Accounting & Bookkeeping for Wholly Owned Subsidiary in India

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A Wholly Owned Subsidiary (WOS) incorporated in India is a separate Indian company, even when 100% of its shares are held by a foreign parent. Its books of account, financial statements, tax records, payroll, GST/TDS compliance and statutory audit must therefore be maintained under the Indian legal and accounting framework, while the finance team may also need to provide monthly reporting and consolidation data to the overseas parent.

This makes WOS accounting different from accounting for a Branch Office, Liaison Office or Project Office. A WOS has its own Indian share capital, bank accounts, contracts, assets, liabilities, employees, customers, vendors and tax registrations. Transactions with the foreign parent or other group companies must be separately identified and reconciled because they may have transfer-pricing, withholding-tax, GST and FEMA implications.

This guide explains practical accounting and bookkeeping requirements for a wholly owned subsidiary in India, including Companies Act books, monthly closing, intercompany accounting, foreign currency, GST/TDS, payroll, fixed assets, FDI accounting, transfer pricing, audit readiness and parent-company reporting. For ongoing support, see our Accounting & Bookkeeping Services in India. Companies setting up an Indian subsidiary may also review our Wholly Owned Subsidiary in India and India Market Entry Consulting Services.

What Are the Accounting Requirements for a Wholly Owned Subsidiary in India?

The WOS Must Maintain Its Own Indian Books of Account

Because the WOS is an Indian incorporated company, its accounting records should independently capture all receipts, payments, sales, purchases, assets, liabilities, payroll, taxes, borrowings and equity transactions relating to the Indian entity.

Books Must Be Kept on Accrual Basis and Double-Entry System

Section 128 of the Companies Act, 2013 requires every company to keep books of account and relevant papers that give a true and fair view of its affairs and explain its transactions. The books are required to be maintained on accrual basis and according to the double-entry system of accounting.

Accounting Must Support Both Indian Compliance and Parent Reporting

The same underlying books may need to support statutory financial statements in India, tax and GST filings, statutory audit, RBI/FEMA reporting, transfer-pricing documentation, management reporting and consolidation into the foreign parent’s group accounts.

Books of Account Under the Companies Act

Maintain Complete Records of Receipts, Payments, Sales and Purchases

Books should contain complete records of money received and spent, sales and purchases of goods or services, assets and liabilities and all material transactions affecting the financial position of the company.

Books Are Normally Maintained at the Registered Office

The Companies Act requires books to be maintained at the registered office, although the Board may decide to keep them at another place in India subject to the applicable filing requirement. Electronic maintenance is permitted subject to the prescribed conditions.

Preserve Books and Vouchers for the Required Period

Section 128 requires books of account and relevant vouchers to be preserved for at least eight financial years immediately preceding the current financial year, or for the full period of existence where the company has been incorporated for less than eight years.

The statutory framework can be reviewed in the official Companies Act, 2013.

Chart of Accounts for a Foreign-Owned Indian Subsidiary

Design the Ledger Structure for Indian Compliance

The chart of accounts should separately identify revenue, direct costs, employee expenses, professional fees, rent, travel, fixed assets, GST, TDS, payroll liabilities, receivables, payables, related parties and other balances needed for Indian statutory reporting.

Map Indian Ledgers to the Foreign Parent’s Group Chart

Where the overseas parent uses a global chart of accounts, each Indian ledger can be mapped to the corresponding group reporting code. This reduces manual reclassification during monthly consolidation while preserving the Indian statutory ledger structure.

Use Separate Ledgers for Intercompany Transactions

Each foreign parent, affiliate or associated enterprise should have clearly identifiable receivable, payable, income and expense ledgers. This makes transfer-pricing review, foreign-currency revaluation and year-end confirmation substantially easier.

Bank Accounting and Cash Management

Reconcile Every Bank Account Monthly

Indian current accounts, foreign-currency accounts where permitted, credit cards and other banking arrangements should be reconciled with the general ledger every month. Unidentified receipts, bank charges and old unreconciled entries should not be allowed to accumulate.

Separate Equity Funding From Operating Receipts

Amounts received from the foreign parent may represent share capital, share application money, permitted borrowings, service income, reimbursement or another transaction. Each receipt should be classified according to its legal and commercial nature rather than simply posted to a generic parent-company account.

Maintain a Short-Term Cash Forecast

A monthly cash forecast covering payroll, taxes, vendors, capital expenditure, rent and expected customer collections helps the Indian finance team plan funding requirements and identify when additional parent funding or working-capital arrangements may be required.

Accounting for Share Capital and Foreign Direct Investment

Record Equity Contribution Correctly

Foreign investment received toward equity should be recorded through the appropriate bank, share application and share-capital/securities-premium accounts based on the stage of allotment and the underlying corporate approvals.

Reconcile Accounting With FC-GPR Reporting

Where an Indian company issues equity instruments to a person resident outside India and the issue is treated as FDI, RBI reporting rules require Form FC-GPR within 30 days from the date of issue of the equity instruments. The books, allotment records and FEMA reporting should reconcile completely.

FLA Reporting Should Match the Financial Records

An Indian company that has received foreign direct investment is required to submit the Annual Return on Foreign Liabilities and Assets to RBI within the applicable timeline. Equity, reserves, foreign liabilities and related balances used for FLA reporting should therefore reconcile with the annual financial statements.

For broader FEMA support, see our FDI & FEMA Compliance Services in India. RBI’s foreign-investment reporting framework is available through the official Reserve Bank of India website.

Intercompany Accounting With the Foreign Parent

Record Each Transaction According to Its True Nature

Common intercompany transactions include management services, software support, technical services, employee recharges, cost allocations, royalty, interest, reimbursements, purchases and service exports. Each transaction should be supported by the relevant agreement, invoice and working.

Reconcile Intercompany Balances Every Month

The Indian WOS and overseas parent should periodically compare intercompany receivable and payable balances. Differences caused by timing, exchange rates, invoices in transit, credit notes or allocations should be resolved before quarter-end or year-end.

Keep Reimbursement and Service Charges Separate

A pure reimbursement and a service charge can have different accounting and tax consequences. The ledger description, agreement, invoice and supporting documents should make the nature of the transaction clear.

Transfer Pricing and Associated Enterprise Transactions

International Transactions Require Arm’s-Length Support

Transactions between the Indian WOS and foreign associated enterprises are subject to India’s transfer-pricing framework where applicable. The accounting system should therefore capture the type, counterparty, amount and basis of each international transaction consistently.

Maintain Supporting Cost and Revenue Workings

Where the Indian subsidiary operates on a cost-plus, service-fee or other transfer-pricing model, the finance team should maintain a clear reconciliation between the accounting ledgers and the transaction value charged to the overseas group entity.

Avoid Year-End Transfer-Pricing Surprises

Intercompany pricing should be monitored during the year. Waiting until audit time to identify under-recovery, excess margin or unbilled intercompany income can lead to significant year-end adjustments and tax complications.

The current transfer-pricing rules and documentation framework can be reviewed on the official Income Tax e-Filing portal.

Revenue, Receivables and Customer Accounting

Revenue Recognition Should Follow the Underlying Contract

Revenue should be recorded based on the applicable accounting standard, contractual terms, service delivery, project milestones or transfer of goods rather than purely on the timing of cash collection.

Maintain Customer-Wise Receivable Ageing

Monthly receivable ageing helps management identify overdue balances, credit risk, disputed invoices and expected cash collection. Foreign parent reporting often requires the same information for group cash-flow forecasting.

Review Unbilled Revenue and Deferred Revenue

Service and project companies should review whether work performed but not yet invoiced, advances from customers or contract liabilities require month-end accounting adjustments.

Vendor, Expense and Accounts Payable Accounting

Record Vendor Bills in the Correct Period

Expenses should be recognised when incurred rather than only when paid. Vendor invoices received after month-end may require accruals where the goods or services relate to the closed period.

Maintain Vendor-Wise Payable Ageing

A payable ageing should distinguish current, overdue, disputed and related-party balances. This supports cash planning, audit confirmations and MSME-related review where applicable.

Apply TDS and GST Treatment at the Transaction Stage

The accounting team should identify the relevant TDS and GST treatment when the transaction is booked instead of trying to determine it only at return-filing time. Proper ledger coding reduces reconciliation errors.

GST, TDS and Other Tax Accounting

GST Ledgers Should Reconcile With Returns

Output GST, input tax credit, reverse-charge liabilities and other GST balances should reconcile with invoices and GST returns. Differences between books and the GST portal should be investigated each month.

TDS Payable Should Reconcile With Expense Ledgers

Vendor expenses, salary-related deductions and other payments subject to TDS should reconcile with challans and returns. Unreconciled TDS payable or receivable balances can create audit and tax issues.

Maintain a Tax Provision and Advance-Tax Working

Periodic tax provisioning helps the company understand expected current-tax expense, advance-tax requirements, deferred-tax effects where applicable and year-end cash requirements.

The official GST portal is available at GST.gov.in.

Payroll and Employee Accounting

Payroll Should Reconcile With the General Ledger

Salary, bonus, incentives, reimbursements, leave encashment and other employee costs should reconcile between payroll software, bank payments and the general ledger every month.

Record Statutory Employee Liabilities Separately

Provident fund, ESI, professional tax, TDS on salary and other applicable deductions or employer contributions should be maintained in separate liability ledgers and reconciled with returns and challans.

Account for Employee Recharges and Expatriate Costs Carefully

Foreign-owned subsidiaries may receive expatriate support or employee recharges from group companies. The arrangement should be documented and the accounting, withholding-tax, GST and transfer-pricing implications reviewed based on the facts.

Foreign Currency and Forex Accounting

Foreign-Currency Transactions Need Consistent Conversion

Intercompany invoices, foreign-currency payables, export receivables and other cross-border transactions should be translated into INR using the applicable accounting policy and accounting-standard requirements.

Revalue Monetary Balances at Period End

Foreign-currency monetary receivables, payables and bank balances may require period-end revaluation. Exchange gains and losses should be recorded systematically rather than used as balancing entries.

Reconcile Statutory Books With Group Reporting Currency

The foreign parent may require the Indian trial balance in USD, EUR, GBP, JPY or another group currency. Conversion for group consolidation should be kept separate from the INR statutory books and supported by a consistent reporting methodology.

Fixed Assets, Depreciation and Capital Expenditure

Maintain a Detailed Fixed Asset Register

The register should capture asset description, purchase date, invoice, location, cost, useful life, depreciation, accumulated depreciation and disposal details. Asset tags and physical verification can strengthen control.

Distinguish Capital Expenditure From Operating Expenses

Computers, plant, office fit-outs, software and other expenditures should be evaluated under the applicable accounting policy to determine whether they should be capitalised or charged to profit and loss.

Reconcile Book and Tax Depreciation Separately

Companies Act depreciation and income-tax depreciation can differ. Separate fixed-asset and tax-depreciation workings help avoid confusion during statutory audit and tax-return preparation.

Month-End Closing for an Indian Subsidiary

Complete All Key Reconciliations Before Closing

Bank accounts, receivables, payables, payroll, GST, TDS, fixed assets, intercompany accounts, loans and statutory liabilities should be reconciled before the monthly management accounts are finalised.

Book Accruals, Prepaids and Provisions

Month-end should include unpaid expenses, prepaid costs, depreciation, employee provisions, tax provisions, forex revaluation and other closing adjustments needed for accurate monthly reporting.

Use a Formal Close Calendar

A close calendar assigning dates and owners for bank reconciliation, AP close, payroll, revenue, intercompany confirmation, tax review and management reporting can significantly improve the reliability and speed of monthly accounts.

Monthly MIS and Reporting to the Foreign Parent

Provide a Standard Monthly Reporting Pack

A practical reporting pack may include trial balance, profit and loss account, balance sheet, cash-flow summary, receivable/payable ageing, bank reconciliation, tax status, headcount, intercompany balances and management commentary.

Explain Material Variances

Actual results should be compared with budget, prior month and prior year where useful. Material changes in revenue, payroll, professional fees, forex, tax or working capital should be explained to the overseas finance team.

Keep Group Adjustments Traceable

Any IFRS, US GAAP or other group-reporting adjustments should be documented outside the Indian statutory ledger where appropriate so the finance team can reconcile the group reporting pack back to Indian books.

Statutory Audit and Year-End Accounting

Every Indian Company Is Subject to Statutory Audit

A wholly owned subsidiary incorporated under the Companies Act is subject to statutory audit under the applicable company-law framework. The accounting team should therefore maintain audit-ready schedules throughout the year.

Prepare a Year-End Audit File Before the Auditor Starts

The audit file should include trial balance, financial statements, ledgers, bank confirmations, receivable/payable schedules, fixed assets, tax reconciliations, intercompany confirmations, contracts, board records and supporting documents.

Audit Trail and Accounting Software Controls Should Be Reviewed

Where accounting software is used, the company should ensure that the applicable Companies (Accounts) Rules requirements relating to audit trail and edit-log functionality are properly addressed and supported for statutory-audit purposes.

Annual Financial Statements and ROC Filing Readiness

Financial Statements Must Follow Schedule III and Applicable Standards

Section 129 requires financial statements to give a true and fair view, comply with the notified accounting standards and follow the applicable Schedule III format. The accounting records should therefore be mapped correctly before year-end finalisation.

Subsidiary Status Affects Certain Company-Law Exemptions

A wholly owned subsidiary of a foreign company is still an Indian subsidiary company. Because a subsidiary company is excluded from the statutory definition of a small company, promoters should not automatically assume that small-company accounting or reporting relaxations are available merely because the Indian business is small in size.

Close the Books Early Enough for Audit and Annual Filing

Delays in bank, GST, TDS, intercompany or fixed-asset reconciliation often compress the statutory-audit and annual-filing timeline. A disciplined March closing process reduces this risk.

Need Accounting Support for Your Indian Subsidiary?

EzyBiz India assists foreign-owned Indian subsidiaries with monthly bookkeeping, accounts payable and receivable, bank reconciliation, payroll accounting, GST/TDS support, intercompany accounting, transfer-pricing data preparation, fixed assets, month-end closing, MIS reporting and statutory-audit support.

Discuss Your Indian Subsidiary Accounting Requirements With Our Team

Practical Monthly Accounting Checklist for a WOS

Core Accounting Checklist

Post all bank, sales, purchase, payroll and expense transactions.
Complete all bank reconciliations.
Reconcile customer and vendor balances.
Reconcile foreign-parent and group-company balances.
Book accruals, prepaids, depreciation and provisions.
Perform foreign-currency revaluation.
Update fixed-asset and depreciation schedules.
Review old or unusual balances.

Compliance and Parent-Reporting Checklist

Reconcile GST ledgers with returns.
Reconcile TDS ledgers with deductions and challans.
Reconcile payroll liabilities with returns.
Review transfer-pricing transaction values.
Reconcile FDI/share-capital records where there were capital transactions.
Prepare monthly MIS and variance commentary.
Maintain audit-trail and supporting documentation.
Update year-end and statutory-audit schedules continuously.

Frequently Asked Questions

Is a Wholly Owned Subsidiary required to maintain separate books in India?

Yes. A WOS incorporated in India is a separate Indian company and must maintain its own books of account under the Companies Act, 2013.

Can the foreign parent’s accounting system be used for the Indian WOS?

A group accounting system may be used if the Indian company’s statutory books, records, audit trail, data access and other legal requirements are properly satisfied. The Indian entity’s accounts must remain separately identifiable and capable of producing compliant Indian financial statements.

How should money received from the foreign parent be recorded?

The accounting depends on the legal nature of the receipt. It may represent equity capital, a permitted loan, reimbursement, service income or another transaction. It should not be posted to revenue merely because the funds came from the overseas parent.

Are transactions with the foreign parent subject to transfer pricing?

International transactions with foreign associated enterprises are subject to India’s transfer-pricing framework where applicable. The accounting system should separately identify and support such transactions.

Does the WOS need to reconcile FC-GPR and accounting records?

Yes. Where equity instruments are issued to the foreign parent, the share-capital accounting, allotment records and FC-GPR reporting should reconcile with each other.

Does a WOS have to prepare monthly MIS for the foreign parent?

Monthly MIS is generally a management or group-reporting requirement rather than a standalone statutory filing. However, it is highly useful for consolidation, cash planning, performance monitoring and early identification of accounting issues.

Does an Indian WOS require statutory audit?

Yes. An Indian company is subject to statutory audit under the Companies Act framework, including a wholly owned subsidiary of a foreign company.

Can bookkeeping be outsourced in India?

Yes. Many foreign-owned subsidiaries outsource bookkeeping, payroll accounting, accounts payable, GST/TDS support, month-end closing and management reporting while retaining management oversight and statutory responsibility within the company.

Related Services

Prepared By: EzyBiz India Consulting LLP

Reviewed By:
Anil Agrawal, Chartered Accountant
Founder, EzyBiz India Consulting LLP
20+ Years of Experience in Tax, Regulatory and Business Advisory

Last Updated: 6 September 2026

Disclaimer:
This article is intended for general informational purposes only and does not constitute accounting, tax, legal, FEMA or professional advice. Accounting and compliance requirements for an Indian wholly owned subsidiary depend on its industry, transactions, accounting standards, foreign investment, related-party dealings, tax registrations and other facts. Companies should verify the latest Companies Act, MCA, RBI/FEMA, Income Tax and GST requirements and obtain professional advice before finalising their accounting or compliance treatment.