# Year End Closing Checklist for an Indian Subsidiary at 31 March

> Source: https://krystal7.com/insights/year-end-closing-checklist-indian-subsidiary-31-march
> Publisher: Krystal7 Consultants (Krystal7 Innovations Private Limited), Gurugram, India
> Author: CA Nandini
> Published: 20 Mar 2026; updated 24 Oct 2026
> Summary: A 31 March year end closing checklist for an Indian subsidiary, with advance tax by 15 March, March TDS by 30 April and the FLA return by 15 July.

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

## AI Overview Summary

- Pay the final advance tax instalment by 15 March, so the total reaches 100 percent of the estimated tax under section 408 of the Income Tax Act, 2025. A shortfall costs 1 percent interest.
- Deduct TDS on year end provisions when you book them, because section 393(11) treats a credit to a provision or suspense account as a credit to the payee. Deposit March TDS by 30 April.
- Pay micro and small suppliers within the MSMED Act limit, at most 45 days. Section 37(2)(g) allows the expense only in the year of payment if dues stay unpaid beyond that limit.
- Raise transfer pricing true up invoices before 31 March so they fall in the right tax year. File the EDF for a software services true up within 30 days from invoice month end.
- File the FLA return with RBI by 15 July on end March figures. Hold the AGM by 30 September and file AOC-4 within 30 days and MGT-7 within 60 days of it.

**A 31 March year end close for an Indian subsidiary runs from February to July. Pay the last advance tax instalment by 15 March under section 408 of the Income Tax Act, 2025. Deduct TDS on year end provisions and deposit March TDS by 30 April. Restate foreign currency balances, clear micro and small supplier dues within 45 days, and raise transfer pricing true ups before 31 March. The FLA return follows by 15 July.**

This page gives the tasks, the owner and the due date for each step, in the order a finance team meets them. The dates are for the close on 31 Mar 2027, the first year end under the Income Tax Act, 2025. The 1961 Act section for each task appears alongside, for anyone still finishing FY 2025-26.

## What goes on a year end closing checklist for an Indian subsidiary?

A year end closing checklist lists every task between the last advance tax instalment and the FLA return, with an owner and a due date. For an Indian subsidiary of a foreign parent it covers tax, TDS, foreign exchange and MSME dues. It also covers intercompany balances, GST, inventory, board approvals, the audit and RBI reporting.

We split the close into five phases. February is for planning. The first half of March is for tax payments and confirmations. The second half of March is for cut off and counts. April is for provisions, TDS and the trial balance. May to July is for the audit, the board and the regulators.

| Phase | Main tasks | Owner | Due date (31 Mar 2027 close) | Law |
|---|---|---|---|---|
| February | Agree the close calendar with the auditor and the parent; re estimate the year's income; list MSME suppliers | Finance controller | 28 Feb 2027 | Section 406, Income Tax Act, 2025 |
| 1 to 15 March | Pay the last advance tax instalment; send intercompany confirmations; compute the transfer pricing true up | Tax lead; group finance | 15 Mar 2027 | Section 408, Income Tax Act, 2025 |
| 16 to 31 March | Raise true up invoices; pay MSME dues; agree cut off; count stock, cash and assets | Finance controller; operations | 31 Mar 2027 | Section 37(2)(g), Income Tax Act, 2025 |
| April | File the LUT for 2027-28 before the first export; book provisions with TDS; restate foreign currency balances; deposit March TDS; file the EDF for March services invoices; file MSME Form 1 | Finance controller; tax lead | 30 Apr 2027 | Section 393; rule 218(2), Income Tax Rules, 2026; rule 96A, CGST Rules |
| May to July | File Q4 TDS statements; finish the audit; approve the accounts; file DPT-3 and the FLA return | Tax lead; company secretary; auditor | 31 May, 30 Jun and 15 Jul 2027 | Rule 219; rule 16, Deposits Rules; RBI FLA FAQ |
| August to December | AGM, AOC-4 and MGT-7; tax audit, Form 48 and return; GSTR-9 | Company secretary; tax lead | 30 Sep to 31 Dec 2027 | Sections 92, 96 and 137, Companies Act, 2013; section 263, Income Tax Act, 2025 |

Sources: the sections and rules named; RBI FAQ on the FLA return, updated 1 Jul 2026.

## When is the final advance tax instalment due?

The final instalment is due by 15 March. By that date the company must have paid the whole of its estimated tax for the year. The table in section 408(1) of the Income Tax Act, 2025 sets this. Any amount paid by 31 March still counts as advance tax under section 408(3). A shortfall at 15 March still costs interest.

Section 425(1) charges simple interest of 1 percent on the amount short at 15 March. A shortfall at 15 June, 15 September or 15 December carries 3 percent. Section 425(2) removes the charge on the June shortfall if the company paid 12 percent by 15 June. It does the same for the September shortfall if the company paid 36 percent by 15 September. The base is the "tax due on the returned income". That is the tax on the declared income less TDS, TCS and certain credits.

The March re estimate is the most important one for a cost plus subsidiary. By February the company knows its costs for eleven months and its transfer pricing true up. We rebuild the estimate in the last week of February and pay the balance in the first week of March. The section 404 threshold still applies, so a company with tax under INR 10,000 for the year pays no advance tax.

For FY 2025-26, the same dates applied under sections 208 to 211 and 234C of the Income Tax Act, 1961. Our batch note on [advance tax due dates](/insights/advance-tax-for-companies-india-due-dates) works through the instalments and the interest for a cost plus subsidiary.

## Does TDS apply to year end provisions?

Yes, where the payee and the amount are known. Section 393(1)(c) of the Income Tax Act, 2025 requires TDS at the time of credit or payment, whichever is earlier. Section 393(11) treats a credit to any account, "whether called "suspense account" or by any other name", as a credit to the payee. A year end provision is such a credit.

The company deposits TDS on March credits by 30 April. Rule 218(2) of the Income Tax Rules, 2026 sets that date, as old rule 30 did. The quarterly statements for January to March follow by 31 May under rule 219: Form 140 for residents and Form 144 for non residents.

Missing the TDS costs a deduction. Section 35(b)(i) disallows 30 percent of a sum payable to a resident without TDS. The same applies if TDS was not paid by the return due date. Section 35(b)(ii) disallows the whole sum payable to a non resident in the same case. The deduction returns in the year the company pays the TDS.

| Year end item | TDS position | Deposit by | Risk if missed | 2025 Act (1961 Act) |
|---|---|---|---|---|
| Audit and legal fees accrued | TDS at 10 percent on professional fees above INR 50,000; 2 percent on fees for technical services | 30 Apr 2027 | 30 percent of the sum disallowed | Section 393(1) Table serial 6(iii); 35(b)(i) (194J; 40(a)(ia)) |
| Contractor and facility charges accrued | TDS at 1 or 2 percent above INR 30,000 a payment or INR 1,00,000 a year | 30 Apr 2027 | 30 percent disallowed | Serial 6(i); 35(b)(i) (194C; 40(a)(ia)) |
| Office rent accrued | TDS at 10 percent on buildings above INR 50,000 a month | 30 Apr 2027 | 30 percent disallowed | Serial 2(ii); 35(b)(i) (194-I; 40(a)(ia)) |
| Management fee or royalty payable to the foreign parent | TDS at the Act or treaty rate; Forms 145 and 146 before remitting | 30 Apr 2027 | Whole sum disallowed | Section 393(2); 35(b)(ii) (195; 40(a)(i)) |
| Leave encashment accrued | Salary TDS when paid | Month after payment | Deduction only on payment, or by the return due date | Section 37(2)(c) (43B(f)) |

Sources: sections 35, 37 and 393, Income Tax Act, 2025; Income Tax Rules, 2026 navigator (rule 218 replaces rule 30). Rates and thresholds are from the section 393 table for payers other than individuals and HUFs.

We see one mistake every year. A provision is booked without TDS because "the invoice has not come". If the vendor and amount are known, the credit triggers TDS. Where the amount is a true estimate with no identified payee, we document why and deduct when the invoice arrives. Our guide to [TDS on payments to non residents](/insights/tds-on-payments-to-non-residents) covers the parent invoices and Forms 145 and 146.

## How should foreign currency balances be restated at 31 March?

Restate every foreign currency monetary item at the closing rate on 31 March. That covers receivables from the parent, payables to foreign vendors, foreign currency loans and EEFC balances. Book the difference as an exchange gain or loss. Section 43 of the Income Tax Act, 2025 taxes it as income or allows it as a loss.

Section 43(1) computes the gain or loss "as per the income computation and disclosure standards notified under section 276(2)". It replaces old section 43AA of the 1961 Act. For most subsidiaries the accounting and the tax treatment of a restated receivable match.

Use one rate source for the whole balance sheet and record it. We pick the rate before 31 March, write it into the close calendar, and apply the same source every year. Non monetary items, such as advances for goods or prepaid services, stay at the historical rate.

One FEMA point sits beside the restatement. From 1 Oct 2026, FEMA 23(R)/2026-RB requires export proceeds to be realised within nine months of the invoice date for services. A receivable from the parent older than that needs attention from the AD bank before the audit. Foreign currency held in an EEFC account is restated in the same way.

## How does the MSME 45 day rule affect the year end close?

Pay every micro and small supplier within the time limit in section 15 of the MSMED Act, 2006. The limit is 15 days without written credit terms and at most 45 days with them. Under section 37(2)(g) of the Income Tax Act, 2025, an amount unpaid beyond that limit is deductible only in the year of payment.

Section 37(3) lets most actual payment items, such as employer PF contributions, be deducted if paid by the return due date. It expressly excludes the clause (g) amount. So a micro supplier invoice due on 27 Mar 2027 and paid on 5 Apr 2027 moves its deduction into tax year 2027-28.

The buyer also owes interest. Section 16 of the MSMED Act charges compound interest with monthly rests at three times the bank rate notified by RBI. After the Monetary Policy Committee decision of 7 Oct 2026, RBI's bank rate is 5.75 percent, so the rate would be 17.25 percent. Check the rate in force when you compute interest. Section 23 denies a tax deduction for that interest.

| MSME task | When | Who | Law |
|---|---|---|---|
| Collect Udyam certificates and tag suppliers as micro, small or medium | February | Accounts payable | MSMED Act, 2006 |
| Check written credit terms on each micro and small supplier | February | Accounts payable | Section 15, MSMED Act |
| Pay all dues falling due by 31 March | By 31 March | Treasury | Section 37(2)(g), Income Tax Act, 2025 |
| Compute interest on late payments and disclose it | April | Finance controller | Sections 16, 22 and 23, MSMED Act |
| File MSME Form 1 for October to March | By 30 April | Company secretary | MSME Form 1 order under section 405, Companies Act, 2013 |

Sources: MSMED Act, 2006; section 37, Income Tax Act, 2025.

Medium enterprises fall outside section 37(2)(g). The MSMED Act payment and interest rules also protect only micro and small suppliers. We still tag all three classes, so the March ageing picks the right invoices. Our guide to [MSME Form 1 and the 45 day rule](/insights/msme-form-1-45-day-payment-rule) covers the return.

## How do intercompany reconciliation and transfer pricing true ups work at year end?

Agree every intercompany balance with the parent before 31 March. Then raise any transfer pricing true up as an invoice or credit note dated within the year. India tests the margin on April to March figures under sections 161 to 173 of the Income Tax Act, 2025. A true up booked after 31 March falls in the wrong tax year.

We send balance confirmations to the parent in the first week of March. The parent and the subsidiary then agree three items: the balance in foreign currency, the exchange rate used, and any invoice in transit. Differences above an agreed limit go to the group finance team for resolution before the books close.

The true up follows the policy in the intercompany agreement. For a cost plus service provider, the company computes the year's operating cost, applies the mark up and compares the result with the revenue booked. The difference becomes a true up invoice, usually in the last week of March.

A services true up to a foreign parent is an export of services. Under regulation 3(2) of FEMA 23(R)/2026-RB, the company files the EDF within 30 days from the end of the invoice month. For a March invoice, that is 30 April. An exporter of services other than software may instead file on or before the date it receives payment. The Authorised Dealer bank can extend the period on a reasoned request.

The company must realise the money within nine months of the invoice date. For GST, the true up is zero rated under the LUT.

A downward true up, by credit note to the parent, reduces the export value. Regulation 6 lets the AD bank allow the reduction on request, and a declaration can suffice up to INR 10 lakh per invoice.

The transfer pricing report follows later. Form 48 (old Form 3CEB) is due one month before the return due date, so by 31 Oct 2027 for tax year 2026-27. Our pages on [transfer pricing documentation](/insights/transfer-pricing-documentation-requirements-in-india) and the [EDF](/insights/edf-form-export-declaration-form-guide) explain both filings.

## What GST work belongs in the March close?

Reconcile the input tax credit in the books with GSTR-2B and check supplier payments against the 180 day rule. Book reverse charge on services from the parent, and file the LUT for the next year. The annual return in Form GSTR-9 for the year follows by 31 December.

Section 16(4) of the CGST Act bars credit on an invoice after 30 November following the year end. The annual return cuts it off earlier if filed first. CBIC Circular No. 237/31/2024-GST of 15 Oct 2024 reproduces the current text. A credit missed in the March close can still be claimed until 30 Nov 2027 for FY 2026-27 invoices.

The second proviso to section 16(2) needs payment to the supplier within 180 days of the invoice date. If the company has not paid by then, it adds the credit to its output tax with interest. We run an ageing of supplier dues at 31 March to catch these.

| GST task | When | Law |
|---|---|---|
| Match books with GSTR-2B for April to March | March and April | Section 16, CGST Act, 2017 |
| Reverse credit on supplier invoices unpaid for 180 days | Return for the month the limit passes | Second proviso to section 16(2), CGST Act |
| Self invoice and pay reverse charge on services from the parent | Return for the month of the invoice | Section 5(3), IGST Act, 2017 |
| File the LUT for the next financial year | Before the first export in April | Rule 96A, CGST Rules; Circular No. 8/8/2017-GST |
| Issue credit notes for the year | By 30 November after the year end | Section 34(2), CGST Act |
| File GSTR-9 and, above the threshold, GSTR-9C | By 31 December after the year end | Section 44, CGST Act; GSTN FAQ on GSTR-9 |

Sources: CGST Act, 2017; CBIC Circulars No. 8/8/2017-GST and 237/31/2024-GST; GSTN FAQ on Form GSTR-9.

CBIC Circular No. 8/8/2017-GST of 4 Oct 2017 says an LUT "shall be valid for the whole financial year in which it is tendered". The LUT for 2026-27 therefore lapses on 31 Mar 2027. The GST portal asks the exporter to select the financial year for which it files the LUT. The LUT must be in place before the export.

Form GSTR-9C applies where aggregate turnover in the financial year exceeds INR 5 crore, as CBIC Circular No. 246/03/2025-GST of 30 Jan 2025 records under rule 80(3) of the CGST Rules. Our batch note on [reverse charge on services from the parent](/insights/gst-reverse-charge-import-of-services-from-parent) covers the self invoice.

## How should inventory and fixed assets be counted at 31 March?

Count stock on 31 March, or as close to it as possible with a documented roll back. Freeze receipts and dispatches during the count. Agree cut off with the warehouse, then value the stock at the lower of cost and net realisable value. Verify fixed assets against the register.

Where CARO 2020 applies, the auditor reports on physical verification of inventory. Paragraph 3(ii)(a) asks whether management verified inventory at reasonable intervals and whether, in the auditor's opinion, the coverage and procedure are appropriate. It also asks whether the auditor noticed discrepancies of 10 percent or more in aggregate for any class of inventory. It asks whether the company dealt with them properly in its books. The same order covers physical verification of property, plant and equipment.

A service subsidiary usually holds little stock. It still has laptops, servers and leased premises. We reconcile the asset register with the IT inventory at 31 March and write off missing items before the audit starts.

Count goods held by third parties through written confirmations. That includes stock at a contract manufacturer, goods in transit and goods on consignment. The auditor will ask for them in the first week of fieldwork.

## Which board approvals and corporate filings follow the year end?

The board approves the financial statements and the board's report, the auditor signs, and the members adopt the accounts at the AGM by 30 September. AOC-4 follows within 30 days of the AGM under section 137, and MGT-7 within 60 days under section 92(4). DPT-3 for the year is due by 30 June.

Section 96(1) sets the six month limit for the AGM after the year end. The Registrar can extend it by up to three months for a special reason, except for the first AGM. An AGM on 30 Sep 2027 puts AOC-4 on 30 Oct 2027 and MGT-7 on 29 Nov 2027.

The first board meeting of the new financial year collects annual disclosures. Each director discloses interests in Form MBP-1 under section 184(1). DIR-3 KYC is not due until 30 Jun 2028, under the rule notified as G.S.R. 943(E).

| Approval or filing | When | Who | Law |
|---|---|---|---|
| Director interest disclosures (MBP-1) | First board meeting after 1 April | Each director | Section 184(1), Companies Act, 2013 |
| Board approval of the financial statements and board's report | Before the auditor signs | Board | Section 134, Companies Act, 2013 |
| DPT-3 return of deposits | By 30 Jun 2027 | Company secretary | Rule 16, Companies (Acceptance of Deposits) Rules, 2014 |
| AGM | By 30 Sep 2027 | Members | Section 96(1), Companies Act, 2013 |
| AOC-4 | Within 30 days of the AGM | Company secretary | Section 137, Companies Act, 2013 |
| MGT-7 | Within 60 days of the AGM | Company secretary | Section 92(4), Companies Act, 2013 |

Sources: Companies Act, 2013; confirmed MCA instruments for DPT-3 and DIR-3 KYC.

Our guide to [AOC-4 and MGT-7 for foreign owned companies](/insights/aoc-4-mgt-7-annual-filing-foreign-owned-company) covers the attachments and the late fees.

## How should the statutory audit be planned before 31 March?

Sign the engagement letter, agree the audit calendar and send the auditor a list of the schedules the company will prepare, all before 31 March. The auditor then books the team and plans the stock count attendance. Most subsidiaries finish fieldwork by July and approve the accounts in August.

The software must keep an audit trail. The proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 has required it since 1 Apr 2023. Rule 3(5) requires a daily backup of electronic books on servers physically located in India. We test both before the year end, because the auditor reports on them.

The tax side runs after the statutory audit. The tax audit report under section 63 of the Income Tax Act, 2025 is due on the "specified date" in section 63(5)(a). That is one month before the return due date under section 263(1). So it is due on 30 Sep 2027 without a transfer pricing report and 31 Oct 2027 with one. The return follows by 31 Oct 2027, or by 30 Nov 2027 where a section 172 report is required.

For FY 2025-26, CBDT Circular No. 07/2026 moved the tax audit report to 21 Oct 2026 and the return to 21 Nov 2026 for companies without a transfer pricing report. Transfer pricing cases kept 31 Oct 2026 and 30 Nov 2026. Our page on the [statutory audit of a foreign owned subsidiary](/insights/statutory-audit-foreign-owned-indian-subsidiary) covers the auditor's appointment and CARO 2020.

## What does the FLA return need from the March close?

The FLA return reports foreign direct investment and overseas investment positions at the end of March. Every Indian resident company with outstanding FDI or ODI at end March files it with RBI on the FLAIR portal by 15 July. The RBI FAQ, updated 1 Jul 2026, lets a company file on unaudited figures by that date.

The close must produce the figures RBI asks for. These include the parent's equity holding, intercompany loans and trade balances with the parent, and any overseas investment. We extract them in May from the draft trial balance and file in June.

The revision is not optional. The FAQ says the company must revise "irrespective of any variation (amount/percentage) in the audited numbers". It must first ask RBI for permission through FLAIR and file the revised return after approval. The FAQ sets no fixed date, so we raise the request as soon as the auditor signs. Our note on [FDI reporting deadlines](/insights/fdi-reporting-requirements-in-india-for-founders) covers the return in full.

## What does the day by day plan around 31 March look like?

The busiest three weeks run from 15 March to 5 April. We work to the plan below for a services subsidiary with a December or March year end parent. Each day lists the task that cannot slip, and the owner who signs it off.

| Day | Task | Owner |
|---|---|---|
| 1 Mar | Send intercompany balance confirmations to the parent; confirm the closing rate source | Finance controller |
| 5 Mar | Finalise the income estimate, including the transfer pricing true up | Tax lead |
| 12 Mar | Pay the final advance tax instalment with a margin for bank delays | Tax lead |
| 15 Mar | Last day for the final advance tax instalment | Tax lead |
| 20 Mar | Issue cut off instructions to vendors and the warehouse; pay MSME dues falling due by 31 March | Accounts payable |
| 25 Mar | Raise the transfer pricing true up invoice or credit note | Finance controller |
| 31 Mar | Count stock, cash and assets; take bank and card statements; freeze the purchase ledger | Operations; finance controller |
| 1 Apr | File the LUT for the new financial year before the first export invoice | Tax lead |
| 1 to 5 Apr | Book provisions with TDS; restate foreign currency balances; post payroll and gratuity accruals | Finance controller |
| 11 Apr | File GSTR-1 for March (monthly filer) | Tax lead |
| 20 Apr | File GSTR-3B for March, including reverse charge on the parent's services | Tax lead |
| 30 Apr | Deposit March TDS; file the EDF for March services invoices; file MSME Form 1 | Tax lead; company secretary |

## What changed in 2026

The Income Tax Act, 2025 renumbered every income tax step in the close from 1 Apr 2026. The 31 Mar 2027 close is the first full year under it. FEMA changed the export reporting from 1 Oct 2026, which affects every services true up.

| Item | Old rule | New rule | Date | Instrument |
|---|---|---|---|---|
| Advance tax instalments | Section 211, Income Tax Act, 1961 | Section 408, Income Tax Act, 2025 | Tax year 2026-27 | Income Tax Act, 2025 |
| Interest on short instalments | Section 234C | Section 425 | Tax year 2026-27 | Income Tax Act, 2025 |
| 30 percent disallowance, resident TDS | Section 40(a)(ia) | Section 35(b)(i) | Tax year 2026-27 | Income Tax Act, 2025 |
| Deduction on actual payment to MSE suppliers | Section 43B(h) | Section 37(2)(g) | Tax year 2026-27 | Income Tax Act, 2025 |
| Foreign exchange gain or loss | Section 43AA | Section 43 | Tax year 2026-27 | Income Tax Act, 2025 |
| March TDS deposit by 30 April | Rule 30, Income Tax Rules, 1962 | Rule 218(2), Income Tax Rules, 2026 | 1 Apr 2026 | G.S.R. 198(E) of 20 Mar 2026 |
| Quarterly TDS statements | Forms 24Q, 26Q and 27Q | Forms 138, 140 and 144 | Tax year 2026-27 | Income Tax Rules, 2026 |
| Remittance forms to the parent | Forms 15CA and 15CB | Forms 145 and 146 | Money remitted from 1 Apr 2026 | Income Tax Rules, 2026 |
| Transfer pricing report | Form 3CEB | Form 48 | Tax year 2026-27 | Income Tax Rules, 2026 |
| Services export declaration | SOFTEX form | EDF within 30 days from the end of the invoice month | 1 Oct 2026 | FEMA 23(R)/2026-RB |
| Export realisation | Fifteen months (from 13 Nov 2025) then nine (from 5 Jun 2026) under the 2015 regulations | Nine months from the invoice date for services | 1 Oct 2026 | FEMA 23(R)/2026-RB |

Sources: Income Tax Act, 2025; Income Tax Rules, 2026 navigator; Income Tax Department form guidance; FEMA 23(R)/2026-RB and its amendments.

### What has happened since 20 March 2026

The Income Tax Rules, 2026 were notified as G.S.R. 198(E) on 20 Mar 2026, the day this page was first published. The Act and the Rules came into force on 1 Apr 2026. CBDT Circular No. 07/2026, announced on 29 Sep 2026, extended the FY 2025-26 tax audit and return dates for non transfer pricing cases.

The MSMED (Amendment) Act, 2026 (Act 16 of 2026) was published in the Gazette on 13 Aug 2026. It leaves sections 15 to 17 and 22 to 24 unchanged. It adds a penalty in a new section 27 for missing the section 22 disclosure. Each provision starts on notification, and no commencement notification had been found by 1 Oct 2026.

## Worked example

IndiaCo Private Limited provides software services to its foreign parent at cost plus 12 percent. The facts are hypothetical. It pays tax under section 200 at 25.168 percent: 22 percent, 10 percent surcharge and 4 percent cess. The Memorandum to the Finance Bill, 2026 sets out these rates. Its close on 31 Mar 2027 throws up four items.

### A professional fee provision without TDS

IndiaCo books a provision of INR 6,00,000 for legal fees from an Indian law firm. The invoice arrives on 20 Apr 2027. The accountant does not deduct TDS on the provision.

1. TDS due on the credit: 10 percent of INR 6,00,000 = INR 60,000, payable by 30 Apr 2027.
2. If IndiaCo deducts only when the invoice arrives in April, it has not deducted in tax year 2026-27. Section 35(b)(i) disallows 30 percent: INR 1,80,000.
3. Extra tax for tax year 2026-27: INR 1,80,000 × 25.168 percent = INR 45,302. The 30 percent returns as a deduction in the year IndiaCo pays the TDS.
4. Section 398 also charges interest on the late deduction and the late deposit.

### A micro supplier paid late

A micro enterprise delivered services on 10 Feb 2027 on written 45 day terms. Its invoice of INR 1,50,000 fell due on 27 Mar 2027. IndiaCo paid it on 27 Apr 2027.

1. Section 37(2)(g) moves the deduction of INR 1,50,000 from tax year 2026-27 to 2027-28.
2. The timing cost in tax year 2026-27 is INR 1,50,000 × 25.168 percent = INR 37,752.
3. At the bank rate of 5.75 percent on 23 Oct 2026, the section 16 rate is 17.25 percent. One month's interest is INR 1,50,000 × 17.25 percent ÷ 12 = INR 2,156.
4. Section 23 of the MSMED Act makes that interest non deductible.

### A dollar receivable restated

IndiaCo holds a receivable of USD 200,000 from the parent, booked at INR 86.00. The closing rate it chose for 31 Mar 2027 is INR 88.50, an assumed figure.

1. Booked value: USD 200,000 × 86.00 = INR 1,72,00,000.
2. Restated value: USD 200,000 × 88.50 = INR 1,77,00,000.
3. Exchange gain: INR 5,00,000, taxable under section 43.
4. Tax on the gain: INR 5,00,000 × 25.168 percent = INR 1,25,840.

### A transfer pricing true up

IndiaCo's operating cost for tax year 2026-27 is INR 40 crore, so the target operating profit at 12 percent is INR 4.80 crore. It has booked revenue that gives INR 4.50 crore.

1. True up needed: INR 4.80 crore − INR 4.50 crore = INR 30 lakh.
2. IndiaCo raises the invoice on 25 Mar 2027 and files the EDF by 30 Apr 2027.
3. It must realise the amount within nine months of the invoice date, so by 25 Dec 2027.
4. Tax on the true up: INR 30,00,000 × 25.168 percent = INR 7,55,040, which belongs in the 15 March instalment.

| Item | Amount (INR) | Tax effect for tax year 2026-27 (INR) | Fix before the books close |
|---|---|---|---|
| Fee provision without TDS | 6,00,000 | 45,302 extra tax if TDS waits for the April invoice | Deduct INR 60,000 on the provision and deposit by 30 Apr 2027 |
| Micro supplier paid late | 1,50,000 | 37,752 moved to the next year, plus INR 2,156 non deductible interest | Pay by 27 Mar 2027 |
| Receivable restated | 5,00,000 gain | 1,25,840 tax on the gain | Include in the March advance tax estimate |
| Transfer pricing true up | 30,00,000 | 7,55,040 tax | Invoice before 31 March and pay the tax by 15 March |

## Common mistakes

1. **Skipping TDS on provisions because no invoice has arrived.** Section 393(11) treats the provision as a credit to the payee. Fix: deduct when you book the provision and deposit by 30 April.
2. **Treating 15 March as a soft date.** Section 425 charges interest on the shortfall even if the company pays on 31 March. Fix: pay the final instalment by 12 March, with a margin.
3. **Paying micro suppliers after 31 March and expecting the deduction.** Section 37(3) gives no grace for clause (g). Fix: run the MSME ageing in the third week of March and pay before the year ends.
4. **Booking the transfer pricing true up in April.** The true up then lands in the next tax year. Fix: invoice before 31 March and file the EDF within 30 days from the end of that month.
5. **Restating advances and prepayments.** Only monetary items move with the closing rate. Fix: list monetary items separately and restate only those.
6. **Forgetting the LUT for the new year.** The LUT lapses on 31 March. Fix: file the next year's LUT before the first export invoice of April.
7. **Filing the FLA return late because the audit is not finished.** RBI accepts unaudited figures by 15 July. Fix: file on draft figures, then ask RBI for permission to revise after the audit.
8. **Leaving intercompany differences open at the audit.** The auditor then asks for confirmations the parent cannot give quickly. Fix: agree balances in the first week of March and again at 31 March.

To have us run the close calendar for your subsidiary, send last year's audited accounts and the intercompany agreement through our [accounting and bookkeeping](/services/accounting-bookkeeping.html) page.

## Checklist

1. Agree the close calendar with the statutory auditor and the parent by the end of February.
2. Rebuild the income estimate, including the transfer pricing true up, in the last week of February.
3. Pay the final advance tax instalment by 15 March so the total reaches 100 percent.
4. Send intercompany balance confirmations to the parent in the first week of March.
5. Pay every micro and small supplier whose dues fall due by 31 March.
6. Raise transfer pricing true up invoices or credit notes dated on or before 31 March.
7. File the LUT for the next financial year before the first export of April.
8. Count stock, cash and fixed assets on 31 March and agree cut off.
9. Book year end provisions with TDS and deposit March TDS by 30 April.
10. Restate foreign currency monetary items at the closing rate and record the rate source.
11. File the EDF for March services invoices and MSME Form 1 by 30 April.
12. File the Q4 TDS statements in Forms 140 and 144 by 31 May.
13. File DPT-3 by 30 June and the FLA return by 15 July.
14. Hold the AGM by 30 September and file AOC-4 and MGT-7 on time.
15. File the tax audit report, Form 48 and the return, then GSTR-9 by 31 December.

## Key terms

- **Advance tax**: Income tax paid during the tax year on the current year's estimated income, under sections 404 to 408 of the Income Tax Act, 2025. A company whose tax for the year is INR 10,000 or more pays it in four instalments by 15 June, 15 September, 15 December and 15 March. (https://krystal7.com/glossary#advance-tax)
- **Year end provision**: An expense a company books at 31 March for goods or services received but not yet invoiced or paid. Section 393(11) of the Income Tax Act, 2025 treats a credit to a provision or suspense account as a credit to the payee, so TDS applies when the provision is booked. (https://krystal7.com/glossary#year-end-provision)
- **Micro or small enterprise (MSE) supplier**: A supplier classified as a micro or small enterprise under the MSMED Act, 2006 and registered on the Udyam portal. A buyer must pay it within the section 15 time limit of 45 days at most, or defer the tax deduction to the year of payment under section 37(2)(g) of the Income Tax Act, 2025. (https://krystal7.com/glossary#micro-or-small-enterprise-supplier)
- **Transfer pricing true up**: An invoice or credit note at the year end that moves an Indian company's margin on transactions with its foreign parent to the arm's length level under sections 161 to 173 of the Income Tax Act, 2025. It must fall within the tax year it corrects. (https://krystal7.com/glossary#transfer-pricing-true-up)
- **Export Declaration Form (EDF)**: The declaration an exporter files through its Authorised Dealer bank under the FEMA export regulations, FEMA 23(R)/2026-RB, from 1 Oct 2026. For services, including a true up invoice to a foreign parent, it is due within 30 days from the end of the invoice month. Non software exporters may file by the payment date. It replaced SOFTEX. (https://krystal7.com/glossary#export-declaration-form)
- **Foreign Liabilities and Assets (FLA) return**: The FLA return is an annual RBI return under FEMA that an Indian company files on the FLAIR portal if it holds foreign direct investment or overseas investment at the end of March. The RBI FAQ gives 15 July as the due date for the year ended 31 March. Companies with no such investment in either year are excused. (https://krystal7.com/glossary#foreign-liabilities-and-assets-return)
- **Letter of Undertaking (LUT)**: The undertaking in Form RFD-11 under rule 96A of the CGST Rules, 2017 that lets an exporter supply goods or services without paying IGST. It is filed for each financial year. If payment for an exported service does not arrive within the allowed time, the exporter pays the IGST with interest under section 50(1). (https://krystal7.com/glossary#letter-of-undertaking)

## Frequently Asked Questions

### What is a year end closing checklist?

It is a dated list of every task a company completes to close its books for the year, with an owner for each. For an Indian subsidiary it runs from the final advance tax instalment on 15 March to the FLA return on 15 July. The AGM, the tax return and GSTR-9 follow.

### When is the last advance tax instalment due for a company?

By 15 March. Section 408 of the Income Tax Act, 2025 requires the whole estimated tax for the year by that date. Tax paid by 31 March still counts as advance tax. Section 425 still charges 1 percent interest on any shortfall at 15 March.

### Is TDS deductible on provisions made at 31 March?

Yes, where the payee and the amount are known. Section 393(11) of the Income Tax Act, 2025 treats a credit to a provision or suspense account as a credit to the payee. TDS on March credits is due by 30 April under rule 218(2) of the Income Tax Rules, 2026.

### What happens if TDS on a year end provision is not deposited?

Section 35(b)(i) disallows 30 percent of a sum payable to a resident without TDS. The same applies if TDS was not paid by the return due date. For a non resident payee, section 35(b)(ii) disallows the whole sum. The deduction returns in the tax year the company pays the TDS, and section 398 interest also applies.

### What is the MSME 45 day rule at the year end?

Section 15 of the MSMED Act, 2006 requires payment to a micro or small supplier within 15 days. Agreed written terms can extend this to 45 days at most. Under section 37(2)(g) of the Income Tax Act, 2025, an amount unpaid beyond that limit is deductible only in the year of payment.

### Does the return due date relief apply to MSME payments?

No. Section 37(3) of the Income Tax Act, 2025 allows most actual payment items if paid by the return due date. It expressly excludes the clause (g) amount for micro and small enterprises. A supplier paid after 31 March therefore shifts the deduction into the next tax year.

### Which exchange rate should be used at 31 March?

Use the closing rate on 31 March for all foreign currency monetary items, from one source applied every year. Section 43 of the Income Tax Act, 2025 taxes the gain or loss. It is computed under the income computation and disclosure standards notified under section 276(2). Advances and prepayments stay at historical rates.

### When should a transfer pricing true up be booked?

Before 31 March, dated within the tax year it corrects. India tests the margin on April to March figures under sections 161 to 173 of the Income Tax Act, 2025. A services true up to a foreign parent needs an EDF within 30 days from the end of the invoice month.

### When should the next year's LUT be filed?

Before the first export without IGST in the new financial year, so in practice in late March. CBIC Circular No. 8/8/2017-GST says an LUT in Form GST RFD-11 is valid for the whole financial year in which it is tendered. The old LUT lapses on 31 March.

### What is the time limit for claiming input tax credit for the year?

Section 16(4) of the CGST Act, 2017 allows credit on an invoice until 30 November after the end of the financial year. Filing the annual return earlier ends the window sooner. CBIC Circular No. 237/31/2024-GST of 15 Oct 2024 reproduces the current text. Credit on FY 2026-27 invoices runs to 30 Nov 2027.

### When is the FLA return due after the year end?

By 15 July, on the FLAIR portal of the Reserve Bank of India. The RBI FAQ, updated 1 Jul 2026, lets a company with FDI or ODI file on unaudited figures by that date. After the audit it must ask RBI for permission and file a revised return, whatever the size of the variation.

### When must a subsidiary hold its AGM after a 31 March year end?

By 30 September, within six months of the year end under section 96(1) of the Companies Act, 2013. AOC-4 follows within 30 days of the AGM under section 137, and MGT-7 within 60 days under section 92(4). The Registrar can extend any AGM except the first by up to three months.

### When is MSME Form 1 filed for October to March?

By 30 April. A company that owes a micro or small supplier for more than 45 days files MSME Form 1 with the Registrar every half year. The return for October to March is due by 30 April, and the return for April to September by 31 October.

### Does the audit trail rule affect the year end close?

Yes. Since 1 Apr 2023, the proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 has required software with an audit trail that cannot be disabled. Rule 3(5) requires a daily backup on servers in India. The statutory auditor reports on both, so test them before 31 March.

## Sources

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