Due Diligence Advisory Services in India: Financial, Tax and M&A Due Diligence

Due Diligence Advisory Services in India help companies, investors, business owners and financial institutions examine the financial position, taxation, statutory compliance, commercial operations and potential liabilities of a business before an acquisition, merger, strategic investment or other significant transaction.

Buying an existing business involves more than reviewing audited financial statements or agreeing on a valuation. A target company may have undisclosed tax liabilities, poor receivable recoverability, overstated profitability, excessive debt, regulatory non-compliance or business risks that materially affect the transaction.

EzyBiz India Consulting LLP provides financial, tax, regulatory and transaction-related due diligence services for Indian companies, foreign investors, business promoters, private investors and organisations evaluating mergers, acquisitions, business purchases and strategic investments.

Our approach combines analysis of financial performance, normalised EBITDA, working capital, cash flows, taxation, corporate records and regulatory exposures with practical reporting of material transaction risks.

Quick Answer: Due diligence is a structured examination of a company before an acquisition or investment. Financial due diligence evaluates sustainable profits, cash flows, borrowings and working capital. Tax due diligence examines potential income-tax, GST, TDS and other tax liabilities. Regulatory and commercial reviews examine compliance, contracts, licences and business risks. Findings can influence valuation, purchase price, warranties, indemnities and closing conditions.

For financial and tax due diligence assistance in India, contact EzyBiz India Consulting LLP at +91 98992 17778, WhatsApp or anil@ezybizindia.in.

For broader acquisition and transaction support, explore our Mergers and Acquisitions Advisory Services in India.

What Are Due Diligence Advisory Services?

Due diligence involves a structured, risk-based review of information about a company, business undertaking or investment opportunity before a transaction or major commercial decision.

Meaning of Due Diligence in Business Acquisitions

In a business acquisition, due diligence helps the buyer verify information supplied by the seller, understand historical liabilities, analyse the financial position and identify matters that may affect the proposed purchase price or transaction structure.

Difference Between Due Diligence and Statutory Audit

A statutory audit primarily addresses financial reporting in accordance with the applicable audit framework. Transaction due diligence is generally designed around the buyer’s or investor’s decision-making requirements and may include earnings quality, working capital, debt, tax exposures and commercial risks. Due diligence is not automatically an audit or assurance engagement.

Who Requires Due Diligence Services?

Typical clients include strategic acquirers, private equity investors, venture capital funds, family offices, Indian promoters, foreign companies, business sellers, corporate groups and investors evaluating minority or controlling stakes.

Types of Due Diligence Services in India

The appropriate scope depends on the transaction, industry, deal value, target company’s operations and the client’s principal concerns.

Financial Due Diligence Services

Financial due diligence examines earnings quality, historical performance, financial reporting, cash flows, debt, receivables, inventories, working capital and other factors affecting the economic value of a business.

Tax and Regulatory Due Diligence Services

Tax diligence examines direct-tax, GST, TDS, transfer pricing and related exposures. Regulatory diligence considers corporate compliance, foreign exchange requirements, statutory notices and other applicable laws based on the engagement scope.

Legal, Commercial and Operational Due Diligence

Legal specialists may review contracts, ownership, litigation and intellectual property. Commercial and operational specialists may evaluate customer concentration, market position, supply chains, management dependence, technology and business continuity.

EzyBiz can coordinate relevant findings with legal advisers, Company Secretaries, Registered Valuers and other qualified professionals so that transaction issues are assessed together.

Financial Due Diligence Services for Business Acquisitions

Financial due diligence evaluates the target’s actual financial performance and the sustainability of its earnings and cash generation.

Quality of Earnings and Normalised EBITDA

Reported EBITDA may contain unusual, non-recurring, related-party or non-operating items. A quality-of-earnings review evaluates the appropriateness of financial adjustments and helps determine whether reported profitability is sustainable.

Revenue Recognition and Profitability Analysis

The review may examine revenue trends, revenue cut-off, credit notes, unusual year-end sales, gross margins, customer concentration and accounting policies. Differences between revenue growth and cash collections may indicate matters requiring further investigation.

Historical Cash Flow and Financial Projections

Profitable businesses can experience cash-flow pressure because of inventory, overdue receivables, capital expenditure or debt servicing. Financial due diligence may compare accounting profits with cash flows and critically evaluate the assumptions underlying management projections.

Illustrative quality-of-earnings adjustment:

Particulars	Amount
Reported EBITDA	₹3.00 crore
Add: Verified non-recurring expense	₹20 lakh
Less: Non-recurring income	₹35 lakh
Less: Identified recurring expense adjustment	₹15 lakh
Illustrative normalised EBITDA	₹2.70 crore

In this hypothetical example, normalised EBITDA is ₹30 lakh lower than reported EBITDA. At an illustrative valuation multiple of five times, the difference could affect indicative enterprise value by ₹1.50 crore. All adjustments must be supported by evidence and evaluated according to the actual transaction.

Working Capital, Debt and Balance Sheet Due Diligence

Working capital and debt analysis are particularly important because they can affect purchase consideration and the funding required after completion.

Normalised Working Capital Assessment

A review may examine trade receivables, inventories, trade payables and other operating balances to determine an appropriate normalised working-capital level. Seasonal variations, overdue accounts and non-recurring transactions should be considered.

Debt and Debt-Like Items Review

Financial diligence may identify bank borrowings, related-party loans, overdue statutory liabilities, unpaid capital expenditure, lease obligations, guarantees and other debt-like or contingent items relevant to the agreed purchase-price mechanism.

Cash, Receivables and Inventory Verification

Cash balances may require reconciliation with bank statements. Receivables may be assessed for recoverability, while inventory reviews may examine ageing, obsolescence, valuation and physical-control procedures.

Illustrative purchase-price adjustment:

Particulars	Amount
Agreed enterprise value	₹12.00 crore
Less: Debt and agreed debt-like items	₹2.50 crore
Add: Surplus cash	₹50 lakh
Less: Working-capital shortfall	₹40 lakh
Indicative adjusted equity consideration	₹9.60 crore

This simplified illustration assumes the parties have agreed on all adjustments. Actual consideration depends on the transaction documents, pricing definitions and closing calculations.

Income Tax and TDS Due Diligence in India

Historical tax exposures can materially influence acquisition decisions because liabilities may remain within an acquired company after ownership changes.

Income Tax Returns, Assessments and Litigation

The review may cover income-tax returns, tax audit reports, computation of income, significant deductions, tax demands, assessments, appeals, penalty proceedings, contingent liabilities and positions adopted in earlier years.

TDS and Withholding Tax Compliance

TDS due diligence may involve reviewing deductions, payment timelines, return filings, reconciliation records, relevant certificates and potential exposure arising from incorrect withholding or delayed deposits.

Tax Losses, Deferred Tax and Contingent Exposures

Accumulated tax losses, depreciation, deferred tax balances, uncertain tax positions and unrecorded demands may require examination. The ability to use carried-forward losses after a change in ownership or merger depends on applicable statutory conditions.

For related professional services, refer to our Income Tax Assessment and Litigation Services and the official Income Tax Department.

GST Due Diligence and Indirect Tax Review

GST due diligence helps buyers assess whether reported transactions, tax payments and input-tax-credit claims are supported by appropriate records.

GST Returns and Financial Reconciliation

Review procedures may include comparison of outward supply records, GSTR-1, GSTR-3B, general ledgers, financial statements and other relevant information. Differences should be evaluated for potential tax implications.

Input Tax Credit, Reverse Charge and E-Way Bills

Relevant checks may cover input-tax-credit eligibility, GSTR-2B reconciliation, blocked credits, reverse-charge obligations, e-invoicing, e-way bills and documentation supporting material transactions.

GST Notices, Refunds and Historical Exposures

Outstanding GST notices, adjudication proceedings, demands, refunds, registration issues and unresolved reconciliations may create financial exposure. Material matters should be quantified where sufficient information is available.

For official GST information, visit the GST Portal and CBIC. See our GST and Indirect Tax Advisory Services.

Corporate Secretarial and Regulatory Due Diligence

Corporate diligence examines whether the target company’s ownership, authorisations, statutory records and material compliance requirements support the proposed transaction.

Shareholding, Capital and Corporate Records

Reviews may include incorporation documents, constitutional records, statutory registers, share capital, share allotments, transfers, beneficial ownership declarations, board minutes and shareholder approvals.

ROC Filings, Charges and Corporate Compliance

Relevant records may include annual filings, director-related information, registered charges, satisfaction of charges, statutory disclosures and other corporate compliance matters. Incomplete records may complicate ownership transfers or financing arrangements.

Business Licences and Regulatory Approvals

The target may hold industry-specific licences, registrations and approvals. The diligence review should identify important renewal obligations, pending notices, change-of-control clauses and permissions that may require modification following acquisition.

Company-law information and statutory filings are available through the Ministry of Corporate Affairs.

Labour Law, Payroll and Employee Due Diligence

Employee-related exposures can affect transaction value, particularly in service-oriented businesses and companies with a large workforce.

Payroll and Employment Documentation

Reviews may include employee registers, payroll calculations, appointment letters, employment agreements, incentive commitments, reimbursements and other relevant employee records.

PF, ESI, Gratuity and Statutory Liabilities

Potential exposures may relate to provident fund, ESI, gratuity, bonus, leave encashment, professional tax and other labour obligations. Applicability and liability must be evaluated under the relevant laws and the company’s actual circumstances.

Key Management Retention and Employee Risks

Acquisition diligence may examine dependence on founders, key technical employees or senior managers. Potential retention costs, employment disputes, unrecorded obligations and workforce restructuring should be considered during transaction planning.

Where appropriate, employee matters should be evaluated alongside legal specialists and the buyer’s integration team.

Commercial, Operational and Legal Due Diligence

Financial statements alone may not reveal all risks relating to customers, market conditions, operations and contractual obligations.

Customer Concentration and Revenue Sustainability

A company dependent on a limited number of customers may face substantial risk if a major customer terminates its relationship after an acquisition. Reviews may examine customer concentration, contract duration, renewal conditions and historical retention.

Supplier Dependency and Operational Risk

Operational diligence may assess supplier dependence, production capacity, supply-chain resilience, inventory arrangements, technology systems, operational controls and major capital-expenditure needs.

Contracts, Intellectual Property and Litigation

Legal professionals may examine material customer and supplier contracts, property title, intellectual property, employment contracts, litigation, contractual enforceability and change-of-control clauses. EzyBiz coordinates relevant financial, tax and regulatory findings with qualified legal specialists.

The scope of commercial or operational work should be agreed separately where specialist industry analysis, technical inspections or information-technology assessments are needed.

Buy-Side and Sell-Side Due Diligence in M&A

Different transaction participants require different due diligence approaches. The agreed scope should reflect whether the client is acquiring, selling or investing in a company.

Buy-Side Financial and Tax Due Diligence

A purchaser commissions buy-side diligence to assess financial performance, identify liabilities, validate investment assumptions and evaluate matters affecting price, structure, warranties and closing conditions.

Sell-Side or Vendor Due Diligence

A business owner may undertake vendor due diligence before approaching buyers. This can help identify reporting issues, tax exposures, compliance gaps or other matters that could disrupt subsequent purchaser reviews.

Red Flag and Limited Scope Due Diligence

Where the transaction is at an early stage or information is limited, a targeted red flag review may focus on matters capable of materially affecting the decision to proceed. A limited review should not be presented as equivalent to comprehensive due diligence.

Businesses planning acquisitions or exits may also review our Business Buy Sell Advisory Services and Business for Sale in India guide.

Due Diligence for Foreign Investment and Private Equity

Foreign investors and financial investors may require additional analysis beyond the normal financial and tax diligence performed for domestic acquisitions.

Foreign Investors Acquiring Indian Companies

Foreign buyers should evaluate applicable sectoral FDI conditions, investment restrictions, shareholder arrangements, historical foreign investment compliance and financial or tax liabilities relevant to an Indian acquisition.

FEMA, RBI and Cross-Border Tax Due Diligence

Reviews may include prior foreign investment filings, pricing compliance, overseas investment transactions, remittance records, external commercial borrowings, transfer pricing, tax treaties and withholding obligations, as relevant to the target.

Private Equity and Strategic Investment Due Diligence

Private equity investors and strategic partners may emphasise governance, financial reporting systems, management information, related-party transactions, funding use, shareholder rights and the target’s ability to support its projected growth.

For official regulatory information, visit the Reserve Bank of India. Foreign businesses may also explore our India Market Entry Consulting Services.

Our Due Diligence Process and Information Requirements

EzyBiz India follows an engagement-specific process intended to identify and communicate material risks relevant to the transaction.

Engagement Planning and Scope Definition

We begin by understanding the buyer’s or seller’s objectives, the target business, proposed transaction, industry, estimated deal size, important risk areas, available information and reporting requirements.

Document Request, Financial Review and Management Discussions

An information request list is prepared based on the agreed scope. The team reviews available records, performs financial and tax analysis, identifies exceptions and discusses significant observations with relevant management personnel.

Reporting, Risk Classification and Transaction Support

Findings may be presented through executive summaries, financial schedules, risk observations, quantification of identified exposures and recommended follow-up actions. We can assist the client in evaluating the financial and transaction implications of the findings.

Typical due diligence information request list:

• Audited financial statements and management accounts for relevant periods
• Trial balance, general ledger and accounting schedules
• Bank statements, bank reconciliations and borrowing details
• Trade receivables, trade payables and inventory ageing
• Customer and supplier concentration reports
• Income-tax returns, computations and tax audit reports
• GST returns, reconciliations and notices
• TDS returns, challans and compliance records
• Shareholding, statutory registers and ROC filings
• Major commercial agreements and business licences
• Employee, payroll and statutory-benefit records
• Litigation, guarantees, commitments and contingent liability details
• Financial projections and management assumptions

The final document list and review period depend on transaction size, scope, information availability and target-company circumstances.

Planning to acquire, invest in or sell an Indian business? Discuss the appropriate financial, tax and regulatory due diligence scope with our Corporate Finance Advisory team.

Due Diligence Reports, Red Flags and Deliverables

A useful due diligence report should help decision-makers understand material findings and their potential effect on the transaction.

Executive Summary and Red Flag Findings

The report may highlight material issues requiring immediate attention, such as unexpected tax liabilities, unusual earnings adjustments, financing restrictions, unsupported receivables or significant regulatory non-compliance.

Detailed Financial and Tax Observations

Depending on the scope, supporting schedules may cover quality of earnings, working capital, debt-like items, cash flow, related-party transactions, tax positions, contingent liabilities and other relevant matters.

Recommendations and Transaction Risk Mitigation

Important findings may inform proposed purchase-price adjustments, further investigations, required remediation, financial conditions precedent, warranties, indemnities and other commercial protections to be developed with legal counsel.

Example Finding	Possible Transaction Implication
Overstated recurring EBITDA	Reconsider valuation assumptions
Working-capital shortfall	Evaluate price adjustment or funding requirement
Unreported statutory liability	Quantify exposure and consider indemnity
Unrecoverable trade receivables	Assess earnings and balance-sheet adjustment
Significant customer dependence	Review retention risk and future projections
Pending material tax litigation	Assess contingent liability and transaction protections

The reporting format should be agreed at the start of the engagement. Due diligence reports are normally prepared for identified users and purposes and are subject to relevant scope limitations.

How Due Diligence Findings Affect Business Valuation

Due diligence findings may directly influence enterprise value, equity value, purchase-price mechanisms and the buyer’s willingness to proceed.

Quality of Earnings and Valuation Multiples

Where valuation is based on EBITDA, adjustments to sustainable earnings may change the indicative value of the target. A business with weak earnings quality or a high concentration of revenue may also warrant different commercial valuation assumptions.

Working Capital and Closing Accounts Adjustments

Parties may agree that the business must be delivered with a specified level of normalised working capital. Completion accounts may adjust consideration for actual working capital, debt and cash according to the agreed definitions.

Warranties, Indemnities and Escrow Protections

Material financial or tax exposures may be addressed through appropriate contractual mechanisms, including indemnities, escrow, holdbacks or specific closing conditions. Qualified legal advisers should draft and review the relevant provisions.

Practical example: A buyer agrees on a proposed enterprise value of ₹15 crore. Due diligence subsequently identifies a potentially material GST exposure and overdue receivables. The parties may reconsider the price, require satisfactory remediation or negotiate specific protections before completion.

Neither the amount nor the form of adjustment is automatic. It depends on the actual findings, negotiations and contractual terms.

For wider acquisition and deal-structuring assistance, review our Mergers and Acquisitions Advisory Services.

Due Diligence Costs, Timeline and Common Questions

The cost and duration of a due diligence assignment depend on business size, transaction complexity, reporting requirements, review periods and availability of reliable information.

How Much Do Due Diligence Services Cost in India?

Fees are generally determined according to the agreed scope, number of entities, size and complexity of the business, review period, location, documentation quality and required specialist involvement. A focused financial or tax review may involve a different fee structure from a comprehensive multidisciplinary assignment.

How Long Does a Due Diligence Review Take?

A focused review may be completed in a relatively short period where records are readily available. Larger acquisitions, multiple entities, foreign investment matters and complex tax exposures can require substantially more time. The engagement should specify an indicative review schedule after the available information is assessed.

Is Due Diligence Necessary Before Buying a Company?

Comprehensive due diligence is strongly recommended before material acquisitions. It helps identify financial, tax, compliance and business risks that may not be immediately apparent from audited accounts or the seller’s representations.

Additional Frequently Asked Questions

What is a red flag due diligence report? It is a focused report identifying the most material risks, potential deal-breakers or issues requiring immediate attention.

Does due diligence guarantee that no liabilities exist? No. Reviews are limited by their agreed scope, available evidence, timing and the quality of information provided.

Can due diligence affect purchase consideration? Yes. Material findings may influence valuation, debt and working-capital adjustments or contractual protections.

Does due diligence include legal verification? Formal legal due diligence, legal opinions and property-title examinations should be undertaken by appropriately qualified legal professionals.

Can a seller conduct due diligence before approaching buyers? Yes. Vendor due diligence can help identify and address issues that might otherwise delay or disrupt a sale.

What is the difference between financial and tax due diligence? Financial due diligence focuses on business performance, earnings quality and financial exposures. Tax due diligence concentrates on historical tax compliance, liabilities and material tax risks.

Why Choose EzyBiz India for Due Diligence Advisory?

EzyBiz India Consulting LLP provides financial, tax, regulatory and transaction support to business owners, strategic buyers, investors and Indian or international companies evaluating corporate transactions.

Chartered Accountant-Led Financial and Tax Analysis

Our team includes experienced Chartered Accountants and other professionals with expertise in financial reporting, taxation, regulatory compliance, corporate finance and business advisory.

Commercially Focused Due Diligence Reporting

Our objective is not merely to identify document deficiencies. We focus on explaining material findings and, where possible, assessing their financial and transaction implications so that clients can make informed decisions.

Integrated Domestic and Cross-Border Transaction Support

We coordinate with Company Secretaries, legal advisers, valuation professionals and other specialists as needed. Our support may extend to tax structuring, acquisition planning, regulatory compliance and transaction coordination within the agreed engagement scope.

Contact EzyBiz India Consulting LLP to discuss financial due diligence, tax due diligence, vendor diligence or acquisition risk assessment.

• Mobile: +91 98992 17778
• WhatsApp: Discuss Your Due Diligence Requirements
• Email: anil@ezybizindia.in
• Enquiry: Contact Our Corporate Finance Team

Related Services

• Mergers and Acquisitions Advisory Services in India
• Business Buy Sell Advisory Services
• Merger and Acquisition Companies in India
• Business for Sale in India
• Advantages of Mergers and Acquisitions
• Fast Track Merger in India
• Corporate Finance Advisory Services
• India Market Entry Consulting Services
• Income Tax Assessment and Litigation Services
• GST and Indirect Tax Advisory Services

Reviewed By

CA Anil Agrawal
Founder, EzyBiz India Consulting LLP
Chartered Accountant with over 20 years of experience in taxation, corporate finance, due diligence, transaction advisory and regulatory compliance.

Last Updated

October 2026

Disclaimer

This article is intended for general information and does not constitute investment, legal, tax, valuation or other regulated professional advice. Due diligence services are subject to the agreed engagement scope, available records, management cooperation and applicable professional standards. Such services do not guarantee the discovery of all liabilities, frauds, errors or compliance failures and do not constitute a statutory audit or an assurance engagement unless separately agreed and performed under the relevant professional framework. Formal legal due diligence, independent valuations and other regulated professional services are undertaken by appropriately qualified or registered specialists where required. EzyBiz India Consulting LLP provides financial, tax, regulatory and transaction-related support within the scope of its engagement. Readers should obtain transaction-specific professional advice before making investment or acquisition decisions.