Corporate Accounting and Auditing · National Financial Reporting Authority (NFRA)

Applicability and Jurisdiction of NFRA Under the 2018 Rules

Updated 10 October 2026 · Fact-checked

NFRA's jurisdiction under the National Financial Reporting Authority Rules, 2018 covers listed companies, large unlisted public companies (paid-up capital ₹500 crore or more, turnover ₹1,000 crore or more, or loans, debentures and deposits of ₹500 crore or more), insurance, banking and electricity companies, and bodies under special Acts. It also covers cases referred by the Central Government and large foreign subsidiaries or associates. To solve questions, test the company against each category in turn.

Understand Applicability and Jurisdiction of NFRA

NFRA is set up under Section 132 of the Companies Act, 2013. It monitors compliance with accounting and auditing standards, oversees the quality of audit work, and investigates professional or other misconduct. But it does not do this for every company. The National Financial Reporting Authority Rules, 2018 list the classes of companies and bodies corporate that fall under it.

Think of it as a size-and-public-interest filter. A company comes under NFRA if many people depend on its numbers. That means companies whose securities are listed, very large unlisted public companies, and sectors that hold public money or run public services, such as banks, insurers and electricity companies. Bodies created by a special Act also come in.

There are two extra doors. First, the Central Government can refer any company, body corporate or person to NFRA in public interest. Second, a foreign body corporate that is a subsidiary or associate of an Indian company is covered if its income or net worth is more than 20% of the Indian company's consolidated income or consolidated net worth.

The unlisted-company test is where students lose marks. It applies only to unlisted public companies. It uses three alternative thresholds, measured as on 31 March of the immediately preceding financial year. Meeting any one is enough.

Now the link with ICAI. For companies and bodies outside NFRA's list, disciplinary action against auditors remains with the professional institute concerned, such as ICAI, through its own disciplinary machinery. Where NFRA has started an investigation into a matter, the institute does not initiate or continue proceedings on that same matter. So the question to ask is always: is this company inside the NFRA list or not?

Key rules to remember

Listed companies: Securities listed on any stock exchange in India or outside India → covered; Applies whatever the size of the company.
Unlisted public companies (any one test): Paid-up capital ≥ ₹500 crore OR annual turnover ≥ ₹1,000 crore OR outstanding loans + debentures + deposits ≥ ₹500 crore, as on 31 March of the immediately preceding financial year; The thresholds are 'not less than', so exactly ₹500 crore or ₹1,000 crore qualifies. The loans test adds loans, debentures and deposits together.
Sector and special-law companies: Insurance companies, banking companies, companies generating or supplying electricity, companies governed by a special Act, and bodies corporate incorporated by an Act in India → covered; No size threshold applies.
Central Government reference: Any body corporate, company or person (or class of them) referred by the Central Government in public interest → covered; Covered only for the referred matter or entity.
Foreign subsidiary or associate: Income or net worth of the foreign subsidiary or associate > 20% of the Indian company's consolidated income or consolidated net worth → covered; Either income or net worth crossing 20% is enough. The foreign body must be a subsidiary or associate of an Indian company.
Overlap with the institute: If NFRA has initiated an investigation on a matter, the institute does not initiate or continue proceedings on it; For entities outside the NFRA list, the institute's disciplinary mechanism continues to apply.

How to solve Applicability and Jurisdiction of NFRA questions

Use this checklist for any question asking whether a company or auditor falls under NFRA.

1Note the type of entity: listed or unlisted, public or private, and its sector (bank, insurer, electricity, special Act).
2Check the listed test first. If securities are listed in India or abroad, NFRA applies. Stop there.
3Check the sector and special-Act test next. If the entity is a bank, insurer, electricity company or a body under a special Act, NFRA applies.
4If the entity is unlisted, confirm it is a public company. A private company fails the size test, so move to the next step.
5For an unlisted public company, test paid-up capital, turnover and loans plus debentures plus deposits against the thresholds, using figures as on 31 March of the preceding financial year. Any one met is enough.
6Check the special routes: a Central Government reference, or a foreign subsidiary or associate that crosses the 20% test.
7State your conclusion in one line, naming the rule that applied, and add who handles discipline if NFRA does not apply (the institute, such as ICAI).
8If asked about the overlap, add that once NFRA starts investigating a matter, the institute does not initiate or continue proceedings on it.

Quickest way: Four-gate scan

When to use it: For MCQs and short case questions where you have under two minutes.

Gate 1: listed? If yes, covered.
Gate 2: bank, insurer, electricity or special Act body? If yes, covered.
Gate 3: unlisted public company with any of ₹500 crore capital, ₹1,000 crore turnover or ₹500 crore loans, debentures and deposits? If yes, covered.
Gate 4: government reference or foreign subsidiary or associate above 20%? If yes, covered.
If no gate opens, NFRA does not apply and the institute's jurisdiction remains.

Common mistakes in Applicability and Jurisdiction of NFRA

Applying the ₹500 crore and ₹1,000 crore tests to private companies.
Students remember the numbers but forget the words 'unlisted public companies'.
Fix: Write 'public' next to the thresholds in your notes. An unlisted private company is not caught by the size test.
Requiring all three unlisted thresholds to be met together.
Students read the thresholds as a combined test.
Fix: They are alternatives. Any one of capital, turnover or loans plus debentures plus deposits is enough.
Treating a listed small company as outside NFRA because of low turnover.
Size tests are over-applied to every company.
Fix: Listing alone brings a company under NFRA. Size matters only for unlisted public companies.
Using the current year's figures instead of 31 March of the preceding financial year.
Students use whatever year is given in the question.
Fix: Check the date. The thresholds are measured as on 31 March of the immediately preceding financial year.
Applying the 20% test to an Indian subsidiary of a foreign company.
The direction of the relationship is misread.
Fix: The 20% test is for a foreign subsidiary or associate of an Indian company, measured against the Indian company's consolidated income or net worth.
Saying NFRA replaces ICAI for all auditors.
Students think NFRA took over the institutes' role entirely.
Fix: NFRA acts only for the covered classes. For others, the institute's disciplinary mechanism continues.

Worked examples

Example 1

Decide whether each company falls under NFRA's jurisdiction under the 2018 Rules. (a) Sagar Textiles Ltd, an unlisted public company: paid-up capital ₹320 crore, turnover ₹1,150 crore. (b) Kaveri Foods Ltd, an unlisted public company: paid-up capital ₹300 crore, turnover ₹800 crore, loans ₹380 crore, debentures ₹100 crore, deposits ₹50 crore. (c) Himalaya Traders Pvt Ltd, an unlisted private company: turnover ₹2,000 crore. (d) Deccan Power Ltd, listed on a stock exchange, turnover ₹150 crore.

Show the solution

(a) Sagar is an unlisted public company. Paid-up capital ₹320 crore is below ₹500 crore. Turnover ₹1,150 crore is not less than ₹1,000 crore. One test is met.
(b) Kaveri is an unlisted public company. Capital ₹300 crore is below ₹500 crore. Turnover ₹800 crore is below ₹1,000 crore. Loans + debentures + deposits = ₹380 crore + ₹100 crore + ₹50 crore = ₹530 crore, which is not less than ₹500 crore. One test is met.
(c) Himalaya is an unlisted private company. The size tests apply only to unlisted public companies, and no other category applies. It is not covered.
(d) Deccan Power is listed, so it is covered regardless of its turnover.

Answer: (a) covered, on the turnover test. (b) covered, on the loans, debentures and deposits test. (c) not covered, because it is a private company. Its auditors stay under the institute's disciplinary jurisdiction. (d) covered, because it is listed.

Example 2

Bharat Industries Ltd, a listed Indian company, has consolidated income of ₹1,000 crore and consolidated net worth of ₹500 crore. Its foreign subsidiary, Bharat Global Inc., has income of ₹210 crore and net worth of ₹90 crore. Is the foreign subsidiary within NFRA's jurisdiction? Also state how this differs from the institute's role.

Show the solution

The foreign subsidiary is a body corporate incorporated outside India and a subsidiary of an Indian company, so the 20% test is relevant.
Income test: ₹210 crore ÷ ₹1,000 crore × 100 = 21%. This is more than 20%.
Net worth test: ₹90 crore ÷ ₹500 crore × 100 = 18%. This is not more than 20%.
Either income or net worth exceeding 20% is enough, so the income test is satisfied.
On the institute's role: the institute's disciplinary mechanism continues for entities outside the NFRA list. Where NFRA has started an investigation on a matter, the institute does not initiate or continue proceedings on it.

Answer: Yes. Bharat Global Inc. is covered because its income is 21% of the consolidated income, which is more than 20%, even though its net worth is only 18% of consolidated net worth. Where NFRA has started an investigation on a matter, the institute does not proceed on it.

Exam tips

In the MCQ section, expect a company with figures. Check listed status first, then public or private, then the thresholds. Do not start with the numbers.
Memorise the figures as a set: ₹500 crore paid-up capital, ₹1,000 crore turnover, ₹500 crore loans, debentures and deposits, and the 20% foreign test.
Watch for borderline values such as exactly ₹1,000 crore. The rule says 'not less than', so the company is covered.
In written answers, name the category that applies, show the arithmetic, then give a one-line conclusion. This earns step marks.
For 'NFRA versus ICAI' questions, give two points: NFRA covers only the listed classes, and the institute's discipline applies elsewhere and gives way once NFRA starts investigating a matter.

Practice questions from National Financial Reporting Authority (NFRA)

Applicability and Jurisdiction of NFRA: frequently asked questions

Which companies come under NFRA as per the 2018 Rules?

Listed companies, large unlisted public companies, insurance, banking and electricity companies, companies and bodies corporate under special Acts, entities referred by the Central Government, and certain foreign subsidiaries or associates of Indian companies. Each category has its own test.

What are the thresholds for unlisted companies under NFRA?

An unlisted public company is covered if its paid-up capital is not less than ₹500 crore, or its annual turnover is not less than ₹1,000 crore, or its outstanding loans, debentures and deposits together are not less than ₹500 crore. Figures are taken as on 31 March of the immediately preceding financial year. Any one test is enough.

Are unlisted private companies covered by NFRA?

Not under the size thresholds, which apply only to unlisted public companies. A private company could be covered only through another route, such as a Central Government reference or being a body under a special Act.

What is the difference between NFRA and ICAI jurisdiction?

NFRA acts on the classes of companies listed in the 2018 Rules. For other companies, the professional institute such as ICAI handles discipline of its members. Once NFRA initiates an investigation on a matter, the institute does not initiate or continue proceedings on it.