Tag: Indian subsidiary

For many overseas businesses, the most practical way to operate in India is through a wholly owned Indian subsidiary of a foreign company, usually a private limited company. It can hire staff, sign contracts, invoice customers and access the local market as an Indian entity, while the foreign parent holds the shares.

The process is well established and largely online. This guide walks through the entry route, the incorporation steps, the foreign investment reporting and the compliance calendar for the first year, so that the set-up is smooth and properly documented from day one.

Key takeaways

• Most sectors allow 100% foreign investment under the automatic route, without prior government approval, subject to sectoral conditions.
• Investment from entities with beneficial owners in countries sharing a land border with India needs government approval, with some relaxations introduced in 2026.
• A private company needs at least two directors, one of whom must be resident in India, and at least two shareholders.
• Incorporation, PAN, TAN and some registrations are handled through the SPICe+ form on the MCA portal.
• Share capital received from the parent must be reported in Form FC-GPR within 30 days of allotment.

Step 1: Confirm the FDI route

Before incorporation, check the sector under India’s FDI policy:

• Automatic route: the majority of sectors, including IT services, most manufacturing and many service activities, permit 100% foreign ownership.
• Government route or caps: certain sectors such as some defence, media, insurance and multi-brand retail activities have caps or need approval.
• Land-border countries: where the investor, or its beneficial owner, is a citizen of a country sharing a land border with India, government approval is needed. Press Note 2 of 2026 introduced a 10% beneficial ownership threshold and faster processing for some sectors, so the current position should be checked case by case.

Step 2: Plan the structure

Decision	Typical choice	Points to consider
Entity type	Private limited company	Limited liability, flexible, widely understood by banks and customers
Shareholders	Foreign parent plus a nominee	Minimum two shareholders for a private company
Directors	Two or more	At least one must have stayed in India for 182 days or more in the financial year
Share capital	As per business plan	No statutory minimum; fund enough for initial operations
Registered office	Indian address	Needed at incorporation or soon after

The resident director can be an Indian professional or an employee based in India. Foreign directors need a Digital Signature Certificate and a Director Identification Number, which are obtained as part of the process.

Step 3: Prepare documents

The foreign parent’s documents usually need to be notarised and apostilled (or consularised, where the country is not part of the Apostille Convention):

• certificate of incorporation and constitutional documents of the parent;
• board resolution authorising the investment and nominating its representative;
• identity and address proof of foreign directors and the authorised signatory;
• proof of the Indian registered office, such as a rent agreement and utility bill with a no-objection letter.

Allow time for this step, because foreign document legalisation is often the longest part of the timeline.

Step 4: Incorporate through SPICe+

The SPICe+ web form on the MCA portal covers name reservation, incorporation, allotment of DIN, PAN and TAN, and linked registrations such as EPFO and ESIC, with GST registration optional. The memorandum and articles are filed electronically. On approval, the Registrar issues the Certificate of Incorporation with the Corporate Identity Number.

Our guide to private limited company registration in India explains the SPICe+ process in more detail.

Step 5: Bring in capital and report it

1. Open a current account with an authorised dealer bank.
2. The parent remits the subscription amount through normal banking channels.
3. The bank issues a foreign inward remittance certificate and completes KYC of the remitter.
4. Allot shares within 60 days of receipt of funds, at a price not lower than the fair value under the FEMA pricing guidelines.
5. File Form FC-GPR on the FIRMS portal within 30 days of allotment, with a valuation certificate and the company secretary’s certificate.

The first subscription at incorporation (subscriber shares) is also treated as foreign investment and needs reporting. Our guide to FDI reporting through FC-GPR and FC-TRS covers the forms and common errors.

Step 6: First-year compliance calendar

• Within 30 days of incorporation: board appoints the first statutory auditor.
• Within 180 days of incorporation: file Form INC-20A declaring receipt of subscription money, before commencing business.
• Registrations: GST (if applicable), Shops and Establishments, professional tax, import-export code if trading across borders.
• Every year by 15 July: Annual Return on Foreign Liabilities and Assets (FLA) to the RBI.
• Annual: financial statements (AOC-4) and annual return (MGT-7A or MGT-7), board and general meetings, and director KYC.
• Tax: income-tax return, transfer pricing documentation and Form 3CEB for transactions with the parent and group entities.

Transfer pricing deserves early attention. Intercompany service fees, cost reimbursements and royalties should be backed by agreements and an arm’s length pricing approach from the start.

Practical tips for a smooth set-up

• Agree the business plan and capital needs before choosing the share capital.
• Appoint a reliable resident director and define their role clearly.
• Set up the accounting system, chart of accounts and payroll from the first month.
• Put intercompany agreements in place before the first cross-border invoice.
• Keep a compliance calendar with owners and dates for each filing.

Frequently asked questions

Can a foreign company own 100% of an Indian subsidiary?

Yes, in most sectors under the automatic route, subject to sectoral caps and conditions. A second shareholder, often a nominee, is needed for a private company.

Is a resident Indian director mandatory?

Yes. Every company must have at least one director who has stayed in India for at least 182 days in the financial year.

How long does it take to set up an Indian subsidiary?

Once documents are ready, incorporation is often completed within a few weeks. Legalising foreign documents usually takes the most time.

What is Form FC-GPR?

It is the form used to report issue of shares to a foreign investor, filed on the RBI’s FIRMS portal within 30 days of allotment.

This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.