Running a business in India without a structured Financial and Tax Due Diligence is one of the most expensive oversights an acquirer, investor, or promoter can make. Whether you are buying a target company under a share purchase agreement, evaluating a merger under Sections 230 to 232 of the Companies Act 2013, or simply entering a joint venture with a new partner, the financial health and tax compliance history of the counterparty determines the real value you are inheriting. Post-2020, with faceless assessments under the Income Tax Act 1961, automated GST reconciliation, and expanded Section 194Q TDS obligations, hidden tax liabilities that once went unnoticed now surface during statutory audits or income-tax search proceedings under Section 132, creating sudden financial shock for buyers. KAMRIT Financial Services LLP delivers end-to-end Financial and Tax Due Diligence: we review Books of Account under Section 128 of the Companies Act 2013, analyse tax returns filed under the Income Tax Act 1961, reconcile GST returns under the CGST Act 2017, evaluate Form 3CD disclosures, assess transfer pricing documentation under Section 92D, and issue a structured Due Diligence Report that protects your investment decision. Our team covers Income Tax, GST, Companies Act, FEMA, and sector-specific regulations so that you receive a single integrated report, not fragments from multiple advisors.
What is Financial and Tax Due Diligence in India 2026?
Financial and Tax Due Diligence is a systematic examination of a target entity's financial records, tax filings, statutory compliances, and regulatory obligations to identify actual and contingent liabilities before a transaction is concluded. In India, this exercise is not governed by a single statute but sits at the intersection of the Companies Act 2013, the Income Tax Act 1961, the CGST Act 2017, the Foreign Exchange Management Act 1999, and sector-specific regulations such as the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 for listed entities, or the RBI NBFC Directions for financial sector targets. The Companies Act 2013 mandates maintenance of proper Books of Account under Section 128 read with Rule 3 of the Companies (Accounts) Rules 2014, and these books form the primary source for financial due diligence. Tax due diligence specifically examines whether the target has filed Income Tax Returns under Section 139 of the Income Tax Act 1961, paid advance tax correctly under Section 207 to 219, deducted and deposited TDS under Sections 192 to 194, and complied with GST registration and return filing under Sections 22 and 39 of the CGST Act 2017. It also reviews whether Minimum Alternate Tax under Section 115JB has been correctly computed, whether carry-forward losses are genuine under Section 80 and Section 72, and whether related-party transactions comply with Section 188 of the Companies Act 2013 and transfer pricing rules under Sections 92 to 92F. Due diligence applies to any party buying, merging with, or investing in an existing Indian business, regardless of whether the target is a private limited company, limited company, LLP, or partnership firm.
Who needs this
Due Diligence is triggered by the transaction structure and the nature of the target entity rather than by a simple turnover threshold. The following conditions commonly activate the need for a formal engagement.
- Share purchase or slump sale where the buyer acquires shares and inherits all historical liabilities of the target entity
- Merger or amalgamation under Sections 230 to 232 of the Companies Act 2013 requiring National Company Law Tribunal approval
- Acquisition of a business as a going concern where GST and Income Tax registrations transfer to the buyer
- Foreign direct investment transaction requiring RBI reporting under FEMA (Transfer of Shares) Regulations 2017
- Investor onboarding a company where the investee has annual turnover exceeding Rs 2 crore and multiple GST registrations
- Proposed IPO or listed company making a substantial acquisition requiring SEBI SAST Regulations 2011 disclosure
- NBFC or fintech target where RBI's Scale Based Regulation framework requires capital and compliance verification
- Joint venture formation where each party wants independent verification of the other's financial standing
- ESOP or sweat equity issuance under Section 54 of the Companies Act 2013 requiring a valuation report
- Winding up or voluntary dissolution under Section 59 of the Insolvency and Bankruptcy Code 2016 where creditors need financial clarity
Documents required
The document stack determines the depth and reliability of the Due Diligence Report. KAMRIT requests documents in a structured data room format so that nothing is missed and the review is completed within the committed timeline.
- Audited Financial Statements for the last 3 to 5 financial years including Balance Sheet, P&L, and Cash Flow Statement
- Tax Audit Report under Section 44AB along with Form 3CB-3CD issued by a Chartered Accountant
- Income Tax Returns filed for the last 5 assessment years with acknowledgments and ITR-V verification status
- GST Returns (GSTR-1, GSTR-3B, and GSTR-9 where applicable) for the last 3 financial years with GST portal reconciliation
- TDS Returns (Form 24Q, 27Q, 27EQ) and TDS certificates (Form 16, 16A) for all deductors and deductees in the scope period
- PAN Card and TAN of the target entity with copies of all GST registration certificates across states
- Memorandum and Articles of Association (MOA and AOA) with all amendments since incorporation
- Shareholding pattern and register of members under Section 88 of the Companies Act 2013
- Board Resolutions and Shareholders' Agreements relevant to the transaction structure
- List of pending litigations, show-cause notices, and assessment orders received from Income Tax, GST, or Provident Fund authorities
- Loan agreements, hypothecation deeds, and charge creation documents registered with MCA under Section 77 of the Companies Act 2013
- Related-party transaction register and transfer pricing study documentation if annual transactions exceed Rs 1 crore with specified persons
How KAMRIT runs it, step by step
KAMRIT follows a structured six-phase engagement model for every Financial and Tax Due Diligence mandate. Each phase has defined inputs, outputs, and timelines so the client always knows what is happening.
- Engagement Scoping and Data Room Setup. KAMRIT conducts a 60-minute scoping call with the client to define the transaction structure, target entity scope, review period (typically 3 to 5 financial years), and specific areas of concern such as transfer pricing or input tax credit reversals. We issue a Data Room Request List specifying the exact documents required. The client creates a shared secure folder. KAMRIT confirms the document inventory within 3 working days of receipt. This phase finalises the engagement scope and fee.
- Financial Records Review. KAMRIT's team of Chartered Accountants examines the audited financial statements, internal management reports, and bank statements for the review period. We verify the net worth position under Schedule III of the Companies Act 2013, check for understated provisions and contingent liabilities disclosed in Notes to Accounts, reconcile inter-company transactions, and verify fixed asset registers. Any material discrepancy is flagged with a quantified financial impact. This review covers 3 to 5 years of financials and takes 5 to 7 working days.
- Tax Compliance Verification. KAMRIT's tax team reconciles Income Tax Returns with audited financials, checks MAT computation under Section 115JB, verifies carry-forward loss schedules and their utilisation under Sections 72 to 80, and reviews advance tax instalment records under Section 211. On the GST side, we reconcile GSTR-1 against GSTR-3B to identify mismatches, verify input tax credit eligibility under Section 16 and 17 of the CGST Act 2017, and check timely filing of all returns. Form 3CD is reviewed for any qualifications or disallowances. This phase takes 7 to 10 working days.
- Regulatory and Litigation Review. KAMRIT checks the target's MCA21 filings including annual returns under Section 92 and financial statements under Section 137. We verify charge registrations under Section 77 and satisfaction filings under Section 82. For RBI-regulated entities, we review FEMA compliance and the target's overseas direct investment disclosures. We also check for outstanding statutory dues, provident fund arrears, and any show-cause notices pending with GST or Income Tax authorities. This phase runs concurrently with the tax review and takes 5 to 7 working days.
- Draft Report Preparation and Client Review. KAMRIT consolidates findings from all phases into a structured Due Diligence Report with an Executive Summary, a Risk Matrix categorising issues as High, Medium, or Low, a quantified liability quantification table, and specific recommendations with regulatory citations. The draft report is shared with the client for review within 5 working days of completing all field reviews. The client gets 2 rounds of queries and clarifications included in the engagement fee.
- Final Report Delivery and Post-Report Support. KAMRIT issues the final signed Due Diligence Report with our Principal Chartered Accountant's digital signature. The report is formatted for use in transaction documents, NCLT filings, or investor presentations. We offer 15 days of post-report support to answer follow-up questions from your legal counsel, lenders, or co-investors at no additional charge.
Timeline
The end-to-end timeline for a standard Financial and Tax Due Diligence engagement ranges from 22 to 35 working days from the date KAMRIT receives a complete Data Room. The first 3 working days cover scoping and document inventory confirmation. Financial records review takes 5 to 7 working days. Tax compliance verification runs 7 to 10 working days and can overlap with the regulatory review which takes another 5 to 7 working days. Draft report preparation takes 5 working days from the last document received. Client review and query resolution adds 3 to 5 working days. Total KAMRIT-controlled work averages 20 to 25 working days. The remaining time depends on how quickly the client provides additional documents or clarifications. If the target operates across multiple GST registrations or states, or if the review period extends beyond 5 financial years, KAMRIT will quote an extended timeline of 35 to 45 working days at the scoping stage. Government or regulatory bodies do not control KAMRIT's internal timelines; however, if the engagement requires filing with NCLT under a merger scheme, the tribunal's hearing schedule will extend the overall transaction timeline beyond our control.
How our pricing compares
KAMRIT Financial Services LLP prices Financial and Tax Due Diligence starting at Rs 74,899 for a single-company, single-state, three-year review scope. This fee is all-inclusive of KAMRIT's professional charges, draft and final report preparation, and two rounds of client queries. Government fees such as MCA21 filing charges, stamp duty on merger petitions filed with NCLT, or charges for ROC document retrieval are billed separately at actuals. IndiaFilings offers a basic financial review starting at Rs 25,000 but their scope is limited to MCA data and does not include GST reconciliation or Form 3CD analysis; their comprehensive due diligence package is quoted at Rs 55,000 to Rs 75,000 depending on turnover. Vakilsearch charges between Rs 35,000 and Rs 80,000 for similar scope but their turnaround is 30 to 45 days and they use a third-party CA network rather than an in-house team. ClearTax focuses on tax due diligence and quotes Rs 45,000 to Rs 65,000 for a three-year tax review, but their service does not include Companies Act compliance checks or MCA charge verification. LegalRaasta offers due diligence starting at Rs 18,000 which covers only a basic MCA21 extract review with no field-level document examination. KAMRIT's higher fee reflects an integrated in-house team of Chartered Accountants and tax advisors who examine Books of Account under Section 128 of the Companies Act 2013, reconcile GST returns under the CGST Act 2017, verify Form 3CD and tax audit reports, and deliver a signed report with quantified liability estimates within 22 to 35 working days. The fee difference versus cheaper alternatives is justified by the depth of the review, the absence of third-party outsourcing, and the comprehensiveness of the final deliverable.
Common mistakes KAMRIT avoids
Most buyers and investors discover due diligence gaps only after the transaction closes. These are the specific mistakes KAMRIT sees repeatedly in first-time engagements.
- Relying only on MCA21 data extracts without pulling Form 3CD and tax audit reports, which reveals the actual disallowances and contingent liabilities not captured in MCA filings
- Ignoring GST input tax credit reversals under Section 17 of the CGST Act 2017 which can create large unexpected liabilities if the target claimed ineligible credit
- Not verifying TDS deposit challans against Form 26AS, allowing short deposits to go undetected which creates interest liability under Section 201A of the Income Tax Act 1961
- Overlooking charge satisfaction filings under Section 82 of the Companies Act 2013 which can block a clean transfer of secured assets
- Accepting the target's net worth figures without verifying the fixed asset register and depreciation schedule under Schedule II of the Companies Act 2013
- Skipping review of overseas direct investment disclosures if the target has subsidiaries abroad, triggering FEMA violation risk under RBI's FEMA 7 and FEMA 13 regulations
- Not checking the validity of GST registrations in each state before assuming they transfer cleanly under Section 22 of the CGST Act 2017 in an asset purchase structure
- Confirming shareholding from MCA records alone without verifying the demat account beneficial ownership under SEBI's SBOM reporting requirements for listed targets