Introduction
Due diligence is not a formality—it’s your risk pricing engine.
In India, the most expensive surprises typically come from:
- compliance gaps that look “small” but compound into penalties and litigation
- weak documentation (missing registers, missing agreements, inconsistent filings)
- payroll and labour exposures that surface only after integration
- GST and TDS mismatches that trigger notices post-closing
This article is written for buyers, founders, CFOs, and deal teams (strategic or PE) who want a practical, operational diligence checklist.
If you want end-to-end support on diligence (financial + tax + compliance), our Internal Audit & Due Diligence capability can support transaction readiness and diligence execution.
How to use this checklist (best practice)
Before you request 300 documents, do this:
- define the deal structure (share purchase vs asset purchase)
- define the period under review (typically 3–5 years)
- identify “deal breakers” vs “price adjusters”
- assign owners: legal, tax, finance, HR/payroll, secretarial
Then use the sections below to build a clean diligence request list.
1) Corporate and legal diligence (structure + contracts)
What to collect
- certificate of incorporation, MOA/AOA, CIN details
- shareholding pattern, cap table, share certificates
- list of subsidiaries, JVs, related parties
- material contracts: customers, vendors, leases, loans
- IP ownership documents (trademarks, software licenses)
- litigation list and legal notices
Red flags to watch
- contracts signed by wrong entity / unauthorized signatories
- revenue concentration without enforceable contracts
- undisclosed related-party transactions
- unresolved litigation or regulatory inquiries
2) Companies Act / secretarial diligence (governance hygiene)
What to collect
- statutory registers (members, directors, charges, etc.)
- board minutes and resolutions (3–5 years)
- AGM records, notices, attendance, minutes
- ROC filings and acknowledgements
- director KYC and disclosures
- related party approvals and registers
Red flags to watch
- missing minutes or “recreated” minutes
- late ROC filings and compounding history
- director disqualifications / non-compliance
- share allotments/transfers not properly documented
If you need post-acquisition clean-up and ongoing ROC discipline, our Corporate Secretarial Services can support: https://perfectaccounting.in/our-services/dallas-experts-manage-bank-account-operations-and-asset-valuation-seamlessly/
3) Tax diligence (direct tax + international tax)
What to collect
- income tax returns and computation (3–5 years)
- tax audit reports (where applicable)
- assessment orders, notices, appeals, demand status
- TDS returns, challans, reconciliations
- transfer pricing documentation (if applicable)
Red flags to watch
- recurring disallowances (signals weak positions)
- unresolved demands and ongoing appeals
- TDS mismatches (deducted vs deposited vs reported)
- aggressive related-party payments without documentation
For tax advisory, notices, and compliance support, our Regulatory Approvals team can help: https://perfectaccounting.in/our-services/atlantas-financial-services-team-handles-gst-and-income-tax-with-exceptional-accuracy/
4) GST diligence (returns, reconciliations, exposure)
What to collect
- GST registrations (all states)
- GSTR-1, GSTR-3B, annual return (as applicable)
- e-invoicing/e-way bill data (if applicable)
- ITC reconciliations and vendor compliance reports
- GST notices, audit communications
Red flags to watch
- GSTR-1 vs 3B mismatches
- ITC claimed without vendor compliance
- wrong place of supply treatment (IGST vs CGST/SGST)
- classification/SAC errors for services
5) Payroll and labour compliance diligence
What to collect
- employee master, salary structures, payslips samples
- PF/ESI registrations, challans, returns
- TDS on salary workings and quarterly filings
- gratuity policy and provisioning
- contractor/vendor agreements and compliance proofs
- HR policies: leave, overtime, disciplinary, POSH (where applicable)
Red flags to watch
- PF/ESI applicability errors
- contractor misclassification risk
- missing joining/exit documentation
- inconsistent salary structures and allowances
If the target has payroll complexity or you want post-deal stabilization, our Payroll Processing & Employment Laws support can help: https://perfectaccounting.in/our-services/france-offers-extensive-support-for-payroll-processing-and-salary-structure-optimization/
6) Financial diligence (quality of earnings + controls)
What to collect
- audited financials and notes
- trial balance and GL dumps
- revenue recognition policy and samples
- ageing reports: receivables, payables
- bank statements and reconciliations
- related-party ledger and confirmations
Red flags to watch
- aggressive revenue recognition
- large “other expenses” without support
- unreconciled bank balances
- weak provisioning (bad debts, warranties, disputes)
For accounting clean-up and audit support, explore our Accounting and Compliance services: https://perfectaccounting.in/our-services/europes-top-firms-trust-our-tax-management-services-for-accurate-tax-returns-and-bank-reconciliations/
7) FEMA and cross-border exposure (if foreign investment exists)
What to collect
- foreign shareholding history and funding trail
- RBI/FEMA filings acknowledgements
- valuation reports for share issuances/transfers
- cross-border agreements and remittance documentation
Red flags to watch
- funds received but shares not allotted on time
- missing valuation support
- cap table not matching statutory registers
- cross-border payments without proper characterization
A clean diligence request list template (copy-paste)
- Corporate documents and group structure
- Shareholding and cap table support
- Material contracts (top customers/vendors)
- Litigation and notices tracker
- ROC filings + statutory registers + minutes
- Income tax returns + assessments + notices
- TDS returns + challans + reconciliations
- GST returns + reconciliations + notices
- Payroll registers + PF/ESI + salary TDS
- Audited financials + TB/GL + bank reconciliations
- Related-party transactions and agreements
- FEMA/RBI filings (if applicable)
How Perfect Accounting can help (soft CTA)
We support buyers and sellers with transaction readiness and diligence across finance, tax, payroll, and compliance—so risks are identified early and documented clearly.
We can help with:
- buy-side and sell-side diligence
- compliance gap assessment and remediation plan
- post-acquisition compliance stabilization (GST/TDS/payroll/ROC)
Final thought
The best diligence outcome is not “no issues.” It’s a clear map of issues: what is fixable, what is structural, what needs indemnity, and what should change the price. A structured checklist and strong documentation discipline turns diligence from a delay into a decision tool.