# Financial & Tax Due Diligence

> Financial due diligence tests whether a target's reported numbers hold up: normalised (quality of) earnings, working capital trends, debt and debt-like items, and cash conversion. Tax due diligence quantifies exposures — pending demands, GST and TDS defaults, transfer pricing and past restructurings. The findings feed into valuation, price adjustments and the indemnities and warranties in the purchase agreement.

Practice: Corporate Finance & Valuation — https://www.industax.com/services/corporate-finance/

In Indian deals, common findings include unrecorded statutory dues, GST credit mismatches, related-party leakages and director-loan issues. Vendor due diligence lets sellers fix them before buyers find them.

We scope the review to the deal size and risks, and report in a format negotiators can use.

## Key facts

| Item | Detail |
| --- | --- |
| Financial | Quality of earnings, working capital, net debt |
| Tax | Direct tax, GST, TDS, TP exposures |
| Output | Findings with quantified impact |
| Used for | Price, indemnities, conditions precedent |

## Who needs this

- Acquirers and investors
- Sellers preparing for a sale
- Lenders funding acquisitions

## What's included

- Scoping
- Data-room review and management calls
- Report with quantification
- SPA input

## Documents

- Financial statements and ledgers
- Tax returns and assessments
- Contracts

## Process

1. **Scope** — Risks and depth agreed.
2. **Review** — Data and interviews.
3. **Report** — Findings for negotiation.

## FAQs

### How long does due diligence take?

Typically two to six weeks depending on the target's size, data availability and scope.

### What is quality of earnings?

An analysis adjusting reported EBITDA for one-off, non-recurring or non-arm's-length items to show sustainable earnings.

### Should sellers do vendor due diligence?

For larger sales, yes — it speeds up the process and avoids surprises that buyers use to cut the price.

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Canonical page: https://www.industax.com/services/corporate-finance/financial-due-diligence
Publisher: Indus Tax — CA-led tax and compliance firm (https://www.industax.com). Contact: info@industax.com, 9059139258.
This is general information, not advice for your specific facts.