A foreign parent setting up in India rarely decides this deliberately. Bookkeeping goes to one firm because someone recommended them, payroll goes to a software vendor because the demo was good, and tax ends up wherever incorporation happened. Six months later nobody can answer a simple question about the numbers without three emails.
India bookkeeping and taxation work better together than apart, because Indian tax filings are generated directly from the books and a gap between the two surfaces as a notice rather than an error message. The exception is statutory audit, which Indian law requires to sit with an independent firm — that separation is not optional.
Working out how to structure your India vendors? WhatsApp us and we will map what can sit together and what has to stay separate.
Quick Summary — What Can Share a Vendor
| Function | Can sit with bookkeeping? | Note |
| GST returns | Yes | Filed directly from the books |
| TDS returns | Yes | Same ledger data |
| Income tax return | Yes | Built on the same financials |
| Payroll processing | Yes | Often a specialist tool, coordinated |
| ROC filings | Yes | Uses the audited financials |
| Statutory audit | No | Must be independent — see below |
💡 TaxKitab Tip The question to ask a prospective vendor is not “do you do tax as well?” It is “who reconciles GSTR-2B against the purchase ledger each month, and what happens when they do not match?” That single task is where books and tax actually meet. If the bookkeeper does not do it, and the tax filer assumes the bookkeeper did, nobody does — and the input tax credit quietly leaks month after month until an annual return forces the reconciliation anyway, by which point some of it is time-barred. — From our GST Filing Mistakes Guide (Book 1). Available at taxkitab.com/books (Rs 179)
Why Indian Filings Depend on the Books More Than You Expect
In many jurisdictions, tax filing is a periodic exercise performed on a closed set of accounts. In India it is closer to continuous.
GSTR-1 goes out monthly from your sales data. GSTR-3B follows, with input tax credit claimed against what suppliers have reported. GSTR-2B has to be reconciled against your purchase ledger every month, because credit that is not matched and claimed within the statutory window is lost. TDS returns run quarterly off the same ledgers.
Each of those filings is generated from the books rather than checked against them. If the person filing does not control the underlying data, they are filing on trust. That works until a supplier reports late, a credit note is missed, or a classification is wrong — at which point the filer and the bookkeeper each assume the other saw it.
Where Splitting Genuinely Causes Problems
Reconciliation falls between the chairs. The most common failure is not a mistake, it is an omission. Nobody owns GSTR-2B matching, so it does not happen.
Notices arrive at the wrong desk. A GST notice needs the underlying invoices to answer. If the person holding the invoices is not the person answering the notice, the response is slow, and Indian notice deadlines are short.
Year-end takes longer than it should. The audit requires a clean trial balance, reconciled ledgers and supported balances. When bookkeeping and tax have been running separately, year-end is when the gaps between them surface — during the audit, which is the worst possible time.
No single person can answer a question. A parent asks why the India numbers moved. The bookkeeper explains the entries, the tax vendor explains the filings, and neither can explain the difference.
Where Splitting Works Perfectly Well
Payroll is the clear case. Indian payroll platforms handle payslips, statutory deductions and employee self-service better than a general accounting team does. Running payroll on a dedicated platform while the accounting firm handles the books is normal and sensible — provided someone reconciles the payroll output into the ledgers each month and confirms the statutory deposits were made.
Company secretarial work is another. Many groups keep a company secretary or corporate services provider for ROC and board matters, working alongside the accounting team.
The principle is simple. Split by specialism, not by convenience. Then name the person responsible for making the pieces reconcile.
The One Separation Indian Law Requires
Statutory audit cannot sit with the firm that maintains the books. This is not a preference or a governance nicety — it is Section 144 of the Companies Act, 2013, which prohibits a company’s auditor from providing bookkeeping and accounting services.
The restriction extends further than most parents expect. It applies to the company, its holding company and its subsidiary — and it applies whether the service is rendered directly or indirectly. Indirectly includes through partners of the audit firm, through associated entities, and through any entity where the audit firm or its partners have significant influence or control, or whose brand or trademark they use.
For a foreign group this has a practical consequence. If your India accounting firm also keeps the books of the parent, then the auditor of the India subsidiary must be independent of that firm too.
What this looks like in practice: your accounting firm maintains the books, prepares the financials and coordinates the audit, and an independent practising Chartered Accountant is appointed as statutory auditor and signs the report. That is the compliant structure, and it is how most India subsidiaries operate.
What to Ask Before You Appoint Anyone
Ask who performs the monthly GSTR-2B reconciliation, and what the escalation is when it does not match. Ask who responds to a GST or income tax notice, and within what timeframe. Ask how payroll data reaches the ledgers, and who checks it. Ask who is your single point of contact when the parent has a question. And ask how statutory audit is handled, and who signs it.
The answers tell you whether you are buying a coordinated service or a set of disconnected tasks.
Frequently Asked Questions
Is it cheaper to split across vendors?
Often on paper, rarely in practice. The savings tend to be absorbed by the coordination effort, the reconciliation work that eventually has to be done anyway, and the cost of resolving anything that fell between the two.
Can the same firm do bookkeeping and file our GST returns?
Yes. That combination is normal and generally preferable, since the returns are produced from the books.
Can our accounting firm also audit us?
No. Indian law requires the statutory auditor to be independent of the firm maintaining the books. Your accounting firm can prepare for the audit and coordinate it, but an independent Chartered Accountant must be appointed and sign.
We already have a payroll platform. Does that conflict?
No. Payroll on a specialist platform alongside an accounting firm is a common and workable structure. Define who reconciles the payroll output into the ledgers each month.
Our India team handles registrations internally. Is that a problem?
Not in itself. Just confirm that the internal owner is tracking recurring filings and not only one-off registrations, since the recurring calendar is where entities fall behind.
References
- Companies Act, 2013 — Section 144, auditor not to render certain services
- CGST Act, 2017 and CGST Rules, 2017 — return and input tax credit provisions
- Income Tax Act, 1961 — TDS return requirements
⚠️ Vendor structures should be checked against your own facts, including who audits the parent and whether any firm in the chain is related to another. Confirm your specific position with your advisor before appointing.
If you are still deciding how to run the India entity at all, EOR vs Subsidiary in India covers that choice. For what a handover actually involves when you do change firms, see Switching Accountants Mid-Year, and for the recurring calendar an India entity carries, see A UK Company With an India Subsidiary.
Related Reading
- Payroll in India for a Foreign Company: PF, ESIC, PT, TDS
- We Have Contractors in India and We’re Incorporating
- Sending Money to Your India Subsidiary
Need help with this? TaxKitab handles Global Payroll for businesses across India and overseas. Talk to us.
Call or WhatsApp: +91 7448200422 Email: info@taxkitab.com Website: taxkitab.com See our Global Desk** service or Contact us. For a complete guide to GST filing errors, see our GST Book 1 (₹179).**
