India market entry · Liaison office accounting and audit
Accounting, Reporting and Audit for Liaison Offices in India
Prepared by S U and Company's CA-led advisory team · Published 27 October 2026 · About S U and Company
A liaison office has no sales ledger, no revenue line, and no profit to report — its entire accounting job is to prove that every rupee it spent came from a remittance it was entitled to receive. That sounds simple, but gaps between what the head office sent and what the office spent show up precisely when they are hardest to fix: at the annual audit, or when the approval comes up for extension.
Quick answer
What accounting, reporting and audit does a liaison office need in India?
A liaison office keeps books recording remittances received from the head office and every expense met from them, reconciles its bank account monthly, prepares TDS workings on salaries, rent and fees, reports to the head office in the group's format, and has its accounts audited each year to support the Annual Activity Certificate.
1. What the books record
A liaison office's books record its remittances from the head office and every expense met from them, with no sales ledger and no profit to compute — a structural difference from a branch or project office, whose books also track revenue and margin.
2. Monthly cycle
| Step | What happens |
|---|---|
| Book | Record the month's expenses from source documents |
| Bank | Reconcile the bank account |
| Funds | Match remittances to expenses |
| Tax workings | Calculate TDS on salaries, rent and fees |
| Report | Send the monthly pack to the head office |
3. Head office account reconciliation
Each inward remittance is recorded in a head office account with its bank certificate, and every expense is matched against the funds received, so the books always demonstrate that costs were covered by remittances rather than any income earned locally — the single reconciliation an auditor or AD bank will look for first.
4. Reporting for the head office
The monthly pack typically covers expenses by head, a reconciliation of funds received and spent, the cash and bank position, tax deducted, and a payroll summary, converted into the group's chart of accounts and reporting format — US GAAP, IFRS, or whatever the parent uses — including foreign exchange differences.
5. Audit and the Annual Activity Certificate
In practice, an audit is unavoidable: the Annual Activity Certificate filed with the authorised dealer bank is submitted together with audited accounts of the liaison office and a Chartered Accountant's certificate, and the ROC filings separately need the foreign company's accounts.
6. The financial year
For Indian filings, a liaison office follows the year from 1 April to 31 March, which may differ from the foreign company's own financial year used for its global accounts — the two need to be reconciled at each year end.
Frequently asked questions
What accounting does a liaison office have to keep?
A liaison office must keep books showing its remittances from the head office and every expense met from them, and prepare annual accounts for its authorised dealer bank, tax authorities and the Registrar of Companies.
How is liaison office accounting different from a branch office?
A liaison office earns no income, so its books record only remittances received and expenses paid, with no sales ledger and no profit. A branch office also has revenue, margins, and tax on profit, which a liaison office’s books never need to show.
Is an audit mandatory for a liaison office?
In practice, yes. The Annual Activity Certificate is submitted with audited accounts of the liaison office and a Chartered Accountant’s certificate, and the ROC filings also need the foreign company’s accounts.
How are remittances from the head office recorded?
Each inward remittance is recorded in a head office account with its bank certificate, and every expense is matched against the funds received, so the books always show that costs were covered by remittances rather than any income of the office.
Which expenses can a liaison office incur?
A liaison office can incur the ordinary costs of its approved liaison tasks, such as rent, salaries and travel, and these must be funded by remittances from abroad — not from any income earned in India.
Can we get reports in US GAAP, IFRS or our head office format?
Yes. The Indian books can be converted into the group’s chart of accounts and reporting format, including foreign exchange differences, and delivered as a monthly pack on the group’s closing calendar.
What is the financial year of a liaison office in India?
For Indian filings, a liaison office follows the year from 1 April to 31 March. The foreign company may use a different year for its own accounts, and the ROC filings follow the Indian year, so the two need to be reconciled each year.
How S U and Company can help
We run the monthly accounting cycle, reconcile remittances to expenses, prepare TDS workings and the head office reporting pack, and coordinate the audit that supports the Annual Activity Certificate. See our liaison office registration guide and ROC compliance guide, or explore the US-to-India entry guides.
Sources and further reading
- Institute of Chartered Accountants of India — auditing and accounting standards.
- Ministry of Corporate Affairs — company-law resources.