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Audit of a Indian company, financial statements, accounting, consulting in the India

India is a country in South Asia, the first country in the world in terms of population and one of the top ten countries in terms of gross domestic product. Industry, agriculture, software development are the main sectors of India’s economy. Indian IT startups can get tax exemption. Financial statements and audits are mandatory to be filed annually.

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General requirements

All Indian companies must annually prepare financial statements and keep and store books of account and accounting records that give truthful and objective representation of the state of the company’s affairs.

The main law regulating companies’ activities is the Companies Act 2013.

Indian accounting standards significantly coincide with the International Financial Reporting Standards (IFRS), but India has not assumed the official obligation to adopt IFRS.

The set of annual financial statements includes:

  • balance sheet of the end of the period;
  • profit and loss statement for the period;
  • statement of changes in equity for the period;
  • cash flow statement for the period;
  • notes that include a summary of the main provisions of the accounting policy;
  • director’s report;
  • auditor’s opinion.

The most common type of company in India is private limited company.

A private limited company must annually file necessary documents with the Registrar of Companies and tax authorities. Annual accounts shall be filed electronically through Certified Filing Centers (CFCs).

In the case of a limited company, its balance sheet is available to the public, and its profit and loss statement is not.

Moreover, every Indian company must prepare and file an annual return with the Registrar of Companies within 60 days after the date the annual general meeting is held or the deadline by which such meeting must have taken place if it has not taken place.

Since the Russian law does not have an analog to annual return, we consider it necessary to clarify this term. Annual return is a short report on the current structure of the company that is prepared annually by the company’s secretary. Normally, it includes:

  • identification data (date of incorporation, registered address);
  • information on directors and their resignations;
  • information on secretaries and their resignations;
  • information on the authorized capital, par value of shares, number of issued shares;
  • information on shareholders and transfer of shares.

Financial statements, books of account and accounting records must be kept in the company’s registered office for the period of at least eight financial years.

Audit of accounts

All incorporated companies must appoint an auditor within 30 days after the incorporation acting in accordance with the Indian financial reporting standards IndAS ICAI.

All limited liability partnerships (LLPs) must audit their financial statements if the annual sales turnover exceeds 4 000 000 INR or if the contribution to the authorized capital exceeds 2 500 000 INR irrespective of the nature of the company’s business.

Time frame for preparation and submission of financial statements

All companies in India have a unified financial year from 1 April to 31 March. Audit starts after the end of the financial year.

A notice of the annual general meeting of shareholders is sent to auditors and shareholders 21 days before the meeting.

The deadline for holding an annual general meeting is 6 months after the end of the financial year (by 30 September).

The annual general meeting approves audited accounts, an auditor and directors.

Annual accounts must be filed with the Registrar of Companies within 30 days after the general meeting or, if the meeting has not taken place, within 30 days after the deadline by which such meeting must have taken place, i.e. by 31 October.

Indian companies registered at an exchange must publish financial statements quarterly within 45 days after the end of each quarter.

A tax return must also be filed by the company by 30 September.

Liability for late filing

If a company does not provide a copy of financial statements, the company is imposed with a penalty of one thousand rupees for each day but not more than 1 000 000 INR (10 lakhs, 1 lakh is 100 000 INR).

Consolidated financial statements

If a company has one or several subsidiaries, it must prepare a consolidated financial report of the company and all subsidiaries in addition to financial statements.

Exceptions are the following companies:

  • it is a subsidiary that is fully or partially owned by another enterprise, and all the owners have been informed and do not object to the fact that the parent company will not provide consolidated financial statements;
  • debt or equity instruments of the company are not traded on an open market;
  • it has not filed and not in the process of filing its financial statements with the securities commission or another regulatory organization in order to issue financial instruments on a public market;
  • the ultimate or intermediate parent company makes consolidated financial statements that are available to the public and comply with IFRS.
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