Schedule III Division I, II and III: which one applies to your company

Schedule III to the Companies Act, 2013 is not one format but three. Schedule III Division I, II and III each prescribe a Balance Sheet, a Statement of Profit and Loss and notes, and section 129(1) requires a company's financial statements to be in the form provided for its class of company. Which Division applies is decided by one question — does the company follow the Accounting Standards (AS) or Ind AS, and is it an NBFC? — not by size or by what last year's auditor used. This article gives a decision table, the Ind AS triggers in brief, the presentation differences that matter in practice, what is common to all three, and how consolidated statements fit in. For the Division I format line by line, see our Schedule III guide.

Schedule III Division I, II and III at a glance

ICAI's Guidance Note on Division I puts it simply: Division I applies to all companies except those to which Division II or Division III applies. For a small CA firm's company audits — private companies, small companies, most family-owned groups — that means Division I in the great majority of files.

Which Division applies: a decision table

Two edge cases come up. Electricity companies are named in the same proviso, but ICAI's Guidance Note points out that neither the Electricity Act, 2003 nor its rules prescribes a format, so Schedule III may be followed until one is. And an NBFC that is not on Ind AS (for example, an unlisted NBFC below ₹250 crore net worth that is not in the group of an Ind AS NBFC) uses Division I, not Division III. Division I treats it as a "finance company": revenue from operations includes revenue from interest and from other financial services, disclosed separately, and the Guidance Note suggests it may also show items such as dividend income, rental income and fees and commission income separately, to align with Division III. RBI's own disclosure requirements apply on top.

When Ind AS applies (and so Division II or III)

Because the Division follows the framework, the real question is rule 4 of the Companies (Indian Accounting Standards) Rules, 2015. In brief, for companies other than banks, insurers and NBFCs:

• Listed companies — equity or debt securities listed or in the process of being listed on a stock exchange in India or outside India, whatever their net worth. Companies listed (or being listed) on an SME exchange, or on the Institutional Trading Platform, are carved out of the mandatory phases (they may still adopt Ind AS voluntarily).
• Unlisted companies with net worth of ₹250 crore or more. Net worth has the meaning in section 2(57) and is tested on the standalone financial statements. A company that crosses the threshold for the first time at the end of a year applies Ind AS from the next year.
• Holding, subsidiary, joint venture or associate companies of any of the above — the group link brings a small company in, whatever its own size.
• Voluntary adoption — any company (and its holding, subsidiary, joint venture or associate companies) may adopt Ind AS, but the choice is irrevocable.

Rule 4(9) adds the point that is easy to forget on an old client: once a company starts following Ind AS, it continues even if it later falls below every threshold. NBFCs came in on their own timetable — from 1 April 2018 for those with net worth of ₹500 crore or more, and from 1 April 2019 for listed NBFCs and unlisted NBFCs with net worth of ₹250 crore or more, with their group companies in each case. Banks and insurers fall outside Schedule III in any case (see the decision table).

Note that "small company" status under section 2(85) — now ₹10 crore paid-up capital and ₹100 crore turnover (see small company limits) — has no bearing on the Division. A small company is almost always on AS and so on Division I, but because it is not on Ind AS, not because it is small. Equally, a company can be a subsidiary of an Ind AS company and therefore on Ind AS, even though it is tiny.

Division I vs Division II: the presentation differences

Division I vs Division II Schedule III is mainly a difference of vocabulary and structure, driven by the underlying standards. The ones that show up first on a review:

The receivables wording is a common giveaway of a template carried over from an Ind AS client into a Division I file: "credit impaired" in the ageing table of a company that has never adopted Ind AS. The Division I rows are covered in our article on trade receivables and payables ageing under Schedule III, and other carry-over slips in Schedule III mistakes in small company accounts.

Worked example: the same equity under both Divisions

An illustrative company has share capital of ₹50,00,000, securities premium of ₹20,00,000, a general reserve of ₹10,00,000 and an accumulated profit of ₹35,00,000 at 31 March 2026. Ignoring any Ind AS remeasurement, the face of the Balance Sheet reads:

And the note behind the second line:

Under Division II, the movements are also shown in the Statement of Changes in Equity, and any items of other comprehensive income get their own column there. The totals do not change because of the Division — the presentation does. Where the numbers do differ, it is because of Ind AS measurement, which is a transition question, not a format one.

Schedule III for NBFCs: what Division III changes

Division III is built for a lender's balance sheet:

• No current / non-current split on the face. Assets are grouped as financial and non-financial, and liabilities likewise, starting with cash and cash equivalents, bank balances, derivative financial instruments, receivables, loans and investments. An NBFC may reorder line items in order of liquidity where appropriate.
• Lender-specific lines — debt securities, borrowings other than debt securities, deposits and subordinated liabilities on the liabilities side; receivables split into trade receivables and other receivables.
• Revenue by nature — the Statement of Profit and Loss opens with interest income, dividend income, rental income, fees and commission income and similar items.
• Different ratios — in place of the eleven ratios in Divisions I and II, Division III asks for capital to risk-weighted assets ratio (CRAR), Tier I CRAR, Tier II CRAR and the liquidity coverage ratio.
• Regulator's requirements — disclosures required by the relevant regulator's Acts, regulations, guidelines or circulars are made in addition.

What does not differ

The March 2021 amendment, G.S.R. 207(E), amended all three Divisions with effect from 1 April 2021. Together with earlier amendments, this means that whichever Division applies, the company gives:

• shareholding of promoters, with the percentage change during the year;
• ageing schedules for trade receivables and trade payables, and for capital work-in-progress and intangible assets under development;
• the trade payables split between micro and small enterprises and others;
• Additional Regulatory Information — title deeds not held in the company's name, benami property proceedings, wilful defaulter status, relationships with struck-off companies, charges not registered with the ROC, layers of companies, and so on;
• ratios — the eleven in Divisions I and II (see Schedule III ratios and the 25% variance), the four regulatory ratios in Division III;
• undisclosed income, CSR and crypto currency disclosures, as additional information in the Statement of Profit and Loss part.

The general instructions are also largely shared: comparatives for every item including notes (except in the first financial statements after incorporation), rounding off based on total income, and cross-referencing of every face item to its note — see Schedule III general instructions and rounding off.

Consolidated financial statements

The same Division applies to the consolidated statements as to the parent's own. Ind AS, once required, applies to both standalone and consolidated financial statements (rule 4(3)), so an Ind AS parent consolidates in Division II (or III); an AS parent consolidates in Division I under AS 21. Each Division carries its own general instructions for consolidated statements: the share in net assets and in profit or loss of each entity in the group as a percentage, minority (or non-controlling) interests shown within equity, and a list of subsidiaries, associates and joint ventures not consolidated, with reasons. Division II also asks for each entity's share in other comprehensive income. For the AS 21 mechanics, see consolidated financial statements under AS 21.

The practical check on every new company client is the same: confirm the framework first (listing, net worth, group links, any past voluntary adoption), record the conclusion in the file, and only then pick the format. Getting the Division wrong is rarely a matter of judgement — it is usually an unasked question.

Frequently asked questions

Sources

• Companies Act, 2013 — section 129 and Schedule III, Divisions I, II and III (India Code, amended)
• 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)
• Companies (Indian Accounting Standards) Rules, 2015 — G.S.R. 111(E), 16 February 2015, rules 3 and 4 (Gazette)
• Companies (Indian Accounting Standards) (Amendment) Rules, 2016 — G.S.R. 365(E), 30 March 2016 (NBFC phases) (Gazette)
• Companies (Accounting Standards) Rules, 2021 — G.S.R. 432(E), 23 June 2021 (Gazette)

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