§ 1
Accounting for the life of a contract
Revenue on construction and long-term service contracts is recognised by reference to the stage of completion, so the books need reliable cost-to-complete estimates and a record of variations and claims. The tax computation follows the income computation and disclosure standards, which can differ from the accounting treatment on items such as retention money and contract losses.
Surplus can be remitted abroad during the project, but the AD bank asks for an auditor's certificate that the amount is surplus after Indian liabilities. Keeping the project accounts closed monthly makes those certificates quick to issue.
§ 2
The law that applies
| Accounting standards on construction contracts and revenue | Percentage-of-completion accounting. |
|---|---|
| Income-tax Act, 2025 and the income computation and disclosure standards | Taxable profit of the project and withholding by the Indian client. |
| FEMA Regulations, 2016 | Intermittent remittances of surplus and closure of the project office. |
§ 3
Issues and how we solve them
The problems that most often hold up or complicate this work, and how we deal with each.
Issue 1
Remittances are delayed because the bank wants proof of surplus.
Our approach
We close the project accounts monthly and issue the surplus certificate on request, with a reconciliation of Indian liabilities, tax and retention.
Issue 2
Tax deducted by the client exceeds the real tax on the project.
Our approach
We prepare profit projections to support a lower withholding certificate and track TDS credits to the tax return.
§ 4
Process and timeline
- 1
Set-up
MobilisationChart of accounts by cost head, budget and cost-to-complete model.
- 2
Monthly
MonthlyBookkeeping, progress billing, GST and TDS, cost reports.
- 3
Annual
AnnuallyAudit, Annual Activity Certificate and tax return.
- 4
Closure
CompletionFinal accounts, tax clearance and closure certificate for repatriation.
§ 5
Our scope of work
Included
- Project bookkeeping
- Cost-to-complete reporting
- Audit coordination
- Surplus remittance certificates
- Annual Activity Certificate
- Closure accounts
§ 6
Questions
Can project surplus be remitted before the project ends?
Yes, intermittent remittances are permitted against an auditor's certificate, provided Indian liabilities are covered.
What is needed to close a project office?
Final audited accounts, a certificate that all liabilities are met, tax clearance and confirmation that the project is complete, submitted through the AD bank.
Prepared by CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375, SU and Company · Last reviewed 4 November 2026. General information only, based on the law as it stood on that date; it is not advice for any particular case.