Year-End Reconciliation Guide for Indian Companies: FY Close Best Practices

Year-end reconciliation in India is time-bound in a way that most other financial tasks are not. March 31 is a hard deadline — TDS mismatches, ITC claims, and RERA escrow discrepancies that remain unresolved at midnight on March 31 carry into the next assessment year with compounding consequences.

This guide covers the reconciliation tasks that must be completed before March 31, in the order they should be addressed.

Q4 Reconciliation Planning Timeline

Starting year-end reconciliation in the last week of March is too late for most organisations. The practical deadline for the matching phase is March 25 — leaving the final week for exception escalation, corrections, and sign-off.

February: Download and Stage

By the end of February, finance teams should have downloaded all data sources that will be needed:

• Form 26AS from TRACES — for all TDS receivable matching
• GSTR-2B for January and February (March data will not be available until mid-April)
• Platform settlement reports for Q4 (October–February complete)
• Bank statements for all accounts — January and February confirmed

Running a preliminary match in February identifies the high-volume discrepancies early, when there is still time to contact deductors for correction returns.

March 1–15: Active Matching Phase

The matching phase covers four parallel workstreams:

Resolving TDS Mismatches Before 31 March

Why March 31 Is the Hard Date

TDS credit from Form 26AS is claimed in the income tax return filed for the relevant assessment year. Corrections to TDS entries by deductors must be processed by TRACES before the assessment year’s ITR filing deadline — typically July 31 or October 31.

For a deductor to file a correction return, they need: the original TAN, the challan BSR code and serial number, and the PAN of the deductee. A well-maintained TDS receivable register makes this contact-and-correct process significantly faster.

Practical Steps

1. Export the full Form 26AS TDS section (Part A1) — all entries for the financial year
2. Match each entry to your TDS receivable ledger by deductor TAN, quarter, and section code
3. Flag entries where: amount deducted differs by more than ₹100, section code is wrong, or PAN is missing/incorrect
4. Send correction requests to flagged deductors — provide them the specific challan reference and correction details
5. Monitor Form 26AS weekly in March for correction confirmations

Good TDS reconciliation software automates steps 1–3, producing a flagged exception list rather than requiring manual comparison.

GST Annual Return Reconciliation (GSTR-9)

The GSTR-9 Reconciliation Chain

GSTR-9 requires declaring the financial year’s aggregate supplies, purchases, and ITC on a consolidated basis. The reconciliation that feeds GSTR-9 has four components:

• GSTR-1 (outward supplies declared) vs actual invoice register — check for missing or incorrectly classified invoices
• GSTR-3B (monthly returns filed) vs GSTR-1 — identify timing differences and corrections
• GSTR-2B (ITC available per GSTN) vs purchase register — identify ITC claimed but not reflected, or available but not claimed
• GSTR-3B ITC claimed vs GSTR-2B ITC available — excess claims require reversal with 18% interest under Section 50

March-end is not the GSTR-9 filing deadline, but it is the last date to claim ITC for the current FY and the last date to reverse excess ITC without interest accruing further.

Fixed Asset and Depreciation Reconciliation

Fixed asset reconciliation before year-end covers three tasks:

• Physical verification sign-off: assets physically verified vs register
• Depreciation calculated per Schedule II (Companies Act) — WDV or SLM method reconciled to opening block
• Additions and disposals for the year confirmed with supporting invoices and approvals

GST ITC on capital goods follows a 5-year clawback rule (Section 17(5) carve-outs aside) — this must be verified against the ITC register before filing GSTR-9C if applicable.

Statutory Audit Preparation

What Auditors Check First

Statutory auditors under the Companies Act typically begin with four reconciliation verifications:

1. Bank reconciliation statements — all accounts, as at March 31 and March 25 (to catch post-period items)
2. Debtors and creditors balance confirmation — responses from significant counterparties
3. TDS receivable — reconciled to Form 26AS, with unreconciled items explained
4. ITC register — reconciled to GSTR-2B, reversals documented

Gaps in any of these produce audit observations. Observations on TDS and ITC reconciliation are particularly consequential — they signal process risk to the auditor and can trigger additional testing.

Organisations that use reconciliation software India for continuous matching — rather than month-end or year-end bursts — typically enter statutory audit with reconciliation already complete and documented.

Reconciliation Sign-Off Process

Year-end reconciliation should conclude with a formal sign-off that documents:

• Date of final bank reconciliation for each account
• Outstanding exceptions at close, with materiality classification
• TDS mismatches remaining (below threshold for correction) with explanation
• ITC reversals made in the March GSTR-3B
• Approving authority (CFO or controller)

This documentation becomes part of the permanent audit file. Under the Income Tax Act, reconciliation records must be retained for 8 years from the end of the relevant assessment year. Under GST, the retention requirement is 6 years from the last date of filing the annual return for that FY.

The GST portal publishes the current GSTR-9 filing deadline and any extensions announced by the GST Council.