Short answer: an Indian subsidiary of a foreign company is audited under the Companies Act on a 31 March year-end, whatever the parent's year-end, and needs a tax audit and a transfer pricing report on the same figures. CARO 2020 usually applies — not because the parent is foreign, but because most subsidiaries exceed its ₹1 crore / ₹1 crore / ₹10 crore limits. The subsidiary stays on Indian GAAP unless it, or an Indian group company, crosses the Ind AS thresholds; the parent reporting under IFRS does not change that. The December reporting pack is a separate deliverable, and the aim is one set of fieldwork serving both.
| Deliverable | Law or requirement | Period | Due |
|---|
| Statutory audit — accounts, auditor's report, CARO report | Companies Act, s.143 | 1 April to 31 March | Before the AGM, which is due by 30 September |
| Tax audit — Forms 3CA and 3CD for FY 2025-26 | s.44AB of the 1961 Act (s.63 of the 2025 Act) | 1 April to 31 March | 31 October 2026 where a transfer pricing report is required |
| Transfer pricing report — Form 3CEB for FY 2025-26 | s.92E of the 1961 Act (s.172 of the 2025 Act) | 1 April to 31 March | 31 October 2026 |
| Group reporting pack | Parent's instructions | Usually 1 January to 31 December | Parent's timetable, often mid-January |
The first three are statutory, are built on the same trial balance, and should never disagree. The fourth is contractual — the parent asks for it — and is built on a different period, often under a different framework. That mismatch is where the extra work sits.
From tax year 2026-27 the tax audit moves to a consolidated Form 26 and the transfer pricing report to Form 48; this season's reports, covering FY 2025-26, stay on the old forms. The dates for the rest of the year are in the annual compliance calendar for an Indian subsidiary.
The Companies (Auditor's Report) Order, 2020 — CARO — adds a long list of specific matters to the auditor's report: fixed assets, inventory, loans given, statutory dues, borrowings, fraud, related-party compliance and more. It applies to every company except those it exempts.
A private company is exempt only if it meets every condition:
| Condition | Limit |
|---|
| Not a subsidiary or holding company of a public company | — |
| Paid-up capital plus reserves and surplus, at the balance sheet date | Not more than ₹1 crore |
| Borrowings from banks or financial institutions, at any time in the year | Not more than ₹1 crore |
| Revenue, including discontinued operations | Not more than ₹10 crore |
The foreign-parent question. Section 2(71) deems a private company that is a subsidiary of a company "not being a private company" to be a public company. Under the 1956 Act there was an express rule, Section 4(7), for subsidiaries of foreign bodies corporate; the 2013 Act dropped it, and the MCA's General Circular 23/2014 of 25 June 2014 confirmed that such subsidiaries keep their private or public status. The view generally taken is that a body corporate incorporated abroad is not a "company" under Section 2(20), so it is not a public company, and foreign ownership alone does not remove the CARO exemption. The drafting has been debated since 2014; where the answer matters, it should be recorded with the auditor at the start of the audit.
Two things do remove it:
- An Indian public company in the chain — for example, where the foreign parent holds the subsidiary through an Indian holding company that is itself public.
- The numbers. Share capital alone often exceeds ₹1 crore by the end of the first year of operations, and a subsidiary with any real revenue passes ₹10 crore quickly.
The separate small-company exemption from CARO is closed to a subsidiary altogether: Section 2(85) excludes every holding and subsidiary company from being a small company.
Every company must maintain internal financial controls. What a private company can be exempt from is the auditor's report on them under Section 143(3)(i) — where turnover is under ₹50 crore or borrowings are under ₹25 crore, and provided the company has not defaulted on filing its AOC-4 or MGT-7.
That last condition is the one that catches foreign-owned subsidiaries: a late AOC-4 or MGT-7, which the parent may never have heard of, can bring IFC reporting into an audit that would otherwise have been exempt. The full test is in is IFC applicable to your private company.
Indian companies report under one of two frameworks:
| Applies to |
|---|
| Ind AS (Indian Accounting Standards, converged with IFRS) | Listed companies; unlisted companies with net worth of ₹250 crore or more; and their Indian holding, subsidiary, joint venture and associate companies |
| Indian GAAP (Companies (Accounting Standards) Rules, 2021) | Everyone else |
A parent that reports under IFRS or US GAAP does not pull its Indian subsidiary into Ind AS. The Ind AS Transition Facilitation Group has confirmed that the roadmap applies to a company as defined in Section 2(20) — one incorporated in India — and the links it draws between group companies run through Indian companies. A subsidiary below ₹250 crore of net worth, with no listed or above-threshold Indian company in its group, stays on Indian GAAP.
It can adopt Ind AS voluntarily, which some groups do to narrow the gap with an IFRS pack. The choice is irreversible, and it does not close the gap entirely: Ind AS carries carve-outs from IFRS, so an Ind AS subsidiary still reconciles to the parent's figures.
A 31 December pack covers nine months of one Indian financial year and three of the previous. It is prepared to the parent's policies and framework, often audited or reviewed by the Indian firm on the group auditor's instructions, to a materiality the group auditor sets.
The reconciling items between the pack and the statutory accounts fall into three groups:
- Period — cut-off, accruals and provisions at 31 December rather than 31 March; income tax provided on a period that is not a tax year.
- Framework — leases on the balance sheet under IFRS 16 but expensed under Indian GAAP; share-based payment charges for group awards; employee benefit measurement; deferred tax.
- Group entries — recharges, management fees and consolidation adjustments booked by the parent that the Indian books record differently, or later.
A standing reconciliation, maintained by the Indian finance team and updated at each close, is worth more than any single audit procedure. Built in May from memory, it is where the statutory auditor and the group auditor end up asking the same questions twice.
The figures feed Indian filings too: the FLA return to the RBI is based on the March accounts, as are the transfer pricing report and the tax audit, which is why the Indian numbers, not the pack, are the ones that have to be right first. The FEMA side is in the FEMA filings companies miss.
Some Indian requirements have no equivalent in a group audit, and a subsidiary running on the parent's ERP is the most exposed:
- Audit trail. Accounting software must keep an edit log of every change to every transaction, which cannot be disabled, and the auditor reports on whether it operated throughout the year for all transactions and was not tampered with — a real question for a global ERP configured abroad.
- Books kept in India. Where books are kept electronically, a back-up must be kept on servers physically located in India, on a daily basis.
- CARO matters, where CARO applies — including whether statutory dues such as TDS, GST, PF and ESI were deposited on time, which draws directly on the monthly calendar.
The approach that works treats the December pack as an interim audit of the March year:
| When | Work |
|---|
| October–November | Engagement letters covering statutory audit, pack, tax audit and transfer pricing report; group audit instructions received; controls and process walkthroughs; interim testing |
| January | Pack audit or review at 31 December; intercompany balances confirmed with the parent |
| February–March | Transfer pricing documentation refreshed; year-end plan agreed |
| April–June | Year-end fieldwork rolled forward from the December work; intercompany balances confirmed again at 31 March |
| July–August | Statutory audit signed; board approves accounts; AGM notice |
| By 30 September | AGM |
| By 31 October | Tax audit and Form 3CEB, on the same audited figures |
The savings come from testing controls and transactions once, confirming intercompany balances at both dates in one exercise, and building the pack-to-statutory reconciliation as a working paper rather than a separate project. The transfer pricing report then draws on transactions already tested — see Form 3CEB and the transfer pricing filings.
This note describes the audit framework for a wholly foreign-owned private company in India as at 23 September 2026. It is not advice on a particular company: whether CARO, IFC reporting or Ind AS applies depends on the company's own figures at its balance sheet date and on every company in its group chain, and the treatment of a foreign parent under Section 2(71) should be agreed with the auditor at the planning stage. Tax audit and transfer pricing dates are statutory dates that the CBDT can extend; confirm the current position before relying on them.