Company with respect to such 11 Provisions can be distinguished from
transaction and/or situation? other liabilities such as trade payables
and accruals because there is uncertainty
C. Points considered by the Committee about the timing or amount of the future
expenditure required in settlement. By
13. The Committee notes that the basic issue raised
contrast:
by the querist relates to the timing of recognition of
liability/provision in respect of pre-project expenses (a) trade payables are liabilities to pay
incurred in the absence of fund source or for which fund for goods or services that have
approval is pending. The Committee has, therefore, been received or supplied and
considered only this issue and has not examined any have been invoiced or formally
other issues that may arise from the Facts of the Case, agreed with the supplier; and
such as, appropriateness of accounting for funds or
(b) accruals are liabilities to pay for
grants received by the Company from OIDB/MoPNG/
goods or services that have been
GoI, accounting treatment of pre-project expenses and
received or supplied but have not
whether these meet the capitalisation criteria, whether
been paid, invoiced or formally
the expenditure incurred meets the terms and conditions
of the sanction/grant etc. The Committee notes from agreed with the supplier, including
the annual report of the Company for the financial year amounts due to employees (for
2021-22 that the Company follows Indian Accounting example, amounts relating to
Standards (Ind AS) in its financial statements and has accrued vacation pay). Although it
therefore examined the issue from Ind AS perspective. is sometimes necessary to estimate
Further, the opinion expressed hereinafter is purely the amount or timing of accruals,
from accounting perspective and the Committee has the uncertainty is generally much
not examined any regulatory or legal aspects including less than for provisions.
under Income-tax Act, 1961 or Rules made thereunder or Accruals are often reported as part
legal interpretation of various orders or communications of trade and other payables, whereas
with Ministry/OIDB/GoI including whether the Ministry/ provisions are reported separately.”
OIDB/GoI is required to reimburse the Company for
escalated cost etc. Conceptual Framework for Financial Reporting
under Indian Accounting Standards (Ind AS)
14. At the outset, the Committee notes from the Facts
of the Case that due to uncertainty about receipt of funds “Definition of a liability
and source of funds, the Company has not provided for 4.26 A liability is a present obligation of the
any expense or liability in its books of account in the entity to transfer an economic resource as
F.Y. 2021-22 and due to subsequent development, as a result of past events.
the source of funds is now ascertained to the Company,
necessary income and expense will be shown by the 4.27 For a liability to exist, three criteria must
Company in its financial statements for F.Y. 2022-23. all be satisfied:
In this context, the Committee notes the following (a) the entity has an obligation (see
requirements of Ind AS 1, ‘Presentation of Financial paragraphs 4.28–4.35);

MARCH 2024 119 www.icai.org

1176
Opinion
THE CHARTERED ACCOUNTANT
(b) the obligation is to transfer an
economic resource (see paragraphs
4.36–4.41); and
(c) the obligation is a present
obligation that exists as a result
of past events (see paragraphs
4.42–4.47).”
“4.69 Expenses are decreases in assets, or
increases in liabilities, that result in
decreases in equity, other than those
relating to distributions to holders of
equity claims.”
“5.4 The balance sheet and statement of
profit and loss are linked because the
recognition of one item (or a change
in its carrying amount) requires the
recognition or derecognition of one
or more other items (or changes in the
carrying amount of one or more other
items). For example:
(a) ...
(b) the recognition of expenses occurs at
the same time as:
(i) the initial recognition of a
liability, or an increase in the
carrying amount of a liability;
or
(ii) the derecognition of an asset,
or a decrease in the carrying
amount of an asset.”
“5.5 The initial recognition of assets or liabilities
arising from transactions or other events
may result in the simultaneous recognition
of both income and related expenses. For
example, the sale of goods for cash results
in the recognition of both income (from
the recognition of one asset—the cash)
and an expense (from the derecognition
of another asset—the goods sold). The
simultaneous recognition of income
and related expenses is sometimes
referred to as the matching of costs with
income. Application of the concepts
in the Conceptual Framework leads to
such matching when it arises from the
recognition of changes in assets and
liabilities. However, matching of costs
with income is not an objective of the
Conceptual Framework. The Conceptual
Framework does not allow the recognition
in the balance sheet of items that do not
meet the definition of an asset, a liability
or equity.
MARCH 2024
Recognition criteria
5.6 Only items that meet the definition of an
asset, a liability or equity are recognised
in the balance sheet. Similarly, only items
that meet the definition of income or
expenses are recognised in the statement
of profit and loss. However, not all items
that meet the definition of one of those
elements are recognised.”
“5.10 It is important when making decisions
about recognition to consider the
information that would be given if an
asset or liability were not recognised. For
example, if no asset is recognised when
expenditure is incurred, an expense
is recognised. Over time, recognising
the expense may, in some cases,
provide useful information, for example,
information that enables users of financial
statements to identify trends.”
(Emphasis supplied by the Committee.)
From the above, the Committee notes that as per Ind AS
1, an entity shall recognise, in a period in profit or loss
(unless an Ind AS requires or permits otherwise), all items
of expense, which is defined in the Conceptual Framework
as decreases in assets, or increases in liabilities, that result
in decreases in equity. The ‘Conceptual Framework for
Financial Reporting under Indian Accounting Standards
(Ind AS)’ defines ‘liability’ as a present obligation of the
entity to transfer an economic resource as a result of
past events. Further, Ind AS 37 states that accruals are
liabilities to pay for goods or services that have been
received or supplied but have not been paid, invoiced or
formally agreed with the supplier and these accruals are
often reported as part of trade and other payables. Thus,
the Committee is of the view that irrespective of the type
of liabilities, an entity should recognise the same in its
financial statements when it has an obligation (legal or
contractual) to pay to the other party or service provider.
Further, the incurrence of liability shall give rise to an
expense, which should be recognised in the Statement
of Profit and Loss unless an Ind AS requires or permits
otherwise.
In this context, the Committee notes that in the extant
case, during placement of order and execution of pre-
project activities, the cost got escalated to around Rs.
23.20 crore against the sanctioned amount of Rs. 19
crore. Against the escalated cost of 23.20 crore, bills
for a value of Rs. 21.22 crore have been received till
the end of financial year 2021-22 but the disbursement
could be done for only Rs. 19 crore (approx.) i.e. to the
tune of fund sanction and disbursed by OIDB. Balance
payment for Rs. 2.22 crore for which bills are received
has not been made in the absence of funds.
120 www.icai.org

Opinion
THE CHARTERED ACCOUNTANT
Thus, in the extant case, on execution of pre-project
activities by the supplier of goods or services, a present
obligation arises on the Company to pay cash to the
supplier, which should be recognised by the Company
with a corresponding expense in the Statement of Profit
and Loss unless such expenditure can be capitalised as
per the requirements of applicable standards, such as,
Ind AS 16, ‘Property, Plant and Equipment’.
Accordingly, the Committee is of the view that the
Company in extant case should have recognised a
liability in respect of the pre-project expenses when
the pre-project activities are executed by the supplier
of goods or services and as a result of which, a present
obligation arises on the Company to pay cash to the
supplier. Therefore, the present accounting treatment
followed by the Company of not recognising the
liability in respect of expenses incurred in the financial
statements for the F.Y. 2021-22 is not correct.
15. The Committee is also of the view that in the
extant case, since the Company did not follow the
above-mentioned accounting treatment, the same (if
material) should be rectified in the current reporting
period, considering it as an error, as per the following
requirements of Ind AS 8, ‘Accounting Policies, Changes
in Accounting Estimates and Errors’.
“Prior period errors are omissions from,
and misstatements in, the entity’s financial
statements for one or more prior periods
arising from a failure to use, or misuse of,
reliable information that:
(a) was available when financial statements
for those periods were approved for
issue; and
(b) could reasonably be expected to have
been obtained and taken into account
in the preparation and presentation of
those financial statements.
Such errors include the effects of mathematical
mistakes, mistakes in applying accounting
policies, oversights or misinterpretations of
facts, and fraud.”
“41 Errors can arise in respect of the
recognition, measurement, presentation
or disclosure of elements of financial
statements. Financial statements do
not comply with Ind ASs if they contain
either material errors or immaterial errors
made intentionally to achieve a particular
presentation of an entity’s financial
position, financial performance or cash
flows. Potential current period errors
discovered in that period are corrected
before the financial statements are
MARCH 2024
1177
approved for issue. However, material
errors are sometimes not discovered
until a subsequent period, and these
prior period errors are corrected in the
comparative information presented in the
financial statements for that subsequent
period (see paragraphs 42–47).
42 Subject to paragraph 43, an entity
shall correct material prior period
errors retrospectively in the first set
of financial statements approved for
issue after their discovery by:
(a) restating the comparative
amounts for the prior period(s)
presented in which the error
occurred; or
(b) if the error occurred before the
earliest prior period presented,
restating the opening balances of
assets, liabilities and equity for the
earliest prior period presented.”
Further, the definition of ‘material’ as given in Ind AS 1,
‘Presentation of Financial Statements’should also be
considered which is as follows:
“Material:
Information is material if omitting, misstating
or obscuring it could reasonably be expected
to influence decisions that the primary users of
general purpose financial statements make on
the basis of those financial statements, which
provide financial information about a specific
reporting entity.”
D. Opinion
16. On the basis of the above, the Committee is of
the following opinion on the issues raised in paragraph
12 above:
(i) The present accounting treatment
followed by the Company of not
recognising the liability in respect of
expenses incurred (but not approved)
in the financial statements for the F.Y.
2021-22 is not correct, as discussed in
paragraph 14 above.
(ii) The Company should have recognised
a liability in respect of the pre-project
expenses when the pre-project activities
are executed by the supplier of goods or
services and as a result of which, a present
obligation arises on the Company to
pay cash to the supplier, as discussed in
paragraph 14 above. Since the Company
121 www.icai.org
1178

Opinion
THE CHARTERED ACCOUNTANT

did not follow the above-mentioned period, considering it as an error, as per the
accounting treatment, the same, if material, requirements of Ind AS 8, as discussed in
should be rectified in the current reporting paragraph 15 above.

1. The Opinion is only that of the Expert Advisory Committee and does not necessarily represent the Opinion
of the Council of the Institute.

2. The Opinion is based on the facts supplied and in the specific circumstances of the querist. The
Committee finalised the Opinion on 31st July, 2023. The Opinion must, therefore, be read in the light of
any amendments and/or other developments subsequent to the issuance of Opinion by the Committee.

3. The Compendium of Opinions containing the Opinions of Expert Advisory Committee has been published
in forty-two volumes. These volumes are available for sale and can be procured online through CDS Portal
at https://icai-cds.org/.

4. Opinions of the Committee may be accessed at the following link: http://115.248.235.50/eacicai/.

5. Opinions can be obtained from EAC as per its Advisory Service Rules which are available on the website of
the ICAI, under the head ‘Resources’. For further information, write to eac@icai.in.

********

MARCH 2024 122 www.icai.org

 1179

Reference
THE CHARTERED ACCOUNTANT

Accountant’s Browser
PROFESSIONAL NEWS & VIEWS PUBLISHED ELSEWHERE

Index of some useful articles taken from Periodicals received during January - February 2024 for the
reference of Faculty/Students & Members of the Institute.
1. Accountancy
Accounting for financial instruments from an Issuer’s
perspective under IGAAP and Ind AS by Siddharth Iyer
and Saurabh Mathur. The Chamber’s Journal,
January 2024, pp.69-84.
Ind AS/IGAAP- interpretation and practical application:
Streaming Arrangements by Dolphy D’souza. BCAJ,
January 2024, pp.68-71.
2. Audit
Forensic auditing for fraud investigation and
prevention – A critical review by Meenu Gupta
and Pradeep Kumar Aggarwal. The Management
Accountant, February 2024, pp.73-77.
3. Economics
Comparative study of national pension system and
old pension system from employees’ perspective by
Parmod Kumar and Pushp Deep Dagar. The Journal
of Insurance Institute of India. October – December
2023, pp.103-115.
Credit Environment by V. Gopalan and Harini Gopalan.
The Management Accountant, February 2024, pp.66-69.
Linkage of multidimensional poverty and per capita
income: A district-level analysts in Uttar Pradesh by
Rashmi Shukla. Economic & Political Weekly.
February 3, 2024, pp.42-47.
Reformist thought to fiscal reform and budget
management by Anshuman Kamila, Ritika Bansal and
Rajiv Mishra. Vikalpa, October - December 2023,
pp.247-254.
4. Investment
Dynamics regulatory aspects of anchor investors in
an IPO by Nishant Gehlot and Amit Kumar Kashyap.
Chartered Secretary, January 2024, pp.71-73.
5. Management
Deal size and synergy gains: A case of India M&A by
Anjala Kalsie and Neha Singh. Vikalpa,
October - December 2023, pp.255-268.
6. Taxation and Finance
Interim Budget: A continuity of policy decision by the
government by Arindam Goswami. The Management
Accountant, February 2024, pp.61p.
Income-tax implications for various financial
instruments by Chirag Shah and Rohan Umranikar.
The Chamber’s Journal, January 2024, pp.25-42.
Residential status of individuals – Interplay with tax
treaty by Mahesh G. Nayak. BCAJ, January 2024,
pp.19-25.

Full Texts of the above articles are available with the Central Council library, ICAI, which can be referred on all working days.
For further inquiries please contact on 011-30110419 and 011-30110420 or by e-mail at library@icai.in.

CLASSIFIEDS
5999 Required Full/Part time C.A(s) as Partners/Retainers,
Semi- Qualified, Article Asstts. for Delhi, Jammu,
Sri Nagar, Sonepat, Gurugram, Faridabad, Noida,
Chandigarh, Shimla & Jaipur. Contact 9205136037
E-mail: kkg200317@gmail.com
6000 34 year old Firm Headquartered in Delhi NCR invites
proposal for merger from sole proprietorship or
partnership firms. Mail with brief profile to sangeeta.
pgc@gmail.com or call 9811278153
6001 CAs preferably with DISA/ CISA/ CPA/ CIA/ CFE/
IND-AS/ FAFP/ PFGA/ CAB/ AMLL/ FTM/ GST etc.
and CA firms interested in joining or merging with
a 52 years old CA firm, write with details enclosing
Membership Card / Firm Status Certificate to
cahelpline45@gmail.com
6002 Required full time partners for Delhi, Chennai,
Vishakhapatnam, Hyderabad, Lucknow, Raipur,
Rourkela and Bangalore on revenue sharing basis.
Please Contact on email id: bk1ckdk@gmail.com
6003 Mumbai based CA 30 years experience [9 years CA
firm and 21 years Indian Multinational companies]
seeks employment from CA Firms / Corporates on
Part / Fulltime. Contact vasant_savla@yahoo.com,
7718827262
6004 Gujarat headquartered 42 year old firm (www.rkdoshi.
com) wishes to open branches in Tamil Nadu, Kerala,
Punjab, AP, Telangana, Assam, Orissa & WB. Contact:
firm.rkdoshi@gmail.com

MARCH 2024 123 www.icai.org

1180

ICAI News
THE CHARTERED ACCOUNTANT

ANNOUNCEMENT
Invitation for empanelment as Examiners for
Chartered Accountants Examinations
Applications are invited from eligible members of the Institute and other professionals including academicians
of reputed educational institutions, tax and legal practitioners etc., having a flair for academic activities including
evaluation of answer books and willing to undertake confidential assignments as a dedicated examiner, for
empanelment as examiner in respect of the following papers of the Chartered Accountants Examinations.

Foundation Examination ● Persons whose applications were rejected earlier

from the Panel are eligible to apply again after a gap
Paper-1 Accounting of 1 year from the date of rejection.
Paper-2 Business Laws ● Those who are already empanelled with ICAI as
examiners need not apply. Their candidature will be
Intermediate Examination considered in the normal course, at the appropriate
time.
Paper -1 Advanced Accounting ● Persons associated with the coaching activities
Paper -2 Corporate & Other Laws are not eligible. Those who have ceased to be
associated with the coaching activity, are permitted
Paper -3 Taxation to apply after a gap of 5 years.
Section A –Income Tax Law
Scales of honorarium for evaluation of answer books
Section B –Indirect Taxes
Paper -4 Cost and Management Examination Paper Rate (for Digital
Accounting Evaluation)
Paper -5 Auditing and Ethics Foundation 1&2 Rs 125/- per
answer book
Paper -6A Financial Management
Intermediate 1,2,4 & 5 Rs 150/- per
Paper -6B Strategic Management (IPC) answer book

Final Examination Intermediate Sectional papers Rs 100/- per

(IPC) (Paper 3A, 3B, 6A answer book
Paper -6 Integrated Business Solutions & 6B)
(Multi-disciplinary Case
Studies) Final 1-5 Rs.190/- per
examination answer book
The eligibility criteria for empanelment as examiner
Application for empanelment as examiner can be made
are as follows: online at http://examinerspanel.icaiexam.icai.org.
● Chartered Accountants with a minimum of five years ICAI has implemented the Digital evaluation (Online
standing in practice or in service are eligible. Evaluation) of answer books in all the papers of
● University Lecturers/Professors with a minimum of Foundation, Intermediate and Final examinations.
five years teaching experience are eligible. Hence, applicants are expected to be comfortable
● ICWA, ACS, M.Com, Post Graduates in Economics working on computers and also evaluating answer
or Law, Lawyers, IT Professionals, MBA (Finance) and books on-line. However, requisite training will be
other professionals with at least five years experience, provided, before on-line evaluation assignments are
either in academic position or in practice or in undertaken. Please fill the application online, take a
employment are eligible to apply. Those with work print out, affix your photograph, sign it and send with
experience having direct relevance to the aforesaid all the requisite enclosures to the following address:
subjects(s) of examination(s) will be preferred.
● Persons above 65 years of age are not eligible. Shri S K Garg
● Persons who are visually impaired or suffer from such Director (Exams)
other physically disability that might necessitate The Institute of Chartered Accountants of India
taking the assistance of any other person for ICAI Bhawan
evaluation of answer books are not eligible. Indraprastha Marg
New Delhi – 110002
● Persons who are undergoing CA Course of the
Institute are not eligible. Director (Exams.)

MARCH 2024 124 www.icai.org


ICAI News
THE CHARTERED ACCOUNTANT
Composition of Standing and Non-Standing Committees for the Year 2024-25
Standing Committee
Committee Chairman/Chairperson
Executive Committee President in Office
CA. Ranjeet Kumar Agarwal
Examination Committee President in Office
CA. Ranjeet Kumar Agarwal
Finance Committee President in Office
CA. Ranjeet Kumar Agarwal
Disciplinary Committee (u/s 21 D read President in Office
with section 17)
CA. Ranjeet Kumar Agarwal
Non-Standing Committee
Committee Chairman/Chairperson
Accounting Standards Board CA. Pramod Jain
Audit Committee Advocate Vijay Kumar Jhalani
Auditing & Assurance Standards Board CA.(Dr.) Sanjeev Kumar Singhal
Board of Studies CA. (Dr.) Rajkumar Satyanarayan CA. Sridhar Muppala
Adukia
Committee for Members in Practice CA. (Dr.) Rohit Ruwatia
Committee on Financial Markets and CA. Durgesh Kumar Kabra
Investors’ Protection
Committee on Commercial Laws, CA. Chandrashekhar Vasant
Economic Advisory & NPO Cooperative Chitale
Direct Taxes Committee CA. Piyush S Chhajed
Corporate Laws & Corporate CA. (Dr.) Debashis Mitra
Governance Committee
Editorial Board Editor in Chief
CA. Ranjeet Kumar Agarwal
Ethical Standards Board CA. (Dr.) Anuj Goyal
Expert Advisory Committee CA. (Dr.) Debashis Mitra
Financial Reporting Review Board CA. Vishal Doshi
Committee on Public and Government CA. Kemisha Soni
Financial Management
GST & Indirect Taxes Committee CA. Sushil Kumar Goyal
Digital Accounting and Assurance Board CA. Aniket Sunil Talati
Board of Internal Audit and CA. Prakash Sharma
Management Accounting
International Affairs Committee CA. Ranjeet Kumar Agarwal
MARCH 2024 125 www.icai.org
1181
Vice Chairman/Vice Chairperson
Vice-President in Office
CA. Charanjot Singh Nanda
Vice-President in Office
CA. Charanjot Singh Nanda
Vice-President in Office
CA. Charanjot Singh Nanda
Vice-President in Office
CA. Charanjot Singh Nanda
Vice Chairman/Vice Chairperson
CA. Abhay Chhajed
CA. Kemisha Soni
CA. Vishal Doshi
CA. Umesh Sharma
CA. Kemisha Soni
CA. Prakash Sharma
CA. Cotha S Srinivas
CA. Sripriya Kumar
Joint Editor
CA. Charanjot Singh Nanda
CA. Mangesh Pandurang Kinare
CA. Piyush S Chhajed
CA. Dayaniwas Sharma
CA. Prasanna Kumar D
CA. Rajendra Kumar P
CA. Dayaniwas Sharma
CA. Priti Savla
CA. Charanjot Singh Nanda
1182

ICAI News
THE CHARTERED ACCOUNTANT

Non-Standing Committee
Committee Chairman/Chairperson Vice Chairman/Vice Chairperson
Committee for Members in Industry & CA. Dheeraj Kumar Khandelwal CA. (Dr.) Sanjeev Kumar Singhal
Business
Peer Review Board CA. Prasanna Kumar D CA. (Dr.) Raj Chawla
Professional Development Committee CA. Mangesh Pandurang Kinare CA. Hans Raj Chugh

Research Committee CA. Hans Raj Chugh CA. (Dr.) Rajkumar Satyanarayan
Adukia
Infrastructure Development Committee CA. Ranjeet Kumar Agarwal CA. Charanjot Singh Nanda

Management Committee
Committee for Members in
Entrepreneurship & Public Service
Committee on Insolvency & Valuation
Standards Board
Public Relations Committee
Taxation Audits Quality Review Board
Continuing Professional Education
Committee
Committee on MSME & Start- up
CA. Ranjeet Kumar Agarwal
CA. Sanjay Kumar Agarwal
CA. Gyan Chandra Misra
CA. Ranjeet Kumar Agarwal
CA. Sanjay Kumar Agarwal
CA. Purushottamlal Khandelwal
CA. Dheeraj Kumar Khandelwal
CA. Charanjot Singh Nanda
CA. Hans Raj Chugh
CA. Durgesh Kumar Kabra
CA. Charanjot Singh Nanda
CA. (Dr.) Anuj Goyal
CA. Gyan Chandra Misra
CA. (Dr.) Raj Chawla

Strategy, Perspective Planning & CA. Ranjeet Kumar Agarwal CA. Charanjot Singh Nanda
Monitoring Committee
Committee on Career Counselling CA. Rajendra Kumar P CA. (Dr.) Rohit Ruwatia

Women Members Excellence CA. Priti Savla CA. Kemisha Soni

Committee
Sustainability Reporting Standards CA. Sripriya Kumar CA. (Dr.) Anuj Goyal
Board
AI in ICAI CA. Dayaniwas Sharma CA. Umesh Sharma
Committee for Aggregation of CA CA. Sanjay Kumar Agarwal CA. Vishal Doshi
Firms
Professional Skills Enrichment CA. (Dr.) Anuj Goyal CA. Sripriya Kumar
Committee
Directorate
Directorate Convenor Dy. Convenor
UDIN Directorate CA. Kemisha Soni CA. Abhay Chhajed
Legal Directorate CA. Charanjot Singh Nanda CA. Rajendra Kumar P
Publication & CDS Directorate CA. (Dr.) Anuj Goyal CA. Sushil Kumar Goyal
Members & Students Services CA. Cotha S Srinivas CA. (Dr.) Raj Chawla
Directorate

RBA Directorate CA. Purushottamlal Khandelwal CA. (Dr.) Rohit Ruwatia

Estate Development Directorate CA. Chandrashekhar Vasant CA. Prakash Sharma

Chitale

MARCH 2024 126 www.icai.org

 1183

ICAI News
THE CHARTERED ACCOUNTANT

Tender Monitoring Directorate CA. Prasanna Kumar D CA. (Dr.) Rohit Ruwatia
Digital Re-Engineering & CA. Umesh Sharma CA. Sridhar Muppala
Transformation Directorate
Centre for Audit Quality Directorate CA. Vishal Doshi CA. Pramod Jain

Human Resources Directorate CA. Charanjot Singh Nanda CA. Sridhar Muppala

Centre of Excellence Directorate Dr. P. C. Jain CA. Abhay Chhajed

Grievance Resolution Directorate CA. Ranjeet Kumar Agarwal CA. Charanjot Singh Nanda

Specific Fund Management Directorate CA. Prasanna Kumar D CA. Piyush S Chhajed
Development of International Trade, CA. Dheeraj Kumar Khandelwal CA. Abhay Chhajed
Services & WTO Directorate (under
International Affairs Committee)
Financial & Tax Literacy Directorate CA. Umesh Sharma CA. Sushil Kumar Goyal
(Committee on Financial Markets and
Investors’ Protection)

OTHER COMMITTEES

Committee Presiding Officer

Board of Discipline (u/s 21A) CA. Rajendra Kumar P

Disciplinary Committee (u/s 21 B) Bench 1 (Eastern Region) CA. Charanjot Singh Nanda

Disciplinary Committee (u/s 21 B) Bench 2 (Western & Central Region) CA. Ranjeet Kumar Agarwal

Disciplinary Committee (u/s 21 B) Bench 3 (Southern Region) CA. Charanjot Singh Nanda

Disciplinary Committee (u/s 21 B) Bench 4 (Northern Region) CA. Ranjeet Kumar Agarwal

Disciplinary Committee (u/s 21 B) Bench 5 (MAF Cases) CA. Ranjeet Kumar Agarwal

RESULTS OF CHARTERED ACCOUNTANTS

FOUNDATION EXAMINATION HELD IN DECEMBER– 2023
The result of the Foundation Examination held in December 2023 was declared recently.
PRESS RELEASE

The details of percentage of candidates passed in the above said examination are given below:

No. of No. of % No. of Exam

GENDER Candidates Candidates
of Pass Centres
appeared passed
MALE 71966 21728 30.19
FEMALE 65187 19404 29.77 562
TOTAL 137153 41132 29.99

MARCH 2024 127 www.icai.org

1184
ICAI News
THE CHARTERED ACCOUNTANT
Launches and Releases
During the 74th Annual Day celebration, various
Committees of the Institute launched/released its
initiatives/publications. The details are below thereof:
Name of Publication/Course/Portal
1. Taxation of Non-Resident Artistes or Sportspersons
Domestically and Internationally
2. Investigating Tools for Harnessing and Strategically
Utilizing the Catalytic Potential of Social Stock
Exchange for Revolutionizing Social Finance in
India.
3. Educational Material on Ind AS 12, Income Taxes
4. Accounting Standards: Quick Referencer
5. Technical Guide on Preparation of Financial
Standards under Cash Basis of Accounting.
6. Compendium of Accounting Standards for Local
Bodies (ASLBs) Volume-III
7. Research Study on How Municipal Financial Data
can be used for Decision Making
8. Screening Examination: Basics of Accountancy:
Certificate Course on Accountants of Panchayat
(Both in Hindi and English)
9. Certificate Course for Accountants of Municipal
Bodies (Both in Hindi and English)
10. Guidance Note on Audit of Banks (2024 Edition)
11. Implementation Guide on Reporting on Audit Trail
under Rule 11(g) of the Companies (Audit and
Auditors) Rules, 2014 (revised 2024 edition)
12. Technical Guide on Audit of Non-Banking Financial
Companies (Revised 2023 Edition)
13. Utility for Bank Branch Audit – 2024 Edition
14. Commonly Asked Questions in Webinar Series
15. Study on Compliance in Reporting in Tax Audit
Report Vol. - II
16. Judicial Pronouncements in Valuation Series-3
17. Lectures on Valuation for Digital Learning Hub of
ICAI
18. Internal Audit Checklist 2024 Edition
19. Liquidation Process
20. Voluntary Liquidation Process
21. Corporate Insolvency Resolution Process
22. NOCLAR: Members in Practice and Service
23. Documentation and Professional Ethics
MARCH 2024
24. Encompassing of Profession and other Occupations
25. Code of Ethics – Obligations for Members in
Practice
26. Personal Independence Requirements for Audit
and Assurance Engagements
27. Background Material on GST Volume -I (12th
Edition)
28. FAQ on UDIN (Revised 2024)
29. Professional Opportunities for Chartered
Accountants in Risk Management
30. Compendium of Opinions Volume XLII Part 2
31. Diploma in International Taxation Paper I
International Tax Transfer Pricing (revised 2023
edition)
32. Diploma in International Taxation Paper II
International Tax Practice (Part II) (revised 2023
edition)
33. Diploma in International Taxation Paper II
International Tax Practice (Part II) (revised 2023
edition)
34. Paper 6 Final Course Integrated Business Solutions:
Case Study Digest
35. Saransh Last Mile Referencer for Auditing
36. Exploring the economic landscape of Maharashtra:
An Analysis of different industries Performance
37. A study on the GDP of Tamil Nadu
38. Tales of Triumph: The stories of Successful
Chartered Accountants
39. Handbook on Dematerialization of Securities for
Private Companies and Shareholders
40. Implementation Guide on Maintenance of
Property, Plant and Equipment (PPE) Register-
Best Practices
41. Background Material for the Certificate Course
on Corporate Social Responsibility Reporting and
Impact Assessment
42. Tender Based Professional Opportunities for
Practicing Chartered Accountants
43. MSME Ready Referencer
44. Committee Initiatives towards capacity Building for
MSME
45. ICAI Startup Manthan
46. Signing of MoUs
47. Startup Odisha
128 www.icai.org
 1185

ICAI News
THE CHARTERED ACCOUNTANT

48. Guidance Booklet for Civil Service Aspirants
49. Study ON MSME-OCEAN OF Opportunity
50. Study on Renewable Energy
51. Study on Social Entrepreneurship
52. Study on Social Media Mastery for Entrepreneurs
53. Study on Telecom Sector-Various Aspects
54. Study on Online Gaming Industry
55. National Survey Report on Members in Practice
56. Professional Opportunities in ‘Mediation’ for
Chartered Accountants

Awards to Best Regions and Branches

First Prize – Gold Sheild and Second Prize – Silver Shield and
Categotry of Awards
Certificate Certificate

Western India Regional Council (WIRC)

Best Regional Council
Best Students’ Association
Best Branch of Regional
Council (Mega Category)
Best Branch of Regional
Council (Large Category)
Best Branch of Regional
Council (Medium Category)
Best Branch of Regional
Council (Small Category)
Best Branch of Regional
Council (Micro Category)
Best Branch of Students’
Association (Mega
Category)
Best Branch of Students’
Association (Large
Category)
Best Branch of Students’
Association (Medium
Category)
Ahmednagar Branch of WIRC of ICAI
Best Branch of Students’
jointly with Jalgaon Branch of WIRC of
Association (Small Category)
ICAI
Best Branch of Students’
Association (Micro
Category)
Eastern India Regional Council
of ICAI jointly with Southern India
(EIRC) of ICAI
Regional Council (SIRC) of ICAI
Western India Chartered Accountants
Students Association (WICASA) Southern India Chartered
jointly with Eastern India Chartered Accountants Students Association
Accountants Students Association (SICASA)
(EICASA)
Bengaluru Branch of SIRC of ICAI
Indore Branch of CIRC of ICAI jointly with Pune Branch of WIRC
of ICAI
Ludhiana Branch of NIRC of ICAI
Ernakulam Branch of SIRC of ICAI jointly with Nagpur Branch of
WIRC of ICAI
Aurangabad Branch of WIRC of
Calicut Branch of SIRC of ICAI ICAI jointly with Amritsar Branch
of NIRC of ICAI
Bhilai Branch of CIRC of ICAI and
Salem Branch of SIRC of ICAI jointly with Ahmednagar branch of
WIRC of ICAI
Ratlam Branch of C IRC of ICAI Dhule Branch of WIRC of ICAI
Bengaluru Branch of SIRC of ICAI
Ahmedabad Branch of WIRC of ICAI jointly with Pune Branch of WIRC
of ICAI
Indore Branch of CIRC of ICAI
Nagpur Branch of WIRC of ICAI jointly
And jointly with the Vasai Branch
with and Calicut Branch of SIRC of ICAI
of WIRC of ICAI
Mangalore Branch of SIRC of ICAI
Salem Branch of SIRC of ICAI jointly with Agra Branch of CIRC
of ICAI
Siliguri Branch of EIRC of ICAI
jointly with and Bhilai Branch of
CIRC of ICAI
Anand Branch of WIRC of ICAI jointly Chengalpattu Branch of SIRC of
with Pimpri Chinchwad Branch of ICAI jointly with and Sambalpur
WIRC of ICAI Branch of EIRC of ICAI

MARCH 2024 129 www.icai.org

1186

ICAI News
THE CHARTERED ACCOUNTANT

Overseas Chapter Awards

S. No. Name of the Chapter of ICAI Position
Category I (More than 500 Members)
1 UAE (Dubai) Chapter of ICAI
Jointly 1st
UAE (Abu Dhabi) Chapter of ICAI
2 Australia (Sydney) Chapter of ICAI 2nd
Category II (101 to 500 Members)
1 Bahrain Chapter of ICAI
Joint 1st
Singapore Chapter of ICAI
2 Oman (Muscat) Chapter of ICAI 2nd
3 Australia (Melbourne) Chapter of ICAI
Joint 3rd
Qatar (Doha) Chapter of ICAI
Category 3 (upto 100 Members)
1 British Columbia, Vancouver Chapter of ICAI 1st
2 Netherlands (Amsterdam) Chapter of ICAI
Jointly 2nd
USA (San Francisco) Chapter of ICA
3 Kenya (Nairobi) Chapter of ICAI 3rd

ANNOUNCEMENT FOR MEMBERS AND STUDENTS

Survey for seeking preference for learning a foreign language through virtual mode
from ICAI Members and Students
LAST DATE: 30TH APRIL, 2024
In our ever-evolving global landscape, proficiency in foreign languages is becoming increasingly valuable.
The ability to communicate effectively across cultures opens doors to new opportunities and enhances
professional growth. To better cater to the diverse needs of our esteemed members and students,
Development of International Trade, Services & WTO (DITS&WTO) Directorate of ICAI is conducting a
survey to gauge preferences for learning foreign languages through virtual modes.
With an aim to overcome language barrier and thereby to have enhanced professional opportunities
overseas, ICAI, under the aegis of the Directorate is conducting online batches of French, Spanish,
Japanese and Business English Languages for its members and students through French, Spanish,
Japanese Embassies and British Council and is working to initiate batches for other foreign languages in
next few months based on the demand for those foreign languages.
Interested members/students are requested to kindly express their interest for the preferred foreign
language which would facilitate ICAI to open up future batches of foreign languages. The expression of
interest can be provided at clicking here (https://docs.google.com/forms/d/e/1FAIpQLSfAxSsb7647prF
Iclv8IT8eQeDOPWd-3OY1adq56ZPFZ3PZyA/viewform) latest by 30th April 2024.
Your input is invaluable in shaping the future of language learning opportunities within our community

Convenor
Development of International Trade, Services & WTO Directorate
Email: cditswto@icai.in

MARCH 2024 130 www.icai.org

 Incorporation of Tricolor:
+++ =
The incorporation of the tricolor into the
logo is a powerful symbol of the Institute's
connection to India. The three colors of the

Incorporation of Tricolor: Guidelines (2023) for using the new

Indian flag represent unity, diversity, and
sovereignty, and they reflect the brand’s

The incorporation of the tricolor into the logo is

commitment to serving the people of India CA India logo for CA members
and contributing to the nation's
a powerful symbol of the Institute’s connection ● The logo consists of the letters ‘CA’ in blue colour with a tri

==
development. The tricolor has been used in
to India. The three colors of the Indian flag
such a fashion that it hints at motion, a colour tick mark (upside down) with white background. The
represent unity, diversity, and sovereignty, and they reflect the
flight, and a journey toward progress,
blue colour denotes creativity, innovativeness, knowledge,
brand’s commitment to serving the people of India and contributing
showcasing the
thinking approach.
Institute's forward-
integrity, trust, truth, stability, and depth. The upside-down
to the nation’s development. The tricolor has been used in such tick mark, typically used by Chartered Accountants, has been
a fashion that it hints at motion, a flight, and a journey toward included to symbolise the wisdom and value of the professional.
progress, showcasing the Institute’s forward- thinking approach. ‘India’ is also added in the logo, as it epitomizes the Institute’s
connection to India First approach and commitment to the
serve the Indian economy in public interest. With growing
Significance of blue color: International recognition of ‘CA’ and International curriculum of
The primary color of the new logo is blue, ICAI proposed in the New CRET, incorporation of the country’s
Signifi name is also a distinct identity and pride of one of the largest
Blue is cance
a color that of blue color:
which has been culled from the ICAI logo.
is associated with
divinity, immortality, bravery, and economies.
Thedetermination.
primary color of the new logo is blue, which
It reflects vastness, being
There should be no alteration of the font (colour,
hasthebeen
colour ofculled
the sky andfrom
ocean,the ICAI logo. Blue is a
and has ● There should be
bold/unbold, no alteration
size). Moreover,ofthere
the font (colour,
should be nobold/unbold,
change
color
beenthat is associated
an integral part of the Indianwith divinity, immortality,
cultural, size). Moreover, there should be no change in spacing and
in spacing and dimensions.
political, and social landscape over the
bravery, and determination. It reflects vastness,
years. Blue is also culturally significant, as
dimensions.
being
it hasthe
been acolour
part of theof thetradition
Indian sky forand ocean, and has The colour palette is
been an integral partmoreofthan
the5,000Indian
years. cultural, political, and social ● The colour palette is
landscape over the years. Blue is also culturally significant, as it
has been a part of the Indian tradition for more than 5,000 years. #F37920 #145886 #55B848
C0 M62 Y91 K0 C93 M61 Y24 K9 C67 M0 Y88 K0

● Do not
Do not change
changethe
thedesign
designand
and colours
colours including
including the the
white
background.
white background.
Adaptability on all platforms: ● Refrainfrom
Refrain fromrotating
rotating
oror tilting
tilting thethe logo
logo clockwise
clockwise andand
anti-
clockwise.
anti-clockwise.
The new logo can be adapted for use on all
platforms, digital and analog, which is essential ● The
The logo should not
logo should not be
beshrunk
shrunkoror distorted
distorted changing
changing thethe
for a modern brand. This versatility ensures that original
originalproportion.
proportion.
the Institute’s brand is consistent across all cha
nnels, helping to strengthen its identity and ● While
Whilemembers
members are
areencouraged
encouraged to to
use thethe
use new CACA
new India Logo
India
credibility. The adaptability of the new logo also makes it more as published
Logo on letterheads,
as published visiting
on letterheads, cards,cards,
visiting website etc, a
website
accessible to the Institute’s stakeholders, including members, transition time of 1 year has been provided to use the old ‘CA’
etc, a
logo ontransition time of 1 signage
existing stationary/ year hasetc.
been provided to use
students, and the general public.
the old ‘CA’ logo on existing stationary/ signage etc.
* Effective from 24th November, 2023.

*Effective from 24th November, 2023.

In a nutshell: Do not change background Do not change the colours

The new logo of CA India reflects the brand’s

connection to India while retaining its existing Do not change background Do not change the colours
identity. The incorporation of the tricolor, the
significance of the blue color, and adaptability
on all platforms are all essential elements of
Correct Logo
the new logo. The design is intended to be aesthetically pleasing
and culturally significant, making it a strong representation of the Correct Logo
Do not Rotate Do not Rotate
Institute’s values and commitment to serving the people of India. Do not Rotate Do not Rotate

Colour Palette

Colour Palette:
#F37920 Do not crop Do not shrink, shear or distort
C0 M62 Y91 K0

Do not crop Do not shrink, shear or distort

#145886
C93 M61 Y24 K9

#55B848
C67 M0 Y88 K0
Regd. With the RNI No. 738/57 Postal Regd. No. DL (C) -01/1190/2024,
ISSN 0009-188X Posted at Patrika Channel, Delhi RMS, Delhi-110006
Published on 1 of Every Month. Posting Date: 1st - 6th of Every Month
st