"A net worth certificate is just a CA signature": what the law actually requires

Ask around and you will hear the same thing: a net worth certificate is a one-page letter, the CA signs it, you pay a few thousand rupees, and the bank or the embassy accepts it. Some people go further and say the figure is whatever you declare, because "net worth is not defined anywhere in the Act." Both claims are wrong, and the second one is the expensive kind of wrong. A net worth certificate is an attestation engagement under the ICAI framework, the underlying figures must trace to audited or verifiable records, and the person who signs it carries professional liability for the number. If the certificate is later used to obtain credit, a visa, a tender award, or a regulatory approval, the CA who signed it is answerable for how the figure was arrived at.

What the law actually says

There is no single section titled "net worth certificate." The obligation is assembled from four sources, and you need all four to produce a defensible certificate.

The definition of net worth. Section 2(57) of the Companies Act 2013 defines net worth as the aggregate value of paid-up share capital and all reserves created out of profits, plus securities premium, reduced by accumulated losses, deferred expenditure and miscellaneous expenditure not written off. Critically, it excludes reserves created out of revaluation of assets, write-back of depreciation and amalgamation. This matters enormously in practice: a company that revalued its land in 2019 and booked a large revaluation reserve cannot count that reserve towards net worth for any Companies Act purpose. The same exclusion logic is the sensible default for individuals and firms, even though Section 2(57) does not directly bind them - a certificate that inflates an individual's net worth using a self-assessed appreciation on a flat is not a certificate anyone should rely on.

Where the figures come from. For a company, the numbers must be extracted from financial statements prepared under Schedule III of the Companies Act 2013. Division I applies to companies still on the erstwhile accounting standards, Division II to Ind AS companies, and Division III to NBFCs. The relevant Schedule III captions are Equity Share Capital, Other Equity (Ind AS) or Reserves and Surplus (Division I), and within Other Equity the sub-heads Securities Premium, Retained Earnings, General Reserve, Capital Redemption Reserve and Revaluation Surplus. The certificate should reproduce these captions verbatim rather than paraphrasing them, because that is what the reviewer at the bank or the regulator is trained to match.

The certification standard. Certificates of this type are governed by ICAI's Guidance Note on Reports or Certificates for Special Purposes, read with SAE 3000 (Revised). The Guidance Note requires the CA to state the criteria used, the source of the information certified, the nature of verification performed, and any restriction on use and distribution. A certificate that says only "we certify the net worth of Mr X as on 31.03.2026 is Rs. 4,20,00,000" and nothing else does not meet this standard. The Guidance Note also requires the CA to use the ICAI Unique Document Identification Number (UDIN) - a certificate without a UDIN is treated as unverified, and most banks now check the UDIN portal directly.

The Income Tax Act position. The Income-tax Act 2025, in force from 1 April 2026 and operationalised through the Income-tax Rules 2026 (Notification No. 22/2026), does not itself mandate a net worth certificate. But it supplies the corroborating trail that a serious certificate depends on: the return of income, the statement of assets and liabilities (Schedule AL, which applies where total income exceeds Rs. 50 lakh), and the annual information statement - Form 26AS under the 1961 Act, now Form 168 under ITA 2025. The ITA 2025 also replaced Form 15CA with Form 145 and Form 15CB with Form 146, which is relevant because a foreign remittance backed by a net worth certificate will often need Form 146 certification from the same CA. Remember that ITA 2025 speaks of a "Tax Year" rather than the old Previous Year and Assessment Year pair, so a certificate for the period ending 31 March 2026 should be described as being for Tax Year 2025-26.

Practical implications

Lenders. Banks demand a net worth certificate in three situations: a personal or corporate guarantee is being taken, an unsecured or partly secured facility is being appraised, or a promoter contribution is being verified in a project finance case. The credit team is not reading the certificate for the total. It is reading it for the composition - how much of the net worth is liquid, how much is encumbered, and how much is a valuation opinion rather than a cost figure. A Rs. 5 crore net worth made up of Rs. 4.6 crore of self-estimated property value and Rs. 40 lakh of bank balance is worth less to a credit officer than a Rs. 2 crore net worth sitting in listed securities and fixed deposits.

Regulators and statutory thresholds. Net worth is the trigger for several obligations. CSR under Section 135 of the Companies Act 2013 applies to a company with net worth of Rs. 500 crore or more (or turnover of Rs. 1,000 crore, or net profit of Rs. 5 crore). Internal audit under Section 138 read with Rule 13 applies to unlisted public companies with paid-up capital of Rs. 50 crore or more, and to private companies with turnover of Rs. 200 crore or more or borrowings of Rs. 100 crore or more. SEBI's AIF regulations set a Rs. 20 crore minimum corpus. Under FEMA, overseas direct investment under the automatic route is capped at 400% of the Indian entity's net worth as per the last audited balance sheet - which is why the ODI net worth certificate is one of the most heavily scrutinised certificates a CA issues.

Tenders and empanelment. Government and PSU tenders almost always carry a minimum net worth eligibility clause and a positive net worth clause for each of the last three years. The tender committee compares the certificate against the filed AOC-4 and the audited accounts. A mismatch between the certificate and the MCA filing is the single most common ground for technical disqualification.

Visas and immigration. Consulates ask for a net worth or financial standing certificate for investor visas, long-stay visas and sponsorship cases. Here the risk runs the other way: an inflated certificate can be treated as a misrepresentation, and the consequence lands on the applicant, not the CA.

Step-by-step: what to do

• Fix the date and the entity. Net worth is a point-in-time figure. Decide whether it is as on 31 March 2026 (Tax Year 2025-26) or an interim date, and whether it is for the individual, the HUF, the firm or the company. Do not mix them - a promoter's personal certificate cannot include the company's reserves.
• Assemble the source documents. For a company: the audited balance sheet, the board-approved financials, the AOC-4 acknowledgement, and the trial balance. For an individual: the filed return of income, Schedule AL where applicable, Form 168 (formerly Form 26AS), bank and demat statements, property title documents with purchase deeds, loan statements showing outstanding balances, and the latest FD receipts.
• Value assets on a stated basis and say what that basis is. Immovable property should be taken at cost, or at circle rate, or at a registered valuer's figure - pick one, apply it consistently, and disclose it. Listed securities at the closing market price on the certificate date. Unlisted shares at book value or at a Rule 11UA valuation. Never take a broker's estimate or a portal listing price.
• Deduct all liabilities, including the ones people forget. Home loan and vehicle loan outstandings, credit card dues, unpaid advance tax and self-assessment tax, personal guarantees that have crystallised, and any amount payable under a settled dispute. Contingent liabilities are disclosed separately rather than deducted, but they must be disclosed.
• Map to Schedule III captions for a company. Report Equity Share Capital and each component of Other Equity separately. Show Revaluation Surplus as a line item and then explicitly exclude it in arriving at Section 2(57) net worth. This one line saves more arguments with bankers than anything else in the certificate.
• Draft the certificate to the Guidance Note format. Include the addressee, the purpose, the criteria applied, the management's responsibility for the underlying information, the CA's responsibility, the verification performed, the certified figure, and the restriction on use. Attach the computation as an annexure.
• Generate the UDIN and quote it on the face of the certificate. Do this within 60 days of signing. Sign with the membership number and firm registration number.
• Reconcile before you release it. Compare the certified figure against the filed return and, for a company, against the last AOC-4. If they differ, explain the difference inside the certificate rather than leaving the reviewer to find it.

FAQ

Can a CA certify net worth without audited accounts?
Yes, for individuals and unaudited entities, but the certificate must state that the figures are based on management-provided information and books not subject to audit, and must describe what verification was performed. For a company that is required to be audited, a certificate based on anything other than the audited financials is not defensible.

Does revaluation of my property increase my certified net worth?
For a company, no - Section 2(57) expressly excludes revaluation reserves. For an individual, a revalued figure can be shown, but it must be supported by a registered valuer's report and the basis must be disclosed on the face of the certificate. A bank will discount it either way.

How long is a net worth certificate valid?
It has no statutory validity period; it certifies a position on a stated date. In practice, banks accept a certificate up to six months old, tender authorities usually require one issued within the current financial year, and consulates typically want one not older than three months. Check the specific requirement before you commission it.

Is a net worth certificate required for NRI remittances?
Not as a standalone requirement. But where an NRI is remitting sale proceeds or repatriating funds, the bank will frequently ask for a net worth or source-of-funds certificate alongside Form 145 and Form 146 (formerly Form 15CA and Form 15CB). The same CA usually issues both, and the figures in the two documents must agree.

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See Also

• "A forensic audit is just a deeper statutory audit": what Indian law actually says
• "Only listed companies need a secretarial audit": what Section 204 actually says
• "Bank branch audit is just ticking vouchers": what RBI's LFAR and IRACP norms actually demand

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