Payment in USD to an Indian Company or Foreign Entity: When Does TDS Actually Apply

By CA Surekha S Ahuja

A Practical Decision Framework — Updated for the Income-tax Act, 2025

The one sentence to remember: TDS follows the legal recipient, the nature of the payment, and its taxability — not the currency symbol on the invoice.

A USD Invoice Often Creates the Wrong TDS Question

An Indian company may invoice in USD. It may be wholly owned by a US, UK, or Singapore parent. It may even receive payment through an overseas bank account.

None of these facts, by themselves, make the payment a payment to a non-resident.

The correct starting point is:

1. Who is legally entitled to the payment?
2. What is the payment for?
3. Is it chargeable to tax in India?

The Quick Answer

Situation	Correct TDS Approach
Invoice is in USD	Currency is irrelevant
Indian company has a foreign parent	Foreign ownership does not make it non-resident
Payment goes to a foreign bank account	Examine the legal recipient
Payee has PAN/GSTIN	Registrations do not by themselves establish legal identity or residence
Payment is directly to foreign parent	Examine Indian taxability and DTAA
Payment is to a branch/project office	Identify the foreign legal entity and tax position
Payment is called "reimbursement"	Test whether it contains any income/service element
Indian subsidiary later pays foreign parent	Analyse the second payment separately

The Four-Step Rule

Every foreign-linked payment should pass through four questions:

Step	Question
1. Recipient	Who is legally entitled to receive the payment?
2. Nature	What is the payment actually for?
3. Chargeability	Is that income chargeable to tax in India?
4. Provision	Which TDS provision, rate, and compliance requirement follows?

The mistake is to start with Step 4:

"It is in USD, so Section 195-type withholding must apply."

That is not the correct analysis.

Indian Subsidiary of a Foreign Parent

Suppose: Foreign Parent → ABC India Pvt Ltd → Customer

ABC India is:

• incorporated in India;
• the contracting party;
• the invoicing party; and
• legally entitled to the consideration.

The fact that its parent is foreign does not make ABC India a non-resident.

An Indian-incorporated company is resident in India under the company residence rules. A foreign company's POEM can separately affect its residence — not the residence of its Indian subsidiary.

Therefore: USD invoice + foreign parent ≠ non-resident recipient

The payment to ABC India should first be examined under the domestic TDS provisions applicable to the nature of the payment.

Direct Payment to the Foreign Parent

The analysis changes where the customer contracts directly with the foreign company:

Indian Customer → Foreign Company

Now determine:

• Nature of income
• Whether it is chargeable in India
• Business connection or PE, where relevant
• Domestic law
• Applicable DTAA
• Withholding and remittance compliance

The Supreme Court's decision in GE India Technology Centre Pvt. Ltd. v. CIT establishes the fundamental principle that withholding on payments to non-residents is linked to chargeability to tax in India.

Therefore, the correct chain is:  Foreign recipient → Nature → Chargeability → Domestic law/DTAA → TDS

not simply: Foreign recipient → TDS

Indian Subsidiary vs. Branch vs. Project Office

Recipient	Broad Position
Indian subsidiary	Separate Indian-incorporated legal entity
Branch office	Generally an extension of the foreign company
Project office	Generally an extension of the foreign company
Liaison office	Restricted presence, subject to applicable conditions

A branch or project office may have an Indian:

• PAN
• GSTIN
• Bank account
• Address
• Employees

But these registrations do not necessarily make it a separate Indian company.

The decisive question remains: Which legal entity is the recipient, and what is its tax status?

The Two-Leg Trap

Consider: Customer → Indian Subsidiary → Foreign Parent

Suppose the customer pays ₹10 crore to the Indian subsidiary, and the subsidiary subsequently pays ₹8 crore to its foreign parent.

These are two separate payment legs.

Leg 1 — Customer → Indian Subsidiary Analyse the payment under the applicable domestic TDS provision.

Leg 2 — Indian Subsidiary → Foreign Parent Separately examine:

• Nature of payment
• Chargeability
• DTAA
• Withholding
• Transfer pricing
• PE implications

The second payment does not automatically convert the first payment into a payment to a non-resident.

However, if the Indian entity is merely a conduit, nominee, collection agent, or intermediary — and the foreign parent is substantively entitled to the consideration — the analysis may change.

Reimbursement: The Label Is Not the Answer

Calling something a "reimbursement" does not automatically take it outside withholding.

Ask:

• Was the cost genuinely incurred on behalf of the payer?
• Is it recovered exactly at cost?
• Is there any markup?
• Is there an embedded service or profit element?

A genuine cost-to-cost reimbursement with no income element may have a different withholding treatment.

The file should support the position through:

Agreement + underlying invoices + cost calculation + allocation + proof of payment + no-markup analysis

POEM: The Foreign Company Exception

A foreign-incorporated company can potentially become resident in India if its Place of Effective Management (POEM) is in India.

This is a factual determination and should not be inferred merely from the existence of:

• an Indian subsidiary;
• Indian employees; or
• Indian operations.

But where substantive strategic and commercial management is effectively exercised from India, POEM requires careful consideration.

The Practical Decision Matrix

Recipient / Transaction	Key Question	Broad Outcome
Indian company	What is the nature of payment?	Apply relevant domestic TDS provision
Indian company	Genuine reimbursement?	Examine income/service element
Foreign company	Is income chargeable in India?	Withholding if chargeable, subject to DTAA
Foreign company	Business income	Examine business connection / PE
Foreign company	Royalty / FTS / interest	Domestic law + DTAA analysis
Branch / project office	Who is the legal entity?	Foreign-entity analysis
Liaison office	Genuine expense reimbursement?	Fact-specific
Foreign company with POEM concern	Where is effective management?	Specific residence analysis
Indian subsidiary → foreign parent	What is the second payment for?	Independently analyse
Conduit / agency arrangement	Who is substantively entitled?	Substance and legal entitlement must be reconciled

The Decision Tree

START
  │
  ▼
Who is legally entitled to the payment?
  │
  ├── Indian incorporated company
  │       │
  │       ▼
  │   Identify nature of payment
  │       │
  │       ▼
  │   Apply relevant domestic TDS provision
  │
  └── Foreign company / non-resident
          │
          ▼
      Identify nature of income
          │
          ▼
      Is it chargeable in India?
          │
          ├── NO
          │    │
          │    ▼
          │  No withholding on that basis
          │  + complete applicable documentation
          │
          └── YES
               │
               ▼
          Domestic law + DTAA
               │
               ▼
          Determine withholding
               │
               ▼
          Complete remittance compliance

Special caution: branch/project office, reimbursement, conduit arrangements, PE, POEM, and back-to-back structures require additional factual analysis.

Case Study: USD 1.2 Million Invoice

ABC India Pvt Ltd is an Indian subsidiary of a US company. The Indian customer contracts with ABC India. ABC India raises an invoice for USD 1.2 million.

The customer asks:

"Since the invoice is in USD and ABC India belongs to a US group, should we deduct non-resident TDS?"

Answer: Not merely for those reasons.

The legal recipient is ABC India Pvt Ltd — an Indian-incorporated company.

Therefore, the first payment is examined under the domestic TDS framework applicable to the nature of that payment.

If ABC India later pays USD 900,000 to its US parent, that is a separate cross-border payment requiring an independent analysis.

Lesson: Follow the legal payment leg, not merely the ultimate movement of money.

Income-tax Act, 2025: The Compliance Transition

The Income-tax Act, 2025 reorganises the TDS framework, including the provisions now contained in Section 393.

For cross-border remittances, the familiar forms have also changed:

Earlier Form	Current Form
Form 15CA	Form 145
Form 15CB	Form 146

The important practical point is:

Do not confuse TDS liability with remittance reporting.

Whether tax is deductible and what remittance form must be furnished are related but distinct questions.

During the transition, finance teams should also maintain a clear record of the date of accrual, credit, payment, and remittance, because the applicable substantive and procedural rules can depend on the relevant period.

Five Questions Before Releasing the Payment

1. Who is the legal recipient? Match the contract, invoice, payment instructions, and accounting records.
2. What are we actually paying for? Service, royalty, interest, commission, rent, reimbursement, or something else?
3. Is the income chargeable in India? Consider domestic law, source rules, PE, and DTAA.
4. Which TDS provision applies? Only determine the provision after the first three questions.
5. What evidence supports the conclusion? Document the analysis before the payment, not after a tax notice.

Five Mistakes That Create TDS Risk

Mistake	Why It Fails
"USD means non-resident TDS"	Currency does not determine residence
"Foreign parent means foreign recipient"	Parent and subsidiary can be separate taxpayers
"PAN/GSTIN means Indian company"	Branches and project offices may also have Indian registrations
"Reimbursement means no TDS"	Substance and income element must be tested
"Later payment to parent changes the first payment"	Each payment leg requires separate analysis

Final Takeaway

When a finance team sees a USD invoice from a foreign-linked business, the first question should not be:

"Should we deduct non-resident TDS?"

It should be:

"Who is legally entitled to the payment, what are we paying for, and is that income chargeable to tax in India?"

The complete framework is:

Recipient → Nature → Chargeability → Provision → Documentation

USD does not make an Indian company foreign. A foreign parent does not make its Indian subsidiary non-resident. And a foreign remittance does not automatically mean TDS.

The answer follows from the legal recipient, the substance of the transaction, and chargeability under the applicable law.

Professional Caution

Cross-border withholding requires particular care where transactions involve foreign parents, branches, project offices, reimbursements, treaty claims, PE, POEM, agency/conduit structures, or back-to-back payments.

For material transactions, maintain a contemporaneous taxability analysis based on the exact facts, contractual structure, and law applicable to the relevant period.

Form 41, Non-PAN Registration & Cross-Border Remittances Under the Income-tax Act, 2025

 By CA Surekha Ahuja

A practical guide to FTS payments to foreign companies from FY 2026-27

PAN should not become the bottleneck to a legitimate treaty claim. But before money crosses the border, the tax, treaty and remittance trail must tell the same story.

More than a change in form numbers

From 1 April 2026, the Income-tax Act, 2025 replaces the earlier framework. For cross-border payments:

Earlier	New	Purpose
Form 10F	Form 41	Treaty-related information
Form 15CA	Form 145	Remittance reporting
Form 15CB	Form 146	CA certification, where applicable

The larger change is the move towards a connected transaction trail:

Identity → Residence → Treaty → Taxability → Withholding → Certification → Remittance

FEMA/banking and transfer pricing operate alongside this chain.

Foreign company without PAN: can Form 41 still be filed?

Yes, where the non-resident is eligible for the prescribed non-PAN route.

The Income Tax Department provides a separate NR-ID registration/login for a non-resident who does not hold PAN and is not required to have PAN. The prescribed information includes foreign TIN and the certificate referred to in section 159(8).

Therefore: PAN pending does not automatically mean that Form 41 must wait.

But Form 41 is an information filing supporting the treaty claim—not a grant of treaty benefit. The actual entitlement depends on the applicable DTAA and facts.

Keep ready

TIN + TRC + entity details + agreement/invoice + treaty analysis + Form 41 acknowledgement

The core particulars should remain consistent across Form 41, Form 146, Form 145 and the remittance documents.

FTS: determine taxability before choosing the form

For Fees for Technical Services, the correct sequence is:

Nature of service → Domestic-law taxability → DTAA article → Treaty conditions → Withholding rate

The core domestic definition of FTS has substantially been carried forward into section 9(7)(b) of the 2025 Act.

However:

Domestic-law FTS does not automatically mean taxable FTS under the DTAA.

The treaty must be separately examined, including make-available or PE conditions where relevant.

Form 145 and 146: the ₹5 lakh decision point

Taxable remittance	Route
Up to ₹5 lakh	Form 145 – Part A
Above ₹5 lakh + AO certificate	Part B
Above ₹5 lakh + CA certificate	Part C + Form 146
Not taxable, subject to conditions	Part D

The ₹5 lakh limit is a procedural threshold, not a taxability threshold, and the prescribed framework considers the payment/aggregate during the tax year.

Form 146 is the CA's certificate covering, among other matters, domestic-law taxability, DTAA taxability and TDS. The prescribed process contemplates it for each qualifying payment.

Case study: ₹2 crore FTS to a foreign parent without PAN

Facts 

Fco, resident in a treaty country, provides technical services to its Indian subsidiary Ico.

• Fco has a valid TRC and foreign TIN.
• Indian PAN is still pending.
• Annual fee: ₹2 crore.
• Ico intends to claim DTAA benefit.

Correct sequence

1. Characterise the service

→ Is it FTS?

2. Determine taxability

→ Domestic law + DTAA

3. Establish treaty documentation

→ TRC + eligible NR-ID/Form 41

4. Certification

→ Form 146, where Part C applies

5. Remittance reporting

→ Form 145 – Part C

6. Withholding

→ Apply the correctly determined domestic/DTAA rate

7. Remittance

→ Complete applicable FEMA/AD-bank requirements

8. Group transaction

→ Separately examine transfer pricing

Key point

Fco need not necessarily wait for PAN merely to complete the prescribed Form 41 process, if it qualifies for the NR-ID route.

But: Form 41 does not, by itself, establish the DTAA rate.

Eight defaults finance teams should avoid

⚠️ Waiting for PAN unnecessarily when the NR-ID route is available.

⚠️ Treating Form 41 as treaty approval.

⚠️ Testing ₹5 lakh invoice-by-invoice instead of considering the prescribed aggregate.

⚠️ Treating Form 146 as an annual certificate covering all future payments.

⚠️ Using the wrong Form 145 route—AO certificate means Part B; CA certificate means Part C + Form 146.

⚠️ Assuming Form 145 completes FEMA compliance.

⚠️ Assuming TDS compliance proves transfer-pricing compliance.

⚠️ Assuming NR-ID and later PAN will automatically merge—profile linkage is an administrative issue and no statutory SLA should be promised.

The compliance chain that should exist before payment

Workstream	Core evidence
Income-tax	Taxability + withholding analysis
DTAA	TRC + Form 41 + treaty analysis
Remittance	Form 145 + Form 146, where applicable
FEMA / Bank	AD-bank documents + purpose classification
Transfer pricing	Arm's-length analysis, where applicable

The ideal audit trail

Contract → Invoice → Tax analysis → TRC/Form 41 → Form 146 → Form 145 → TDS → Bank remittance → TP file

If these documents do not describe the same transaction, the compliance file is vulnerable.

Penalty: Form 145 is not merely a bank form

Failure to furnish Form 145 or furnishing inaccurate information can attract a penalty up to ₹1 lakh under section 462.

This is apart from possible consequences relating to TDS, incorrect treaty claims, transfer pricing or other applicable requirements.

The larger message

The Income-tax Act, 2025 is not simply replacing old forms.

It is building a more structured cross-border trail:

Who → Where resident → What income → Why taxable/not taxable → Why treaty benefit → What was certified → What was reported → What was withheld → What was remitted

The policy direction is therefore clear: Less friction for genuine non-residents, but greater consistency and traceability for tax administration.

Final takeaway

The question should not be: “Which form do we file?”

It should be: “Can we defend the entire transaction from contract to cross-border remittance?”

If yes, the forms become the output of sound tax analysis—not a substitute for it.

The safest foreign remittance is one where every document tells the same story.

Position as of September 2026. This article is for general professional information. The applicable Act, Rules, DTAA, CBDT instructions, portal procedures and AD-bank/FEMA requirements should be verified for the specific transaction before remittance.

CSR COMPLIANCE NOTICE UNDER SECTION 206? RECONCILE FIRST, RESPOND SECOND

By CA Surekha Ahuja

A practical framework for CSR computation, unspent amounts, project delays and an evidence-backed ROC response

“The strongest regulatory response is not the longest one. It is the one in which every number, date and conclusion can be traced to the law and the underlying evidence.”

A notice under Section 206 of the Companies Act, 2013 should never be treated as a routine request for information.

The immediate task may be to answer questions raised by the Registrar of Companies (ROC). The more important task is to reconstruct the company’s complete CSR position—from the statutory obligation and Section 198 computation to actual expenditure, unspent amounts, project status, transfers, disclosures and supporting records.

That leads to the most important practical principle:

DON’T START WITH THE NOTICE. START WITH THE RECONCILIATION.

Section 206 enables the ROC to seek further information, explanations and documents where scrutiny of filed documents or information warrants it. If the response is inadequate, further books, papers and explanations may be called for.

Therefore, a CSR response should not be prepared as a collection of explanations. It should be prepared as a reconciled evidence file.

THE CSR COMPLIANCE CHAIN

The complete position should ideally be reconstructed in this sequence:

CSR Applicability
↓
Section 198 Net Profit
↓
CSR Obligation @ 2%
↓
Eligible CSR Expenditure
↓
Unspent Amount, if any
↓
Ongoing Project / Other Unspent
↓
Statutory Transfer / Utilisation
↓
Board’s Report & CSR Disclosures
↓
CSR-2
↓
Books + Bank + Project Evidence
↓
ROC Response - A mismatch at any stage can create questions at the next.

ESTABLISH THE CSR OBLIGATION BEFORE EXAMINING THE SPEND

The first question is not: “How much CSR did the company spend?”

It is: “How much CSR was the company legally required to spend?”

Section 135 applies where the prescribed thresholds relating to net worth, turnover or net profit are met in the immediately preceding financial year.

Once applicable, the company generally has to spend at least 2% of the average net profits of the three immediately preceding financial years, calculated in accordance with Section 198. Where the company has not completed three financial years since incorporation, the prescribed computation is based on the completed preceding financial years.

A simple working paper

Financial Year	Section 198 Net Profit	CSR Base	2% CSR Obligation
Year 1	₹X
Year 2	₹Y
Year 3	₹Z
Average		₹A	₹A × 2%

This computation should be capable of being traced to the audited financial statements and the underlying Section 198 adjustments.

A CSR reconciliation built on the wrong base will produce the wrong conclusion, however perfect the subsequent documentation may appear.

BUILD ONE MASTER CSR RECONCILIATION

Before drafting the ROC response, prepare one master statement covering the entire relevant financial year.

Particulars	Amount / Date / Status
CSR obligation	₹_____
Eligible CSR expenditure	₹_____
Unspent amount	₹_____
Nature of unspent amount	Ongoing project / Other
Statutory action required	_____
Amount transferred	₹_____
Date of transfer	_____
Applicable due date	_____
Amount actually utilised	₹_____
Amount reported in Board’s Report	₹_____
Amount reported in CSR-2	₹_____
Present status	_____
Supporting evidence available	Yes / No

This table often exposes issues before the ROC does. For example:

Books say ₹60 lakh spent.
Board’s Report says ₹75 lakh.
CSR-2 says ₹60 lakh.

The problem is no longer simply CSR expenditure. It is now a reconciliation and disclosure issue.

UNSPENT CSR: CLASSIFY BEFORE EXPLAINING

“Unspent CSR” is a factual position. Its legal treatment depends on the circumstances.

Broadly, the company must distinguish between:

Situation	Statutory treatment
Unspent amount relating to an ongoing project	Transfer to the prescribed Unspent CSR Account within the specified statutory period and utilisation in accordance with Section 135
Other unspent amount	Transfer to a Schedule VII fund within the prescribed statutory period

For an ongoing project, the amount transferred to the Unspent CSR Account is required to be spent within the statutory period; failure to spend the amount within that period triggers the subsequent transfer requirement prescribed under Section 135. For other unspent amounts, the transfer to a Schedule VII fund is required within the prescribed six-month period from the end of the financial year.

The professional mistake

A response should not simply say:

“The project was delayed, therefore the amount remained unspent.”

That explains the fact, but not the legal treatment.

The response must establish:

What was the project?
Why did it qualify as ongoing, if that is the position?
How much was actually spent?
How much remained unspent?
What statutory action was required?
Was that action taken within time?
What happened thereafter?

CASE STUDY: THE PROJECT WAS GENUINE — BUT DELAYED

Consider a company with a genuine CSR project having an approved budget of ₹1 crore.

During the year:

• ₹40 lakh was actually spent;
• the balance ₹60 lakh remained unspent;
• implementation was delayed because of land, regulatory, contractor or other documented issues.

Three statements must be kept separate:

1. COMMITMENT IS NOT EXPENDITURE

Approval of a ₹1 crore project does not establish that ₹1 crore was spent.

The accounts, bank records, invoices, utilisation evidence and project records must support actual expenditure.

2. PROJECT DELAY IS NOT NECESSARILY PROJECT ABANDONMENT

If the project genuinely satisfies the statutory conditions for an ongoing project, the prescribed unspent-CSR mechanism must be followed.

A delay should therefore be analysed under the ongoing-project provisions, rather than automatically labelled a default.

3. SUBSEQUENT UTILISATION IS NOT THE SAME AS TIMELY COMPLIANCE

If an amount was required to be transferred within a statutory deadline and was transferred later, the later action may demonstrate remediation, but it does not retrospectively convert a delayed statutory action into a timely one.

This distinction is critical in a regulatory response.

MCA guidance also makes an important point: mere disbursal of funds to an implementing agency does not by itself establish CSR expenditure where the amount has not actually been utilised; the utilisation position and supporting certification must be examined.

IF THE STATUTORY TRANSFER WAS DELAYED, SEPARATE THE TWO STORIES

A mature ROC response should distinguish between:

Historical position	Present position
What was required by law?	What has now been done?
What was actually done?	What remains outstanding?
What was the applicable due date?	Has the position been regularised?
Was there a delay?	What corrective action was taken?
What evidence existed at the relevant time?	What evidence now supports remediation?

The temptation is to write: “The amount has now been transferred; therefore there is no default.”

That is an unsafe formulation where the statutory deadline had already expired.

The better approach is factual: Acknowledge the historical position → explain the circumstances → establish the present status → document corrective action → address the applicable statutory consequences.

Section 135(7) prescribes penalties for failure to comply with the transfer requirements, subject to the statutory limits.

Do not convert a remediation fact into a historical compliance claim.

MAKE THE ROC RESPONSE MIRROR THE RECONCILIATION

A Section 206 response should preferably follow the ROC's questions one by one.

ROC Query	What the response should establish
CSR obligation	Section 135 applicability and Section 198 computation
Amount spent	Actual eligible expenditure and accounting support
Unspent amount	Exact reconciliation
Project status	Ongoing / other, with factual basis
Delay	Specific reasons and documentary evidence
Transfer	Amount, account/fund, date and proof
Utilisation	Actual utilisation and supporting records
Disclosures	Agreement with Board’s Report and CSR-2
Present status	Current position and corrective action, if any

A useful drafting formula is:  QUERY → LAW → FACT → RECONCILIATION → EVIDENCE → CONCLUSION

This keeps the response factual and prevents lengthy explanations from obscuring the actual issue.

EVIDENCE SHOULD FOLLOW THE ASSERTION

Every material statement in the response should have an evidence trail.

Assertion	Evidence that should ordinarily support it
CSR obligation was ₹X	Section 198 computation + financial statements
₹X was spent	Ledger + bank statement + invoices
Project was ongoing	Project approval + project documentation + implementation records
Delay was genuine	Correspondence, approvals, regulatory/contractual records
Amount was transferred	Bank statement + transfer proof
Amount was utilised	Utilisation records/certification + project expenditure
Disclosure was correct	Board’s Report + CSR-2 + reconciliation
Corrective action was taken	Transfer/payment proof + revised internal reconciliation

The principle is simple: Every important conclusion should be traceable backwards—from the ROC reply to the document, from the document to the accounting entry, and from the accounting entry to the underlying transaction.

FIVE RED FLAGS THAT CAN WEAKEN A CSR RESPONSE

1. CSR LIABILITY DOES NOT RECONCILE

The obligation differs between the working, Board’s Report and CSR-2.

2. “SPENT” DOES NOT AGREE WITH THE BOOKS

The response claims expenditure that cannot be traced to actual utilisation.

3. WRONG TREATMENT OF UNSPENT AMOUNT

The company explains the project delay but does not establish the statutory treatment of the unspent amount.

4. FILINGS TELL A DIFFERENT STORY

Annual Report, CSR disclosures, CSR-2, financial statements and the ROC response contain inconsistent figures or descriptions.

5. OVER-CLAIMING COMPLIANCE

A response attempts to describe a historical delay as complete compliance merely because the position was subsequently corrected.

A precise admission supported by evidence is usually stronger than an aggressive denial unsupported by reconciliation.

THE BOARD-LEVEL TEST BEFORE SIGNING THE RESPONSE

Before the response goes to the ROC, management and the Board should be able to answer YES to these questions:

• Do we know exactly how the CSR obligation was computed?
• Does the computation agree with Section 198 and the financial statements?
• Does actual CSR expenditure agree with the books and bank records?
• Have all unspent amounts been correctly classified?
• Have the applicable statutory transfers been identified and evidenced?
• Do the Board’s Report disclosures agree with CSR-2?
• Is every project-delay explanation supported by contemporaneous evidence?
• Have we separated historical compliance from subsequent remediation?
• Can every material figure and date in the response be independently verified?

If the answer to any is NO, the response should not be finalised merely because the deadline is approaching.

THREE POSSIBLE COMPLIANCE POSITIONS

Not every Section 206 response is a defence of a perfect compliance record.

The company may fall into one of three broad positions:

Position	Best response strategy
Compliant + well documented	Reconcile and demonstrate compliance clearly
Substantively correct + poorly documented	Reconstruct, substantiate and strengthen the evidence trail
Historical compliance gap	State the position accurately, explain the circumstances, remediate where possible and address the statutory consequences

This is an important professional distinction. The objective is not to make every historical position look perfect. The objective is to make the present response accurate, complete and defensible.

THE BIGGER PROFESSIONAL LESSON

CSR compliance is often viewed as a 2% calculation.

In practice, a regulatory review can turn it into a much broader exercise involving:

Profit computation → obligation → expenditure → project classification → unspent amount → statutory transfer → utilisation → accounting → Board disclosures → CSR-2 → evidence.

That is why a CSR compliance file should not be maintained as a collection of disconnected documents.

It should be maintained as a single audit trail. And the discipline should be year-wise.

CSR planning may extend across multiple years, but the statutory treatment of obligation, expenditure and unspent amounts must still be examined for each relevant financial year.

THE PROFESSIONAL FORMULA - INTERNAL COMPLIANCE

RECONSTRUCT
↓
RECONCILE
↓
VERIFY
↓
REMEDIATE, IF REQUIRED
↓
DOCUMENT
↓
RESPOND

ROC RESPONSE

QUERY
↓
LAW
↓
FACT
↓
EVIDENCE
↓
CONCLUSION

This is far more effective than beginning with a narrative and trying to find supporting documents afterwards.

FINAL TAKEAWAY

The most important question after receiving a CSR notice under Section 206 is not: “How do we reply to the ROC?”

It is:  “What exactly was the company required to do, what did it actually do, what happened subsequently, and can we substantiate every material number, date and conclusion?”

That is the real compliance exercise.

DON’T START WITH THE NOTICE. START WITH THE RECONCILIATION.

Because in regulatory compliance, credibility is built not by the strength of the explanation, but by the consistency of the evidence behind it.

LEGAL REFERENCE

Companies Act, 2013: Sections 135, 198 and 206, read with the applicable CSR Rules and MCA guidance on CSR implementation, unspent CSR and utilisation.

This article expresses general professional views for educational purposes. A response to a Section 206 notice should be finalised only after reviewing the specific notice, relevant financial years, statutory timelines, CSR records, books of account, filings and supporting evidence.

CCFS-2026: BEYOND FEE RELIEF — WHAT SHOULD HAPPEN TO A LONG-DEFAULTING COMPANY?

By CA Surekha Ahuja

Regularise, preserve or exit? The decision should come before the filing.

A company may stop doing business without ceasing to exist. The real professional question is not how to clear its old filings, but whether the company should continue, be preserved or be brought to an orderly end.

CCFS-2026 provides eligible companies an important opportunity to address specified historical filing defaults at concessional cost. With the scheme window extending to 15 September 2026, the immediate temptation is to focus on the potential saving in additional fees.

That may be the wrong starting point.

For a company that has remained inactive for several years, the filing backlog is often only the visible part of a larger problem involving corporate status, governance, historical records, director-related consequences and future commercial purpose.

THE FIRST QUESTION IS NOT “WHAT SHOULD WE FILE?”

Consider a company that has:

• had no meaningful business for several years;
• not filed annual compliance for multiple years;
• lost one director through death or another through resignation or prolonged unavailability; and
• accumulated substantial compliance exposure.

The obvious response is: “Let us file all the pending forms under CCFS-2026.”

The better professional response is: “Why should this company continue to exist?”

That question changes the entire analysis.

If the company…	The strategic question	Possible direction
Has a genuine future business purpose	Is retaining the existing entity commercially justified?	Regularise & continue
Has no present activity but credible future utility	Is preservation preferable?	Evaluate dormancy
Has no foreseeable commercial purpose	Why incur continuing compliance costs?	Evaluate orderly exit
Has unresolved governance issues	Can valid corporate action presently be taken?	Resolve governance first
Has unresolved assets or liabilities	Is it ready for a status change?	Resolve the underlying position first

This is the central decision framework.

INACTIVITY, DORMANCY AND STRIKE-OFF ARE NOT THE SAME

“No business” is not a legal status.

A company may have:

• no turnover;
• no employees;
• no transactions; and
• no immediate intention to restart,

yet remain legally in existence with continuing statutory obligations.

The distinction is important:

Concept	What it represents
Inactivity	A commercial fact
Dormancy	A statutory status
Strike-off	A legal process subject to statutory conditions

Inactivity does not automatically mean dormancy. Dormancy does not mean dissolution.

Therefore, the absence of business should trigger a status and strategy review, not an assumption that there is nothing left to do.

GOVERNANCE MAY HAVE TO BE RESOLVED BEFORE COMPLIANCE

This is where many long-defaulting cases become technically difficult.

Suppose the company's board has fallen below the statutory minimum because of death, resignation or other cessation of directors.

The problem is no longer simply:

“Which form is pending?”

It becomes:

“Who is presently authorised and legally capable of taking the required corporate actions?”

The company's Articles, present board composition, shareholder position, nature and date of vacancies, DIN status and other facts may all become relevant.

The appropriate sequence may therefore be:

Present status → Governance → Historical reconstruction → Eligibility → Strategic decision → Implementation

A governance defect should not be retrofitted after the compliance forms have already been prepared.

CCFS RELIEF DOES NOT ANSWER EVERY QUESTION

Another important distinction is between scheme eligibility and statutory eligibility.

Three separate questions should be asked:

Can the particular overdue filing receive CCFS relief?

Can the company obtain dormant status?

Can the company proceed with voluntary strike-off?

An affirmative answer to one does not automatically answer the others.

The scheme framework identifies specified covered forms and exclusions, while dormancy and voluntary strike-off remain subject to their respective statutory conditions.

Fee relief should never be confused with permission to choose a particular corporate outcome.

RECONSTRUCT THE PAST BEFORE CLOSING IT

“Five years of pending ROC filings” is not a sufficient professional diagnosis.

The history should be reconstructed year by year.

Financial year	Financial statements	Annual return	Auditor / governance	Other matters
FY 2021-22	Review	Review	Review	Review
FY 2022-23	Review	Review	Review	Review
FY 2023-24	Review	Review	Review	Review
FY 2024-25	Review	Review	Review	Review
FY 2025-26	Review	Review	Review	Review

This can reveal missing records, changes in directors or auditors, classification issues and other matters affecting the correct filing sequence.

Historical compliance should be reconstructed—not merely cleared.

THE CHEAPEST FILING ROUTE MAY NOT BE THE CHEAPEST CORPORATE OUTCOME

The obvious calculation is: Cost without CCFS − Cost with CCFS = Saving

That is useful. But it is incomplete.

The better calculation is:  Historical regularisation cost + future compliance cost + professional/administrative cost − strategic value retained

Consider:

Consideration	Continue	Dormancy	Exit
Historical regularisation	₹___	₹___	₹___
Future compliance burden	Higher	Applicable	Generally ends after lawful completion
Strategic value	Retained	Preserved	Not retained
Long-term suitability	Assess	Assess	Assess

This produces a more meaningful question: What is the lowest-risk and most economically sensible legal future for the company?

Not merely: How much can be saved on old filing fees?

SECTION 164(2): DO NOT MIX THE COMPANY AND DIRECTOR ANALYSIS

Long-term non-filing may raise issues concerning director disqualification under Section 164(2).

But two assumptions should be avoided: CCFS automatically removes director disqualification.

and  Filing the company's pending forms automatically eliminates every historical consequence.

The company and the directors should therefore be examined separately.

Company-level review

Status → filings → eligibility → governance → future route

Director-level review

DIN / directorship position → historical non-compliance → Section 164 implications → separate remedies, where applicable

The issues may be connected, but they are not identical.

THE PROFESSIONAL DECISION FRAMEWORK

The entire exercise can be reduced to one sequence:

             LONG-DEFAULTING COMPANY
                       │
                       ▼
                 PRESENT STATUS
                       │
                       ▼
                   GOVERNANCE
                       │
                       ▼
            HISTORICAL COMPLIANCE
                       │
                       ▼
                  ELIGIBILITY
                       │
                       ▼
                FUTURE PURPOSE
                       │
             ┌─────────┼─────────┐
             ▼         ▼         ▼
          CONTINUE  PRESERVE     EXIT
             │         │         │
             ▼         ▼         ▼
        REGULARISE  DORMANCY  STRIKE-OFF

The strength of this framework is its order.

The decision precedes the filing.

BEFORE 15 SEPTEMBER 2026: THE PROFESSIONAL APPROACH

For a long-defaulting company, the available time should be used for diagnosis—not merely last-minute uploading of forms.

1. Establish the present position

Verify company status, board composition, director position, assets, liabilities and ROC actions.

2. Reconstruct the historical position

Prepare the year-wise and form-wise compliance map.

3. Test eligibility

Examine the company, each proposed form and the proposed corporate route independently.

4. Quantify the economics

Compare regularisation costs with the long-term cost of each available option.

5. Decide the future

Continue. Preserve. Or exit.

6. Implement the chosen route

Complete the necessary governance actions, filings, approvals and supporting documentation within the applicable scheme period.

THE REAL VALUE OF CCFS-2026

CCFS-2026 should not be viewed merely as: “A chance to file old forms more cheaply.”

Its greater value may be the opportunity to finally address a question that has often been postponed for years: Does this company still have a reason to exist?

If the answer is yes, regularise it properly.

If the answer is “possibly, but not now”, consider preservation through the appropriate statutory route.

If the answer is no, consider an orderly exit rather than perpetuating an unnecessary compliance burden.

The professional sequence is therefore:

UNDERSTAND THE PRESENT → RECONSTRUCT THE PAST → TEST ELIGIBILITY → DECIDE THE FUTURE → IMPLEMENT

Professional compliance is not about filing the maximum number of forms at the minimum possible cost. It is about putting the company in the right legal and commercial position for what comes next.

For eligible long-defaulting companies, CCFS-2026 may therefore represent more than fee relief.

It may be an opportunity to convert years of unmanaged corporate non-compliance into a deliberate decision about the company's future

CARO 2020 for FY 2025-26 The Ultimate Applicability & Trigger-Point Matrix

 By CA Surekha S Ahuja

CARO does not begin with 21 clauses. It begins with one question: Does CARO apply?

CARO 2020 is issued under Section 143(11) of the Companies Act, 2013 and applies from FY 2021-22 onwards.

For FY 2025-26, the practical approach is:

APPLICABILITY → LAW → TRIGGER → THRESHOLD, IF ANY → EVIDENCE → EXCEPTION → REPORTING

The key mistake is treating CARO as a tick-box exercise or assuming every clause has a monetary threshold.

Some clauses are transaction-based, some event-based, some compliance-based, and some require auditor assessment.

1. FIRST TEST — DOES CARO APPLY?

CARO does not apply to:

Company	Position
Banking company	Exempt
Insurance company	Exempt
Section 8 company	Exempt
One Person Company	Exempt
Small company	Exempt
Specified qualifying private company	Exempt

A Nidhi company or NBFC is not automatically exempt merely because it is a Nidhi/NBFC. Their specific CARO provisions are contained in Clause 3(xii) and Clause 3(xvi) respectively.

2. SMALL COMPANY — THE FY 2025-26 TEST

The limits were increased with effect from 1 December 2025:

Parameter	Limit
Paid-up share capital	≤ Rs.10 crore
Turnover	≤ Rs.100 crore

The Rs.100 crore turnover test is based on turnover as per the P&L for the immediately preceding financial year. Accordingly, for FY 2025-26, the turnover considered is FY 2024-25.

The company must also satisfy the exclusions in Section 2(85), including that it is not a holding company, subsidiary company, Section 8 company or company/body corporate governed by a special Act.

In short:

Paid-up capital ≤ Rs.10 crore

AND

FY 2024-25 turnover ≤ Rs.100 crore

AND

No Section 2(85) exclusion

→ Small company → CARO exempt

3. PRIVATE-COMPANY EXEMPTION — ALL CONDITIONS MUST BE MET

A private company which is not a small company may still be exempt under CARO paragraph 1(2)(v).

All conditions are cumulative — AND, not OR.

Condition	Requirement
Paid-up capital + reserves & surplus	≤ Rs.1 crore at balance-sheet date
Bank/FI borrowings	≤ Rs.1 crore at any point during FY 2025-26
Total revenue	≤ Rs.10 crore during FY 2025-26
Status	Not a holding/subsidiary of a public company

If even one condition fails → this exemption is lost.

4. IF CARO APPLIES — FIND THE TRIGGER

Clause	What should trigger your review?	Key threshold / test
3(i)	PPE/intangibles, physical verification, title deeds, revaluation, benami property	10% applies to specified discrepancies/revaluation tests
3(ii)	Inventory and working-capital limits	10% class-wise inventory discrepancy; WC limits >Rs.5 crore
3(iii)	Loans, advances, guarantees, securities	>90 days overdue; also test terms, evergreening and demand/no-term loans
3(iv)	Transactions covered by Sections 185/186	Compliance test
3(v)	Deposits / deemed deposits	Compliance test
3(vi)	Section 148 cost-record requirement	Applicability + maintenance
3(vii)	Statutory dues	Undisputed dues >6 months; disputed dues separately
3(viii)	Previously unrecorded income admitted/surrendered in tax proceedings	Recording in books
3(ix)	Borrowings	Any default, wilful defaulter, utilisation/end-use and group-funding tests
3(x)	IPO/FPO/debt instruments or private placement/preferential allotment	Utilisation + statutory compliance
3(xi)	Fraud / Section 143(12) / whistle-blower complaints	Nature and amount / consideration
3(xii)	Nidhi company	Nidhi-specific requirements
3(xiii)	Related-party transactions	Sections 177/188 + disclosures
3(xiv)	Internal audit	Section 138 applicability + reports considered
3(xv)	Non-cash transactions with directors/connected persons	Section 192
3(xvi)	RBI/NBFC/HFC/CIC matters	Registration / regulatory requirements
3(xvii)	Cash losses	Current FY + immediately preceding FY
3(xviii)	Auditor resignation	Reasons/issues considered
3(xix)	Going-concern uncertainty	Liabilities existing at BS date falling due within 1 year
3(xx)	Unspent CSR	30 days / 6 months, depending on category
3(xxi)	CARO qualifications/adverse remarks in components	CFS reporting

5. THE NUMBERS THAT MUST NOT BE CONFUSED

Number	Where it belongs
Rs.10 crore / Rs.100 crore	Small-company test
FY 2024-25	Turnover year for FY 2025-26 small-company test
Rs.1 crore / Rs.1 crore / Rs.10 crore	Private-company CARO exemption
10%	Specific PPE/inventory/revaluation tests
Rs.5 crore	Working-capital limits — Clause 3(ii)(b)
90 days	Overdue loans — Clause 3(iii)(d)
6 months	Undisputed statutory dues — Clause 3(vii)(a)
1 year	Liability period relevant to Clause 3(xix)
30 days / 6 months	Unspent CSR transfers

These are not universal CARO materiality thresholds.

6. THREE CRITICAL TRAPS

90 DAYS ≠ GENERAL BORROWING DEFAULT

3(iii)(d): loan/advance overdue more than 90 days

3(ix)(a): any default in repayment of borrowings or payment of interest

6 MONTHS ≠ ALL STATUTORY DUES

3(vii)(a): undisputed dues outstanding more than six months

3(vii)(b): disputed dues — report amount and forum; no six-month test

Rs. 5 CRORE ≠ CARO APPLICABILITY

The Rs.5 crore threshold belongs only to Clause 3(ii)(b) for working-capital limits secured by current assets.

It does not determine whether CARO applies.

7. THE SIMPLE CARO WORKING-PAPER FORMULA

For every clause:

LAW → TRIGGER → THRESHOLD, IF ANY → FACTS → EVIDENCE → EXCEPTION → REPORTING

Use one simple working-paper structure:

Clause	Trigger	Threshold, if any	Facts	Evidence	Exception	Conclusion
3(ii)(b)	WC limits secured by current assets	>Rs. 5 crore	Rs___	Sanctions/statements	___	___
3(iii)(d)	Loan overdue	>90 days	Rs___	Ageing/confirmations	___	___
3(vii)(a)	Undisputed statutory dues unpaid	>6 months	Rs___	Returns/challans	___	___
3(ix)(a)	Borrowing default	No minimum threshold	Rs___	Bank confirmations	___	___
3(xvii)	Cash loss	Current + preceding FY	Rs___	Computation	___	___
3(xix)	Material uncertainty	Liabilities due within 1 year	Rs___	Cash flow/ageing	___	___

THE BOTTOM LINE

CARO is not a 21-clause tick-box exercise.

For FY 2025-26:

FIRST — Does CARO apply?
SECOND — What triggers the clause?
THIRD — Is there a prescribed threshold?
FOURTH — What does the evidence establish?
FINALLY — What must the auditor report?

The real CARO discipline is not “Applicable / Not Applicable”. It is “Why applicable, what triggered it, what evidence supports it, and what exactly has to be reported?”

That is the CARO decision matrix an audit team can actually use.

MCA Extends CCFS 2026 Deadline to 31 August 2026 | Major Relief for Companies with Pending Filings

 BY CA SUREKHA AHUJA

The Ministry of Corporate Affairs (MCA) has extended the timeline under the Companies Compliance Facilitation Scheme 2026 (CCFS-2026) from 15 July 2026 to 31 August 2026.

The extension has been provided to support companies that could not complete their pending statutory filings due to disruptions arising from MCA data centre restoration activities and to provide additional time for companies to regularise their compliance position.

Key Highlights of CCFS-2026 Extension

Particulars	Details
Scheme Name	Companies Compliance Facilitation Scheme 2026 (CCFS-2026)
Extended Due Date	31 August 2026
Earlier Due Date	15 July 2026
Purpose	To provide an opportunity to complete pending statutory filings and regularise defaults
Major Benefit	Significant relief from additional fees on eligible filings
Applicable Entities	Companies having pending eligible ROC filings

Major Relief for Companies

Under CCFS-2026, eligible companies can file their pending statutory documents, including annual and other prescribed filings, with substantial relaxation in additional fee burden as provided under the scheme.

This provides a valuable opportunity for companies to:

• Complete pending ROC compliances.
• Avoid prolonged non-compliance status.
• Reduce additional fee exposure.
• Ensure updated corporate records before future regulatory scrutiny.

Companies Should Act Before 31 August 2026

Companies having pending filings should review their compliance status on the MCA portal and utilise this extended window to complete necessary filings within the revised deadline.

Failure to regularise pending compliances after expiry of the scheme may result in:

• Levy of additional filing fees.
• Increased regulatory exposure.
• Possible compliance actions under the Companies Act, 2013.

Professional Advice: Directors and management should not wait until the last date. A compliance review of pending forms, financial statements, annual returns and event-based filings should be undertaken immediately to maximise the benefit available under CCFS-2026.

Reference: MCA General Circular No. 03/2026 relating to Companies Compliance Facilitation Scheme 2026.

Deadline Reminder: 31 August 2026 — Last Opportunity to Clean Up Pending ROC Compliances.

Important Update – MCA Relaxes Additional Fees for DPT-3 Filing for FY 2025-26

 TEAM MCA - SANDEEP AHUJA & CO

The Ministry of Corporate Affairs (MCA) has issued General Circular No. 02/2026 dated 19 June 2026, granting relief from payment of additional filing fees for Form DPT-3 relating to FY 2025-26.

As per the circular, companies may file Form DPT-3 up to 31 July 2026 without payment of additional fees, considering the capacity enhancement and restoration activities being undertaken at the MCA Data Centre following the fire incident reported on 05 June 2026.

Important Clarification

The circular does not extend the statutory due date of Form DPT-3. The prescribed due date continues to remain 30 June 2026.

The relaxation is limited to waiver of additional fees for filings made up to 31 July 2026. Accordingly, companies should continue to target filing within the original due date and use the extended fee-waiver period only where necessary.

Particulars	Position
Statutory Due Date	30 June 2026
Additional Fee Waiver Available Up To	31 July 2026
Whether Due Date Extended	No
MCA Circular	General Circular No. 02/2026 dated 19 June 2026

Professional Note: While the relaxation provides welcome relief, timely filing remains advisable to avoid last-minute compliance issues, portal congestion, and reconciliation challenges.

FORM DPT-3 FOR FY 2025–26 The Ultimate Practical Filing Guide

 By CA Surekha Ahuja

Column-by-Column Reporting - CC, OD & Term Loans - Reconciliation Framework - Compliance Risks - All FAQs Resolved

Filing Deadline Alert

Due Date: 30 June 2026

Particulars	Exposure
Base Penalty for Late Filing	₹5,000
Continuing Default	₹500 per day
Serious Deposit Violations under Section 73	Penalty up to ₹1 Crore or 2× Deposit Amount (subject to statutory limits) and other consequences under the Companies Act

Important: DPT-3 for FY 2025–26 should be filed on or before 30 June 2026. Delayed filing may attract additional fees and continuing default consequences under the Companies Act, 2013.

Introduction & Legal Framework

Form DPT-3 is prescribed under Rule 16 and Rule 16A of the Companies (Acceptance of Deposits) Rules, 2014, read with Sections 73 to 76 of the Companies Act, 2013.

The form is used for reporting:

• Deposits accepted by a company; and/or
• Outstanding receipts of money not treated as deposits under Rule 2(1)(c).

Every company other than a Government company should evaluate its reporting obligation under Rule 16 and Rule 16A as on 31 March. In practice, companies having outstanding deposits and/or receipts of money falling within the reporting framework of the Deposit Rules generally require DPT-3 compliance.

For most private limited companies, DPT-3 primarily involves reporting:

• Director loans
• Bank borrowings
• Cash Credit (CC) facilities
• Overdraft (OD) facilities
• Working capital borrowings
• Inter-corporate borrowings
• Share application money
• Customer advances
• Other exempted receipts

Why DPT-3 Matters

Most DPT-3 errors arise not because of complex law but because of:

• Incorrect purpose selection
• Omission of bank borrowings
• Wrong classification of director loans
• Incorrect reporting of share application money
• Misclassification of customer advances
• Failure to reconcile figures with audited financial statements

A properly prepared DPT-3 should therefore be supported by legal analysis, reconciliation with books of account and verification of exemption conditions under Rule 2(1)(c).

Step 1 – Purpose Selection: The Most Critical Decision

Before entering any figures, select the correct purpose.

For most companies, this is the single most important decision in the entire filing process.

Practical Rule

For the vast majority of private limited companies, the appropriate selection is:

"Particulars of transactions not considered as deposit."

Purpose Option	Select When	Columns to Fill	Auditor Certificate
Onetime Return	Historical outstanding amounts from 01.04.2014 to 31.03.2019 not considered deposits	Column 14	Required
Particulars NOT considered as Deposit	Only exempted receipts such as director loans, bank loans, inter-corporate borrowings etc.	Column 15	Generally Not Required
Return of Deposit + Particulars NOT Deposit	Both deposits and exempted receipts exist	Columns 10, 12, 13, 15	Required
Return of Deposit	Company has reportable deposits	Columns 8(d), 9, 10, 11, 12, 13	Required

Step 2 – Column-by-Column Reference Guide

Basic Information (Columns 1–7)

Column	Field	What to Enter	Important Note
1(a)	CIN	Valid CIN	Mandatory
2	Company Details	Verify pre-filled details	Update email if required
3	Purpose	Select one option only	Determines active fields
4	Company Type	Public / Private	Verify carefully
5	Government Company	Yes / No	Refer Section 2(45)
6	Objects	Verify main objects	Check pre-filled data
7(b)	Date of Last Closing	31 March of relevant FY	Annual reporting date

Financial Information (Columns 8–15)

Column	Particulars	Requirement
8	Net Worth	Based on latest audited financial statements
8(d)	Maximum Deposit Limit	Relevant mainly for eligible public companies
9	Number of Depositors	Applicable where deposits exist
10	Particulars of Deposits	Applicable for deposit reporting
11	Matured but Unclaimed Deposits	Mandatory where applicable
12	Liquid Assets	Applicable where deposits exist
13	Charge Details	Applicable where charge exists
14	Outstanding Amount Not Considered Deposits	One-time return only
15	Particulars Not Considered Deposits	Most important column for private companies

Practical Formula Note – Net Worth

Net Worth = Paid-up Share Capital + Free Reserves + Securities Premium − Accumulated Losses − Deferred/Miscellaneous Expenditure − Unprovided Depreciation

Common Error: Including revaluation reserves in net worth.

Practical Formula Note – Maximum Deposit Limit

Maximum Deposit Limit = Net Worth × 35%

Applicable primarily to eligible public companies.

Step 3 – Column 15: Complete Exempted Deposit Breakdown

Column 15 is the most important disclosure section for private companies.

Sub-Column	Nature of Transaction	Reportable	Example
15(a)	Government / Statutory Authority Loans	Yes	SIDBI, State Government
15(b)	Foreign Government / Institution Borrowings	Yes	ECB, Foreign Institution
15(c)	Banking Facilities and Borrowings (including CC, OD, Working Capital and Term Loans)	Yes	CC, OD, Working Capital, Term Loan
15(d)	Public Financial Institution Loans	Yes	IFCI, NABARD
15(f)	Inter-Corporate Borrowings	Yes	Loan from another company
15(g)	Share Application Money	Subject to conditions	Pending allotment
15(h)	Director Loans	Yes	Director funding
15(k)	Employee Security Deposit	Subject to conditions	Employee deposit
15(m)	Business Advances	Subject to conditions	Customer advance
Relevant Clauses	Debentures, Convertible Notes, AIF Funding etc.	As applicable	Based on facts

DPT-3 Reporting vs Non-Reporting Matrix

Particulars	Reportable	Column
Bank CC	Yes	15(c)
Bank OD	Yes	15(c)
Bank Term Loan	Yes	15(c)
Working Capital Facility	Yes	15(c)
Director Loan	Yes	15(h)
Inter-Corporate Loan	Yes	15(f)
Share Application Money (within prescribed period)	Yes	15(g)
Customer Advance (within exemption period)	Yes	15(m)
Public Deposits	Yes	10
Trade Creditors	No	NA
MSME Creditors	No	NA
GST Payable	No	NA
TDS Payable	No	NA
PF / ESI Payable	No	NA
Salary Payable	No	NA
Directors' Remuneration Payable	No	NA
Audit Fee Provision	No	NA
Professional Fee Provision	No	NA
Outstanding Expense Provisions	No	NA
MTM Loss	No	NA
Government Grants	Generally No	NA

Critical Exclusions

The following should generally not be disclosed under DPT-3:

• Trade creditors
• MSME creditors
• Directors' remuneration payable
• Salary payable
• Audit fee provisions
• Professional fee provisions
• Outstanding expense provisions
• Interest accrued but not due
• Fully repaid loans
• MTM losses
• Statutory dues

Step 4 – CC, OD & Term Loan Treatment

Bank borrowings are among the most frequently misreported items in DPT-3.

Decision Matrix

Borrowing Type	Reportable	Column
Cash Credit (CC)	Yes	15(c)
Overdraft (OD)	Yes	15(c)
Working Capital Loan	Yes	15(c)
Bank Term Loan	Yes	15(c)
Director Loan	Yes	15(h)
Inter-Corporate Loan	Yes	15(f)

Amount to be Reported

Component	Include
Principal Outstanding	Yes
Interest Accrued and Due	Yes
Interest Accrued but Not Due	No
Fully Repaid Amounts	No

Reporting Formula

Amount Reportable = Principal Outstanding as on 31 March + Interest Accrued and Due

Common Error: Reporting sanctioned limits instead of actual outstanding balances.

CC / OD Practical Note

CC and OD facilities are generally repayable on demand. Accordingly, the outstanding balance as on 31 March is ordinarily considered for reporting.

Director Loan Reporting

Verification Formula

Amount Reportable under Column 15(h) = Outstanding Director Loan as on 31 March + Interest Accrued and Due

Common Error: Reporting original loan amount instead of year-end outstanding balance.

Inter-Corporate Borrowings

Verification Formula

Amount Reportable under Column 15(f) = Outstanding ICD as on 31 March + Interest Accrued and Due

Share Application Money

Position	Treatment
Within prescribed period	Column 15(g)
Beyond prescribed period	Review deposit implications

Practical Verification Note

Every old share application money balance should be separately reviewed before claiming exemption.

Customer Advances

Position	Treatment
Within exemption conditions	Eligible for exemption
Beyond exemption conditions	Re-evaluate classification

Practical Verification Note

Review ageing of every advance outstanding as on 31 March before claiming exemption.

Step 5 – Opening Balance Mismatch Framework

Scenario	Practical Resolution
Opening DPT-3 differs from previous year's closing	Prepare reconciliation and obtain confirmation
Director loan mismatch	Verify ledger balances
ICD mismatch	Verify confirmations
Share application money mismatch	Verify allotment records
CC / OD mismatch	Match with books and bank statements
HUF / LLP loan	Review exemption eligibility separately

Verification Principle

Current Year Opening Balance should ordinarily reconcile with the Previous Year's Closing Balance, subject to documented adjustments and reconciliation.

Step 6 – Balance Sheet Reconciliation Framework

Before filing DPT-3, perform a complete reconciliation with audited financial statements.

Particulars	Amount
Secured Borrowings	XXX
Unsecured Borrowings	XXX
Director Loans	XXX
Inter-Corporate Borrowings	XXX
Other Reportable Receipts	XXX
Less: Non-Reportable Liabilities	XXX
Amount Reportable in DPT-3	XXX

Reconciliation Formula

Amount Reportable in DPT-3 = Reportable Borrowings and Receipts − Non-Reportable Liabilities

Common Error: Assuming Balance Sheet liabilities automatically equal DPT-3 disclosures.

Step 7 – Auditor's Certificate

Filing Type	Auditor Certificate
Exempted Receipts Only	Generally Not Required
Deposit Return	Required
Combined Filing	Required
One-Time Return	Required

Best Practice

Even where not mandatory, obtain independent verification of balances before filing.

Step 8 – Key Compliance Risk Checkpoints

Risk Area	Preventive Action
Late Filing	File before 30 June
Incorrect Purpose Selection	Review before submission
Omission of Bank Borrowings	Verify all facilities
Wrong Director Loan Classification	Verify exemption conditions
Share Application Delays	Review timelines
Customer Advance Ageing	Review periodically
Unreconciled Figures	Match with audited books

Penalty Formula

Penalty = ₹5,000 + ₹500 per day of continuing default

Professional Documentation File

Maintain the following documents along with DPT-3 working papers:

Document	Purpose
Audited Financial Statements	Source of disclosures
Loan Confirmations	Verification of balances
Director Loan Declarations	Support for exemption claims
Share Application Records	Verification of timelines
Customer Advance Ageing Report	Verification of exemption conditions
Previous Year's DPT-3	Opening balance reconciliation
Internal Reconciliation Working Papers	Audit trail and documentation
Auditor Verification Note	Internal compliance support

Best Practice

Maintain a complete DPT-3 compliance file even where an auditor's certificate is not mandatory.

Private Company Filing Checklist – FY 2025–26

☐ Purpose selected correctly

☐ Date of closing entered as 31.03.2026

☐ Net worth verified from audited Balance Sheet

☐ All CC / OD facilities reviewed

☐ Working capital facilities reviewed

☐ Bank term loans reviewed

☐ Director loans verified

☐ Inter-corporate borrowings identified

☐ Share application money reviewed

☐ Customer advance ageing reviewed

☐ Opening balances reconciled

☐ DPT-3 matched with audited books

☐ Exclusions verified

☐ Auditor confirmation obtained

☐ DSC validity checked

☐ Filing completed before 30 June 2026

Frequently Asked Questions

Q1. Should a company with no loans or deposits file DPT-3?

Companies should evaluate their filing obligation based on facts and applicable requirements. Many professionals adopt a conservative NIL filing approach to avoid future MCA queries.

Q2. Are CC, OD and Working Capital facilities reportable?

Yes. Outstanding banking facilities generally require reporting under the applicable exempted category.

Q3. Should interest be included?

Interest accrued and due is generally included. Interest accrued but not due is generally excluded.

Q4. Does resignation of a director affect an existing director loan exemption?

Generally no. The position at the time of receipt is critical.

Q5. Is a loan from a director's HUF covered under the director loan exemption?

Generally no. The exemption applies to the director in an individual capacity.

Q6. How should customer advances outstanding beyond the exemption period be evaluated?

Such cases require separate examination as exemption conditions may cease to be satisfied.

Q7. Is share application money exempt indefinitely?

No. Applicable timelines must be monitored carefully.

Q8. What if the opening balance does not match last year's closing DPT-3?

Prepare a proper reconciliation and obtain confirmation before filing.

Q9. Is an auditor's certificate required where only bank loans exist?

Generally not, if only exempted receipts are being reported.

Q10. Are trade creditors and salary payable reportable?

No. These are generally outside the DPT-3 reporting framework.

Q11. How should corporate credit card dues be treated?

Review the underlying banking arrangement and accounting classification. Where they represent an outstanding banking facility, reporting under Column 15(c) may be appropriate.

Q12. Is a fully repaid loan reportable?

No. DPT-3 generally reports outstanding balances as on 31 March.

Q13. Are MTM losses reportable?

No. MTM losses are accounting adjustments and generally do not represent receipts of money.

Q14. How should loans from RBI-regulated NBFCs be evaluated?

Such loans should be examined under the relevant exemption category based on the nature of the lender and transaction.

Q15. Are Government grants and incentives reportable?

Generally no. These are ordinarily not treated as deposits or borrowings for DPT-3 purposes.

Five Numbers Every DPT-3 Filer Must Verify

Particulars	Verification Point
Net Worth	Column 8
CC / OD Outstanding	Column 15(c)
Director Loan Outstanding	Column 15(h)
Opening vs Previous Closing	Reconciliation
Advances Outstanding	Ageing Review

Conclusion

Form DPT-3 is no longer a routine ROC filing. It has evolved into a significant disclosure mechanism through which regulators assess a company's borrowing profile, exempted receipts, deposit compliance and overall financial reporting discipline.

Most filing disputes arise from incorrect purpose selection, omission of bank borrowings, misclassification of director loans, ageing issues relating to advances and share application money, and failure to reconcile disclosures with audited financial statements.

A robust DPT-3 filing should therefore be supported by detailed reconciliation, verification of exemption conditions, proper documentation of outstanding balances and timely filing before the statutory deadline.

A few hours spent on reconciliation and review today can prevent substantial compliance exposure and regulatory scrutiny tomorrow.

Legal References: Rule 2(1)(c), Rule 16 and Rule 16A of the Companies (Acceptance of Deposits) Rules, 2014; Sections 73 to 76 of the Companies Act, 2013; MCA Guidance; Professional Guidance and FAQs on DPT-3 Reporting.