Other current liabilities and provisions under Schedule III: what belongs where

After trade payables and borrowings are placed, every credit balance left in the trial balance has to land somewhere — and in small-company drafts it usually lands in one large "other current liabilities" figure. Schedule III expects more. Other current liabilities under Schedule III have a prescribed list, statutory dues and capital creditors are deliberately kept out of trade payables, and provisions are a separate line with their own long-term and short-term split. This guide gives the Division I list item by item, the trade-payable test, the provision-versus-accrual line, a worked note with figures, and the tax and CARO points that hang off statutory dues. It is part of our Schedule III guide; Ind AS companies follow Division II, which is not covered here.

Other current liabilities under Schedule III: the prescribed list

Note G of Part I of Division I (as amended by G.S.R. 207(E) from 1 April 2021) classifies other current liabilities as follows. Show only what applies, in this order:

Item (a) of the old list — current maturities of long-term debt — was omitted in 2021. Those instalments now go to short-term borrowings as a separate line; see current maturities of long term borrowings under Schedule III. Leaving them here is still a common slip in carried-forward templates.

Three items carry extra words. For unpaid dividends, section 124 of the Companies Act requires a dividend unpaid or unclaimed for thirty days after declaration to be moved, within seven days, to a special Unpaid Dividend Account in a scheduled bank; amounts unclaimed for seven years from that transfer go to the Investor Education and Protection Fund. For share application money, Schedule III asks for the terms, the number of shares and premium, the allotment period, whether authorised capital is sufficient, and how long the money has been pending beyond the allotment period and why. ICAI's Guidance Note on Division I (Revised January 2022, paras 8.2.1–8.2.4) adds that money above authorised capital, where the increase is pending, goes to other current liabilities, and so do calls paid in advance, with any interest accruing on them.

The current/non-current test is the usual one: a liability is current if it is settled in the operating cycle, due within twelve months, or the company has no unconditional right to defer settlement for twelve months. Anything that fails all of these goes to other long-term liabilities, split into trade payables and others. See current non current classification under Schedule III for the tests in full.

Statutory dues payable classification: what is not a trade payable

The Guidance Note (para 8.4.1) draws the line. A payable is a trade payable if it is for goods purchased or services received in the normal course of business. Amounts due under other contractual or statutory obligations are not, and should be shown under "others", disclosed nature-wise. The Guidance Note gives these examples:

• Statutory dues — its example is contribution to provident fund; para 8.6.3 adds withholding taxes (TDS/TCS), GST, excise duty, and employer and employee contributions to PF, ESI and labour welfare fund.
• Capital creditors — amounts due for purchase of property, plant and equipment and intangible assets.
• Contractually reimbursable expenses.
• Interest accrued on trade payables — including MSME interest.

Acceptances (bills accepted for purchases) stay in trade payables. Trade deposits and security deposits received that are not in the nature of borrowings go to other current or non-current liabilities (para 8.6.3), not to borrowings.

Two practice items need a decision, because Schedule III does not name them:

• Advances from customers — an obligation to supply goods or services, not a payable for something received. In practice they are shown under other payables as "advances from customers"; "income received in advance" is better kept for amounts already billed for a future period. Either way, they should not be netted against trade receivables of the same customer group.
• Employee dues — salaries, wages, reimbursements and full-and-final settlements payable are, in practice, not shown as trade payables either. Show them as "employee benefits payable" or "salaries and wages payable" under other payables.

Year-end accruals for services already received — audit fee, rent, electricity — meet the trade-payable test. The Guidance Note treats such accruals as unbilled trade payables in the ageing schedule, so moving them all into "expenses payable" under other liabilities understates trade payables and the MSME split. See trade payables ageing under Schedule III.

Provision or liability? The AS 29 test

AS 29 defines a provision as a liability that can be measured only by using a substantial degree of estimation. It distinguishes provisions from trade payables and accruals on exactly that ground: an accrual may need some estimate of amount or timing, but the uncertainty is generally much less. The Guidance Note uses the same distinction and adds that a provision is not to be treated as an unbilled trade payable.

A provision is recognised only when there is a present obligation from a past event, an outflow is probable and the amount can be estimated reliably (AS 29 para 14). For each class of provision, AS 29 paras 66 and 67 ask for the movement in the year — opening, additions, amounts used, reversals, closing — and the nature and expected timing of the outflow. Small and Medium-sized Companies may omit those two paragraphs; recognition and measurement still apply to them.

Short term provisions and long-term provisions under Schedule III

Notes E and H of Division I use the same two sub-heads for both lines: (a) provision for employee benefits and (b) others (specify nature). The Guidance Note (paras 8.5.1 and 8.6.4) explains how to fill them:

• Employee benefits are split. AS 15 governs measurement, but the current/non-current split follows the Schedule III definition. Where the company has no unconditional right at the balance sheet date to defer settlement for twelve months, that part is current. In practice, for gratuity the amount expected to be paid in the next twelve months is taken as the current portion (an actuarial report often gives it), and leave that employees can encash or take at any time is treated as current in full, since the company cannot defer it, even if not all of it will be used within the year.
• "Others" is specified nature-wise — the Guidance Note names warranties, taxation and dividend. Each gets its own line, not one "provisions" figure.
• Dividend: under AS 4 (as amended in 2016), dividends proposed or declared after the balance sheet date are not a liability at the year end. They are disclosed in the notes (Schedule III asks for the amount proposed and the per-share amount). A provision for dividend arises only for a dividend declared before the year end, such as an unpaid interim dividend.
• Tax: AS 22 (para 27) requires current tax assets and liabilities to be offset where the company has a legally enforceable right to set off the recognised amounts and intends to settle net; para 28 says that right normally exists where both relate to income tax under the same law and the law permits a single net payment. In practice, advance tax and TDS of the same year are netted against that year's provision and the net amount shown, with the gross figures given in the note.

The non-current part of employee benefit and warranty provisions goes to long-term provisions; the rest to short term provisions. Do not put either in other current liabilities.

Worked example: the notes for a small manufacturer

Example Pvt Ltd (FY 2025-26, figures illustrative) has these credit balances after trade payables and borrowings are placed: interest accrued on a term loan, an AMC billed in advance, GST, TDS, PF and ESI payable, a creditor for a machine, customer advances, March salaries, dealers' security deposits refundable on demand, gratuity and leave as per an actuarial valuation, a bonus estimate, a warranty provision and the tax provision.

What changed from the client's own grouping: audit fee and electricity accruals moved to trade payables (unbilled); the ₹3,40,000 machine creditor moved out of sundry creditors; the leave provision moved from long-term to short-term because employees can encash it at any time; and the term loan's next-twelve-month principal, which the Tally "Current Liabilities" group held, moved to short-term borrowings. The previous-year column is re-presented the same way, with the usual regrouping note.

Two ratios move with these lines — the current ratio and the trade payables turnover ratio — so recheck them after reclassification.

Statutory dues payable, section 43B and CARO

The statutory dues line is small, but three other reports read it. For FY 2025-26 accounts, the relevant provisions are in the Income-tax Act, 1961; the Income-tax Act, 2025 applies from tax year 2026-27.

• Section 43B allows taxes, duties, cess and fees, the employer's contributions to PF, superannuation, gratuity and other welfare funds, bonus and commission to employees (section 36(1)(ii)) and leave encashment only on actual payment — with relief where payment is made by the due date for the return under section 139(1). The year-end GST payable, employer PF and bonus are therefore checked against challans after the year end.
• Employees' contributions deducted from salary are income under section 2(24)(x) and are deductible under section 36(1)(va) only if deposited by the due date under the relevant fund law (PF, ESI and the like). Explanation 2 makes clear that section 43B's return-date relief does not apply to them. Keep employee and employer shares on separate ledgers.
• Section 43B(h) — sums payable to micro and small enterprises beyond the section 15 MSMED Act time limit — has no return-date relief. That is a trade payables matter; see MSME dues and section 43B(h).
• CARO 2020 paragraph 3(vii)(a) asks whether undisputed statutory dues were deposited regularly, and for the arrears outstanding at the year end for more than six months from the date they became payable. An ageing of the statutory dues ledgers answers both.

Before you sign: liabilities and provisions tie-outs

• No current maturities of long-term borrowings left in other current liabilities.
• Other payables broken up by nature — statutory dues, capital creditors, customer advances, employee dues, deposits — not one figure.
• Accruals for services received in trade payables (unbilled); estimates in provisions; neither in the other's line.
• Unpaid dividend liability agrees to the Unpaid Dividend Account balance; transfers to IEPF on time.
• Share application money due for refund and calls in advance shown here, with the Schedule III particulars.
• Employee benefit provisions split current / non-current; warranty and tax provisions shown nature-wise.
• No provision for dividend proposed after the year end.
• Statutory dues schedule agrees to the TB and to the 43B and CARO 3(vii) working papers.

Unpaid dividends and application money also connect to the equity side — see the share capital note under Schedule III. Getting these Schedule 3 lines right takes one pass through the credit balances, ledger by ledger, before the draft goes to review.

Frequently asked questions

Sources

• Companies Act, 2013 — Schedule III, Division I, Part I, Notes D, E, F, G and H, and section 124 (India Code, amended text)
• Schedule III amendment — G.S.R. 207(E), 24 March 2021 (Gazette)
• ICAI — Guidance Note on Division I – Non Ind AS Schedule III to the Companies Act, 2013 (Revised January 2022), paras 8.2, 8.4.1, 8.4.4, 8.5.1, 8.6.1–8.6.4, 8.8.4 and 8.8.7.7
• ICAI — AS 29, Provisions, Contingent Liabilities and Contingent Assets, paras 10, 12, 14, 66 and 67
• ICAI — AS 22, Accounting for Taxes on Income, paras 27 and 28 (offset of current tax)
• ICAI — AS 4, Contingencies and Events Occurring after the Balance Sheet Date (revised 2016), para 14 — dividends declared after the balance sheet date
• Income-tax Act, 1961 — sections 2(24)(x), 36(1)(va) and 43B (applies to FY 2025-26)
• ICAI — Guidance Note on the Companies (Auditor's Report) Order, 2020 (Revised 2022 Edition), paragraph 3(vii)(a)

Audit and accounts updates, practical tips and knowledge: join the Audit and Accounts Update group on WhatsApp.