Grievance: Non-alignment of accounting practices for higher educational bodies.
Sanjeev Goyal
PMOPG/E/2026/0006073
Concerned Department: Ministry of Finance
(A) Asset Capitalisation: The asset capitalisation threshold prescribed under the Uniform Format of Accounts issued by the Ministry of Education for higher educational institutions is ₹2K which is significantly lower than the industry-wide limit of ₹5K. This base was fixed several decades ago and has not been revised since, despite inflation and passage of considerable time.
In contrast, the guidelines issued by the Department of Expenditure under the FRBM Act, vide Office Memorandum No. 3(2)/e-Assets Register/ARC/2017-18/994 dated 20.09.2017, prescribe a higher threshold of ₹5K for the recognition of fixed assets. This clearly indicates the need for rationalisation of the asset capitalisation limit currently exclusively applicable to higher educational institutions.
Further, no monetary threshold has been prescribed for books, implying that all books are required to be capitalised irrespective of their cost.
The existing low limit results in capitalisation of low-value items and complicate asset management, which is contrary to the principle of materiality and leads to unnecessary inflation of the fixed asset base.
From a policy perspective, this undermines comparability, transparency, and efficient financial reporting across Government-funded institutions. It is, therefore, necessary that the capitalisation thresholds applicable to higher educational institutions be reviewed and aligned.
B) Accounting Treatment of Employer’s Contribution to NPS: With projections indicating an unsustainable rise in pension liabilities, the Government switched from old Pension Scheme to the National Pension System (NPS) with effect from 01.01.2004. NPS is a defined contribution scheme, under which the employer’s liability is limited to a fixed monthly contribution, and the employer bears no future pension liability beyond this contribution.
In accounting terms, the employer’s contribution to NPS represents a current-period employment cost and is, therefore, treated as part of salary expenses in the books of accounts. However, under the Uniform Accounts format prescribed by the Ministry of Education for higher educational institutions, the employer’s share of NPS is classified as a contribution towards retirement benefits and charged to General Administrative Expenses, instead of being included under salary expenditure.
Given that the NPS contribution is directly linked to employment, involves a predetermined and defined cost, and fully discharges the employer from any future liability, it is basically a component of salary cost. Moreover, with liberal withdrawal options available even during the service period, NPS can no longer be viewed purely as a terminal benefit. It is important to note that all autonomous bodies, except higher educational institutions governed by the Ministry of Education, record employer’s NPS contribution as part of salary expenditure.
These divergent accounting practices have resulted in the under-reporting of salary costs in higher educational institutions, thereby compromising the reliability of financial data used for analysis, planning, comparison and future projections. Since manpower expenses constitute the largest cost component for any educational institution, exclusion of NPS thereof distorts the financial picture to some extent and undermines informed decision-making.
From a governance and public finance perspective, uniformity, transparency, and accuracy in financial reporting are essential for evidence-based policymaking and effective resource allocation. These accounting exceptions created for higher educational institutions, in respect of both asset capitalisation and NPS contribution, do not fully align with contemporary Government accounting principles.
A comprehensive policy review is, therefore, warranted to:
align asset capitalisation thresholds with prevailing industry norms and
ensure uniform treatment of NPS contributions as salary expenditure,
