Statement of Profit and Loss Format Schedule III: Every Line

Schedule III P&L format — SignReady guide

In this guide · 8 sections

Statement of profit and loss format under Schedule III: lines I to XVI
The General Instructions for the Statement of Profit and Loss
Schedule III P&L format: a full worked example
Lines XII to XIV: when a business line is discontinued
Profit and loss account format under the Companies Act, from a Tally P&L
Common slips in the Schedule III P&L
FAQs
Sources

Key points

Part II of Schedule III Division I prescribes a vertical Statement of Profit and Loss with lines I to XVI: income, seven expense heads by nature, two profit sub-totals around exceptional and extraordinary items, tax, discontinuing operations and EPS.
The amended form says "Total Income (I + II)" at line III — "Total Revenue" was replaced by G.S.R. 207(E) from 1 April 2021.
Line XI is labelled "(VII-VIII)" in the form, but the arithmetic is IX − X: profit before tax less tax expense. Compute it correctly whatever the label says.
The General Instructions for the P&L do the real work: revenue split (Note 2), finance costs (Note 3), other income (Note 4) and the additional information in Note 5 — the 1% rule, auditor's fees, CSR, undisclosed income, crypto.
There is no gross profit line. Tally's Direct/Indirect structure has to be re-cut by nature: wages to employee benefits, interest to finance costs, raw material stock to cost of materials consumed.

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The statement of profit and loss format in Schedule III fits on one page of the Companies Act, 2013, but every line on it has a rule behind it. Part II of Division I sets sixteen numbered lines; the General Instructions for the Statement of Profit and Loss then tell you what each note must break down and what additional information goes beneath. This guide takes the P&L line by line exactly as amended, sets out the General Instructions, works a complete example with note references and figures that tie, maps each line from a Tally P&L, and lists the slips that recur in small-company drafts. It covers Division I (companies following Accounting Standards); Ind AS companies use Division II. For the whole format, including the balance sheet, see the Schedule III guide.

Statement of profit and loss format under Schedule III: lines I to XVI

The form is headed "Profit and loss statement for the year ended …", with columns for the note number, the current reporting period and the previous reporting period. ICAI's Guidance Note on Division I (Revised January 2022, section 9) describes it as a vertical form in which expenses are aggregated by their nature, and states that functional classification of expenses — cost of sales, selling and administration — is not permitted. Each line, as it stands in the amended text:

Line	Label in the form	What it holds
I	Revenue from operations	Sale of products, services, other operating revenues (net of GST, less excise duty where it applies) — Note 2
II	Other income	Interest, dividend, net gain on sale of investments, other non-operating income — Note 4
III	Total Income (I + II)	"Revenue" became "Income" under G.S.R. 207(E), w.e.f. 1 April 2021
IV	Expenses	Cost of materials consumed; Purchases of Stock-in-Trade; Changes in inventories of finished goods, work-in-progress and Stock-in-Trade; Employee benefits expense; Finance costs; Depreciation and amortisation expense; Other expenses; Total expenses
V	Profit before exceptional and extraordinary items and tax (III − IV)	Operating result before the unusual items
VI	Exceptional items	Ordinary-activity items whose size, nature or incidence needs separate disclosure (AS 5 para 12)
VII	Profit before extraordinary items and tax (V − VI)
VIII	Extraordinary items	Items clearly distinct from ordinary activities and not expected to recur (AS 5 para 4.2)
IX	Profit before tax (VII − VIII)
X	Tax expense: (1) Current tax (2) Deferred tax	AS 22; MAT credit and earlier-year tax shown separately
XI	Profit (Loss) for the period from continuing operations (VII − VIII)	Arithmetically IX − X — see below
XII	Profit/(loss) from discontinuing operations	Pre-tax result of a discontinuing operation under AS 24
XIII	Tax expense of discontinuing operations
XIV	Profit/(loss) from Discontinuing operations (after tax) (XII − XIII)
XV	Profit (Loss) for the period (XI + XIV)	The figure carried to Surplus in reserves and surplus
XVI	Earnings per equity share: (1) Basic (2) Diluted	AS 20, with the nominal value per share

The line XI label. The form, both in the India Code text and in the copy reproduced in the Guidance Note's annexure, labels line XI "(VII-VIII)". That is the formula for line IX. Profit from continuing operations is profit before tax less tax expense, so the arithmetic is IX − X. The label is a drafting slip in the Schedule, not a different measure. The Note to the General Instructions allows line items to be substituted, so the label can be printed as "(IX − X)"; whichever label is used, the figure must be profit before tax less tax.

Two rules sit above the form. The Note to the General Instructions says the Schedule sets out the minimum line items, and lines, sub-lines and sub-totals may be added or substituted where relevant to understanding performance. General Instruction 1 says that where an Accounting Standard needs a change in a head or sub-head, the Schedule stands modified accordingly — which, with the Note, is why the MAT credit line, excise duty on the face and the AS 24 disposal gain or loss can appear on the face though the form does not list them.

The General Instructions for the Statement of Profit and Loss

Five numbered instructions follow the form:

Note 1 — Part II applies to the income and expenditure account of a not-for-profit company (section 2(40)(ii)) in the same way as to a statement of profit and loss.
Note 2 — revenue from operations in the notes: (A) for other than a finance company, sale of products, sale of services, grants or donations received (section 8 companies only, inserted in 2021), other operating revenues, less excise duty; (B) for a finance company, interest and other financial services. Detail in revenue from operations under Schedule III.
Note 3 — finance costs as interest expense, other borrowing costs, and applicable net gain/loss on foreign currency transactions and translation.
Note 4 — other income as interest income (non-finance companies), dividend income, net gain/loss on sale of investments, and other non-operating income net of directly attributable expenses.
Note 5 — additional information, set out below.

Note 5 is long, and much of it applies to every company:

Note 5 item	What must be disclosed
(i)(a)	Employee benefits expense: salaries and wages; contribution to provident and other funds; ESOP/ESPP expense; staff welfare
(i)(b)	Depreciation and amortisation expense
(i)(c)	Any item of income or expenditure exceeding 1% of revenue from operations or ₹1,00,000, whichever is higher
(i)(d)–(i)	Interest income; interest expense; dividend income; net gain/loss on sale of investments; adjustments to the carrying amount of investments; net foreign exchange gain or loss (other than in finance costs)
(i)(j)	Payments to the auditor as auditor, for taxation matters, company law matters, management services, other services, and reimbursement of expenses
(i)(k)–(m)	CSR expenditure (section 135 companies); exceptional and extraordinary items; prior period items
(ii), (iii)	Raw materials, goods purchased, gross service income and work-in-progress under broad heads
(iv), (v)	Material amounts set aside to or withdrawn from reserves; material amounts set aside to or withdrawn from provisions
(vi)	Stores and spares consumed, power and fuel, rent, repairs to buildings, repairs to machinery, insurance, rates and taxes (excluding taxes on income), miscellaneous expenses — each separately
(vii)	Dividends from subsidiary companies; provisions for losses of subsidiary companies
(viii)	CIF value of imports; expenditure in foreign currency; imported vs indigenous materials consumed with percentages; dividends remitted in foreign currency; earnings in foreign exchange
(ix)–(xi)	Inserted in 2021: undisclosed income surrendered in tax assessments; CSR details (amount required, spent, shortfall, reasons, nature, related party, provision movement); crypto or virtual currency

The General Instructions common to both statements also apply to the P&L: each line on the face is cross-referenced to its note (GI 3(ii)), rounding depends on Total Income (GI 4), and comparatives are given for every item, including the notes (GI 5).

The P&L and its notes, drafted from the TB

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Schedule III P&L format: a full worked example

Example Engineering Pvt Ltd manufactures components and trades in a small range of bought-out parts. Total Income is below ₹100 crore, so it may report in ₹ lakhs to two decimals. It has 5,00,000 equity shares of ₹10 each and no potential equity shares. Figures are illustrative.

Particulars	Note	Year ended 31.03.2026	Year ended 31.03.2025
I. Revenue from operations	18	1,028.90	925.60
II. Other income	19	12.85	10.40
III. Total Income (I + II)		1,041.75	936.00
IV. Expenses
Cost of materials consumed	20	604.30	548.20
Purchases of Stock-in-Trade	21	36.40	30.10
Changes in inventories of finished goods, work-in-progress and Stock-in-Trade	22	(8.60)	3.20
Employee benefits expense	23	118.50	104.80
Finance costs	24	21.70	19.40
Depreciation and amortisation expense	10	32.80	29.60
Other expenses	25	141.20	128.90
Total expenses		946.30	864.20
V. Profit before exceptional and extraordinary items and tax (III − IV)		95.45	71.80
VI. Exceptional items	26	6.20	—
VII. Profit before extraordinary items and tax (V − VI)		89.25	71.80
VIII. Extraordinary items		—	—
IX. Profit before tax (VII − VIII)		89.25	71.80
X. Tax expense: (1) Current tax		23.10	18.40
Tax relating to earlier years		0.40	—
(2) Deferred tax		0.70	(0.30)
XI. Profit for the period from continuing operations (IX − X)		65.05	53.70
XII–XIV. Discontinuing operations		—	—
XV. Profit for the period (XI + XIV)		65.05	53.70
XVI. Earnings per equity share of ₹10 each: (1) Basic (2) Diluted	27	₹13.01 / ₹13.01	₹10.74 / ₹10.74

How it ties: total expenses are 604.30 + 36.40 − 8.60 + 118.50 + 21.70 + 32.80 + 141.20 = 946.30. Tax expense is 23.10 + 0.40 + 0.70 = 24.20, so XI is 89.25 − 24.20 = 65.05. EPS is ₹65.05 lakhs ÷ 5,00,000 shares = ₹13.01. The negative ₹8.60 lakhs means closing finished goods and WIP exceeded opening — an increase in inventories reduces expenses; see cost of materials consumed and changes in inventories for the sign convention.

Points the example shows:

Exceptional item. ₹6.20 lakhs is a litigation settlement — one of the circumstances AS 5 para 14 lists. Line V − VI treats exceptional items as a charge, so in practice an exceptional gain is shown in brackets (or the label adjusted) so the sub-total still works. Note 26 gives the details, as Note 5(i)(l) requires. More in exceptional, extraordinary and prior period items.
Tax. The Guidance Note (paras 9.8.1.3–9.8.1.5) asks for excess or short provision of earlier years to be disclosed separately, interest on shortfall in advance tax to go to finance costs (separately disclosed), and penalties out of current tax — compensatory penalties treated like interest, others in other expenses.
Depreciation refers to the PPE and intangible assets note, where the charge for the year appears; in practice no separate P&L note is needed.
EPS carries the nominal value per share, as AS 20 para 48 requires. A Small and Medium Sized Company may omit diluted EPS under the Companies (Accounting Standards) Rules, 2021, but basic EPS is required of every company. See earnings per share under AS 20.

Lines XII to XIV: when a business line is discontinued

Suppose that in January 2026 the Board had approved and announced a detailed, formal plan to close the trading division (AS 24 para 15), and that the division is a separate major line of business that can be distinguished operationally and for financial reporting — the AS 24 definition the Guidance Note quotes (para 9.9.1). Lines I to IV would then show continuing operations only, and the bottom of the statement would read:

Line	₹ lakhs
IX. Profit before tax — continuing operations (89.25 − 5.10)	84.15
X. Tax expense — continuing operations (24.20 − 1.25)	22.95
XI. Profit from continuing operations (IX − X)	61.20
XII. Profit from discontinuing operations	5.10
XIII. Tax expense of discontinuing operations	1.25
XIV. Profit from discontinuing operations after tax (XII − XIII)	3.85
XV. Profit for the period (XI + XIV)	65.05

Profit for the period does not change; only its split does. The Guidance Note (paras 9.9.2–9.9.3) adds that AS 24 para 32 requires, on the face, the pre-tax result attributable to the discontinuing operation with its tax, and the pre-tax gain or loss on disposal of its assets or settlement of its liabilities. Shutting a single shop or product variant is not a discontinuing operation unless the definition is met; in small-company files lines XII to XIV are usually nil.

Profit and loss account format under the Companies Act, from a Tally P&L

Tally's Profit & Loss A/c is a trading-and-P&L in two halves split at gross profit. Schedule III has no gross profit line and classifies by nature, so the Tally figures have to be re-cut:

Tally P&L line	Schedule III line
Sales Accounts	I — revenue from operations, net of GST
Direct Incomes	I (job work, manufacturing scrap) or II, by nature
Indirect Incomes	Mostly II — interest, dividend, profit on sale of PPE, written-back balances
Opening Stock / Closing Stock	Split: raw materials into cost of materials consumed; finished goods, WIP and stock-in-trade into changes in inventories
Purchase Accounts	Raw material purchases to cost of materials consumed; goods bought for resale to purchases of stock-in-trade
Direct Expenses	By nature: wages to employee benefits; power and fuel, stores, job work to other expenses; freight inward to material cost (or to purchases of stock-in-trade for traded goods)
Indirect Expenses	Employee benefits, finance costs, depreciation, other expenses — and any exceptional or prior period item pulled out
Gross Profit c/o / b/f	No equivalent — drop it
Provision for tax, deferred tax entries	X — current and deferred tax, never in other expenses
Net Profit	XV — must equal the Tally figure after tax entries

The group-by-group detail is in Tally group mapping to Schedule III. Within the expense heads, salary, PF, gratuity and staff welfare form the employee benefits note, and interest plus processing and guarantee charges form finance costs — see employee benefits and finance costs under Schedule III. What remains goes to other expenses, where the eight Note 5(vi) items, the 1% rule and the auditor's fees are disclosed.

Common slips in the Schedule III P&L

Old labels. "Total Revenue" at line III, five years after it became "Total Income".
A gross profit sub-total or a cost-of-sales line carried over from the Tally layout. The Guidance Note does not permit functional classification.
Line XI computed to its label — VII − VIII instead of IX − X — so profit for the period ignores tax.
Raw material stock in changes in inventories, or the sign of the change reversed. Raw material movement belongs in cost of materials consumed.
Tax-related items in current tax: interest under the Income-tax Act or penalties folded in, or earlier-year tax not shown separately. (FY 2025-26 accounts still deal with tax under the Income-tax Act, 1961; the Income-tax Act, 2025 applies from tax year 2026-27.)
Exceptional items used for anything unwelcome, while genuine prior period items sit unseen in other expenses without the Note 5(i)(m) disclosure.
EPS without the nominal value, or on year-end rather than weighted average shares where shares were issued during the year.
Comparatives not regrouped when this year's classification changed, so the previous-year column no longer matches the notes.

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Frequently asked questions

What is the format of the statement of profit and loss as per Schedule III?

Division I prescribes a vertical statement with lines I to XVI: revenue from operations, other income, total income, seven expense heads by nature, profit before exceptional and extraordinary items and tax, exceptional items, extraordinary items, profit before tax, tax expense, profit from continuing operations, three lines for discontinuing operations, profit for the period and basic and diluted EPS.

Is there a gross profit line in the Schedule III profit and loss statement?

No. Expenses are presented by nature — materials, stock-in-trade, changes in inventories, employee benefits, finance costs, depreciation and other expenses — and ICAI's Guidance Note on Division I states that functional classification is not permitted. A company may compute gross margin for analysis, but it is not a line on the face.

Why does line XI of the Schedule III P&L say (VII-VIII)?

It is a drafting slip in the form: VII − VIII is the formula for profit before tax (line IX). Profit from continuing operations is profit before tax less tax expense, so the arithmetic is IX − X. The label can be printed as (IX − X); either way the figure is profit before tax less tax.

Is Total Revenue or Total Income used in Schedule III?

Total Income. G.S.R. 207(E) of 24 March 2021 substituted "Income" for "Revenue" in line III with effect from 1 April 2021, and the rounding-off instruction is also based on Total Income.

Do small companies have to show EPS in the profit and loss statement?

Yes, basic EPS is required for every company under AS 20 and line XVI. A Small and Medium Sized Company may omit diluted EPS under the Companies (Accounting Standards) Rules, 2021. The nominal value per share is disclosed with the EPS figures.

Sources

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About this guide. Written by the SignReady Team at PracticeGuru (Brainy Accountant Solutions Pvt Ltd). SignReady is our product and is mentioned where it fits. The guide reflects the law and standards as at 29 October 2026 and the sources listed above. It is general information, not professional advice: check the primary sources and apply your own professional judgement to each engagement.
Version history: 29 Oct 2026 — first published.