India Compliance Roundup: February — Key Deadlines, Filings & Regulatory Updates

Why February Is the Strategic Compliance Month

February sits in a unique position in India's compliance calendar. It carries the standard monthly obligations — GST returns, TDS deposits, PF/ESI contributions — but its real significance lies in what it sets up. February is the last full month before the March 31 financial year-end, making it the final window to complete year-end tax planning, issue Q3 TDS certificates, reconcile intercompany transactions, and prepare for the avalanche of March deadlines.

For companies with foreign direct investment, February is when the advance tax estimation for the fourth instalment (due 15 March) must be finalized, transfer pricing documentation must be substantially complete, and all quarterly compliance from Q3 should be closed out. This roundup covers every February obligation and the strategic preparation tasks that distinguish well-run foreign subsidiaries from those scrambling in March.

GST Compliance Deadlines in February

GSTR-7 and GSTR-8 — 10 February

GSTR-7 (TDS under GST) and GSTR-8 (TCS by e-commerce operators) for January are due by 10 February. Government agencies deducting GST TDS and e-commerce operators collecting TCS must file these returns to report deductions and collections made in January.

GSTR-1 — 11 February

Monthly filers must submit GSTR-1 (outward supplies statement) for January by 11 February. QRMP taxpayers can optionally upload B2B invoices for January via the Invoice Furnishing Facility (IFF) by 13 February. This optional upload allows the recipient to claim ITC on a monthly basis even though the supplier files quarterly.

GSTR-3B (Monthly Filers) — 20 February

The summary return and tax payment for January is due by 20 February. With the financial year-end approaching, February's GSTR-3B filing should include a thorough review of ITC utilization. Companies should verify that all eligible ITC for the year has been claimed, expired credits have been identified, and any required reversals under Rule 37 (for unpaid invoices beyond 180 days) have been processed.

PMT-06 (QRMP Tax Payment) — 25 February

QRMP taxpayers must pay their estimated monthly tax for January via PMT-06 by 25 February. This is a payment-only obligation — the actual return (GSTR-3B) is filed quarterly. The payment amount is based on either the fixed-sum method (35% of previous quarter's net cash liability) or the self-assessment method (actual liability for the month).

GSTR-5 and GSTR-5A — 20 February

Non-resident taxable persons (GSTR-5) and OIDAR service providers (GSTR-5A) must file returns for January by 20 February. Foreign companies providing cross-border digital services to Indian consumers — SaaS platforms, cloud services, online advertising — must comply with GSTR-5A if they are registered under the simplified GST registration framework for non-resident OIDAR suppliers.

GSTR-11 — 28 February

Persons with Unique Identity Numbers (UIN) — typically embassies, consulates, and UN bodies — must file GSTR-11 for January by 28 February to claim refund of taxes paid on inward supplies. While this filing is not directly relevant to most foreign companies, foreign diplomatic and multilateral entities operating in India should track this deadline.

Income Tax and TDS Deadlines in February

TDS Deposit for January — 7 February

All tax deducted at source during January must be deposited using Challan 281 by 7 February. This covers TDS under all applicable sections — salary (192), professional fees (194J), contractor payments (194C), rent (194-I), and payments to non-residents (Section 195). Late deposit attracts interest at 1.5% per month under Section 201(1A).

For cross-border payments to parent companies or related entities, the deductor must apply the correct DTAA rate and complete the Form 15CA/15CB certification before remittance. February is a heavy month for intercompany settlements as foreign parents often request year-end cost allocations, management fee true-ups, and royalty settlements ahead of the 31 March year-end.

Form 16A Issuance — 15 February

TDS certificates in Form 16A for Q3 (October-December) deductions must be issued to deductees by 15 February. This deadline follows the Q3 TDS return filing deadline of 31 January. Form 16A is generated through the TRACES portal after the quarterly return is processed.

For foreign-owned subsidiaries, Form 16A issuance is particularly important for payments to non-residents. The certificate confirms the TDS rate applied, the treaty benefit claimed, and the amount remitted. Non-resident payees use Form 16A to claim credit for Indian TDS in their home jurisdiction. Failure to issue Form 16A by the deadline attracts a penalty of INR 100 per day under Section 272A(2)(g), capped at the TDS amount.

Challan-cum-Statements (Forms 26QB, 26QC, 26QD, 26QE) — 28 February

Challan-cum-statements for TDS on specific transactions in January — property purchases (26QB), rent exceeding INR 50,000/month paid by individuals/HUFs (26QC), payments under Section 194M (26QD), and consideration paid to resident for transfer of virtual digital asset (26QE) — are due by 28 February. While these are primarily individual obligations, company directors purchasing property or making specified payments must comply.

Advance Tax Planning for the Fourth Instalment

Estimating the Final Tax Liability

The fourth and final instalment of advance tax for FY 2026-27 is due on 15 March. By February, companies should have a near-final estimate of total taxable income for the year. The fourth instalment must bring the cumulative advance tax payment to 100% of the total estimated tax liability.

For foreign-owned subsidiaries, the key variables affecting the February tax estimate include:

• Intercompany pricing adjustments: Management fees, royalties, and cost-sharing charges from the parent company — these must be at arm's length under transfer pricing rules
• Year-end provisions: Bonus provisions, leave encashment, gratuity contributions, and other employee benefit accruals
• Depreciation computation: Final calculation of depreciation under the Income Tax Act (which differs from book depreciation under Ind AS/Companies Act)
• MAT calculation: For companies paying tax under the Minimum Alternate Tax (Section 115JB), the book profit computation must be finalized
• Deferred tax adjustments: While deferred tax does not affect advance tax, the interaction between book income and taxable income needs reconciliation

Interest Implications of Underpayment

If the total advance tax paid (across all four instalments) is less than 90% of the assessed tax, interest under Section 234B applies at 1% per month from April of the assessment year until the date of actual payment. Additionally, Section 234C interest at 1% per month applies for any instalment shortfall. Neither of these interest charges is deductible as a business expense, making accurate estimation in February crucial.

FEMA and RBI Compliance in February

ECB-2 Monthly Return — Within 7 Working Days

Companies with external commercial borrowings must file the ECB-2 return for January through their AD Category I bank within 7 working days of the month end — typically by 10-12 February. All ECB transactions — drawdowns, interest accruals, principal repayments, and hedging details — must be reported. Nil returns are required even if no transactions occurred.

FC-GPR and FLA Compliance Review

February is the time to conduct a comprehensive review of all FEMA compliance for the financial year. Verify that:

• All share allotments to foreign investors during the year have corresponding FC-GPR filings within 30 days of allotment
• Any share transfers between resident and non-resident shareholders have been reported via FC-TRS
• ECB-2 monthly returns for all 12 months are up to date
• The company's sectoral cap compliance is verified against current FDI policy

Addressing any gaps now avoids complications during the annual FLA return filing (due 15 July) and ensures clean records for any future investment rounds.

PF, ESI, and Labour Law Deadlines in February

EPF and ESI Contributions — 15 February

Employer contributions for EPF and ESI for January salaries must be deposited by 15 February. The ECR (Electronic Challan cum Return) must be filed on the EPFO portal along with the contribution payment. ESI contributions are deposited separately through the ESIC portal.

February is also the time to reconcile EPF contribution records for the year. Companies should verify that Universal Account Numbers (UANs) for all employees are correctly linked, KYC details (Aadhaar, bank account, PAN) are updated, and any employee exits during the year have been properly processed with Form 10C/10D/19 as applicable.

Professional Tax (State-Specific)

Professional Tax deadlines for February vary by state. Key deadlines include Maharashtra (monthly by last day of February for employers), Karnataka (by 20 February for January), Andhra Pradesh and Telangana (by 10 February for January), and West Bengal (by 21 February for January). Companies with multi-state operations must track each state's payment and return filing obligations independently.

Year-End Preparation Tasks for February

Transfer Pricing Documentation

Foreign subsidiaries with intercompany transactions must have transfer pricing documentation substantially complete by the end of February. While the formal transfer pricing report (Form 3CEB) is not due until 31 October of the assessment year, the underlying benchmarking analysis, functional analysis, and economic analysis should be prepared using data available through January.

Key intercompany transactions requiring documentation include management and advisory fees charged by the parent, brand royalty or trademark license fees, cost-sharing or cost contribution arrangements, intercompany loans and guarantees (with arm's length interest rates), and secondment arrangements for expatriate employees. Each transaction must be tested against the arm's length principle using one of the prescribed methods — CUP, RPM, CPM, TNMM, or PSM.

Statutory Audit Preparation

The statutory audit for FY 2026-27 typically begins in April. February is when the finance team should begin preparing audit schedules, reconciling bank accounts, confirming intercompany balances with the parent and sister entities, and ensuring that all accounting entries are recorded. For foreign-owned subsidiaries following Ind AS, February is the time to review IFRS-to-Ind-AS conversion adjustments and ensure consistency with prior years.

Key audit preparation tasks for February include: confirming receivable and payable balances with the parent company and sister entities through intercompany confirmation letters; reconciling foreign currency denominated transactions and applying the correct exchange rate for year-end translation (RBI reference rate as on 31 March); reviewing provisions for doubtful debts, warranties, and contingent liabilities; and ensuring that all related party transactions are documented with supporting transfer pricing benchmarking. The auditor will specifically examine whether the company's accounting policies for revenue recognition, depreciation, and employee benefits are consistently applied and compliant with Ind AS requirements.

Review GST ITC Claims

The deadline to claim ITC for invoices relating to FY 2025-26 in the GSTR-3B return is 30 November 2026 (the due date for filing the return for the month of October 2026 or the annual return, whichever is earlier). However, February is the practical window to identify any missed ITC claims from earlier months and ensure they are captured in remaining monthly returns. Common missed claims include capital goods ITC, reverse charge mechanism payments, and imports with delayed customs clearance.

Employee Tax Declarations and Proofs

February is the month when employers typically collect final investment proof submissions from employees for the financial year. This affects TDS on salary calculations for February and March. The HR and payroll team should send reminders to employees to submit proof of life insurance, provident fund contributions, housing loan interest, medical insurance, and other deductions claimed under Sections 80C, 80D, 80E, and the standard deduction.

For foreign subsidiaries with expatriate employees, additional complexity arises from cross-border salary structures. Expatriates on shadow payroll arrangements — where the salary is paid by the parent company but the Indian subsidiary bears the cost — require careful TDS computation. The employer must consider the total global compensation, apply Indian tax rates to the India-attributable portion, and factor in any tax equalization payments. Failure to correctly compute TDS on expatriate salaries is a frequent audit finding that results in interest under Section 201(1A) and potential penalties under Section 271C.

Compliance Calendar: February at a Glance

The following table consolidates all February deadlines for quick reference:

Practical Tips for Foreign-Owned Companies

Finalize Intercompany Charges Before Month-End

February is the last practical window to finalize intercompany pricing with the parent company. Management fees, royalties, cost allocations, and service charges for the year should be agreed upon and invoiced before 28 February. This allows accurate advance tax estimation for the 15 March instalment and ensures transfer pricing documentation reflects final numbers rather than estimates.

Conduct a Mid-Year FEMA Audit

Before the year-end rush, conduct an internal audit of all FEMA compliance actions taken during the year — FC-GPR filings, FC-TRS filings, ECB-2 returns, and downstream investment reporting. Identifying gaps in February gives a 45-day buffer to rectify issues before the financial year closes. Engage a FEMA compliance specialist if your company made any share allotments, share transfers, or received ECBs during the year.

Prepare Director and KMP Declarations

Before the next board meeting (typically scheduled in February or March for Q3 results), ensure all director and Key Managerial Personnel (KMP) declarations are current. This includes MBP-1 (disclosure of interest by directors), DIR-8 (intimation of disqualification), and updated disclosures under Section 184. For foreign directors, verify that their digital signature certificates are valid and not expiring before the March year-end filings.

Review GST Registration Status Across States

Companies with multi-state operations should verify that their GST registrations in all states are active and up to date. The GST authorities have been actively cancelling registrations of taxpayers who have not filed returns for six consecutive months. If any state registration was suspended or cancelled, initiate the revocation process in February to avoid complications with March GST filings.

Key Takeaways

• February carries standard monthly deadlines — GSTR-1 (11th), GSTR-3B (20th), TDS deposit (7th), PF/ESI (15th) — but its primary value is as the year-end preparation month.
• Form 16A issuance for Q3 TDS is due by 15 February — critical for non-resident payees who need TDS certificates to claim foreign tax credits in their home jurisdiction.
• The advance tax fourth instalment (due 15 March) requires finalization in February — coordinate with the parent company on intercompany charges to avoid underpayment interest.
• Transfer pricing documentation should be substantially complete by end-February, even though the formal Form 3CEB deadline is October 31.
• A February FEMA compliance audit provides a 45-day buffer to rectify any gaps before the financial year closes on 31 March.