Accounting & Bookkeeping for US Companies in India
The United States is India's second-largest trade partner, with bilateral trade exceeding $190 billion annually and American FDI in India surpassing $60 billion since 2000. Whether your Indian entity is a wholly-owned subsidiary, a branch office, or an LLP, maintaining compliant and accurate books of account is not optional — it is a legal mandate under the Companies Act, 2013 and the Income Tax Act, 1961.
US companies operating in India face a dual accounting challenge: the Indian subsidiary must maintain books in accordance with Indian Accounting Standards (Ind AS), while the US parent consolidates using US GAAP. These two frameworks, while both converging toward IFRS, have material differences in revenue recognition, lease accounting, and financial instrument classification that require careful mapping during consolidation.
India mandates that all companies — regardless of ownership — maintain double-entry bookkeeping, preserve records for a minimum of eight financial years, and undergo a statutory audit by a practicing Chartered Accountant every year. For US-owned subsidiaries, the compliance surface area extends to transfer pricing documentation, FEMA reporting, and quarterly GST returns. Missing any of these triggers penalties, reputational risk, and potential disqualification of directors.
BeaconFiling provides end-to-end accounting and bookkeeping services specifically designed for US companies operating in India, ensuring dual-standard compliance from day one.
How the India-US DTAA Affects Accounting & Bookkeeping
The India-US Double Taxation Avoidance Agreement, signed in 1989 and amended through a 2000 protocol, has direct implications for how your Indian subsidiary's books are structured and how intercompany payments are taxed.
Fees for Included Services (FIS) — The Make Available Clause
Unlike most Indian DTAAs that use the term "fees for technical services" (FTS), the India-US treaty uses "fees for included services" (FIS) under Article 12. The FIS rate is capped at 15%. Critically, the India-US DTAA contains a unique "make available" clause — accounting and bookkeeping services paid by the Indian subsidiary to the US parent are only taxable as FIS if the service makes technical knowledge, experience, or skill available to the Indian entity so it can apply that knowledge independently. Routine back-office accounting support typically does not meet this threshold, which means withholding tax may not apply if structured correctly.
Withholding Tax on Intercompany Payments
When your Indian subsidiary pays the US parent for management fees, shared service charges, or cost allocations related to accounting functions, the following DTAA rates apply:
- Dividends: 15% (if the US parent holds 10%+ voting stock), compared to India's domestic rate of 20%
- Interest: 10% on bank loans, 15% on other interest — relevant when the US parent funds the subsidiary through intercompany debt
- Royalties: 10% for equipment, 15% for other royalties — applicable if accounting software licenses are charged to the subsidiary
- FIS: 15%, subject to the make available clause
To claim reduced treaty rates, the US entity must furnish a valid Tax Residency Certificate (TRC) from the IRS and file Form 10F with Indian tax authorities. Your accounting team must track TRC validity dates and ensure TDS returns reflect the correct treaty rate, not the domestic rate.
Transfer Pricing for Accounting Services
If your Indian subsidiary receives accounting or shared-service support from the US parent (or vice versa), these are related-party transactions subject to India's transfer pricing documentation requirements. You must maintain a master file, local file, and — for groups with consolidated revenue exceeding INR 5,500 crore — a country-by-country report. The arm's length price for intercompany accounting services is typically benchmarked using the Transactional Net Margin Method (TNMM) or the Cost Plus Method.
Document Requirements from the USA
The USA is a member of the Hague Apostille Convention, simplifying document authentication for Indian compliance filings.
Documents for Setting Up Accounting
- Certificate of Incorporation of the US parent — apostilled copy required for bank account KYC and statutory audit files
- Board Resolution authorizing the appointment of an Indian accounting firm or Chartered Accountant — notarized and apostilled
- Intercompany service agreement covering shared accounting services — this document is essential for transfer pricing compliance and must detail the scope, pricing methodology, and arm's length benchmarking
- US parent's consolidated financial statements (prior year) — needed for Ind AS consolidation mapping
- Power of Attorney (if the US parent is authorizing a local representative for GST, TDS, and MCA filings) — notarized and apostilled
Ongoing Documentation
- Tax Residency Certificate from the IRS — renewed annually, required to claim DTAA benefits on every intercompany payment
- Form 10F — self-declaration filed with Indian tax authorities alongside the TRC
- Digital Signature Certificate (DSC) — mandatory for directors signing MCA annual returns and income tax returns electronically
Step-by-Step Accounting & Bookkeeping Process
Here is the structured process BeaconFiling follows for US-owned Indian subsidiaries:
Step 1: Chart of Accounts Setup
Design a chart of accounts that maps to both Ind AS (for Indian statutory reporting) and US GAAP (for parent consolidation). This dual-mapped structure eliminates manual reconciliation at year-end and ensures your Indian books feed directly into the US parent's consolidation software (SAP, Oracle, NetSuite, or QuickBooks).
Step 2: Monthly Bookkeeping
Record all transactions in compliance with Ind AS — including revenue recognition under Ind AS 115, lease accounting under Ind AS 116, and financial instruments under Ind AS 109. Maintain separate ledgers for INR transactions and foreign currency transactions under FEMA requirements. Generate monthly trial balances, bank reconciliation statements, and intercompany reconciliation reports.
Step 3: GST Compliance
File GST returns — GSTR-1 (outward supplies, by the 11th of each month), GSTR-3B (summary return, by the 20th), and GSTR-9 (annual return, by December 31). US companies providing services to their Indian subsidiary must check for reverse charge mechanism applicability under Section 9(3) and 9(4) of the CGST Act. Read our detailed guide on GST registration for US companies.
Step 4: TDS Compliance
Deduct Tax Deducted at Source (TDS) on all applicable payments — salaries, rent, professional fees, and intercompany remittances. File quarterly TDS returns (Form 24Q for salaries, 26Q for non-salary payments, 27Q for payments to non-residents). Ensure DTAA rates are applied on cross-border payments with proper TRC documentation.
Step 5: Statutory Audit Preparation
Prepare financial statements (Balance Sheet, Profit & Loss, Cash Flow Statement, and Notes) in XBRL format for MCA filing. The statutory auditor — an independent Chartered Accountant appointed at the Annual General Meeting — audits these statements under the Standards on Auditing issued by ICAI. File AOC-4 (financial statements) and MGT-7 (annual return) with the Registrar of Companies within 30 and 60 days of the AGM, respectively.
Step 6: Tax Audit & Income Tax Return
If your Indian subsidiary's turnover exceeds INR 10 crore, a tax audit under Section 44AB is mandatory. File the income tax return by October 31 (for audited companies). Submit the transfer pricing report (Form 3CEB) by October 31 for all intercompany transactions. Additionally, file the FLA return with the RBI by July 15 each year to report foreign liabilities and assets.
Timeline & Costs
Setup Timeline
| Activity | Duration |
|---|---|
| Chart of accounts design (dual-mapped) | 3-5 business days |
| Accounting software configuration | 2-3 business days |
| GST registration (if not already done) | 5-7 business days |
| TDS registration and TAN activation | 3-5 business days |
| First monthly close | Within 10 business days of month-end |
Ongoing Compliance Calendar
| Filing | Frequency | Deadline |
|---|---|---|
| GST returns (GSTR-1, GSTR-3B) | Monthly | 11th and 20th of following month |
| TDS returns (24Q, 26Q, 27Q) | Quarterly | Within 31 days of quarter-end |
| Advance tax payments | Quarterly | June 15, Sep 15, Dec 15, Mar 15 |
| Statutory audit + AOC-4/MGT-7 | Annual | Within 30/60 days of AGM |
| Income tax return | Annual | October 31 |
| Transfer pricing report (3CEB) | Annual | October 31 |
| FLA return to RBI | Annual | July 15 |
| GST annual return (GSTR-9) | Annual | December 31 |
Cost Breakdown
| Service | Approximate Annual Cost |
|---|---|
| Monthly bookkeeping (Ind AS compliant) | INR 15,000 - 50,000/month (~$180-600) |
| GST return filing | INR 3,000 - 8,000/month (~$36-96) |
| TDS return filing | INR 2,000 - 5,000/quarter (~$24-60) |
| Statutory audit | INR 50,000 - 2,00,000/year (~$600-2,400) |
| Tax audit (if applicable) | INR 25,000 - 75,000/year (~$300-900) |
| Transfer pricing documentation | INR 1,00,000 - 3,00,000/year (~$1,200-3,600) |
Costs vary based on transaction volume, number of employees, and complexity of intercompany arrangements. Read our blog on in-house accounting team vs. outsourcing in India for a detailed comparison.
Common Challenges for US Companies
Ind AS vs. US GAAP Reconciliation
Key differences between Ind AS and US GAAP that affect US-owned subsidiaries include treatment of goodwill (Ind AS amortizes, US GAAP does not), lease classification (Ind AS 116 has a single model, US GAAP ASC 842 retains dual classification), and revenue recognition timing for long-term contracts. Your accounting team must maintain a permanent reconciliation schedule mapping these differences for quarterly and annual consolidation.
Transfer Pricing Scrutiny
India's tax authorities closely scrutinize intercompany transactions between US parents and Indian subsidiaries — particularly management fees, cost allocations, and accounting service charges. Failure to maintain contemporaneous transfer pricing documentation attracts a penalty of 2% of transaction value. Read our blog on 7 transfer pricing mistakes that trigger a tax audit.
FEMA Compliance for Foreign-Owned Entities
Every inward remittance (capital or current account) must be accounted for under FEMA regulations. The Indian subsidiary's books must separately track share capital received from the US parent, intercompany loans, trade payables, and service fee remittances. The annual FLA return to the RBI requires a complete foreign liabilities and assets statement. Read our FEMA compliance guide for foreign companies.
Multiple Compliance Deadlines
US companies often miss Indian compliance deadlines because the Indian financial year (April-March) does not align with the US calendar year (January-December). This creates overlapping reporting periods and compressed timelines for statutory audit, tax filing, and consolidation. Check our blog on 12 compliance deadlines foreign companies miss for a complete calendar.
GST Complexity for Cross-Border Services
When a US parent provides services to its Indian subsidiary (such as shared accounting, IT support, or management oversight), the Indian entity may be liable for GST under the reverse charge mechanism. Misclassification of services or failure to self-assess GST can result in interest and penalties. See our complete guide on GST for foreign companies — 40 questions answered.
Why Choose BeaconFiling
BeaconFiling specializes in accounting and bookkeeping for US-owned Indian entities. Our team of Chartered Accountants maintains dual-mapped charts of accounts, handles all statutory filings (MCA, GST, TDS, income tax, RBI), and delivers consolidation-ready reporting packages aligned with US GAAP. We have managed books for US companies across sectors — from SaaS startups to Fortune 500 subsidiaries — and understand the nuances of India-US cross-border compliance, including transfer pricing benchmarking and FEMA reporting.
Schedule a free consultation to discuss your Indian subsidiary's accounting needs, or explore our accounting and bookkeeping service for a complete overview.