The India entity closes its statutory year on 31 March. The US parent closes in December. Most groups discover the consequence in their second year, when the auditor’s numbers and the consolidation numbers refuse to agree.
An India subsidiary of a US parent reports on two bases: Indian statutory accounts under the Companies Act for the year ending 31 March, and a monthly or quarterly reporting pack for US consolidation on the parent’s calendar. Running them as two sets of books guarantees they diverge. The workable approach is one ledger with a defined bridge — a documented reconciliation from Indian statutory numbers to the parent’s reporting basis.
Running an India entity and reporting into a US parent? WhatsApp us your year ends and we will set out where the bridge sits.
Quick Summary
| Dimension | India statutory | US consolidation |
| Year end | 31 March, by default under s.2(41) Companies Act 2013 | The parent’s year end, often 31 December |
| Framework | Accounting Standards or Ind AS, as applicable | US GAAP |
| Currency | INR | USD, with translation |
| Audit | Statutory audit, by an independent practising CA | Group audit scope set by the parent’s auditor |
| Driver | Compliance and filing | Management and SEC or lender reporting |
| Frequency | Annual, with quarterly tax compliance | Monthly or quarterly close |
💡 TaxKitab Tip Do not maintain two ledgers. Maintain one Indian ledger that satisfies the statutory requirement, and a documented bridge schedule that moves from it to the parent’s basis — currency translation, GAAP differences, intercompany eliminations, and any cut-off adjustment for the different year end, each as a named line with a reason. When the group auditor asks why the India number in the consolidation differs from the audited India accounts, that one schedule is the answer. Two ledgers cannot produce that answer; they produce two numbers and an argument.
The Financial Year Is Not Optional, But There Is a Route
Section 2(41) of the Companies Act, 2013 defines the financial year as the period ending on 31 March. For an Indian company that is the default and there is no election to change it.
One exception applies directly here. A company that is a holding company, subsidiary or associate of a company incorporated outside India may apply for a different financial year where it is needed to consolidate accounts abroad. The application goes to the Regional Director — jurisdiction moved there from the NCLT under the Companies (Amendment) Act, 2019 — in e-Form RD-1 under Rule 40 of the Companies (Incorporation) Rules, 2014, with the order filed with the ROC in Form INC-28. It must show the group relationship, the foreign company’s year, the proposed year and why consolidation requires it, with a board resolution.
Whether to pursue it is a judgment: it removes the cut-off problem permanently at the cost of an application, a wait and a transition period. Groups holding the India entity long term and reporting monthly to a December-year parent often do it once; smaller entities keep 31 March and live with the bridge.
This concerns the Companies Act year only. The tax year runs April to March regardless, so an approved change aligns the statutory accounts, not the tax computation.
Where the Two Bases Actually Diverge
Five places, in roughly descending order of how often they cause trouble.
Currency translation. Which rate applies to which balance — closing for assets and liabilities, average for income and expense, historical for equity — and where the translation difference goes, must be set once and applied consistently. An ad hoc rate each month produces a translation reserve nobody can explain.
Revenue recognition and cost-plus. Where the India entity serves the parent it is normally paid cost-plus. The margin, the cost base and the period of recognition must match on both sides; a mark-up booked in India in March and by the parent in April compounds.
Employee benefit provisions. Gratuity and leave encashment, often actuarially valued, do not map neatly onto US GAAP. A standing difference, not a timing one, and it needs a stated policy.
Fixed assets and depreciation. Schedule II useful lives may differ from group policy. Most groups keep the Indian register on Indian lives and carry a depreciation adjustment in the bridge.
Cut-off. With a 31 March statutory year and a 31 December parent year, three months of the Indian statutory year sit in the parent’s next year.
Transfer Pricing Sits Underneath All of It
The intercompany charge is not a management convenience. If the Indian entity serves its US parent it must be paid at arm’s length, and both tax authorities will test the margin.
Two consequences for the books. The cost base must be identifiable and supportable, so the Indian ledger has to separate costs that enter the cost-plus base from those that do not. And the charge needs documentation contemporaneous with the year, not assembled when a question arrives.
Where the parent reimburses costs with no margin, expect a challenge — the commonest transfer pricing adjustment in this structure, covered as a structural decision in who files what, and where, for a US company with an India team.
The Entity Files Even When Nothing Happened
An Indian subsidiary with no revenue still has ROC annual filings, a statutory audit, an income tax return and its registrations. A dormant year is not a filing holiday — see the India entity that files even with no revenue.
And one structural point: the firm that maintains the books cannot sign the statutory audit. It is signed by an independently appointed practising chartered accountant — a requirement, not a preference, explained in books and taxation with the same firm.
What a Good Monthly Pack Contains
If the parent is going to rely on the India numbers between statutory years, the pack has to carry enough to be relied on.
Trial balance in INR and USD with the rates used. P&L and balance sheet on the group’s chart of accounts, mapped to the Indian chart. The bridge schedule with each reconciling item named. Intercompany balances agreed to the parent’s ledger, not merely reported. Headcount and payroll cost. Statutory compliance status — filed and due. An open items list.
That is more than most India entities send, and it is the difference between a parent that trusts the India number and one that re-does it. The detail is in monthly reporting from an India subsidiary, and the year-end question in India’s financial year versus the parent’s.
How We Work on This
We maintain the Indian ledger, produce the statutory accounts for the independent auditor, and build and run the bridge and the monthly pack for the parent.
The US side — consolidation treatment, GAAP positions, transfer pricing documentation on the US side, and anything before the IRS — sits with our US partner, an IRS Enrolled Agent, under a separate engagement with you. The statutory audit in India is signed by an independent practising CA, separately appointed.
Frequently Asked Questions
Can our India subsidiary use a December year end? Only with Regional Director approval under the proviso to Section 2(41), which is available to a subsidiary of a foreign company that needs it for consolidation abroad. The tax year remains April to March either way.
Ind AS or the older Accounting Standards? It depends on size and status under the Companies (Indian Accounting Standards) Rules. Most small foreign subsidiaries remain on Accounting Standards — confirm for your entity rather than assuming.
Who audits the India entity? Not us. The firm that keeps the books cannot audit them. We prepare for the audit and handle queries; an independent practising CA signs it.
What exchange rate should the consolidation use? Set a policy — typically closing rate for monetary balance sheet items, period average for P&L, historical for equity — name the rate source, and apply it every month.
How long should the bridge schedule be? Shorter each year. Fifteen items in year one is normal; fifteen in year three means the underlying policies were never aligned.
Can we use the parent’s chart of accounts in India? Map to it, yes. Replace the Indian chart with it, no — the statutory format and schedules have their own requirements.
References
- Companies Act, 2013 — Section 2(41) and its proviso; Schedule II (depreciation); Section 144 (prohibited services by an auditor)
- Companies (Amendment) Act, 2019 — transfer of jurisdiction over financial year applications from the NCLT to the Regional Director
- Companies (Incorporation) Rules, 2014, Rule 40 — e-Form RD-1; Form INC-28 for filing the order
- Income-tax Act, 2025 — tax year April to March; transfer pricing provisions on international transactions with associated enterprises
⚠️ Applicability of Ind AS, the audit scope and the transfer pricing method depend on the entity’s own facts, and the Regional Director process is discretionary. Confirm your position with your Indian advisers and the group auditor before changing year end or reporting basis.
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