Taxpayers must cross-check the details in their Annual Information Statement (AIS), Form 26AS and Form 16 and report any discrepancy before filing their Income Tax Return (ITR). Being proactive with discrepancies ensures accurate filing and avoids unnecessary notices or adjustments by the department.

How to rectify discrepancies

Identify the mismatch: The taxpayer needs to check whether the error is due to incorrect reporting by a third party (like a bank or employer), duplication of entries, or the statements are yet to be updated.

Raise feedback on AIS portal: In case of discrepancies, the taxpayer should login to their AIS portal and provide feedback, specifying the nature of the mismatch—whether the information is incorrect, not related, or partially correct.

Reach out to the source: It is advisable to reach out to the deductor (such as your employer, bank, etc.), since the feedback provided on the AIS is routed to the respective source for verification. Proactively informing them can help ensure timely rectification of the error at their end.

Keep documentation ready: Maintain supporting documents like salary slips, bank statements, Form 16, interest certificates, and communication with the deductor to substantiate your claims.

Wait for correction (if time permits): If the deductor agrees to correct the entry and you are within the due date, wait for the correction to reflect before filing your ITR.

File return with correct information: If the discrepancy remains unresolved before the due date, file your return with the correct details as per your records and documentation, and be prepared to respond to a possible notice.

Neeraj Agarwala, partner, Nangia & Company, suggests saving acknowledgment of the feedback submitted on the AIS portal or communication with the deductor. “It may help in case of a later inquiry or scrutiny,” he adds.

Publication – Financial Express

By Neeraj Agarwala

In India’s thriving startup ecosystem, Employee Stock Option Plans (ESOPs) have emerged as a cornerstone of the employee compensation, particularly in technology-driven, high-growth sectors and multinational groups. ESOPs offer employees the opportunity to participate in the company’s success through future ownership, aligning long-term incentives between employers and employees. These instruments are structured to create significant upside when a company performs well, especially when its valuation increases. They also serve as an effective retention mechanism, motivating employees to stay engaged and committed during the company’s growth stage.

However, what happens when this potential upside is abruptly diminished due to events outside the employee’s control? A notable example is the 2022 corporate restructuring involving Flipkart and PhonePe, where the value of unexercised ESOPs dropped substantially, prompting the company to issue a one-time, voluntary compensation to affected employees. This gesture of goodwill, however, opened up a significant and complex debate on its tax treatment under Indian law.

This article explores the facts, context, and implications surrounding such compensation, with limited emphasis on judicial precedents and instead focusing on commercial rationale, stakeholder interests, and policy gaps.

Understanding ESOPs: From Incentive to Value Realization

ESOPs are structured as rights, not obligations, granted by companies to employees to purchase shares at a future date at a pre-agreed price. These rights vest over time and can be exercised upon meeting certain conditions. The life cycle of an ESOP generally involves the following stages:

1. Grant: The option is granted to the employee.
2. Vesting: The employee earns the right to exercise the options over a vesting period.
3. Exercise: The employee purchases shares at the exercise price.
4. Allotment: The company allots the shares to the employee.
5. Sale: The employee sells the shares, triggering potential capital gains.

Under the Indian taxation regime, ESOPs are taxed at two key stages:

• At the time of exercise, where the difference between the fair market value (FMV) and the exercise price is taxed as a perquisite under Section 17(2)(vi).
• Upon sale, where any gain is taxed under the head capital gains.

However, when corporate events like demergers, spin-offs, or strategic realignments occur, the value of unexercised options may fluctuate drastically even before the employees can benefit from them- and that’s where the tax complexities enter. This creates a unique challenge for the tax system, which is built on realization-based taxation principles, not hypothetical or notional events.

Global Perspective and Policy Gaps

Unlike jurisdictions such as the US or UK, where ESOP taxation frameworks are more evolved and better integrated with securities law and corporate actions, India lacks specific provisions dealing with compensatory payments due to notional ESOP value loss. The current legal infrastructure focuses only on exercise and sale events.

As a result, corporate goodwill gestures may inadvertently result in tax burdens that defeat their original purpose. This creates dissonance between commercial reality and fiscal policy, necessitating intervention from the Central Board of Direct Taxes (CBDT) to issue clarifications or introduce tailored rules.

The Flipkart-PhonePe Separation: Background and Compensation

In a significant restructuring exercise in 2022, Flipkart Singapore (FPS), the holding entity for Flipkart India and PhonePe, completed a spin-off that separated PhonePe as an independent entity. While this move was intended to unlock value and create independent growth trajectories for the businesses, it had a depreciative effect on the share value of FPS, impacting the value of ESOPs granted by Flipkart to Indian employees.

Recognizing this loss, Flipkart Singapore made a voluntary, one-time payment to employees, including some who were no longer with the company, as well as certain non-employees like advisors. This payment was:

• Non-contractual: There was no legal obligation to make the payment.
• Non-recurring: It was a one-time compensatory measure.
• Non-transfer-related: The ESOPs were not exercised, sold, or transferred.
• Importantly, recipients continued to hold their unexercised ESOPs, which meant that no real transaction had occurred in terms of exercising or liquidating stock options. The payment merely attempted to compensate for unrealized economic value, thereby raising questions on whether it constituted taxable income.

Tax Controversy: Income or Capital Receipt?

The tax classification of this payment quickly became contentious. Employees contended that the payment was a capital receipt, not chargeable under any head of income. On the other hand, the tax authorities appeared inclined to treat the amount as a perquisite, taxable under “income from salary,” under Section 17(2)(vi) thereby triggering TDS obligations.

This raised a host of compliance challenges:

• Could the payment be taxed without an actual transfer or benefit being realized?
• Was there a legal basis to consider the compensation as taxable salary or perquisite?
• If it was not income under any head, should TDS have been deducted at all?

Some employees sought Nil TDS certificates under Section 197, anticipating that the payment would not attract tax. However, the inconsistent treatment by tax officers and lack of CBDT guidance meant that many applications were denied, leading to litigation.

Legal Character of Payment- A Brief Analysis

The matter found judicial clarity in the Karnataka High Court’s ruling in Manjeet Singh Chawla v. Deputy Commissioner of Income‑tax (WP No. 20212 of 2023, order dated 2 June 2025). Key passages are instructive:

“TDS cannot be directed on a payment that does not constitute income. The one‑time voluntary compensation, being a capital receipt for diminution in the value of stock options, falls outside the charging provisions of the Act.”
— Krishna Kumar J., ¶ 7(i)

This emphasizes that the charging section of the Income-tax Act cannot apply to receipts that do not qualify as ‘income’ in the first place. The one-time nature of the payment, unconnected with any salary, reinforces its capital nature.

“ESOPs are capital assets within the meaning of s. 2(14); yet, where there is no exercise and therefore no cost of acquisition, the machinery provisions of s. 45 read with s. 48 fail. Consequently, no capital‑gains charge can arise.”
— Krishna Kumar J., ¶7(ii)

The Court recognized that while ESOPs may be ‘capital assets’, no capital gain can be charged without a transfer or a computation mechanism—principles rooted in landmark decisions like B.C. Srinivasa Setty [TS-2-SC-1981].

“Without the mandatory ‘exercise’ trigger in s. 17(2)(vi), no perquisite taxation is possible; Parliament has provided no alternative computation.”
— Krishna Kumar J., ¶ 7(v)

This statement reiterates that taxation under Section 17(2)(vi) can only arise upon actual exercise. Since the ESOPs were never exercised, the section cannot apply.

The judgment provides clarity that voluntary compensation for notional loss in ESOP value, without any corresponding benefit or realization, cannot be taxed either as salary or capital gains. The Karnataka HC effectively closed the door on speculative tax treatment by reinforcing that both charge and computation provisions must be satisfied for taxation to succeed.

Other Jurisprudence on Similar Payments

The Indian judiciary has delivered divergent rulings on the tax treatment of one-time ESOP compensation, adding to the uncertainty in this area. The Karnataka High Court in Manjeet Singh Chawla v. DCIT  [TS-806-HC-2025(KAR)] unequivocally held that such compensation is a capital receipt not taxable under the Income-tax Act, primarily because there was no exercise of the ESOPs and no computation mechanism existed to tax the receipt. Similarly, the Delhi High Court in Sanjay Baweja v. DCIT  [TS-377-HC-2024(DEL)] ruled in favor of the assessee, holding that since there was no exercise of options and no benefit actually accrued, the payment could not be brought to tax as a perquisite under Section 17(2)(vi).

The Hon’ble Madras High Court, however, adopted a more substance-oriented interpretation in Nishith Kumar Mehta v. ITO  [TS-582-HC-2024(MAD)]. It held that since ESOPs are granted by virtue of employment, any benefit flowing from them—directly or indirectly—partakes the character of a perquisite. The inclusive definitions of ‘salary’ and ‘perquisite’ are broad enough to cover such a payment. The court reasoned that the absence of a specific computation method for an unexercised option should not defeat the charge of tax, especially when the monetary value of the benefit received is clearly known. It supported this with the principle laid down by the Supreme Court in the Infosys Technologies Ltd. case that “benefit from the ESOP is to be determined for purposes of, and as a prerequisite for, taxation as a ‘perquisite’.”

Another important area of divergence concerns the classification of ESOPs as ‘capital assets’ under Indian tax law. The Madras High Court, in a restrictive reading of the term, held that unexercised ESOPs do not constitute capital assets within the meaning of Section 2(14) of the Income-tax Act. This conclusion led the court to deny the characterization of compensation for ESOP loss as falling under capital gains provisions. In contrast, the Karnataka High Court adopted a broader interpretation, emphasizing that Section 2(14) defines ‘capital asset’ expansively as ‘property of any kind’, which includes intangible rights such as ESOPs. However, the Court noted that even if ESOPs qualify as capital assets, the absence of an actual transfer or realization event rendered the capital gains provisions inapplicable in the given circumstances. The key takeaway from this reasoning is that both the characterization of an asset and the occurrence of a taxable event are critical to attract the capital gains tax machinery.

In summary, the Karnataka and Delhi High Courts provide strong support for the view that voluntary compensation for ESOP loss is a capital receipt not chargeable under the Act, while the Madras High Court leans toward a pro-revenue interpretation, relying on the employment linkage and the concept of derived benefit.

The Karnataka HC judgment, aligned with the Delhi HC, provides robust legal grounding that voluntary compensation for ESOP loss is a capital receipt, not taxable under any head of income, and not subject to TDS. It distinguishes the Madras HC’s pro-revenue stance, reinforcing the principle that computation mechanism must exist for a tax levy to succeed.

Broader Implications for Employees and Employers

The complexities arising from such voluntary ESOP compensation extend beyond tax law into the domains of compliance, workforce management, and corporate governance. From an employee’s standpoint, receiving a one-time compensatory payment that is taxed—despite being non-liquid and goodwill-based—can create significant cash flow challenges. This becomes particularly burdensome if the funds have already been allocated to personal or financial obligations. Moreover, the absence of a uniform tax treatment across jurisdictions and lack of guidance from the Central Board of Direct Taxes (CBDT) exacerbates uncertainty, making it difficult for employees to accurately assess and plan their tax liabilities. For many, this ambiguity translates into a heightened risk of litigation, as they are forced to contest unjustified tax deductions or penalties.

On the employer’s side, the challenges are equally multifaceted. Companies must navigate a grey zone where deducting tax without clear legal backing risks employee discontent and reputational harm, while failing to withhold could attract regulatory scrutiny and penalties. This uncertainty necessitates a comprehensive review of ESOP plan designs, particularly for multinational corporations operating in India, who must now account for jurisdiction-specific nuances in tax treatment. It also demands closer coordination between HR, legal, and finance departments to ensure that any form of discretionary compensation—voluntary or otherwise—is defensible under Indian tax laws.

In essence, the ripple effects of ambiguous ESOP tax treatment touch upon retention strategies, financial compliance, and the broader employer-employee relationship. These concerns reinforce the urgent need for legislative or administrative clarity.

Looking Ahead: Need for Clarity and Reform

The divergent judicial pronouncements from various High Courts—including Karnataka, Delhi, and Madras—indicate that the issue of taxability of one-time ESOP compensation remains unsettled. While the Karnataka and Delhi High Courts have taken a taxpayer-friendly view by treating such compensation as non-taxable capital receipts, the Madras High Court has interpreted the law differently, classifying the payment as a taxable perquisite. This legal inconsistency underscores the urgent need for either a uniform ruling from the Hon’ble Supreme Court or the issuance of clarificatory guidance from the Central Board of Direct Taxes (CBDT).

In the interim, corporates would be well-advised to rigorously document the rationale behind any discretionary compensation to mitigate exposure. Employers should evaluate their withholding tax obligations in light of these evolving legal positions and, where necessary, pursue advance rulings or certificates under Section 197 of the Income-tax Act to avoid post-facto disputes.

Employees, on their part, must ensure careful record-keeping with respect to their ESOP entitlements, valuations, and any related correspondence or payouts. It is prudent to consult tax advisors before treating such compensation in their tax returns to avoid penal consequences.

Until uniformity is achieved through either legislative clarification or apex judicial pronouncement, both employers and employees must operate with enhanced diligence to navigate the current ambiguities in law.

Final Thoughts

The Flipkart-PhonePe episode serves as a case study on the intersection of tax law, equity compensation, and corporate restructuring. It highlights how well-intentioned corporate actions can result in unintended tax exposure unless the legal and fiscal ecosystem evolves in parallel.

As India grows into a global startup hub, ESOP related tax controversies will only increase. While judicial interpretations will play a role, what’s urgently needed is clarity from the tax administration, especially in borderline cases involving notional losses and voluntary compensation. Clarity in ESOP taxation, particularly in cross-border and restructuring contexts, is essential for ensuring fairness, reducing litigation, and fostering a predictable business environment. Until then, vigilance, documentation, and proactive advisory remain the best tools for both employers and employees.

Publication – Taxsutra

By Amit Agarwal

The tax deductions under Chapter VI-A, which includes investments, health insurance premium and donations, have increasingly come under the income tax department’s scanner  due to allegations of inflated claims, fictitious documentation, and misuse.

The fallout is tax notices and system-generated nudges, telling taxpayers to either voluntarily revise their claims or furnish supporting documentation. In this context, it’s essential to understand what triggers scrutiny and how to claim deductions safely and correctly:

Several taxpayers who had made donations to certain political parties under section 80GGC were issued notices when discrepancies were discovered in transaction patterns of those parties.

Old vs new regime

Before planning deductions, compare your tax liability under both the tax regimes. For instance, one with a taxable income of Rs 50 lakh under the new regime may pay Rs 12 lakh in taxes, whereas under the old regime (with deductions), one with Rs 48 lakh taxable income could pay Rs 13 lakh. This analysis should be the starting point to decide whether to claim Chapter VI-A deductions.

Proportionate claims 

Deductions should be reasonable in relation to your disposable income. If someone with Rs 8 lakh taxable income claims deductions upwards of Rs 3 lakh (i.e., more than one-third of income), it may raise red flags with the department’s automated systems. Disproportionate claims are a common trigger for scrutiny.

Verifying exempt institutions

Taxpayers rely on intermediaries—such as banks, insurers, or agents—when making tax-saving investments. While they provide accurate information for deductions, extra caution is warranted when claiming donations under sections 80G or 80GGC. Verify that the institution is approved and registered with the Income Tax Department. A list of eligible exempted institutions is available under the “Tax Utilities” tab of the income tax departments website.

Enhanced reporting requirements

For AY 2025-26, the Income Tax Return (ITR) forms have introduced more granular reporting requirements. For example, claims under 80C and 80E now require disclosure of investment details along with document reference numbers. These changes reflect the department’s push for increased transparency.

Payment trail is crucial

In scrutiny cases, providing a receipt for a donation or investment may not suffice. The I-T department will check your bank statements. Therefore, all eligible payments should be routed through traceable bank channels to establish an auditable trail.

Salaried taxpayers who bypass their employer’s Form 16 disclosures and directly claim deductions are at higher risk of being questioned. Claims made to little-known institutions or newly registered political parties are often cross-checked.

Publication – Financial Express 

By Neeraj Agarwala

I tried filling up the ITR2 form last week but could not do it as it was showing an error. Should I wait for some more time now?

—Ashish Sharma

The notified Income Tax Return (ITR) forms for Assessment Year (AY) 2025–26 have undergone significant structural and content-level changes, which in turn have required additional time for system development, integration, and testing of the corresponding utilities. Accordingly, the schema for ITR 2 and ITR 3 has not yet been released. Note that, in light of these changes, the due date for filing returns has been extended from July 31, 2025 to September 15, 2025.You will have to wait for the income tax return forms to be released to file ITR 2.

I had paid advance tax for my interest on deposits and salary income for FY25. I got capital gains from some shares. I am awaiting some more capital gains statements from brokers. Can I pay all tax while filing returns?

—Rajender Wadhwani

Yes, you may pay the balance tax on capital gains while filing your income tax return, but interest under Sections 234B and 234C may apply depending on when the gains arose and whether sufficient advance tax was paid during the previous year. It’s advisable to compute and pay any outstanding tax as soon as possible to reduce interest liability.

I took a home loan in 2018 and got possession in January 2025. As I have not claimed tax exemption ever on a home loan, how much tax exemption can I claim at the time of filing returns this year?

—Suresh Kumar

Under Section 24(b), deduction for interest paid on a home loan is available from the financial year in which the possession of the property is obtained. You can start claiming this deduction from FY 2024-25 (AY 2025-26). Further, since the completion of property took more than 5 years, the deduction on interest will be limited to Rs 30,000 in case of self-occupied property.

Additionally, under Section 80C, the principal repayment of the loan is eligible for deduction, up to a maximum of Rs 1.5 lakh per financial year, along with other eligible investments. To retain the deduction claimed under Section 80C, the property must not be sold within five years from the end of the financial year in which possession is obtained. If it is sold within this period, the deductions claimed earlier will be reversed in the year of sale and added back to your taxable income. This deduction under section 80C is available only under the old tax regime.

Publication – Financial Express

By Neeraj Agarwala

The Central Electricity Authority (CEA) has proposed to offer incentives to domestic manufactures producing critical components re-quired in the power sector such as magnets and voltage transformers in a bid to reduce reliance on China.

The Authority has pre-pared a draft list of critical items that are presently being imported, along with support required by manufacturers for indigenisation of these items. The list has been prepared in consultation with stakeholders such as the industry body, Indian Electrical & Electronics Manufacturers’ Association.

It has invited all the stake holders, including PSUs and other industries, to decide on prioritisation of the identified critical items or any additional items which stake-holders consider as critical and support is required for their indigenous development. The last date is June 20.

CRITICAL COMPONENTS

Other countries in the list include France, South Korea, Japan, Germany and the US. The CEA has asked stake holders to share suggestions on cost, volume required and the percentage contribution of the critical item in the total cost of the product. The purpose is to prioritise items which are more critical.

The critical items identified by the CEA include voltage transformers, semi-conductor devices such as Thyristors and DC capacitors, super capacitor, printed circuit boards, neodymium iron-boron magnets, and specialised magnetic core materials. Welcoming the development, Subharth Saha, Associate Director of Power Sector Advisory at Nangia & Co, said while the current list appropriately captures major equipment categories, a key area that needs to be simultaneously addressed is the set of critical materials that directly feed into the manufacturing of these equipment.

Publication – The Hindu Businessline

By Subharth Saha

The Income Tax Department has released updated Excel utilities for ITR-1 and ITR-4 (AY 2025-26), introducing significant changes for taxpayers opting for the old tax regime. These forms now demand enhanced transparency and detailed disclosures for deductions like HRA, home loan interest (Section 24(b)), and investments under Section 80C and Section 80E series.

The Income Tax Department has released the Excel utilities for ITR-1 and ITR-4 pertaining to AY 2025-26. Several changes have been introduced, particularly for taxpayers opting for the old tax regime (OTR).

Over the years, verifying deductions like HRA, 80C, 80G, etc., has been a challenge for the department. In its push for greater transparency and auto-verification, the ITR forms have been gradually evolving. With this year’s utility, four new disclosure schedules are activated when the OTR is selected in Part A – General Information. Here’s a breakdown of what’s changed and what taxpayers need to prepare.

Schedule EA – Section 10(13A): HRA Taxpayers claiming HRA exemption are now required to disclose whether their place of work is in a metro or non-metro city. This detail directly impacts the HRA computation, which is the least of the following:

Actual HRA received or 50% of salary (basic + DA) for metro cities / 40% for non-metros or rent paid minus 10% of salary.
Only Mumbai, Delhi, Kolkata, and Chennai qualify as metro cities under Section 10(13A). The form mentions this, but taxpayers unfamiliar with the rule might still misclassify their city, leading to incorrect HRA claims. 

Schedule 24(b): Interest on Borrowed Capital For home loan interest deduction, earlier versions of ITR-1 and ITR-4 only asked for the interest amount claimed under Section 24(b). However, from AY 2025–26, taxpayers must now also report: name of the lender (bank or financial institution), loan account number, date of loan sanction, total sanctioned loan amount and outstanding loan balance. Taxpayers must keep their home loan interest certificates handy while filing.

Section 80C deductions 

ITR-1 and ITR-4 now introduce a separate schedule for Section 80C deductions. Taxpayers now need to report: policy or certificate numbers for life insurance, PPF, NSC, ELSS, etc. This measure supports the auto-verification process and discourages unverifiable deduction claims.

Section 80E series

Here, deductions on education, housing and EV loans require additional disclosures such as name of the lender, loan account number, date of loan sanction, total sanctioned loan amount and outstanding loan balance.

ITR-1 and ITR-4, once known as Sahaj or simple form, now have been aligned for auto verification. Further, these schedules are expected to be added to ITR-2 and ITR-3 also. While the increased requirements may seem burdensome—especially for salaried individuals and self-filers—the underlying objective is to ensure accurate, verifiable deductions. Whether or not these changes cause friction during the filing season will become clear in the coming months. However, the direction is evident: more transparency, more data and fewer unverifiable claims.

Publication – Financial Express 

By Neeraj Agarwala

In a rare occurrence, India’s falling real-time renewable energy tariffs are causing losses to Big Tech firms. The reason: a mechanism aimed at ensuring price stability and managing risks. Meta, Amazon and Microsoft are incurring losses on their green energy power purchase agreements (PPAs) that are based on Contract for Difference (CfD), said four people aware of the development. Power producers and buyers agree to pricing under long-term pacts. When such agreements are based on CfD, either party has to pay the difference between the contracted and the actual price to the other. In case the market prices are higher than the agreed-upon ‘strike price’, the power producer pays the differential to the procurer–in this case, corporates. But if the market price is lower than the contracted price, the company has to pay the differential to the developer.

With the prices falling below ₹1 per unit last month, the tech firms that signed CfD-based longterm PPAs are witnessing an average loss of around ₹1 per unit. Corporations and generators enter intoCfD-based PPAs for risk management and assured prices. For large corporations, these are important to earn carbon credits.

“The CfD contracts are under stressgiven the renewable energy prices trajectory,” said one of the four people cited above, requesting anonymity. “The price touched record lows last month and the recent trend is a rare development. The losses to corporates tied up in CfD-based PPAs would also be unprecedented, although unquantifiable as these PPAs are mostly private,” said an executive with an energy exchange cited above who also did not want to be named. “There are not many corporates in the country who have tied up such PPAs. The major players include the global tech giants.”

Queries emailed to Amazon, Meta,and Microsoft remained unanswered till press time.

The average market-clearing price (MCP) on the Indian Energy Exchangeduring solar hours (11:00-16:00 hours) in May was ₹2.2 per unit against ₹3.5 a unit a year earlier, with prices in some time blocks at nearly ₹0 per unit. The average MCP in non-solar hours (00:00-11:00 hours and 16:00-24:00 hours) in May was ₹3.8/unit vs ₹5.2/unit a year earlier.

AEI New Energy Trading Pvt. Ltd, a subsidiary of Amazon Inc, has a 20-year PPA at ₹2.72 per unit from 100 MW (AC)/135 MW (DC) solar project in Rajasthan. Last August, Microsoft signed a PPA for 437.6 MW of green attributes in one of the largest corporate renewable deals in the country.

Suddhasatta Kundu, directorpower sector advisory at Nangia & Co LLP, said, “In the short term, there may be a reduction in solar price; however, in the long term, CfDs will be a favourable risk-mitigation instrument for the buyer. Green attributes requirement would certainly drive, but it will not solely be the driving factor.”

Publication – Livemint

By Suddhasatta Kundu

The government may set up a panel under corporate affairs secretary Deepti Gaur Mukerjee to prepare a framework to build an “enabling ecosystem” to create large home-grown chartered accountancy (CA) firms comparable to the ‘Big Four,’ people familiar with the develop-ment said. The plan follows a meeting by the Prime Minister’s Office (PMO) on Friday to deliberate on creating a system where CA firms would be encouraged to pursue expansion and growth, they said.

The meeting was chaired by Shaktikanta Das, Principal secretary-2 to Prime Minister Narendra Modi, and attended by senior officials from the PMO and the corporate affairs ministry, among others.

The planned panel will likely suggest changes required to the extant policy and regulatory frameworks to enable small firms to scale up through both local and global tie-ups, the people said. It could also review im-pediments currently discouraging firms to grow in size.

Currently, the Big Four-EY, Deloitte, KPMG, PwC-along with Grant Thornton and BDO domina-te the Indian audit ecosystem.

“With policy support, regulatory momentum, and entrepreneurial drive, it is realistic that India could produce its own Big 4 in this decade itself,” said Rakesh Nangia, founder & managing partner at Nangia & Co LLP.

Publication – CNBC TV18

By Rakesh Nangia

The Prime Minister’s Office (PMO) held a crucial meeting on Friday, June 6, 2025, aimed at accelerating the development of Indian advisory firms that can compete with the global Big 4 — Deloitte, PwC, EY, and KPMG — in scale, capabilities, and influence, sources told CNBC-TV18.

Scheduled under the chairmanship of Shaktikanta Das, Principal Secretary to the Prime Minister, the meeting brought together key secretaries from the government, highlighting the strategic importance of building strong domestic advisory capacity.

Attendees and discussion points

Sources shared, “The meeting saw the participation of Deepti Gaur Mukherjee, Corporate Affairs Secretary; Arvind Shrivastava, Revenue Secretary; M Nagaraju, Secretary of the Department of Financial Services; Ajay Seth, Secretary of the Department of Economic Affairs; and Sanjeev Sanyal, member of the Economic Advisory Council to the Prime Minister (EAC-PM).”

Together, these officials deliberated on how to nurture and scale Indian advisory firms to match the stature and reach of the global Big 4.

Speaking on the government’s ambitious plan on Monday, June 10, 2025, Commerce and Industry Minister Piyush Goyal said that the country is working towards building its own Big Four, and such firms are expected soon.

Goyal added that while earlier India’s rules did not allow mergers between CA firms, the mindset has started changing. “A typical CA firm wanted to be the boss and didn’t recognise the strength of partnerships. For instance, Ernst & Young has 750 partners, our mindset is also changing.”

Why India needs its own ‘Big 4’

Sources shared that the ideas to build domestic capacities in advisory space comes on the back of the government push to shift the dominance of global majors.

Currently, the advisory and consulting market in India remains heavily dominated by these global giants, which not only command a significant share of lucrative government contracts but also influence policy implementation through their advisory roles. However, the absence of a strong, homegrown counterpart means that India is often dependent on foreign firms for strategic consulting, audit, tax advisory, and other services critical to governance and economic development.

The government’s focus on building Indian Big 4 firms stems from multiple objectives:

• Boosting Domestic Capabilities: To develop firms with deep local knowledge and global standards that can serve both government and private sector clients effectively.
• Scaling Capacity: Creating larger, more diverse firms that can handle complex advisory mandates, reducing dependence on multinational firms.
• Promoting Indian Expertise: Encouraging Indian firms to bid aggressively for government contracts and advisory roles, ensuring that economic benefits stay within the country.
• Strengthening Economic Sovereignty: Reducing reliance on foreign consultants in sensitive areas of policy and governance.
• Retaining Talent: Several Indians are at senior positions at these global giants and thus once our homegrown agencies or firms have a stronger presence and business; talent t retaining within the country will increase

Next steps and industry engagement

Significantly, at today’s meeting none of the existing Indian advisory firms or private consultants were part of this initial high-level meeting. According to sources, the PMO plans to soon invite key private players to participate in follow-up discussions, signalling an intent to build a broad-based coalition around this vision.

The government is expected to explore various policy measures, including regulatory support, incentives, and capacity-building initiatives, to help domestic firms grow rapidly. This aligns with the broader ‘Atmanirbhar Bharat’ (self-reliant India) agenda, which aims to foster indigenous enterprise in critical sectors.

Globally, the Big 4 firms dominate the audit, consulting, and advisory space, with revenues running into tens of billions of dollars. In India, their presence has expanded over decades, often eclipsing homegrown firms in scale and expertise. While India has successful consulting firms, none currently match the Big 4’s global footprint or comprehensive service offering.

The government’s push to build Indian Big 4 firms represents a strategic initiative to create institutions that not only serve the domestic market but can also compete on the global stage, enhancing India’s stature in the global knowledge economy.

Rakesh Nangia, Founder & Managing Partner, Nangia & Co LLP, said: “With policy support, regulatory momentum, and entrepreneurial drive, it is realistic that India could produce its own Big 4 in this decade itself. PM Modi has envisioned the emergence of a formidable cadre of homegrown CA Firms that can rival, in both stature and capabilities, the dominance of global Big 4s. Anchored in the broader ideological framework of Aatmanirbhar Bharat, his aspiration is to catalyse a paradigm shift wherein Indian CA Firms transcend to attain global prominence.”

Publication – CNBC TV18

By Rakesh Nangia

With the government on Friday brainstorming on scaling up home-grown accounting, audit and advisory firms, Rakesh Nangia, Managing Partner of Nangia & Co LLP, tells businessline that Indian audit firms are globally competitive and lists out policy support measures required for further boosting their prospects. Excerpts from the interaction.

What is the significance of the discussion that the government held today?

This discussion has a strategic importance as it is a move towards enhancing India’s self-reliance in professional services sector.By fostering the growth of large-scale Indian firms in audit, tax and advisory, we can build institutions that are more closely aligned with the Indian regulatory and business landscape. This initiative also lays the foundation for creating globally competitive Indian firms capable of exporting high-value professional services, much like the success witnessed in the IT sector. Such brainstorming sessions provide a vital platform for collaboration among the Government, industry, and professionals to collectively define a long-term vision, identify systemic gaps, and formulate policy interventions.

What are your competitive strengths vis-a-vis the big global 4s?

Our core strength lies in our deeper understanding of the Indian regulatory framework, business landscape and client expectations. In contrast to global firms, we deliver agile, customised solutions, supported by swift decision-making and direct partner level involvement.We place strong emphasis on building long-term client relationships, our approach is anchored in trust, accessibility and continuity. As an Indian Firm, we bring deep domain expertise combined with cultural context, allowing us to respond more effectively to the needs of emerging sectors and high-growth enterprises. Most importantly, as a founder-led firm, we bring a high degree of ownership, accountability, and agility, which allows us to remain responsive and forward-looking in a dynamic business environment.

What future do you envisage for home-grown audit and accounting firms?

The potential for homegrown audit and advisory firms is immense. As one of the world’s fastest-growing economies, India is witnessing rapid expansion in its startup ecosystem, capital markets, and regulatory landscape all of which demand credible, high-quality professional services. Indian firms are well-positioned to meet this demand, offering advantages of local expertise, cultural alignment, and operational agility. With the right policy support, whether through public sector procurement, capacity building or regulatory facilitation, these firms can scale effectively and emulate the global success as achieved by India’s IT sector. The opportunity extends beyond domestic service delivery – it is about positioning Indian firms as global providers of tax and advisory talent. With sustained investments in technology, governance frameworks, and service quality, there is every reason to believe that Indian firms can emerge as globally competitive players within this decade.

What kind of policy measurers and regulatory changes are required to help home grown firms?

First, public sector procurement norms should actively promote the inclusion of Indian firms in large-scale audit, tax, and advisory mandates. This would offer them greater visibility, institutional experience, and the ability to scale. Second, regulatory parity is crucial. While Indian firms are subject to rigorous standards, many global networks operate through affiliate models with varying levels of accountability. Establishing a level playing field will ensure fair competition. Third, investment in talent development is key. There is a pressing need to skill, reskill, and retain professionals in emerging areas such as digital audit, ESG, and international tax. Government-led programmes, in collaboration with the Institute and industry bodies, can play a transformative role in this regard. Finally, it is essential to introduce supportive reforms that make it easier for Indian firms to grow and compete globally. This includes simplifying rules that allow Indian firms to expand internationally.

What are your plans for expansion?

Ultimately, our expansion plan is centred on building a strong, sustainable institution that delivers high-quality services consistently while adapting to the changing business environment. We are committed to deepening our expertise and broadening our geographic reach, nationally and internationally, so that we can support clients wherever they operate. By investing in advanced capabilities, we aim to be recognized as a credible Indian firm that offers global-level execution and insights. We are also investing significantly in next-generation capabilities particularly in tax technology, compliance automation, AI and data analytics to enhance service delivery and drive greater efficiency. Our goal is not only growth in scale but also in reputation – becoming a trusted advisor known for integrity, innovation, and responsiveness. In essence, we want to create a legacy – a firm that stands the test of time, built on solid foundations of quality, client trust, and forward-thinking leadership. This is the roadmap that would guide our journey in the years ahead. We expect 35 per cent cumulative growth on year-to-year basis.

Publication – Hindu Business Line

By Rakesh Nangia