Statutory Audit of a US Subsidiary in India, Timeline and Penalties

Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.

A US company's Indian subsidiary needs a statutory audit every year under sections 139 to 148 of the Companies Act, 2013, with no size threshold. Only a Chartered Accountant or a CA firm practising in India can sign it, under section 141. The audit covers the year ending 31 March, even when the US parent closes on 31 December. The AGM adopts the accounts within six months, and AOC-4 follows within 30 days. Form 3CEB, or Form 48 from tax year 2026-27, sits alongside.

This page is for US parents and their Indian finance teams. It covers the auditor, the year end clash, the US GAAP bridge, CARO 2020, the tax filings, a month by month timeline and the penalties. INR 1,00,000 is one lakh (100,000) and INR 1 crore is 10 million.

What does the statutory audit of a US subsidiary in India involve?

The Indian subsidiary prepares its own financial statements for the year ending 31 March, under Indian accounting standards. An Indian Chartered Accountant firm audits them and reports to the shareholders under section 143. The members adopt them at the AGM, and the company files them with the Registrar of Companies (ROC) in Form AOC-4.

Chapter X of the Companies Act, 2013 governs the audit. Section 139 applies to every company incorporated in India. No turnover, capital or profit threshold switches it off.

The US parent's size changes nothing here. A wholly owned subsidiary cannot be a "small company", because the proviso to section 2(85) excludes holding and subsidiary companies. Explanation (c) to section 2(87) says "company" includes any body corporate, so a Delaware parent counts.

The filings below run alongside the audit on the same books.

Item	Law or rule	Deadline for FY 2025-26
Statutory audit and report	Companies Act, 2013, sections 139 to 148	Before the AGM
AGM adopts the accounts	Section 96(1)	30 Sep 2026
AOC-4 (or AOC-4 XBRL)	Section 137(1)	30 days after the AGM
MGT-7 annual return	Section 92(4)	60 days after the AGM
Tax audit report, Forms 3CA and 3CD	Section 44AB, Income Tax Act, 1961	31 Oct 2026 with Form 3CEB; 21 Oct 2026 without
Transfer pricing report, Form 3CEB	Section 92E, Income Tax Act, 1961	31 Oct 2026
Reporting pack to the US parent	Group instructions	Parent's timetable

Our guide to the statutory audit of a foreign owned Indian subsidiary covers the rules for every corridor.

If the parent is a UK company, our guide to the statutory audit of a UK subsidiary shows how the Indian audit stays separate from the group audit.

Who can audit a US company's Indian subsidiary?

Only a Chartered Accountant in practice can sign, or a firm or LLP whose partners practising in India are mostly Chartered Accountants. Section 141(1) sets this rule, and the Institute of Chartered Accountants of India (ICAI) issues the certificate of practice. A US CPA firm cannot sign the Indian report, but its Indian network firm can.

Section 2(17) defines a chartered accountant as a member under the Chartered Accountants Act, 1949 who "holds a valid certificate of practice". Under section 141(2), only partners who are Chartered Accountants may sign for a firm. A US partner of the global network cannot sign, even when the group auditor leads the relationship.

Section 141(3) disqualifies several people. The ones that matter most for a US group are:

1. A body corporate other than an LLP, so the network's Indian advisory company cannot audit.
2. An officer or employee of the company.
3. A person who holds the company's securities. A relative may hold up to INR 1,00,000 in face value (rule 10 of the Companies (Audit and Auditors) Rules, 2014, the Audit Rules).
4. A person with a business relationship with the company, its holding company or a fellow subsidiary, as rule 10(4) defines it.
5. A person or partner who already holds more than twenty company audits. When a private company appoints its auditor, G.S.R. 464(E) of 5 Jun 2015 narrows that count. It leaves out one person companies, dormant companies, small companies and private companies with paid up capital below INR 100 crore.
6. A person who "directly or indirectly" renders any service listed in section 144 to the company, its holding company or its subsidiary company.

The last item reaches the US parent. If the Indian firm's network does the US parent's internal audit or bookkeeping, the Indian firm may be barred. Our note on whether the parent's global audit firm can audit the Indian subsidiary works through that test.

How is the auditor appointed, and when is ADT-1 filed?

The board appoints the first auditor within 30 days of incorporation under section 139(6). The first auditor serves until the first AGM. At that AGM, the members appoint an auditor until the end of the sixth AGM. The company files Form ADT-1 within 15 days of that meeting.

If the board misses the 30 days, it tells the members, who appoint the auditor at an extraordinary general meeting within 90 days. Before any appointment, the auditor gives written consent and a certificate of eligibility under the first proviso to section 139(1).

Section 139(1) ties the 15 day ADT-1 notice to the AGM appointment. Practitioners also file ADT-1 for the first auditor, and so do we, within 15 days of the board meeting. Our batch note on the first auditor and ADT-1 covers the form fields.

Rotation reaches some US funded subsidiaries. Rule 5 of the Audit Rules sets the classes. Private companies with paid up capital of INR 50 crore or more must rotate. G.S.R. 621(E) of 22 Jun 2017 raised that limit from INR 20 crore. Companies with public borrowings or deposits of INR 50 crore or more also rotate.

Once rotation applies, an individual auditor serves one term of five years and a firm serves two. Rule 6(3) of the Audit Rules bars an incoming firm from "the same network" as the outgoing firm. A US parent that funds growth through equity should test rule 5 after every allotment.

Can the Indian subsidiary follow the US parent's December year end?

Only with approval. Section 2(41) fixes the financial year as the period ending 31 March. Its first proviso lets a subsidiary of a company incorporated outside India use a different period. It must need that period to consolidate its accounts abroad, and the Central Government must approve it.

The Companies (Amendment) Act, 2019 moved this power from the Tribunal to the Central Government. The application now goes to the Regional Director in Form RD-1, who decides it under rule 40 of the Companies (Incorporation) Rules, 2014. The Companies (Incorporation) Fourth Amendment Rules, 2018 inserted rule 40. After approval, the company files the order with the ROC in Form INC-28.

A company incorporated on or after 1 January closes its first year on 31 March of the following year. A subsidiary incorporated on 10 Feb 2026 therefore closes its first year on 31 Mar 2027.

We advise most US parents to keep 31 March. Three calendars apply to a US owned subsidiary, and only one of them can move:

1. The Companies Act year, 31 March unless the Regional Director approves another date.
2. The Indian tax year under section 3 of the Income Tax Act, 2025, which always runs from 1 April to 31 March.
3. The US tax year of the subsidiary as a foreign corporation. The IRS instructions for Form 5471 say it generally must match the majority US shareholder's tax year.

Moving the Companies Act year to December leaves the tax year on March. The company would then need two closes and two sets of audited or tax audited figures.

Option	Companies Act year	Indian tax year	Audits each year	Our view
Keep 31 March, send a December pack	1 Apr to 31 Mar	1 Apr to 31 Mar	Statutory audit and tax audit on the same March figures; component work on the December pack if the group auditor asks	Default for most US groups
Apply on Form RD-1 for 31 December	1 Jan to 31 Dec, once approved	Still 1 Apr to 31 Mar	Statutory audit on December figures; tax audit on March figures	Rarely worth it
Keep 31 March and ask the group auditor to rely on the March audit	1 Apr to 31 Mar	1 Apr to 31 Mar	Statutory audit; group auditor rolls forward to December	Works for a small component

Our batch note on a 31 March year end under a December parent sets out the consolidation timetable in more detail.

How do US GAAP reporting packs map to Ind AS or Indian AS?

The US parent consolidates under US GAAP. The Indian statutory accounts follow either the Companies (Accounting Standards) Rules, 2021 (Indian AS) or Indian Accounting Standards (Ind AS). Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 decides which, on the Indian company's own figures.

An unlisted subsidiary moves to Ind AS when its net worth reaches INR 250 crore. It also moves when an Indian holding, subsidiary, joint venture or associate company applies Ind AS. Section 2(20) limits "company" to Indian companies. So a large US parent never pulls its subsidiary onto Ind AS.

Most US owned subsidiaries therefore keep Indian AS books and send a US GAAP pack. Any company may adopt Ind AS voluntarily under rule 4(1)(i), but it cannot go back (rule 4(9)). The bridge items below come up in most US packs.

Area	US GAAP (pack)	Indian AS (statutory, most subsidiaries)	Ind AS (statutory, larger subsidiaries)
Office leases	ASC 842: right of use asset and lease liability; operating lease cost straight line	AS 19: operating lease rent expensed straight line; nothing on the balance sheet	Ind AS 116: right of use asset and liability; depreciation plus interest
Revenue on services to the parent	ASC 606 five step model	AS 9: proportionate completion or completed service contract method	Ind AS 115 five step model
Gratuity actuarial gains and losses	ASC 715: usually other comprehensive income first, then amortised	AS 15: recognised at once in profit or loss	Ind AS 19: other comprehensive income, never recycled
Deferred tax	ASC 740: temporary differences, valuation allowance	AS 22: timing differences; virtual certainty for losses	Ind AS 12: temporary differences; probable test
Parent RSUs granted to Indian staff	ASC 718: cost usually recorded in the employing subsidiary's pack	ICAI Guidance Note on share based payments; agree the treatment with the auditor	Ind AS 102: the subsidiary records the cost even if the parent settles

Keep one GAAP bridge from the Indian trial balance to the pack, and update it every quarter. Indian adjustments made after the pack goes out must flow back to the group. Our financial reporting guide for foreign subsidiaries and our MIS report format for a foreign parent show the layouts we use.

Does CARO 2020 apply to a US owned subsidiary?

Usually yes. The Companies (Auditor's Report) Order, 2020 (CARO 2020, S.O. 849(E) of 25 Feb 2020) applies to every company except banks, insurers, section 8 companies, one person companies, small companies and qualifying private companies. A subsidiary can never be a small company, so only the private company exemption helps.

That exemption in paragraph 1(2)(v) needs all four tests at once:

1. The company is a private company and not a subsidiary or holding company of a public company.
2. Its paid up capital plus reserves and surplus is INR 1 crore or less on the balance sheet date.
3. Its borrowings from banks or financial institutions never exceed INR 1 crore during the year.
4. Its total revenue under Schedule III is INR 10 crore or less for the year.

Is a subsidiary of a US listed parent a subsidiary of a "public company"? In our reading, no. Section 2(71) defines a public company by reference to section 2(20), which covers only Indian companies. Record the position agreed with the auditor in the engagement letter.

G.S.R. 880(E) of 1 Dec 2025 raised the small company limits to INR 10 crore of capital and INR 100 crore of turnover (PIB). The change does not help a subsidiary.

When CARO applies, two clauses catch US owned subsidiaries most often. Clause 3(vii) asks whether the company deposited statutory dues on time, including TDS on payments to the US parent. Clause 3(xiii) asks whether related party transactions comply with sections 177 and 188 and appear in the accounts.

What does the audit trail rule mean for a US hosted ERP?

Since 1 Apr 2023, a company that keeps its books on software must use software that records an audit trail of every transaction. The edit log must carry the date of each change, and nobody may disable it. The auditor reports on this under rule 11(g) of the Audit Rules. A cloud ERP run from the US must meet the same test.

The proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 (the Accounts Rules) holds the requirement. MCA inserted it by G.S.R. 205(E) of 24 Mar 2021, and G.S.R. 206(E) of the same date added the auditor's duty in rule 11(g). Both took effect for financial years from 1 Apr 2023 after two deferrals.

Three other parts of rule 3 matter when the server sits in the US:

1. The books must stay accessible in India at all times (rule 3(1)).
2. A daily backup must sit on servers physically located in India (proviso to rule 3(5), G.S.R. 624(E) of 5 Aug 2022).
3. Every year, the company gives the ROC the service provider's name, IP address and location (rule 3(6)). It also names the person in India who controls the books.

Section 128(5) keeps books for eight financial years, so plan log retention for eight years. Our batch note on the audit trail and edit log rule lists the evidence auditors ask for.

How do the tax audit and Form 3CEB fit with the statutory audit?

They are separate reports built on the audited accounts. The tax audit reports tax particulars under section 44AB of the Income Tax Act, 1961 for FY 2025-26. Section 63 of the Income Tax Act, 2025 takes over from tax year 2026-27. Form 3CEB, later Form 48, certifies the subsidiary's transactions with the US parent at arm's length.

A company needs a tax audit when turnover exceeds INR 1 crore. The limit is INR 10 crore when cash receipts and cash payments are each 5 percent or less. Almost every US owned subsidiary has international transactions with its parent, so it also files the transfer pricing report.

The timing link sits in section 63(4) of the 2025 Act, as it did in the proviso to section 44AB. The statutory audit must be complete before the tax audit's specified date, one month before the return date. A late board approval therefore makes the tax audit late too.

For FY 2025-26, CBDT Circular No. 07/2026 of 28 Sep 2026 moved only the non transfer pricing dates. A subsidiary with a US parent usually stays on the transfer pricing dates.

Filing	FY 2025-26 (AY 2026-27)	Tax year 2026-27	Provision (1961 Act / 2025 Act)
Tax audit report, transfer pricing case	31 Oct 2026, Forms 3CA and 3CD	31 Oct 2027, Form 26	44AB / 63
Transfer pricing report	31 Oct 2026, Form 3CEB	31 Oct 2027, Form 48	92E / 172 with rule 85
Return, transfer pricing case	30 Nov 2026, ITR-6	30 Nov 2027	139(1) / 263(1)(c)
Tax audit report, no international transactions	21 Oct 2026 under Circular No. 07/2026	30 Sep 2027, Form 26	44AB / 63

Sources: the CBDT forms guidance and Circular No. 07/2026.

The statutory accounts and the transfer pricing report must agree. Suppose Form 3CEB shows a service fee of INR 48 crore from the parent. The revenue note and the related party note should show the same figure. Our guides to Form 3CEB and transfer pricing between a US parent and an Indian subsidiary cover the study and the methods.

Which US rules reach the Indian audit?

Three US rules can shape the Indian engagement, but none lets a US firm sign the Indian report. PCAOB registration applies when the Indian firm plays a substantial role in a US listed parent's audit. SEC independence rules cover the subsidiary as an affiliate. IRS Form 5471 needs US GAAP figures for the subsidiary.

PCAOB registration

PCAOB Rule 2100 requires every public accounting firm that plays a substantial role in an issuer's audit to register, foreign firms included. Under Rule 1001(p)(ii), that includes most of the audit work on a component holding at least 20 percent of group assets or revenues. It also covers material services of 20 percent or more of engagement hours or fees.

SEC independence

The SEC staff FAQs on Rule 2-01 of Regulation S-X say affiliates include "the audit client's parents and subsidiaries". So an Indian subsidiary of an SEC registrant falls inside the group auditor's independence perimeter. The Indian firm must then meet both section 144 and the SEC list of prohibited services.

Form 5471

The US parent reports the subsidiary on Form 5471 with its US return. The IRS instructions ask for the income statement "in the foreign corporation's functional currency in accordance with U.S. GAAP". The December pack usually serves both the consolidation and Form 5471.

What is the month by month timeline for a December year end parent?

The table runs through calendar 2026. The US parent closes on 31 December, and the Indian subsidiary closes FY 2025-26 on 31 Mar 2026. It assumes a transfer pricing case and an AGM on the last permitted day. Earlier AGMs pull AOC-4 and MGT-7 forward.

Month (2026)	Indian statutory and tax work	US parent work	Rule
January	Q3 TDS statement on payments to non residents (Form 27Q) by 31 Jan; December pack from Indian books	Calendar 2025 close; group auditor's component work on the December pack	Rule 31A, Income Tax Rules, 1962
February	Sign the audit engagement letter; agree the calendar; confirm audit trail logging and Indian backup	Group audit instructions for calendar 2026	Rule 3, Accounts Rules
March	Last advance tax instalment 15 Mar; year end 31 Mar; stock and asset counts; send intercompany confirmations	Q1 ends on the same day as the Indian year	Section 2(41)
April	Close the books; book the transfer pricing true up; reconcile intercompany balances	Q1 pack	Group instructions
May	Statutory audit fieldwork; Q4 Form 27Q by 31 May	Q1 review closes	Rule 31A
June	Fieldwork ends; draft accounts and CARO responses; DPT-3 by 30 Jun	Q2 planning	Rule 16, Companies (Acceptance of Deposits) Rules, 2014
July	FLA return to RBI by 15 Jul, on audited or provisional figures; board approves accounts; auditor signs	Q2 pack (30 Jun)	RBI FLA FAQ
August	Board's report; tax audit and Form 3CEB fieldwork; AGM notice with 21 clear days	Q2 review	Section 101(1)
September	AGM by 30 Sep; ADT-1 within 15 days if the AGM appoints or reappoints the auditor	Q3 close planning	Sections 96(1), 139(1)
October	Tax audit report and Form 3CEB by 31 Oct; AOC-4 within 30 days of the AGM	Q3 pack (30 Sep)	Sections 44AB, 92E, 137(1)
November	ITR-6 by 30 Nov; MGT-7 within 60 days of the AGM; master file if the group crosses the limits	Year end planning	Sections 139(1), 92(4)
December	Retest XBRL, rotation and CARO limits after any capital injection; plan the December pack	Calendar 2026 year end	XBRL Rules, rule 3

From tax year 2026-27, Form 144 replaces Form 27Q under rule 219 of the Income Tax Rules, 2026. The quarterly dates stay the same. The RBI FLA FAQ (updated 1 Jul 2026) lets a company file on provisional figures and revise after the audit. Our compliance calendar for 2026-27 lists the other dates.

The Q1 overlap helps a calendar year parent. Its first quarter ends on 31 March, the same day as the Indian year. One hard close then serves the Indian audit and the US Q1 pack.

When are AOC-4 and MGT-7 due?

AOC-4 is due within 30 days of the AGM under section 137(1), and MGT-7 within 60 days under section 92(4). The AGM falls within six months of the year end, so by 30 Sep 2026 for FY 2025-26. A first AGM falls within nine months of the first year end.

A US funded subsidiary often files AOC-4 XBRL instead of plain AOC-4. Rule 3 of the Companies (Filing of Documents and Forms in XBRL) Rules, 2015 sets the tests. XBRL applies at INR 5 crore of paid up capital, INR 100 crore of turnover, or on Ind AS. Paid up capital counts face value only, not share premium.

The ROC can extend an AGM, other than the first, by up to three months for a special reason under section 96(1). MCA has allowed AGMs by video conference through a series of general circulars, so check that the circular in force covers your meeting date. The section 96 date applies either way. None of MCA's 2026 general circulars 01/2026 to 04/2026 moved the AGM date.

Our AOC-4 and MGT-7 guide covers the attachments and the V3 portal steps.

What are the penalties for a late audit or late filings?

No single penalty covers a late audit. The delay pushes the AGM, AOC-4, MGT-7 and the tax filings past their dates, and each carries its own charge. Accounts or annual returns unfiled for three continuous years disqualify every director under section 164(2)(a), US directors included, for five years.

Default	Provision	Company (INR)	Officers (INR)
No auditor appointed, or other breach of sections 139 to 146	Section 147(1)	Fine 25,000 to 5,00,000	Fine 10,000 to 1,00,000
AGM not held on time	Section 99	Fine up to 1,00,000, plus up to 5,000 a day	Same
AOC-4 late	Section 137(3)	10,000 plus 100 a day, capped at 2,00,000	10,000 plus 100 a day after the first, capped at 50,000
MGT-7 late	Section 92(5)	10,000 plus 100 a day after the first, capped at 2,00,000	10,000 plus 100 a day after the first, capped at 50,000
ROC additional fee on AOC-4 or MGT-7	Companies (Registration Offices and Fees) Rules, 2014	100 a day per form	Not applicable
Tax audit report late, FY 2025-26	Section 271B, Income Tax Act, 1961	Lower of 0.5% of turnover or 1,50,000	Not applicable
Form 3CEB late, FY 2025-26	Section 271BA, Income Tax Act, 1961	1,00,000	Not applicable
Form 26 or Form 48 late, tax year 2026-27 onward	Section 428(c) and (d), Income Tax Act, 2025	75,000 or 1,50,000; 50,000 or 1,00,000	Not applicable

The section 271B and 271BA penalties allow a reasonable cause defence under section 273B. The 2025 Act charges are fees that arise automatically. MCA's Companies Compliance Facilitation Scheme, 2026 (CCFS-2026) ran from 15 Apr 2026 to 15 Sep 2026. General Circulars 01/2026, 03/2026 and 04/2026 set it up and extended it. It has closed, so late filers now pay the full additional fee.

Late accounts also hold up dividends, which the AGM declares from audited profits. Our guide to dividends from an Indian subsidiary to a foreign parent sets out the order of steps.

What changed in 2026

Most 2026 changes reach the tax side of the audit file. The Companies Act audit rules stayed the same, and a Bill to amend them is pending.

Area	Old position	New position	Date	Instrument
Tax audit	Section 44AB; Forms 3CA, 3CB, 3CD	Section 63; Form 26 from tax year 2026-27	1 Apr 2026	Income Tax Act, 2025; Income Tax Rules, 2026 (G.S.R. 198(E), 20 Mar 2026)
Transfer pricing report	Section 92E; Form 3CEB	Section 172; Form 48 from tax year 2026-27	1 Apr 2026	Income Tax Act, 2025; rule 85
Late tax audit and transfer pricing reports	Penalties under 271B and 271BA, with reasonable cause relief	Automatic fees under 428(c) and 428(d)	1 Apr 2026	Finance Act, 2026
FY 2025-26 dates, no transfer pricing report	Audit 30 Sep 2026; return 31 Oct 2026	Audit 21 Oct 2026; return 21 Nov 2026; transfer pricing cases unchanged	28 Sep 2026	CBDT Circular No. 07/2026
Ind AS 107, 109 and related standards	Earlier text	Contingent features in financial assets, nature dependent electricity contracts, added disclosures	12 Aug 2026	Companies (Indian Accounting Standards) Amendment Rules, 2026 (G.S.R. 725(E))
Companies Act amendments	Current Act	Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026), pending	Introduced 23 Mar 2026; Joint Committee report 3 Aug 2026	Lok Sabha, referred to a Joint Committee

The Bill was not law on 23 Oct 2026. As introduced, clause 44 would insert section 139(12). Classes of companies that meet prescribed conditions would then need no auditor. The Joint Committee presented its report on 3 Aug 2026 and recommended limiting this exemption to private companies. Even if Parliament passes the clause, nothing changes until the Central Government prescribes a class and its conditions. Until then, every subsidiary of a US company appoints an auditor.

Worked example

US Inc, a Delaware corporation with a 31 December year end, owns IndiaCo Private Limited in Bengaluru. The facts are hypothetical. IndiaCo was incorporated on 14 Aug 2024, so its first year ended on 31 Mar 2025. For FY 2025-26 it reports:

• revenue of INR 48 crore, all from software services to US Inc (FY 2024-25: INR 9 crore);
• profit before tax of INR 4.50 crore under Indian AS, after an actuarial loss of INR 30 lakh on gratuity;
• paid up capital of INR 8 crore and reserves of INR 3 crore, so net worth of INR 11 crore;
• no bank borrowings, and a five year office lease from 1 Apr 2025 at INR 1.20 crore a year, paid at each year end.

The tests

Question	Test	IndiaCo's figure	Result
Framework	Net worth INR 250 crore (rule 4, Ind AS Rules)	INR 11 crore	Indian AS
AOC-4 variant	Paid up capital INR 5 crore (XBRL Rules, rule 3)	INR 8 crore	AOC-4 XBRL
CARO 2020	Revenue INR 10 crore or less, plus three other tests	INR 48 crore	CARO applies
Internal financial controls opinion	Latest audited turnover below INR 50 crore and borrowings below INR 25 crore (G.S.R. 583(E))	FY 2024-25 turnover INR 9 crore; borrowings nil	Exempt on both limbs
Rotation	Paid up capital INR 50 crore (rule 5)	INR 8 crore	Not applicable
Tax audit and Form 3CEB	Turnover above INR 10 crore; international transactions	INR 48 crore; services to US Inc	Both needed

The dates

The first AGM met on 18 Dec 2025, inside nine months of 31 Mar 2025. It appointed the auditor until the sixth AGM, so ADT-1 was due by 2 Jan 2026. For FY 2025-26, the board approves the accounts on 24 Aug 2026 and sends notice on 1 Sep 2026. Twenty one clear days run from 2 Sep to 22 Sep, so the AGM can meet from 23 Sep. It meets on 24 Sep 2026.

AOC-4 XBRL is then due by 24 Oct 2026 and MGT-7 by 23 Nov 2026. The tax audit report and Form 3CEB are due by 31 Oct 2026, and ITR-6 by 30 Nov 2026.

The US GAAP bridge for the year to 31 Mar 2026

IndiaCo's Indian AS profit before tax is INR 4.50 crore. AS 15 put the INR 30 lakh actuarial loss through profit or loss. US Inc's policy takes it to other comprehensive income under ASC 715. The pack therefore shows profit before tax of INR 4.80 crore and an INR 30 lakh loss in other comprehensive income.

The lease does not change profit. AS 19 and ASC 842 both charge INR 1.20 crore a year on a straight line. The pack adds a right of use asset and a lease liability at commencement. At a 9 percent rate, five payments of INR 1.20 crore have a present value of INR 1.20 crore × 3.8897 = INR 4.67 crore.

The December pack

US Inc's calendar 2026 needs IndiaCo's January to December figures. Revenue for January to March 2026 (in FY 2025-26) was INR 13 crore. Revenue for April to December 2026 (in FY 2026-27) was INR 39 crore. Calendar 2026 revenue is INR 52 crore, or USD 5.91 million at an assumed rate of INR 88 to the dollar.

The cost of filing late

Suppose IndiaCo files AOC-4 XBRL on 3 Dec 2026, 40 days late. The additional fee is INR 100 × 40 = INR 4,000. If the ROC also adjudicates under section 137(3), the company faces INR 10,000 + (INR 100 × 40) = INR 14,000. The officer in charge faces INR 10,000 + (INR 100 × 39) = INR 13,900.

Suppose the tax audit report and Form 3CEB also go in on 9 Nov 2026, nine days late. Section 271B charges the lower of 0.5 percent × INR 48 crore = INR 24,00,000, or INR 1,50,000. The penalty is INR 1,50,000. Section 271BA adds INR 1,00,000. The same delay in tax year 2026-27 would cost INR 75,000 + INR 50,000 = INR 1,25,000 in automatic fees.

Common mistakes

1. Asking the US auditor to sign the Indian report. Fix: appoint an Indian CA firm that passes sections 141 and 144.
2. Filing the US GAAP pack as the Indian accounts. Fix: keep Schedule III accounts and a quarterly GAAP bridge.
3. Assuming Ind AS because the parent is large. Fix: test the Indian company's own net worth each year, share premium included.
4. Applying for a December year without checking the tax year. Fix: model two closes before filing Form RD-1.
5. Missing the switch to AOC-4 XBRL after a capital injection. Fix: test the XBRL Rules and rule 5 rotation after every allotment.
6. Booking the transfer pricing true up after the audit. Fix: book the cost plus adjustment in the year end accounts.
7. Letting the network do the parent's internal audit unchecked. Fix: get a written section 144 confirmation that covers the US parent.
8. Running the US ERP without Indian backup evidence. Fix: get written proof of logging, Indian backup and the rule 3(6) details.
9. Leaving US directors without digital signatures. Fix: renew signatures before July. Our guide on foreign national directors covers the DIN and signature.
10. Waiting for the audit to file the FLA return. Fix: file by 15 July on provisional figures. Once the audit is signed, ask RBI for permission on the FLAIR portal and file the revised return after approval.

Checklist

1. Appoint the first auditor by board resolution within 30 days of incorporation, and file ADT-1 within 15 days.
2. Confirm the auditor's eligibility under section 141 and its independence under section 144, including services to the US parent.
3. Decide the financial year, and keep 31 March unless a December year justifies a Form RD-1 application.
4. Test Ind AS, CARO 2020, XBRL and rotation each year on the Indian company's own figures.
5. Agree one calendar covering the US packs, the statutory audit, the tax audit and the AGM.
6. Obtain written evidence of the audit trail, Indian access and daily Indian backup before 31 March.
7. Send intercompany confirmations to the US parent in March and reconcile them in April.
8. Book the transfer pricing true up before the books close.
9. File the FLA return by 15 July, on provisional figures if needed.
10. Approve the accounts at a board meeting, and have the auditor sign before the AGM notice goes out.
11. Hold the AGM by 30 September, and file ADT-1 within 15 days of any auditor appointment.
12. File the tax audit report and Form 3CEB by 31 October, or Form 26 and Form 48 from tax year 2026-27.
13. File AOC-4 within 30 days and MGT-7 within 60 days of the AGM.
14. Reconcile the December pack to the Indian ledgers and send the US GAAP figures for Form 5471.

To have us map this calendar to your subsidiary, send the incorporation certificate and last AOC-4 through our company compliance page.

Frequently Asked Questions

Can our US audit firm sign the Indian subsidiary's audit report?+

No. Section 141(1) of the Companies Act, 2013 allows only a Chartered Accountant in practice in India. A firm qualifies if most of its partners practising in India are Chartered Accountants. The US firm's Indian network firm can sign if it passes sections 141 and 144. Only its Chartered Accountant partners can sign for it.

Does a US subsidiary with no revenue still need an audit in India?+

Yes. Section 139 has no revenue, capital or profit threshold. A subsidiary that has only received share capital still appoints an auditor and files audited accounts in AOC-4. The audit is short, and CARO 2020 may not apply if all four paragraph 1(2)(v) tests are met.

Can the Indian subsidiary use a 31 December year end like its US parent?+

Only with approval under the first proviso to section 2(41). The company applies to the Regional Director in Form RD-1 under rule 40 of the Companies (Incorporation) Rules, 2014. The tax year under section 3 of the Income Tax Act, 2025 still runs from April to March. Most US groups therefore keep 31 March.

When is ADT-1 due for a US owned subsidiary?+

Within 15 days of the AGM that appoints or reappoints the auditor, under section 139(1). The board appoints the first auditor within 30 days of incorporation under section 139(6). Practitioners also file ADT-1 for the first auditor. We file it within 15 days of the board meeting, which puts the date on the ROC record.

Does the Indian subsidiary prepare accounts under US GAAP?+

No. The statutory accounts follow Indian AS under the Companies (Accounting Standards) Rules, 2021, or Ind AS where rule 4 of the Ind AS Rules applies. The subsidiary sends the US parent a separate US GAAP reporting pack. A quarterly bridge from the Indian trial balance keeps the two consistent.

Does a large US parent force its Indian subsidiary onto Ind AS?+

No. Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 tests the Indian company's own net worth and its Indian group companies. The limit for an unlisted company is INR 250 crore. Section 2(20) limits "company" to Indian companies, so the US parent's size does not count. The subsidiary may still adopt Ind AS voluntarily.

Does CARO 2020 apply to the subsidiary of a US company?+

Usually yes. A subsidiary cannot be a small company under section 2(85). Only the private company exemption in paragraph 1(2)(v) of CARO 2020 can help. It needs capital plus reserves and bank borrowings each within INR 1 crore, and revenue within INR 10 crore.

Is Form 3CEB part of the statutory audit?+

No. Form 3CEB is a separate accountant's report under section 92E of the Income Tax Act, 1961, due 31 Oct 2026 for FY 2025-26. Form 48 under section 172 of the Income Tax Act, 2025 replaces it from tax year 2026-27. It uses the audited accounts, so the statutory audit must finish first.

Does the Indian firm need PCAOB registration?+

Only if it plays a substantial role in the audit of a US issuer. Under PCAOB Rule 1001(p)(ii), that means most of the audit work on a component holding at least 20 percent of group assets or revenues. Material services of at least 20 percent of engagement hours or fees also count. Rule 2100 then requires registration, foreign firms included.

Do SEC independence rules apply to the Indian subsidiary?+

Yes, when the US parent is an SEC registrant. SEC staff guidance on Rule 2-01 of Regulation S-X treats the audit client's subsidiaries as affiliates. The Indian network firm must then avoid services such as bookkeeping and internal audit outsourcing. Section 144 applies on top.

Is the FLA return filed on audited figures?+

Not necessarily. The RBI FAQ on the Foreign Liabilities and Assets return (updated 1 Jul 2026) sets 15 July. It accepts audited or unaudited figures. A company that files on provisional figures must revise the return once the audit is complete, whatever the size of the change.

What is the penalty for filing AOC-4 late?+

The ROC charges an additional fee of INR 100 a day on top of the normal fee. Under section 137(3), the company also faces a penalty of INR 10,000 plus INR 100 a day, capped at INR 2,00,000. The managing director, CFO or director in charge faces up to INR 50,000.

Does the US parent's Form 5471 use the Indian audited accounts?+

Not directly. The IRS instructions for Form 5471 ask for the income statement in the foreign corporation's functional currency under US GAAP. The December reporting pack usually supplies those figures. Reconcile it to the Indian audited accounts so the two filings tell the same story.

Sources

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