S U and Company

India market entry · Branch office accounting and audit

Accounting, Reporting and Audit for Branch Offices in India

Prepared by S U and Company's CA-led advisory team · Published 27 October 2026 · About S U and Company

A branch office has no share capital of its own, so its books centre on one relationship that a subsidiary's books never have to deal with: the head office account. Every rupee that moves between the branch and its parent runs through that account, and it has to reconcile cleanly before the Annual Activity Certificate, the tax return, or a bank's own scrutiny of the branch's funding pattern.

Quick answer

What accounting does a branch office need to keep in India?

A branch office must keep books of account for its Indian business, record transactions with the head office through a dedicated head office account, prepare audited accounts for its ROC and bank filings, and report to the head office on its own group format. Monthly bookkeeping, bank and head office reconciliation, fixed-asset tracking, TDS and GST workings, and audit coordination are the recurring cycle.

1. How branch accounting differs from a subsidiary's

A branch office is part of the foreign company, not a separate one, so its books include a head office account in place of share capital, and there is no separate company-law audit of the kind a subsidiary undergoes under the Companies Act. It still needs audited accounts for its authorised dealer bank and Registrar of Companies filings, and in practice an audit is effectively mandatory once those filings are accounted for.

2. The monthly cycle

  • Bookkeeping. Sales, purchases, expenses and payroll recorded from source documents.
  • Bank reconciliation. Every bank account matched to the books, including remittances received from the head office.
  • Head office account. Funds received from, and charges allocated by, the head office recorded and reconciled on their own line.
  • Fixed assets. An asset register and depreciation worked out consistently for the books and for tax.
  • TDS and GST workings. Tax to be deducted and the net GST liability calculated with due dates flagged, not left to be discovered at return time.
  • Reporting. A monthly pack delivered in the head office's own group format — US GAAP, IFRS, or another standard.

3. Head office expenses have a cap

Head office expenses allocated to the branch can be claimed in the Indian accounts, but only within the limit the income tax law sets — a point worth flagging early rather than discovering at assessment, since it directly affects how much of a group's central cost allocation is actually deductible in India. Allowed and disallowed amounts should be kept visibly separate in the books, not blended into a single head office charge line.

4. Reporting the head office actually understands

The Indian books can be converted into the group's own chart of accounts and reporting format — US GAAP, IFRS, or another standard — including foreign exchange differences, and delivered on the group's own closing calendar rather than a generic one. A typical monthly pack includes a trial balance, profit and loss, balance sheet, cash and bank position, the head office account, tax liabilities, and a payroll summary, adjustable to whatever template the group already uses elsewhere.

5. Audit and Annual Activity Certificate coordination

The branch's audited accounts feed directly into the Annual Activity Certificate filed with the authorised dealer bank (see our FEMA and RBI compliance guide) and into the tax audit where turnover crosses the applicable limit. Keeping the books current through the year, rather than reconstructing them at audit time, is what actually determines whether these filings land on time.

6. The financial year

For Indian income tax purposes, a branch office follows the 1 April to 31 March year regardless of what financial year the foreign company itself uses for its own group accounts. ROC filings follow the Indian year as well, so the two calendars — the group's own and India's — need to be aligned deliberately rather than assumed to match.

Frequently asked questions

How is a branch office’s accounting different from a subsidiary’s?

A branch office is part of the foreign company, so its books include a head office account instead of share capital, and there is no separate company-law audit of the kind a subsidiary undergoes. It still needs audited accounts for its ROC and authorised-dealer-bank filings.

Is an audit mandatory for a branch office?

In practice, yes. A branch office needs audited accounts for its authorised dealer bank and ROC filings, a Chartered Accountant’s Annual Activity Certificate, and a tax audit where its turnover exceeds the applicable limit.

Can head office expenses be claimed in the branch office’s accounts?

Only within limits. Deduction for head office expenses allocated to the branch office is capped under the income tax law, and the underlying payments need their own tax analysis — allowed and disallowed amounts should be separated clearly in the books.

Can I get monthly reports in US GAAP, IFRS or my own group format?

Yes. The Indian books can be converted into the group’s chart of accounts and reporting format, including foreign exchange differences, delivered on the group’s own closing calendar rather than a generic one.

What does the monthly reporting pack typically include?

A trial balance, profit and loss, balance sheet, cash and bank position, the head office account, tax liabilities, and a payroll summary, adjustable to the group’s own template.

Which accounting software can a branch office use?

Any reliable software — Tally, Zoho Books, QuickBooks, Xero, or the group’s own system — with backup records kept in India for audit and ROC purposes.

What is the financial year of a branch office in India?

For income tax purposes, a branch office follows the Indian year from 1 April to 31 March, regardless of what financial year the foreign company itself uses for its own accounts. ROC filings follow the Indian year.

How S U and Company can help

We run monthly bookkeeping, head office account reconciliation, and audit coordination for branch offices, reporting in the group's own format. See our tax, GST and transfer pricing guide and ROC compliance guide, or explore the US-to-India entry guides.

Sources and further reading