India Entry: Incorporating an Indian Subsidiary for Foreign Companies
Choosing the right entry route
A foreign company can operate in India through an Indian company or LLP that it owns, or through an office of the foreign company itself. The choice decides what the Indian set-up can do, who is liable and which approvals are needed.
| Route | What it can do | Approval route | Liability | Typical use |
|---|---|---|---|---|
| Wholly owned private limited subsidiary | Any business permitted under the FDI policy, in its own name | Automatic route where the sector allows; otherwise government approval | Separate entity; the parent’s exposure is generally limited to its share capital | Long-term operations: sales, services, development centres, manufacturing |
| Limited liability partnership (LLP) | Business similar to a company | FDI only in sectors with 100% FDI under the automatic route and no FDI-linked performance conditions | Separate entity; liability generally limited to agreed contributions | Groups preferring an LLP structure |
| Branch office | Only RBI-permitted activities, such as export and import, consultancy, research and technical support; no retail trading, and generally no manufacturing outside a Special Economic Zone | Through an Authorised Dealer (AD) Category-I bank (RBI approval in specified cases); the parent must meet track record and net worth conditions | Foreign company directly liable | Extending the parent’s business without forming a company |
| Liaison office | Representation only; cannot earn income in India | As for a branch office | Foreign company directly liable | Market study before committing to operations |
| Project office | Executing a specific contract; closes when the project ends | Through an AD Category-I bank where the contract and project funding meet prescribed conditions | Foreign company directly liable | Construction, installation or turnkey projects |
Some sectors have FDI caps or conditions, a few are prohibited and others need government approval. Investment from a country that shares a land border with India needs prior government approval, including where the beneficial owner is situated in, or is a citizen of, such a country. We check this before you commit to a structure.
Branch, liaison and project offices also register with the Registrar of Companies and file an annual activity certificate. This guide covers the subsidiary.
Key requirements for a wholly owned subsidiary
- Shareholders: at least two, so a group company or an individual usually holds a few shares as the parent’s nominee, declared as the Companies Act requires.
- Directors: at least two, one of whom must be resident in India under the Companies Act, 2013 (a test of stay in India during the financial year, not nationality). Each needs a Director Identification Number (DIN) and a digital signature certificate (DSC).
- Name: ends with “Private Limited”; using the parent’s name or brand needs its authorisation.
- Capital: no minimum paid-up capital under the Companies Act, though some regulated sectors set one.
- Registered office: an address in India, supported by address proof and the owner’s consent.
Documents checklist
Documents signed or issued abroad are notarised in that country and then apostilled (for Hague Apostille Convention countries) or consularised by the Indian embassy or consulate (for other countries). Documents in another language usually need a certified English translation.
| For | Documents usually needed |
|---|---|
| Foreign parent company | Certificate of incorporation; charter or bylaws where asked for; registered office proof; board resolution approving the investment and naming an authorised signatory; details of shareholders and ultimate beneficial owners |
| Each foreign director or individual subscriber | Passport; recent address proof (bank statement, utility bill, driving licence or residence card); photograph; email address and mobile number |
| Indian resident director | PAN; Aadhaar or other identity proof; address proof; photograph; DSC; DIN if already allotted |
| Registered office in India | Recent utility bill; rent or leave and licence agreement, or ownership document; owner’s no-objection letter |
Step-by-step incorporation
- Confirm route and structure: the FDI route and conditions for the activity, shareholders, directors, capital and business objects.
- Digital signatures: DSCs for the directors and the parent’s authorised signatory.
- Name reservation: through SPICe+ Part A on the Ministry of Corporate Affairs (MCA) portal.
- Documents from abroad: notarised and apostilled (or consularised); scanned copies are filed.
- SPICe+ Part B: filed with the e-MoA and e-AoA, registered office proof, declarations and consents, and DIN applications. The linked AGILE-PRO-S form covers registrations such as EPFO and ESIC, GST where opted, and the bank account.
- Incorporation: the Registrar issues the certificate of incorporation with the Corporate Identity Number (CIN), PAN and TAN, after any queries are resolved.
- Bank account and capital: bank KYC on the company, the parent and its beneficial owners; the parent remits the share capital.
- Shares and commencement: share certificates are issued and the declaration of commencement of business (Form INC-20A) is filed.
- RBI reporting: Entity Master registration on the FIRMS portal, then Form FC-GPR.
- Set-up: first board meeting, first auditor, statutory registers, professional tax and payroll registrations, and written parent–subsidiary agreements.
We do not quote a fixed number of days; the time depends mainly on how quickly the apostilled documents are ready, then on MCA processing.
Bank account and bringing in capital
The company opens a current account with an Authorised Dealer bank in India. The parent remits the share money from its own bank account abroad through banking channels. The bank issues a Foreign Inward Remittance Certificate (FIRC) and a KYC report on the remitter, both needed for the RBI filing, so the remitter must be the investor named in the register of members.
Under FEMA, shares must be issued within 60 days of receiving the money; otherwise the money must be refunded within the prescribed time.
FEMA and RBI reporting
Foreign investment is governed by the Foreign Exchange Management Act, 1999 (FEMA), the rules made under it and RBI directions. Reporting is done on the RBI FIRMS portal.
- Form FC-GPR within 30 days of allotting shares to the foreign investor, with the FIRC, the KYC report, a valuation certificate where required and the prescribed declarations.
- Form FC-TRS when shares are transferred between a resident and a non-resident, within the prescribed time, generally by the resident party.
- Annual FLA return (Foreign Liabilities and Assets) to RBI by 15 July each year; unaudited figures can be used and revised later.
- Loans from the parent follow the external commercial borrowing (ECB) framework, with registration through the bank and periodic reporting.
- Downstream investment rules apply if the subsidiary itself invests in another Indian entity.
Late filings can usually be regularised through a late submission fee or compounding, but they hold up later transactions.
FEMA valuation of shares
Shares issued by an unlisted Indian company to a non-resident must be priced at not less than fair value, worked out under an internationally accepted pricing methodology on an arm’s length basis and certified by a Chartered Accountant, a SEBI-registered merchant banker or a practising cost accountant.
- Shares subscribed in the memorandum at incorporation are generally issued at face value.
- Each later allotment needs a fresh valuation certificate.
- On transfers, a resident selling to a non-resident cannot sell below fair value, and a non-resident selling to a resident cannot sell above it.
See our business valuation and advisory services.
Running the Indian company
We provide these services as one engagement, so the foreign parent has a single point of contact in India:
- GST: registration and returns where required; services to the parent abroad may qualify as zero-rated exports under a Letter of Undertaking, subject to conditions — see GST registration & returns.
- Accounting: books kept in India, with monthly MIS for the parent’s group reporting — see accounting & bookkeeping.
- Statutory audit: required every year, whatever the company’s size — see audit & assurance.
- Income tax and transfer pricing: advance tax, the annual return, and arm’s length pricing for transactions with the parent, supported by documentation and an accountant’s report — see income tax services.
- ROC compliance: board meetings, the AGM, statutory registers, director KYC and annual filings (AOC-4, MGT-7) — see company & ROC compliance.
- TDS and payroll: TDS on salaries, vendors and payments to the parent; provident fund, ESI and professional tax where applicable; for remittances see remittance certificates and lower TDS.
First-year compliance calendar
A general guide; actual dates depend on the incorporation and allotment dates.
| Compliance | When | What it involves |
|---|---|---|
| First board meeting | Within 30 days of incorporation | Noting incorporation, bank account, directors’ disclosures of interest |
| First auditor | Appointed by the board within 30 days of incorporation | Holds office until the end of the first AGM |
| Share certificates | Within two months of incorporation | For shares subscribed in the memorandum |
| Form INC-20A (commencement of business) | Within 180 days of incorporation | Confirms subscribers have paid; needed before the company starts business or borrows |
| Form FC-GPR | Within 30 days of allotment to the foreign investor | Filed on FIRMS after Entity Master registration |
| Registers, minutes and SBO declarations | From incorporation; SBO filings within the prescribed time | Statutory registers; identifying the individuals who ultimately control the company |
| Board meetings | At least four a year, not more than 120 days apart | Small-company relaxations do not apply to subsidiaries; video conferencing is generally allowed |
| First financial year ends | 31 March after incorporation; if incorporated between 1 January and 31 March, 31 March of the next year (for example, February 2027 to 31 March 2028) | Financial statements prepared |
| Annual FLA return | By 15 July after the financial year | Foreign investment reported to RBI |
| Statutory audit and first AGM | First AGM within nine months of the close of the first financial year | Audited accounts adopted; auditor appointed, generally for five years |
| ROC annual filings | AOC-4 within 30 days and MGT-7 within 60 days of the AGM | Financial statements and annual return |
| Income tax return and transfer pricing | Within the prescribed time for the tax year | Return, tax audit if applicable, accountant’s report and transfer pricing documentation |
Common mistakes to avoid
- Investing before checking the sector route, including approval conditions and land-border beneficial ownership.
- Sending capital from someone other than the investor, such as a group company or a director, which causes KYC mismatches and FC-GPR delays.
- Delaying allotment or FC-GPR, which can mean refunds, late submission fees or compounding.
- Missing the resident director requirement, or appointing someone who does not meet the stay test or understand the role.
- Starting business before filing Form INC-20A.
- No transfer pricing documentation for service fees, cost recharges and reimbursements with the parent, risking tax adjustments and penalties.
- Informal parent loans outside the ECB framework.
Read more about the firm.
Frequently Asked Questions
Can a foreign company own 100% of an Indian company?
Yes, in most sectors under the automatic route. Some sectors have FDI caps or conditions or need government approval, and investment from a country that shares a land border with India, including through beneficial ownership, needs prior government approval.
Can an overseas individual founder set up a company in India?
Yes. A foreign national or an Indian citizen living abroad can be a shareholder and director, subject to the FEMA rules for the sector. Their documents are notarised and apostilled, and the company still needs a second shareholder and a resident director.
Does an Indian subsidiary need a resident director?
Yes. Under the Companies Act, 2013, at least one director must be resident in India, based on stay in India during the financial year, not nationality. Many foreign groups appoint a trusted local professional or a senior India employee.
Is there a minimum capital requirement?
The Companies Act, 2013 sets no minimum paid-up capital for a private company, though some regulated sectors do. The capital should cover start-up costs; more can be added later with fresh FEMA reporting.
What has to be reported to RBI after the parent invests?
The company reports the share allotment in Form FC-GPR on the RBI FIRMS portal within 30 days, with the bank’s FIRC and KYC report and a valuation certificate where required, and files the annual FLA return by 15 July each year.
How long does incorporation take?
It depends mainly on how quickly the apostilled documents of the parent and directors are ready, then on Ministry of Corporate Affairs processing, so we do not commit to a fixed number of days.
Can the Indian subsidiary follow the parent’s financial year?
The Companies Act year normally ends on 31 March, but a subsidiary of a foreign company can apply to the National Company Law Tribunal for a different year needed for consolidation abroad. For income tax, the year always runs from 1 April to 31 March.
Does the subsidiary need an audit if it has little or no revenue?
Yes. Every company must have its financial statements audited by a practising Chartered Accountant each year and file an income tax return, even with no revenue or a loss.
How can the Indian subsidiary pay money to the parent?
Through dividends out of profits, arm’s length payments for services, royalties or cost recharges under written agreements, or repayment of ECB loans. Each needs tax withholding and documentation — see our income tax and TDS services.
This page is general information, not advice for your specific facts. Rates, thresholds and form numbers change; contact us to confirm the position for your transaction.