Key Updates in ICAI’s Tax Audit Guidance Note:2025 Edition vs. 2023 Edition – A Concise Comparison

Summary:-

The ICAI Guidance Note on Tax Audit (Revised 2025) introduces key changes based on recent Finance Acts and CBDT notifications. It highlights new tax law amendments, revised Form 3CD reporting, and practical clarifications, with a focus on threshold limits, timelines, and compliance procedures.

Legislative Updates from Finance Acts 2024/2025:-

• Section 115BAE (New Manufacturing Co-operatives): Introduces a 15% concessional tax rate for co-operatives, with opt-in/out reporting via Form 10-IFA in Clause 8A (effective AY 2024-25).
• Buyback of Shares (Section 2(22)(f)): Treats buyback proceeds as dividends, reported under new Clause 36B with details on amount, date, and cost (effective AY 2025-26), shifting from capital gains treatment.
• Presumptive Taxation Extensions: Adds Section 44BBC (cruise ships, AY 2025- 26) and Section 44BBD (electronics manufacturing, AY 2026-27) to Clause 12.

The post Assurance Gazette – September 2025 Edition first appeared on Nangia & Co LLP.

Introduction

The RBI has issued new, comprehensive directions on co-lending arrangements to broaden their scope and provide a clear regulatory framework. These directions will come into effect on January 1, 2026, or an earlier date chosen by a Regulated Entity (RE) as per its internal policy. Any new CLA entered into after the effective date must comply with these directions.

Main Content

Applicability

The Co-lending Directions are applicable to:

• Commercial Banks (excluding Small Finance, Local Area, and Regional Rural Banks),
• All-India Financial Institutions, and
• Non-Banking Financial Companies (including Housing Finance Companies)

Note: These directions shall not apply to loans sanctioned under multiple banking, consortium lending, or syndication.

General Guidelines

A key provision is that each RE in a CLA must retain a minimum 10% share of the individual loans on its books. The credit policy of RE’s must cover CLAs, including portfolio limits, target segments, partner due diligence, and provisions for customer service and grievance redressal.

The agreement between co-lending partners must detail the terms and conditions, borrower selection criteria, and a mechanism for grievance redressal. The loan agreement with the borrower must clearly disclose the segregated roles of the REs and identify the entity that serves as the single point of contact for the customer. Any change in the customer interface requires prior intimation to the borrower.

Regulated Entities must provide borrowers with complete CLA details in line with RBI’s Key Facts Statement for Loans & Advances guidelines and can classify their share of eligible CLA loans as priority sector lending under the applicable RBI Master Directions.

NBFCs shall adhere to the applicable accounting standards, while booking of unrealised profit under CLAs, if applicable. However, such profits, shall be deducted from Common Equity Tier 1 capital or net owned funds for meeting regulatory capital adequacy requirement till the maturity of such loans.

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“Minimum information to be provided to the Audit Committee and Shareholders for approval of RPT” by SEBI and the related NFRA Communication

Introduction

Related party transactions (RPTs) pose significant governance and audit challenges due to their complexity and risk of conflicts of interest. To strengthen transparency, SEBI has issued Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93 dated June 26, 2025 (the “Circular”), establishing standards for minimum disclosures to audit committees and shareholders. In parallel, NFRA’s Auditor Interactions Series 3 clarifies auditor responsibilities under Ind AS 24, AS 18, and SA 550 (the “NFRA interaction”). Together, these measures provide a comprehensive framework outlining how RPTs should be identified, approved, disclosed, and subjected to rigorous audit scrutiny.

Key Highlights

The main focus is on the key regulatory changes, their practical implications for companies and auditors, and recommended practices for effective compliance with the new disclosure and governance requirements for related party transactions.

The post Assurance Gazette – July 2025 Edition first appeared on Nangia & Co LLP.

Key Amendments in Form 3CD for AY 2025-26

Introduction

The Central Board of Direct Taxes has introduced amendments through the Incometax (Eighth Amendment) Rules, 2025,via Notification No. 23/2025 dated March 28, 2025 to some clauses of Form 3CD (part of tax audit report). These amendments come into effect from 1 April 2025 and are discussed below.

Clause 12:

Addition of Section 44BBC

What? Introduced new section 44BBC. This section introduces a special presumptive taxation regime for non-resident entities involved in the operation of cruise ships. Under this provision, 20% of specified receipts related to passenger carriage will be deemed as taxable income.

Why? To bolster India’s cruise-shipping sector, the Finance Bill 2024 introduces a new section, 44BBC, establishes a presumptive taxation regime for non-resident cruise ship operator.

Nangia’s Take

• The CBDT issues circulars, notifications, and rules under the powers granted by the Income-tax Act to implement, administer, and clarify legislative provisions, thereby supporting compliance and effective enforcement.

The post Assurance Gazette – June 2025 Edition first appeared on Nangia & Co LLP.

MCA Notification on Amendments to Ind AS 21.

Introduction

Ind AS 21 provides guidance on incorporating foreign currency transactions and foreign operations into financial statements and translating these statements into a presentation currency. However, the standard previously lacked specific instructions for determining exchange rates when two currencies are not exchangeable a common issue in economies experiencing strict foreign exchange controls. To fill this gap, the IASB amended IAS 21 to include guidance on “Lack of Exchangeability.” The MCA has now aligned Ind AS 21 with these international amendments. The changes define exchangeability, specify when a currency is considered non-exchangeable, and outline a methodology for determining an appropriate exchange rate in the absence of a reliable official rate.

Nangia’s Take

With global businesses facing increasing foreign exchange volatility and regulatory uncertainty, the MCA’s move to strengthen Ind AS 21 marks a progressive step toward ensuring more consistent, transparent, and decision-useful financial reporting. These changes address growing concerns among preparers and auditors over inconsistent interpretations of exchangeability, especially in countries facing currency controls or hyperinflation. Companies with significant foreign operations are advised to carefully assess their foreign currency exposures and update their accounting policies ahead of the April 2025 effective date and apply the estimation method consistently across periods and similar transactions along with effective disclosures for changes in estimation methodology.

The post Assurance Gazette – May 2025 Edition first appeared on Nangia & Co LLP.

SEBI LODR Amendments in Corporate Governance for a Listed Entity which has listed its Non- Convertible Debt Securities

Introduction

The recent amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, introduced on March 27, 2025, signify a crucial step towards enhancing corporate governance, strengthening disclosure norms, and investor protection. These changes reflect SEBI’s commitment to fostering transparency and ensuring that listed entities uphold the highest standards of compliance and accountability.

Nangia’s take

The SEBI (LODR) Amendments of March 27, 2025, mark a significant shift in corporate governance, particularly for High Value Debt Listed Entities (HVDLEs). The introduction of Chapter VA strengthens board composition, compliance mandates, and related party transaction governance, ensuring greater accountability and transparency. Entities must now establish key committees, comply with directorship limits, and adhere to enhanced disclosure norms. Additionally, unlisted material subsidiaries of HVDLEs face stricter governance oversight. Secretarial compliance has been reinforced, requiring annual audits and timely regulatory submissions. These changes collectively aim to fortify investor confidence, improve market discipline, and align regulatory frameworks with global best practices.

The post Assurance Gazette – April 2025 Edition first appeared on Nangia & Co LLP.

NFRA’s Auditor-Audit Committee Interaction Series on Expected Credit Losses

Introduction

Expected Credit Loss, under Ind AS 109, is crucial for timely credit risk recognition, ensuring accurate financial reporting and asset valuation. By considering past data, current conditions, and future forecasts, it enhances transparency, regulatory compliance, and investor confidence, aligning with the applicable financial reporting framework. NFRA’s Auditor-Audit Committee Interaction Series 1 highlights key questions Audit Committees may raise with auditors on ECL

Nangia’s Take

National Financial Reporting Authority (NFRA) has introduced the Auditor-Audit Committee Interaction Series, emphasizing the critical role of auditor communication with Audit Committees, particularly regarding Expected Credit Losses (ECL) under Ind AS 109. This initiative presents key questions to enhance understanding of compliance, transparency, and accountability in ECL financial reporting. By strengthening Auditor-Audit Committee interaction and offering greater clarity on the measurement and recognition of ECL allowances, it ensures proper reporting to the Audit Committee, strengthening oversight of a company’s credit risk management and financial health.

NFRA: Second communication of Auditor-Audit Committee Interactions Series, focusing on Deferred Tax Assets, Liabilities

The National Financial Reporting Authority (NFRA) has released the second installment of its “Auditor-Audit Committee Interactions Series,” focusing on the audit of income taxes, particularly Deferred Tax Assets (DTAs) and Deferred Tax Liabilities (DTLs) as outlined in Ind AS 12. This follows the initial communication, which covered the assessment of Expected Credit Losses.

The post Assurance Gazette – March 2025 Edition first appeared on Nangia & Co LLP.

Accounting for Expenditure on Corporate Social Responsibility

Corporate Social Responsibility (CSR) has become a fundamental aspect of corporate governance, ensuring businesses contribute meaningfully to societal and environmental development. With evolving legal and regulatory frameworks, the ICAI has released the Revised Technical Guide to offer a detailed and practical understanding of the accounting treatment of CSR Expenditures and their presentation in the financial statements.

Key Updates in the 2025 Technical Guide summarises below and provides clarity on the amendments made thereof.

Aspect :Unspent CSR Amount “Other than on Ongoing Projects”

Update: Companies should transfer unspent amounts to a Schedule VII Fund within 6 months of the expiry of the financial year. Accordingly, a provision for liability for the amount representing the extent to which the amount is to be transferred needs to be recognised in the financial statements.

Aspect: Unspent CSR Amount “On Ongoing Projects”

Update: Unspent amount should be transferred to a special CSR account within 30 days from the end of the financial year and utilized within 3 years, failing which it should be transferred to a Schedule VII Fund within 30 days from the date of completion of the third financial year. Accordingly, the provision for liability for the amount representing the extent to which the amount is to be transferred within 30 days of the end of the financial year needs to be recognised in the financial statements.

Aspect: Carry Forward of excess CSR spent

Update: Excess CSR expenditure can be recognised as prepaid expense in the Balance Sheet under the head “Other Current Assets” and can be carried forward for up to 3 financial years, subject to Board approval. The prepaid expenditure would be reversed in the first interim period of the next financial year, at least to the extent of the CSR spend required to be effected in that financial year and shall not be pro-rated over the quarters for which interim financials are prepared (where applicable).

The post Assurance Gazette – February 2025 Edition first appeared on Nangia & Co LLP.

In this issue, we also bring The Expert Advisory Committee’s analysis of the company’s share in the property to be classified as Inventory or Investment Property under Ind AS 2 or Ind AS 40 respectively. It captures the Committee’s conclusion that the property aligns with Inventory classification as the primary intent of the business to meet criteria under specified standard.

Classification of the Project as Inventory or Investment Property under Ind AS framework-EAC Opinion

Facts of the Case

The Company, a PSU under the Ministry of Housing & Urban Affairs, achieved Navratna status in 2014 and operates in PMC(Project Management Consultancy), Real Estate, and EPC Engineering, Project and Construction) segments. It developed a joint real estate project with AMC (‘A’ Municipal Corporation) (76.98% Company, 23.02% AMC) at J Place, intending to sell it post completion. Despite multiple sale attempts from 2008 to 2014, the property could not be sold due to lack of interest and missing statutory approvals. In the interim, it was temporarily rented out to government entities, with income shared as per the ownership ratio. The Occupancy Certificate was obtained on Jan-24, and the Company plans to launch the sale soon after completing RERA and other requirements.

Quey

The Company seeks the Expert Advisory Committee’s opinion on whether its share of assets in the J Place property should continue to be classified as ‘Real Estate Inventory’, reclassified as ‘Investment Property’, or treated differently under applicable Ind AS.

Points considered by the Committee- Analysis of Inventory Classification Under IND AS 40

The primary issue is whether the company’s share of assets in the J Place Property project should be classified as ‘Inventory’ or ‘Investment Property’. The analysis focuses exclusively on this classification and does not address other accounting or legal considerations.

The post Assurance Gazette – January 2025 Edition first appeared on Nangia & Co LLP.

Accounting Treatment for ESCO Projects 

An Energy Service Company (ESCO) offers energy solutions aimed at optimizing energy usage, improving efficiency, and reducing costs. Through services such as energy audits, efficiency upgrades, renewable energy installations, and ongoing energy management, ESCOs help clients achieve significant savings, reduce environmental impact, and promote sustainability. These services are tailored to meet the specific energy needs of different sectors, including commercial, industrial, governmental, and institutional. 

Revenue streams for ESCOs are primarily categorized into two types. The first is upfront revenue, which includes income earned at the start of the project, such as equipment sales and consulting fees. The second is ongoing revenue, which refers to continuous income tied to the performance of energy-saving measures, including payments for energy management and maintenance services. 

Accounting Treatment under Indian Accounting Standards (Ind AS) 

Applicable IND AS are IND AS 115 “Revenue from contacts with customers”, IND AS 116 “Leases”, IND AS 16 “Property, Plant and Equipment”. 

IND AS 116 “Leases” 

ESCO shall check the contract for classification under IND AS 116 “leases”. IND AS 116 defines lease as, “A contract, or part of a contract, that conveysthe right to use an asset (the underlying asset) for a period of time in exchange for consideration.” 

Further it provides some conditions to be fulfilled by a contract to be identified as a lease contract. These conditions are listed below: 

Right to Control the Use of an Asset  

The contract must convey the right to control the use of an identified asset for a specified period. This means that the lessee must have the ability to direct how and for what purpose the asset is used during the lease term. 

Identification of an Asset  

The contract must involve an identified asset, either explicitly specified or implicitly specified at the time the contract is signed. The asset must be physically distinct or identifiable (e.g., a specific building or piece of machinery).

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