Related Party Disclosures (Ind AS 24): What Must Be Reported
- Every transaction with a promoter, director, their family, or a group company must be named and valued separately in your financial statements under Ind AS 24.
- "Nil balance at year-end" is not an excuse — if a transaction happened during the year, it must still be disclosed.
- Key management personnel compensation must be broken into six specific categories; lumping it into one line is non-compliant.
- Who Counts as a Related Party Under Ind AS 24?
- What Transactions Must Be Disclosed?
- KMP Compensation: The Six-Category Breakdown
- Worked Example: Disclosing a Director's Salary and a Group Loan
- Government-Related Entities: A Practical Exemption
- How to Present the Note in Financial Statements
- Common Mistakes in Related Party Disclosure
If your company prepares financial statements under Indian Accounting Standards, related party disclosure is not optional fine print — it is a mandatory note that regulators, auditors, and investors read first when they want to spot conflicts of interest. Ind AS 24 tells you exactly which relationships to report, which transactions to quantify, and how to present them. Get it wrong and your auditor will qualify the report; get it right and you build credibility with every stakeholder who reads your accounts.
Who Counts as a Related Party Under Ind AS 24?
The definition is wider than most business owners expect. A related party is any person or entity that can control, jointly control, or significantly influence your company — or over whom your company has that power. In plain terms, this includes:
- Subsidiaries, associates, and joint ventures of your company
- The parent company and its other subsidiaries (your fellow subsidiaries)
- Key Management Personnel (KMP) — managing director, whole-time directors, CFO, company secretary, and any person with authority and responsibility for planning, directing, and controlling the company
- Close family members of KMP — spouse, children, dependents of spouse, and parents who depend on the KMP financially
- Entities controlled or significantly influenced by KMP or their close family — so if your CFO owns 60% of another private limited company, that company is your related party
- Post-employment benefit plans (like a gratuity trust) managed for your employees
Two companies are not related parties simply because they share a common customer, a common lender, or a government connection. Ind AS 24 draws this boundary deliberately to avoid over-disclosure.
What Transactions Must Be Disclosed?
Any transfer of resources, services, or obligations between related parties must be disclosed — even if no price is charged. Common transaction types include:
- Purchase or sale of goods
- Purchase or sale of property or other assets
- Rendering or receiving of services
- Leases
- Guarantees given or received
- Loans advanced or received, including interest
- KMP compensation (salaries, bonuses, commissions, ESOPs, post-employment benefits, termination benefits, and other long-term benefits)
- Dividend paid or received
The standard requires you to state the nature of the relationship, the amount of the transaction, outstanding balances, and any provisions for doubtful debts related to those balances.
KMP Compensation: The Six-Category Breakdown
This is where most companies cut corners. Ind AS 24 requires KMP compensation to be split into exactly these six buckets:
| # | Category | Typical Examples |
|---|---|---|
| 1 | Short-term employee benefits | Salary, bonus, leave encashment paid within 12 months |
| 2 | Post-employment benefits | Gratuity, provident fund contributions |
| 3 | Other long-term benefits | Long-service leave, deferred bonus vesting beyond 12 months |
| 4 | Termination benefits | Severance pay, notice-period payments |
| 5 | Share-based payments | ESOPs, restricted stock units at fair value |
| 6 | Directors' sitting fees and commission | Per-meeting fees, annual commission to non-executive directors |
Worked Example: Disclosing a Director's Salary and a Group Loan
Let's say Priya Enterprises Pvt Ltd has a Managing Director, Ms. Priya Sharma, who also controls a sister concern — Priya Traders Pvt Ltd. During FY 2026-27, the following transactions happened:
- Ms. Sharma's annual salary: ₹36,00,000; employer PF contribution: ₹2,16,000; gratuity accrual: ₹84,000
- Priya Enterprises gave an interest-free loan of ₹50,00,000 to Priya Traders in April 2026; ₹20,00,000 was repaid by March 2027 — outstanding balance at year-end: ₹30,00,000
- Priya Enterprises purchased raw material worth ₹1,20,00,000 from Priya Traders during the year
Here is how the disclosure note should look:
Nature of relationship: Ms. Priya Sharma — KMP (Managing Director). Priya Traders Pvt Ltd — entity controlled by KMP.
Transactions during FY 2026-27:
- Short-term employee benefits (salary): ₹36,00,000
- Post-employment benefits (PF + gratuity): ₹2,16,000 + ₹84,000 = ₹3,00,000
- Loan advanced to Priya Traders: ₹50,00,000
- Loan repaid by Priya Traders: ₹20,00,000
- Purchase of goods from Priya Traders: ₹1,20,00,000
Outstanding balances at 31 March 2027: Loan receivable from Priya Traders — ₹30,00,000 (interest-free, unsecured, repayable on demand). No provision for doubtful debt has been made.
Notice two things: the gratuity and PF are not lumped with salary — they sit in a separate post-employment category. And the loan is disclosed even though it partly repaid, because a transaction did occur during the year.
Government-Related Entities: A Practical Exemption
If a government controls both your company and another entity, Ind AS 24 provides a partial exemption. You are not required to individually disclose every transaction with every government-related entity — instead, you may give a general description of the nature and a quantitative indicator (individually significant or collectively material amounts). This exemption matters for PSUs and companies with heavy government contracting. However, you must still disclose the name of the government and the nature of your relationship with it.
How to Present the Note in Financial Statements
Transactions with the same type of related party (for example, all fellow subsidiaries) may be aggregated — but only if aggregation does not obscure information that would be material to a user. If one transaction is unusually large or on non-market terms, disclose it separately. Also state clearly whether prices were on arm's-length terms — but Ind AS 24 does not require you to assert that; it only requires you to state the terms. Do not add a blanket phrase "all transactions were at arm's length" without backing it up with transfer pricing documentation if applicable.
Preparing the related party note accurately requires you to have clean, well-organised books first. Tools like Balance Sheet Generator on KyaTax can help you structure your financials before your CA finalises the Ind AS notes.
Common Mistakes in Related Party Disclosure
- Omitting transactions that netted to zero. A company lent ₹1 crore to a director and got it back in the same year. Many companies skip this because the year-end balance is nil. Wrong — the transaction must be disclosed because it occurred.
- Forgetting close family members. If the MD's adult son receives a salary from the company, that is a related-party transaction. Companies often report the MD's compensation but ignore family members on the payroll.
- Lumping all KMP compensation into one line. Writing "Director remuneration: ₹45,00,000" without the six-category split is non-compliant with Ind AS 24.
- Ignoring guarantees. A corporate guarantee given to a bank on behalf of a subsidiary is a related-party transaction even if no cash moves. It must be disclosed with the guaranteed amount outstanding.
- Using vague relationship descriptions. Writing "related party" without specifying whether it is a subsidiary, associate, or KMP-controlled entity does not satisfy the standard. Name the relationship precisely.
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Open Balance Sheet Generator →Frequently asked questions
Does Ind AS 24 apply to private limited companies?
Ind AS 24 applies to companies that are required to follow Indian Accounting Standards — broadly, listed companies and unlisted companies above the prescribed net worth or turnover thresholds notified by the Ministry of Corporate Affairs. If your private limited company falls below those thresholds, you follow AS 18 under the Companies (Accounting Standards) Rules instead, which has similar but less detailed requirements.
Are transactions between a holding company and its wholly owned subsidiary exempt from disclosure?
No. Ind AS 24 requires disclosure of transactions with subsidiaries, including wholly owned ones, in the parent's financial statements. The exemption in Ind AS 24 is narrow — it only allows a parent that is itself a subsidiary to skip certain disclosures in specific consolidation contexts, and even then only if certain conditions are met.
What if the related party transaction was at market price — does it still need to be disclosed?
Yes. Ind AS 24 requires disclosure regardless of whether the transaction was at market price, at a discount, or free of charge. The standard's purpose is transparency, not just catching under-priced deals. You may state that the transaction was on normal commercial terms, but disclosure is still mandatory.
Can we disclose all directors' compensation as a single total figure?
No. Ind AS 24 requires compensation to be broken into the six specified categories (short-term benefits, post-employment benefits, other long-term benefits, termination benefits, share-based payments, and sitting fees/commission). A single total figure is non-compliant and is a common audit observation.
General information for FY 2026-27, not professional advice for your specific case. Rules change — verify against the latest notification or ask a KyaTax expert.
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