Ind AS 20 – Accounting for Government Grants & Disclosure of Government Assistance
Content updated 21 October 2026. Dates, reporting basis and sources are stated beside the revised examples.
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Reviewed by CA Nikhil Gupta · Last reviewed 4 June 2025
📋 Table of Contents
- Scope and definitions: paragraphs 1–3.
- Recognition and timing: paragraphs 7–12 and 16–22.
- Non-monetary and asset grants: paragraphs 23–28.
- Income presentation and repayment: paragraphs 29–33.
- Government assistance and disclosures: paragraphs 34–39.
Read the current ICAI compendium text. The paragraph references above are to Ind AS 20.
1. What government grants cover
Ind AS 20 covers government resources transferred to an entity in exchange for past or future compliance with conditions. A grant can be cash, an asset or the benefit of a qualifying below-market government loan. Identify what the grant is intended to compensate before choosing its accounting treatment.
| Type | Key question | Treatment to consider |
|---|---|---|
| Asset-related grant | Is the primary condition to acquire or construct a long-term asset? | Deferred income or deduction from the asset's carrying amount. |
| Income-related grant | Which costs or periods does it compensate? | Match it systematically to those costs; present separately or offset the related expense. |
| Forgivable government loan | Is there reasonable assurance that forgiveness conditions will be met? | Treat as a grant when that test is met; an ordinary soft loan is not automatically forgivable. |
| Non-monetary grant | Has the government transferred an asset such as land? | Account for both asset and grant at fair value, or use the permitted nominal-amount alternative. |
| Other government assistance | Can its value be measured and distinguished from normal trading? | Some assistance, such as free advice, calls for relevant disclosure rather than a measurable grant entry. |
2. When to recognise a grant
Paragraph 7 requires reasonable assurance of both compliance with the attached conditions and receipt of the grant. An application, scheme approval or even cash received does not by itself prove both conditions. “Virtually certain” is not the Ind AS 20 recognition threshold.
- Read the scheme's eligibility, investment, production, sales and continuing conditions.
- Record the evidence supporting reasonable assurance of compliance and receipt.
- Identify the costs or periods being compensated, then recognise the grant systematically with those expenses.
- Reassess changes in conditions, recovery or repayment obligations.
Grants compensating costs already incurred, or providing immediate support without future related costs, are recognised in profit or loss when they become receivable (paragraphs 20–22). A multi-year scheme does not automatically require equal annual income or recognition only when cash arrives.
3. Asset-related grants: two presentation methods
Paragraphs 24–27 permit deferred income or deduction from the asset's carrying amount. The standard does not designate one method as preferred. Disclose the policy and apply it consistently to similar grants.
| Item | Deferred income | Asset deduction |
|---|---|---|
| Initial asset amount | ₹200 lakh | ₹150 lakh after grant deduction |
| Initial deferred grant | ₹50 lakh | None |
| Annual depreciation | ₹10 lakh | ₹7.5 lakh |
| Annual grant release | ₹2.5 lakh | Reflected in lower depreciation |
| Net annual profit-or-loss charge | ₹7.5 lakh | ₹7.5 lakh |
Dr Bank or grant receivable 50 / Cr Plant 50
Dr Depreciation expense 7.5 / Cr Accumulated depreciation 7.5
The net presentation does not mean that only ₹150 lakh was paid to the supplier. Paragraph 28 explains why gross asset purchases and grant receipts may be shown separately in cash-flow information.
4. Income-related grants
Recognise income-related grants with the costs they compensate. Paragraphs 29–31 permit a separate credit, a general heading such as other income, or a deduction from the related expense. The actual presentation in a company's report must be checked; grants are not universally reported in other income.
Cr Grant income ₹12 lakh
Alternatively, credit the related expense under the adopted policy. When cash is collected, debit bank and credit the receivable; do not recognise the income twice.
5. Applying the rules to PLI schemes
Production Linked Incentive arrangements have scheme-specific conditions. A company must assess its own eligible products, thresholds, approvals and continuing obligations. Classify assistance by its substance; a scheme's name does not replace that assessment.
| Question | Practical answer |
|---|---|
| Is approval enough? | No. Test compliance and receipt separately. Dixon's FY25 IT-hardware example below illustrates approval without meeting the criteria at the reporting date. |
| Must the claim be paid first? | No universal cash-only rule applies. Use the reasonable-assurance test and match the related costs. A later approval may affect when assurance is established. |
| Is every pending claim a contingent asset? | No. A recognised receivable can remain unpaid. Where recognition criteria are not met, assess the facts and relevant contingent-asset requirements; do not classify by filing status alone. |
| Where is the receivable shown? | Assess the nature of the right and current/non-current criteria. Filing a form does not itself decide financial versus non-financial asset classification. |
| Which amount is income? | Distinguish a gross government claim, amounts transferred to customers, net income retained and cash collected. Reconcile each separately. |
6. Non-monetary grants and below-market loans
Land and equipment
Paragraph 23 permits fair-value measurement of both the non-monetary asset and grant, or a nominal amount. Land commonly has an indefinite useful life: do not amortise its grant over an invented “land life.” Where a land grant requires construction of a building or other obligations, recognise income over the periods bearing those costs, as described in paragraph 18.
Worked example: a government loan
Assumptions: receive ₹100 lakh now; pay interest of ₹3 lakh at each year-end for five years; repay ₹100 lakh principal at the end of year 5; comparable market borrowing rate is 10%; no fees. Assume reasonable assurance exists and the benefit compensates future qualifying costs, so it is initially deferred. Paragraph 10A measures the benefit as proceeds less the loan's initial carrying value under Ind AS 109.
= 73.46449
Grant benefit = 100 − 73.46449 = 26.53551
Dr Bank 100.00000
Cr Loan liability 73.46449
Cr Deferred government grant 26.53551
Round displayed amounts to ₹73.46 lakh and ₹26.54 lakh after calculating. For a loan subsequently measured at amortised cost, first-year effective interest is ₹7.34645 lakh; after the ₹3 lakh coupon, the liability becomes ₹77.81094 lakh. The grant's release follows the costs it compensates; it is not automatically immediate income.
7. Repayment and disposal
A grant that becomes repayable is a change in accounting estimate under paragraph 32. Apply the accounting method already used:
- Income grant: apply repayment against any unamortised deferred credit first, then charge the excess to profit or loss.
- Asset grant shown as deferred income: reduce the deferred-income balance by the amount repayable. Do not increase it. Any repayment beyond the available deferred balance requires a profit-or-loss charge.
- Asset deduction method: increase the asset's carrying amount; recognise immediately the cumulative additional depreciation that would have arisen without the grant. Consider impairment of the resulting carrying amount (paragraph 33).
Selling an asset does not automatically settle every grant condition. Check continuing obligations and repayment terms before determining the treatment of any remaining deferred balance. Account for the asset disposal using its carrying amount under the applicable asset standard.
8. What three FY25 annual reports actually show
The following amounts are reported facts, not assumptions. Each case identifies its entity basis and source. “FY25” means the year ended 31 March 2025.
Case 1: Dixon Technologies — scheme eligibility and net presentation
FY2024–25, consolidated report; amounts converted from ₹lakh to ₹crore. Dixon's Note 60 separates its subsidiaries' PLI schemes rather than reporting one uniform accounting outcome.
What this teaches: scheme approval, income recognition, cash collection and a receivable balance describe different things. Read the conditions for each scheme and distinguish net income retained by the entity from the gross claim. The group's policy uses reasonable assurance, and its expense-related grants may be deducted from related expenditure.
Source: Dixon FY25 annual report filed with NSE, consolidated Note 60(a)–(d), printed pp.400–401 (PDF pp.389–390); policy 7.5. These scheme-specific amounts are not presented as total group PLI income.
Case 2: Sun Pharma — grants in operating revenue and a separate receivable
FY2024–25; the report uses ₹million. Divide a reported million amount by 10 to convert it into ₹crore, and keep consolidated and standalone figures separate.
Accounting policy: policy (p) requires reasonable assurance of compliance and receipt, matches expense grants to the relevant costs, and deducts asset grants from the asset's carrying amount. This illustrates the asset deduction method in actual published accounts.
Source: Sun Pharma FY25 annual report, consolidated policy (p), printed p.242; Notes 18 and 30, pp.254 and 257 (PDF pp.244, 256 and 259). Standalone equivalents: pp.164, 176 and 179. The published grant totals do not provide a scheme-by-scheme MEIS/RoDTEP split.
Case 3: Tata Motors — claim-year timing and an actual asset-related grant
FY2024–25, standalone financial statements; ₹crore. The reporting year of incentive income can differ from the production year to which the claim relates.
What this teaches: use the actual grant's terms and the company's policy. Note 32(a) matches grants to related costs, defers asset-related grants over the asset's useful life and offsets expense-related grants against related expenditure. A recognised income amount is different from an outstanding deferred-grant balance.
Source: Tata Motors FY25 annual report, standalone Notes 30(b) and 32(a)–(b), printed pp.468–470 (PDF pp.472–474). These figures refer to the FY25 reporting entity and period; later group restructuring does not change their historical basis.
9. AS 12 and Ind AS 20: useful distinctions
AS 12 also permits deferred-income treatment for grants related to depreciable fixed assets. It is incorrect to describe its method as deduction-only.
| Topic | AS 12 | Ind AS 20 |
|---|---|---|
| Depreciable asset grants | Deduct from asset cost or treat as deferred income. | Deferred income or asset deduction. |
| Non-monetary asset grants | Acquisition cost for concessional assets; nominal value if free. | Fair value or the permitted nominal-amount alternative. |
| Promoters' contribution | Specified grants of this nature go to capital reserve. | Government grants follow the income approach; government ownership participation is a separate scope issue. |
| Below-market government loans | No equivalent explicit Ind AS 109 measurement requirement. | Measure the benefit under paragraph 10A with Ind AS 109. |
| Refundable grants | AS 12 has its own refund requirements. | Change in accounting estimate; apply paragraph 32. |
Sources: MCA AS 12, paragraphs 14–17 and 20–21; ICAI's 2025–26 Ind AS 20 text, paragraphs 10A, 12, 23–32 and Appendix A.
Keep these distinctions clear
- Reasonable assurance is the grant recognition threshold.
- Recognition, presentation, collection and a closing receivable are separate assessments.
- Both asset presentation methods are permitted; disclose the chosen policy.
- Match grant income to the costs it compensates, including the immediate-support exceptions.
- Record scheme conditions, unfulfilled obligations and repayment risks.
10. Frequently asked questions
Does PLI always go to other income?
No. Assess the grant's nature and presentation policy. Income grants may be presented separately or offset related expenses. Dixon's scheme-specific disclosures use other operating revenue, while Tata Motors reports government incentives in other income. The reasonable-assurance test applies before recognition.
Can I recognise an unpaid claim as income?
Payment is not the only recognition trigger. Recognise only when there is reasonable assurance of compliance and receipt, then match the grant to the related costs. A pending payment does not automatically make an already recognised claim a contingent asset.
What happens to the grant when the asset is sold?
Check the grant agreement, continuing obligations and any repayment requirement. For a repayable grant, apply paragraph 32 using the existing deferred-income or asset-deduction method. Do not automatically release a balance to income and expense the same repayment again.
Is every tax incentive outside Ind AS 20?
No. Paragraph 2(b) excludes benefits determined through taxable profit, tax loss or income-tax liability. Assess expenditure-based credits and other assistance by their actual terms. A government purchase of ordinary shares and a normal customer contract are separate transactions rather than government grants.
Related Ind AS Articles
Sources and reporting basis
Standards checked against the ICAI 2025–26 compendium; company examples use annual reports for the year ended 31 March 2025. Source check: 21 October 2026. Reported balances and income amounts are labelled separately.
- Ind AS 20 — ICAI compendium: paragraphs 7–12, 18, 20–32 and 39.
- AS 12 — MCA text: paragraphs 14–17 and 20–21.
- Dixon FY25 report — issuer filing with NSE: consolidated Note 60, printed pp.400–401; policy 7.5. Units: ₹lakh.
- Sun Pharma FY25 report: consolidated policy (p), Notes 18 and 30, printed pp.242, 254 and 257; standalone pp.164, 176 and 179. Units: ₹million.
- Tata Motors FY25 report: standalone Notes 30(b) and 32, printed pp.468–470. Units: ₹crore.
Use this grant checklist
For each scheme, reconcile the approved amount, income recognised, customer pass-through, receivable, cash collected and deferred balance. Check the reporting year, entity basis and units before comparing companies.
Disclose the accounting policy, nature and extent of recognised assistance, and unfulfilled conditions or contingencies as required by Ind AS 20 paragraph 39.