Tax Planning Before March 31

Why March 31 Is the Most Critical Date in Indian Taxation

India's financial year runs from April 1 to March 31, and nearly every tax-saving action must be completed before the year-end. For foreign companies with Indian operations, this deadline carries particular weight: missed deductions cannot be claimed retroactively, advance tax shortfalls trigger automatic interest under Sections 424 and 425 of the Income-tax Act, 2025 (sections 234B and 234C of the Income-tax Act, 1961), and certain compliance obligations expire permanently.

The stakes are significant. A foreign-owned private limited company in India faces an effective corporate tax rate of 25.17% under section 200 read with section 205(1) of the Income-tax Act, 2025 (section 115BAA of the Income-tax Act, 1961) — a 22% base rate plus surcharge and cess. Without the concessional rate election, domestic companies pay up to 30%, while foreign companies face a base rate of 35% plus applicable surcharge. Every rupee of unclaimed deduction directly increases your effective tax burden.

Advance Tax: The March 15 Deadline You Cannot Miss

The final installment of advance tax for FY 2026-27 falls due on March 15, 2027. By this date, 100% of the estimated annual tax liability should have been paid. If your company missed this deadline or underpaid, the consequences are automatic:

• Section 425 of the Income-tax Act, 2025 (section 234C of the Income-tax Act, 1961) interest: 1% per month on the shortfall amount for each quarter where cumulative payments fell below the required threshold (15% by June 15, 45% by September 15, 75% by December 15, 100% by March 15)
• Section 424 interest: 1% per month from the 1 April following the end of the tax year until the date of actual payment, if total advance tax paid is less than 90% of the assessed tax liability

For a subsidiary with INR 1 crore in tax liability that paid only 80% by March 15, Section 424 interest would run at 1% per month on the INR 20 lakh shortfall — INR 20,000 per month until it is cleared. Review your advance tax position immediately and make a final payment before March 31 if any shortfall exists.

Who Must Pay Advance Tax?

Any company (including a wholly owned subsidiary of a foreign parent) whose total tax liability exceeds INR 10,000 in a financial year must pay advance tax. This includes tax on business income, capital gains, rental income, and interest income. Companies opting for section 200 are not exempt from advance tax obligations.

Year-End Deduction Strategies for Corporate Entities

Indian tax law offers several deductions that must be claimed within the financial year. For companies operating under the old tax regime, these represent significant savings opportunities:

Depreciation Planning

Assets put to use before March 31 qualify for depreciation in FY 2026-27. Under section 33 of the Income-tax Act, 2025 (section 32 of the Income-tax Act, 1961), higher depreciation rates apply to specific asset classes: computers including software at 40%, general plant and machinery at 15%, and buildings at 10%. If your subsidiary has budgeted capital expenditure for Q1 of the next year, consider advancing the purchase to claim an additional year of depreciation.

Note: Assets put to use for less than 180 days in the financial year qualify for only 50% of the normal depreciation rate. For maximum benefit, ensure assets are operational by October 1.

R&D Expenditure: Section 45 of the Income-tax Act, 2025 (Section 35 of the Income-tax Act, 1961)

Companies engaged in scientific research can claim deductions on R&D expenditure. Payments to approved research associations or universities qualify for 100% deduction, as does DSIR-approved in-house R&D expenditure, under section 45 of the Income-tax Act, 2025 (section 35 of the Income-tax Act, 1961). The earlier weighted (more-than-100%) deductions have lapsed. Ensure all R&D payments and approvals are completed before March 31.

Bad Debt Write-Off

Under section 31(2) of the Income-tax Act, 2025 (section 36(1)(vii) of the Income-tax Act, 1961), bad debts can be written off against taxable income if they were previously included in income and are now irrecoverable. The write-off must be recorded in the books of accounts before March 31. Conduct a thorough receivables review and formally write off genuinely irrecoverable debts before year-end.

Transfer Pricing Year-End Actions

For Indian subsidiaries of foreign companies, transfer pricing compliance requires specific year-end actions. Under Section 161 of the Income-tax Act, 2025 (section 92 of the Income-tax Act, 1961), all international transactions with associated enterprises must be at arm's length price.

• Year-end adjustments: If actual transaction prices deviate from the arm's length range, make compensating adjustments before March 31. These adjustments must be reflected in invoices and financial statements for FY 2026-27.
• Documentation: Begin compiling contemporaneous transfer pricing documentation now. While the Form 48 (formerly Form 3CEB) filing deadline is October 31, the underlying analysis must reference data from the financial year ending March 31.
• Benchmarking studies: Commission your transfer pricing study with a CA firm before year-end to ensure adequate time for comparable company analysis and margin benchmarking.

Read our detailed guide on 7 transfer pricing mistakes that trigger a tax audit to avoid common pitfalls.

GST Reconciliation and Input Tax Credit

March 31 is the practical checkpoint for reconciling GST input tax credit (ITC) on invoices from FY 2026-27. Under Section 16(4) of the CGST Act (as amended by the Finance Act, 2022), ITC for any invoice or debit note must be claimed by 30 November following the end of the financial year, or the date of filing the annual return, whichever is earlier.

However, practical reconciliation must happen before year-end:

• Reconcile your purchase register with GSTR-2B for every month of FY 2026-27
• Follow up with vendors on missing invoices or mismatched GSTINs
• Reverse any ITC claimed on invoices where payment has not been made to the supplier within 180 days (second proviso to Section 16(2) of the CGST Act)
• Verify that all ITC claimed relates to business purposes and is not blocked under Section 17(5)

For GST compliance support, our team can conduct a full ITC reconciliation before year-end.

TDS Compliance: Final Quarter Obligations

The Q4 TDS return (Forms 138, 140 and 144 (formerly Forms 24Q, 26Q and 27Q)) for January-March 2027 must be filed by May 31, 2027, but all TDS deductions must be made at the point of payment or credit (whichever is earlier) during the quarter. Before March 31, verify:

• TDS has been deducted on all payments to non-residents under section 393(2) of the Income-tax Act, 2025 (section 195 of the Income-tax Act, 1961), with correct rates applied based on the DTAA or the Income Tax Act
• Form 145 (formerly Form 15CA) has been filed for foreign remittances during the year, with Form 146 (formerly Form 15CB, the CA certificate) where the taxable remittance exceeds INR 5 lakh and no Assessing Officer certificate is held
• TDS certificates (Form 16A) for Q3 have been issued to deductees
• Any TDS shortfall from earlier quarters has been deposited with interest under section 398(3)(a) of the Income-tax Act, 2025 (section 201(1A) of the Income-tax Act, 1961)

For a comprehensive overview of withholding obligations on cross-border payments, read our guide on TDS on foreign payments in India.

FEMA and RBI Compliance Deadlines

Foreign-owned companies must meet several FEMA compliance deadlines around the financial year-end:

• FLA Return: The Annual Return on Foreign Liabilities and Assets must be filed by July 15 with the RBI, but the data is based on the March 31 balance sheet. Ensure your books accurately reflect all foreign liabilities and assets as of year-end.
• FC-GPR: Any pending FC-GPR filings for shares allotted to foreign investors must be completed within 30 days of allotment. Review whether all allotments during the year have been reported.
• ECB reporting: Companies with external commercial borrowings must file Form ECB-2 through the AD Category-I bank within seven calendar days of the end of any month in which loan proceeds were received or debt servicing was undertaken. Verify that all returns for FY 2026-27 have been filed.

For comprehensive FEMA and RBI compliance support, our regulatory team can audit your year-end position.

Capital Gains Planning

If your Indian entity holds investments or assets, review the capital gains tax implications before March 31:

• Long-term capital gains (LTCG): Gains on listed equity shares and equity-oriented mutual funds exceeding INR 1.25 lakh are taxed at 12.5% (post-Budget 2024 changes). Consider tax-loss harvesting: selling loss-making investments to offset gains from profitable ones.
• Short-term capital gains (STCG): Gains on listed equity held for less than 12 months are taxed at 20%.
• Unlisted securities: For foreign companies holding unlisted Indian shares, LTCG (holding period of 24 months) is taxed at 12.5% without indexation benefit.

Losses not set off in the current year can be carried forward for up to eight tax years, but only if the return is filed before the due date. Ensure all capital losses are documented before March 31.

Statutory Audit and Books of Accounts

Before March 31, ensure your books of accounts are complete and audit-ready. Under Section 63 of the Income-tax Act, 2025 (section 44AB of the Income-tax Act, 1961), every company with turnover exceeding INR 1 crore (or INR 10 crore if 95% of transactions are digital) must undergo a tax audit. The annual compliance cycle begins immediately after year-end, with the tax audit report due by September 30 (or October 31 for companies requiring transfer pricing reporting).

Foreign-owned companies must also prepare for the statutory audit under the Companies Act, 2013. The Annual General Meeting must be held within 6 months of year-end (by September 30); the statutory auditor holds a five-year term, and annual ratification of the appointment is no longer required since the Companies (Amendment) Act, 2017. Review outstanding provisions, contingent liabilities, and related-party transaction disclosures with your auditor before March 31 to avoid post-closing adjustments that could delay the audit timeline.

Key Takeaways

• Review advance tax payments immediately; any shortfall after the March 15 deadline triggers automatic 1% monthly interest under Sections 424 and 425
• Complete all capital expenditure, bad debt write-offs, and R&D payments before March 31 to claim deductions in FY 2026-27
• Initiate transfer pricing year-end adjustments and documentation now; the Form 48 deadline is October 31 but data must reflect the March 31 year-end
• Reconcile GST input tax credit with GSTR-2B and reverse any ineligible credits before the financial year closes
• Verify all TDS deductions under section 393(2) for non-resident payments, and ensure Form 145/Form 146 filings are current