§ 1
What good accounting looks like for an Indian entity
The Companies Act requires books of account on an accrual basis, kept at the registered office or another place notified to the Registrar, with a daily back-up on a server in India when they are kept electronically. Since April 2023, the accounting software must also keep an audit trail (an edit log) that cannot be switched off, and the auditor reports on it.
Most foreign-owned subsidiaries follow Indian accounting standards (AS) rather than Ind AS, because Ind AS applies only above net worth thresholds or where the parent's Indian group is on Ind AS. The parent, however, consolidates in IFRS or US GAAP. The practical work is a reconciliation: keeping statutory books in Indian GAAP and producing a monthly reporting pack with the adjustments the parent needs, typically leases, revenue recognition, employee benefits and deferred tax.
A well-run close makes the year-end audit short. The auditor's main requests (fixed asset registers, ageing, intercompany confirmations, TDS and GST reconciliations, related party schedules) can be produced as a by-product of the monthly close rather than reconstructed in May.
§ 2
The law that applies
| Companies Act, 2013, sections 128 to 148 | Books of account, financial statements, audit, auditor appointment and reporting. |
|---|---|
| Companies (Accounts) Rules, 2014 | Electronic books, daily back-up in India and the audit trail requirement. |
| Companies (Accounting Standards) Rules and Ind AS Rules | Which set of accounting standards the company must follow. |
| Companies (Auditor's Report) Order, 2020 (CARO) | Additional matters the auditor reports on for most private companies. |
| Income-tax Act, 2025 | Tax audit above the turnover limits and the reconciliation between book and taxable profit. |
§ 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
The parent receives the reporting pack late or it does not agree to the Indian books.
Our approach
We agree a close calendar with the group's controllers, map the Indian chart of accounts to the group chart once, and deliver a pack with a reconciliation from Indian GAAP to the group framework every month, so year-end differences are already explained.
Issue 2
The accounting software does not maintain a compliant audit trail.
Our approach
We review the software configuration against the audit trail rule, enable the edit log, restrict who can switch features off and document the controls the auditor will test. Where the software cannot comply, we help migrate to one that can before year end.
Issue 3
The audit drags on because schedules are rebuilt every year.
Our approach
We maintain a standing audit file: fixed asset register, lease schedules, related party listing, intercompany confirmations and statutory dues reconciliations, updated monthly, so the auditor receives a complete set on day one.
Issue 4
Intercompany balances never agree with the parent.
Our approach
We reconcile intercompany accounts monthly with the group, settle in time to avoid FEMA issues on overdue balances, and document the cost-plus or service charge workings that also support the transfer pricing file.
§ 4
Process and timeline
- 1
Onboarding
Weeks 1–2Review of opening balances, chart of accounts mapping, software and audit trail set-up.
- 2
Monthly close
Working days 1–8Bookkeeping, bank and intercompany reconciliations, accruals, payroll and statutory dues, management accounts.
- 3
Group pack
Per group calendarIFRS or US GAAP reporting pack with reconciliation to Indian GAAP.
- 4
Year end
April–SeptemberFinancial statements under Schedule III, notes, audit schedules and support through the statutory and tax audits.
§ 5
Ongoing obligations
| Obligation | Basis | When |
|---|---|---|
| Statutory audit and board's report | Companies Act, 2013 | Before the AGM (by 30 September) |
| Financial statements filing | Form AOC-4 | Within 30 days of the AGM |
| Tax audit report | Income-tax Act, 2025 | Before the return due date |
| Daily back-up of electronic books on a server in India | Companies (Accounts) Rules | Daily |
§ 6
Our scope of work
Included
- Bookkeeping and monthly close
- Management accounts
- Group reporting pack (IFRS / US GAAP)
- Audit trail review
- Year-end financial statements
- Statutory and tax audit coordination
- Intercompany reconciliations
Not included (quoted separately)
- The statutory audit itself (performed by an independent auditor)
- System implementation projects
§ 7
Practical notes
§ 8
Questions
Does an Indian subsidiary have to follow Ind AS?
Only if it crosses the net worth or listing thresholds, or is a subsidiary of an Indian company that follows Ind AS. Most foreign-owned private subsidiaries follow Indian accounting standards (AS).
Can books be kept outside India?
Books may be kept in electronic form on servers outside India, but a back-up must be kept on a server physically located in India and updated daily.
Is a tax audit always required?
No. A tax audit is required when turnover exceeds the prescribed limit (higher where cash transactions are minimal), and in some other cases such as presumptive taxation opt-outs.
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.