Does an Indian subsidiary of a US or other foreign company need a statutory audit?

An Indian company is generally subject to statutory audit requirements under the Companies Act, 2013. The company should confirm auditor appointment, applicable reporting requirements and filing deadlines for its circumstances.

Is a statutory audit the same as a tax audit?

No. A statutory audit is required under company law, while a tax audit applies when the relevant income-tax conditions are met. One audit does not automatically answer every tax, foreign-investment or group-reporting requirement.

Does every foreign-owned Indian subsidiary need Form 3CEB?

Not simply because it has a foreign shareholder. For tax years governed by the Income Tax Act, 1961, Form 3CEB is associated with specified international transactions or specified domestic transactions. The Income Tax Act, 2025 and Income Tax Rules, 2026 apply for Tax Year 2026–27 onwards, so the corresponding provision and reporting form should be checked for that year. Assess the actual transactions and the law that applies to the relevant tax year.

Does the Indian company have to prepare audit records even if it has no revenue?

Do not assume that no revenue means no records or audit obligations. Company-law requirements and other obligations can apply before commercial activity begins. Confirm the requirements and keep accounting records from the start.

Does the US parent’s group auditor replace the Indian statutory auditor?

Not automatically. Group audit instructions and reporting packages may support consolidation, but they do not by themselves replace an audit or filing required under Indian law.

When should audit planning begin?

Start during the company’s setup. Agree the accounting calendar, supporting documents, related-party transaction records and responsibilities well before year-end, and confirm deadlines against the rules applicable to the relevant financial year.

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Foreign-owned company · Audit and reporting

Audit Requirements for an Indian Subsidiary of a Foreign Company

An Indian subsidiary may have several separate audit and reporting responsibilities. The applicable work depends on company law, the company’s tax position, related-party transactions, sector and other facts. A foreign shareholder does not create one universal audit checklist, so plan each requirement separately.

Prepared by AU Corporate · Published 12 October 2026. This guide is general information, not a substitute for a review of the company’s current facts and applicable law.

Quick answer

What audits should a foreign-owned Indian subsidiary check?

Start with the statutory audit under Indian company law. Separately assess whether a tax audit, transfer-pricing report such as Form 3CEB, GST-related annual filings or other sector-specific assurance requirements apply. Keep the Indian statutory records distinct from any audit package requested by the overseas parent. Confirm the current rules and deadlines for the relevant financial year.

1. Statutory audit under Indian company law

An Indian company is generally required to have its financial statements audited under the Companies Act, 2013. The company should arrange auditor appointment in line with the applicable provisions, maintain books and supporting records, and coordinate the audit with the preparation and approval of its financial statements.

The audit process is not limited to the year-end balance sheet. The auditor may need to understand accounting policies, related-party balances, revenue recognition, expenses, bank transactions, share capital, fixed assets, payroll and supporting evidence. Keep records organised throughout the year instead of reconstructing them shortly before the audit.

Confirm the appointment and eligibility of the statutory auditor.
Maintain the general ledger, bank statements, invoices and supporting vouchers.
Reconcile share capital, shareholder balances and intercompany accounts.
Prepare financial statements and supporting schedules on a defined timetable.
Track applicable board, shareholder, audit and Registrar of Companies filings.

2. Tax audit is a separate test

A tax audit is a separate requirement under the applicable income-tax law. Whether it applies depends on the company’s facts and the provisions in force for the relevant tax year. Do not assume that the statutory audit automatically means a separate tax audit is required, or that the statutory audit removes the need to assess tax-audit conditions.

Confirm the applicable criteria with the company’s tax adviser. India’s Income Tax Act, 2025 and Income Tax Rules, 2026 apply for Tax Year 2026–27 onwards, while earlier tax years may remain governed by the 1961 Act and its rules. The Income Tax Department publishes guidance for both; use the law and forms applicable to the year and transaction rather than relying on an old checklist.

3. Transfer-pricing reporting for related-party transactions

A foreign-owned subsidiary may transact with its overseas parent or other group companies through services, software, royalties, cost allocations, goods, loans or other arrangements. These transactions should be identified and documented so the company can assess the applicable arm’s-length, documentation and reporting rules.

For tax years governed by the Income Tax Act, 1961, Form 3CEB is the accountant’s report associated with specified international transactions and specified domestic transactions. The Income Tax Act, 2025 applies for Tax Year 2026–27 onwards and reorganises the relevant provisions, so the reporting form and requirements for that year must be checked under the current Act and Rules. Neither the old form nor its section references should be carried forward without verification. Transfer-pricing reporting is not triggered simply by the existence of a foreign shareholder; assess the actual transactions and applicable rules.

Keep signed agreements, invoices, calculations, evidence of services or benefits, allocation workings and reconciliations between the agreements and accounting records. See our guide to FLA Return and transfer-pricing compliance for related reporting considerations.

4. GST, payroll and other reporting may also apply

GST returns, withholding-tax filings, payroll-related compliance and industry-specific reporting are not all audits, but they can form part of the subsidiary’s wider compliance calendar. Applicability depends on registrations, supplies, employees, transaction types and other conditions.

Do not treat every item as mandatory for every company. Instead, prepare a responsibility matrix that records the requirement, reason it applies, source of the obligation, due date, owner and evidence of completion. Review the matrix when the business hires staff, begins new activities, registers for GST or changes its related-party transactions.

5. Coordinate with the US parent without confusing the requirements

The US parent may ask for monthly reporting, group accounting schedules, consolidation adjustments, internal controls or audit evidence. These requests can be important for group reporting, but they are distinct from statutory obligations that apply to the Indian company.

Agree the reporting format and timetable with the parent early. Where the parent uses a different accounting framework, identify any reconciliation or mapping needed between the Indian company’s statutory books and the group reporting package. Avoid assuming that one set of schedules will automatically satisfy every local and group requirement.

6. A practical audit-readiness checklist

Appoint the relevant auditor and confirm the engagement scope.
Close bank, receivable, payable, payroll and intercompany reconciliations regularly.
Retain contracts, invoices, approvals and evidence for material transactions.
Maintain a list of related parties and review cross-border transactions before year-end.
Check tax-audit, transfer-pricing, GST and other reporting applicability separately.
Agree the parent’s group-reporting calendar and required schedules.
Assign an owner and due date to each statutory and tax filing.

This is a planning checklist, not a universal list of filings. Requirements, thresholds, forms and deadlines can change and should be verified for the specific company and reporting year.