Foreign Subsidiary Formation in India
A complete guide for overseas parent companies - entity options, the incorporation process, and requirements that apply to every foreign-parent formation.
Foreign companies expanding into India most often do so by setting up an Indian subsidiary - a separate legal entity incorporated under the Companies Act, 2013, that signs its own contracts, employs its own staff, and pays Indian tax on its own profits, while limiting the parent's liability for what happens in India. This guide covers the entity options, the core incorporation process, and the requirements that apply regardless of which country the parent is based in.
Entity Options for a Foreign Parent Company
The right structure depends on the parent's objectives, funding plans, and how much local operational control is needed.
Wholly Owned Subsidiary / Majority-Owned Subsidiary
A Private Limited Company under the Companies Act, 2013, with the foreign parent holding anywhere from a majority stake up to 100%. The most common route for parents wanting full or near-full operational control with limited liability.
Joint Venture
A Private Limited Company jointly held with an Indian partner - useful where local market knowledge, distribution access, or regulatory requirements in a specific sector make an Indian co-promoter valuable.
Limited Liability Partnership (LLP)
100% FDI is permitted in LLPs under the automatic route, but only in sectors and activities where 100% FDI is already allowed with no FDI-linked performance conditions attached. Suits holding, advisory, or lighter-weight functions more than fundraising-focused operating businesses.
Branch or Liaison Office
For parents wanting an India presence without incorporating a separate Indian company - filed via Form FNC with RBI. A Liaison Office can only undertake representational activities; a Branch Office has wider permitted activities but needs specific RBI approval and is taxed as a foreign company at a higher rate.
Project Office
A third RBI-approved route, distinct from Branch and Liaison Office - used specifically to execute a contract awarded to the foreign company by an Indian entity, typically for infrastructure or turnkey projects. Available under the automatic route if the project is funded by inward remittance from abroad, a multilateral/bilateral international financing agency, or has been granted a term loan by an Indian public financial institution or bank; otherwise, RBI approval is needed. It winds up once the underlying project is completed.
Incorporation Process
The core steps stay the same for a Private Limited subsidiary regardless of the parent's country - what changes by jurisdiction is the DTAA position and the paperwork required on the parent's side.
Name Reservation
DSC for proposed directors, followed by RUN/SPICe+ Part A name approval with the RoC.
SPICe+ Filing
Drafting of MOA & AOA and SPICe+ Part B filing - PAN and TAN applied for within the same form.
Certificate of Incorporation
RoC issues the Certificate of Incorporation along with PAN and TAN.
Bank Account & Subscription
Indian bank account opened and subscription money remitted from the foreign parent.
FC-GPR Filing
Shares allotted to the parent are reported to RBI via Form FC-GPR on the FIRMS portal.
Post-Incorporation
GST, Startup India/DPIIT, EPF & ESI, Shops & Establishment, and the compliance calendar set up.
Requirements That Apply Regardless of Parent Country
- FC-GPR FilingWith RBI on receipt of foreign investment, regardless of the parent's jurisdiction.
- Resident DirectorAt least one board member with 182+ days' stay in India during the financial year, under Section 149(3) of the Companies Act, 2013.
- GST Under Reverse ChargeApplies on intercompany service fees and management charges paid to any foreign parent.
- Effective Tax RateA domestic Indian subsidiary can access an effective corporate tax rate of approximately 25.17% under Section 200 of the Income-tax Act, 2025 (the erstwhile Section 115BAA), regardless of the parent's country.
Country-Specific Formation Guides
The incorporation process is the same everywhere - what differs is the DTAA position, funding route nuances, and group-reporting considerations for the parent's home jurisdiction. We've covered the most common ones in detail:
Singapore Subsidiary Formation
DTAA position, GAAR scrutiny, and grandfathered capital gains treatment for Singapore holding structures.
US Subsidiary Formation
Check-the-box elections, NCTI (formerly GILTI)/Subpart F considerations, and DTAA treatment for US parent companies.
UAE Subsidiary Formation
Free zone vs. mainland structuring, SBO reporting, and UAE corporate tax considerations.
UK Subsidiary Formation
Group financial reporting alignment, share transfer mechanics, and funding route options for UK parents.
Japan Subsidiary Formation
DTAA withholding caps, J-GAAP/IFRS group reporting reconciliation, and Japan's Anti-Tax Haven CFC rules for Japanese parent companies.
Australia Subsidiary Formation
DTAA dividend and royalty treatment, AASB/Ind AS reporting alignment, and Australia's Part X CFC attribution rules for Australian parent companies.
Compliance Burden Across Entity Types
A side-by-side view of compliance load, revenue-generation ability, and taxation across the entity options foreign parents most commonly choose between.
| Entity | Compliance Burden | Can Generate Revenue in India | Taxation |
|---|---|---|---|
| Wholly/Majority-Owned Subsidiary | Highest - annual filings (AOC-4, MGT-7), statutory audit regardless of size, board meetings, DIR-3 KYC, ROC event-based filings | Yes, fully | Domestic company rate, ~25.17% effective under Section 200 |
| LLP | Lower - no mandatory audit below prescribed turnover/contribution thresholds, no board meetings, Form 11 and Form 8 annually | Yes, fully | Taxed as a partnership - no dividend distribution tax on profit withdrawal, unlike a company |
| Branch Office | Moderate-high - RBI approval to establish, annual activity certificate to RBI/AD bank, statutory audit, ROC filings as a foreign company | Yes, within RBI-approved activities only | Taxed as a foreign company - higher rate than a domestic Indian subsidiary |
| Liaison Office | Lower-moderate - RBI approval to establish, annual activity certificate, but no local revenue means simpler tax filings | No - representational activities only; cannot invoice or generate income in India | No India tax on income, since none is permitted; return still filed |
| Project Office | Moderate - RBI approval (or automatic route if project criteria met), tied to a specific contract/project, winds up on project completion | Yes, but only for the specific contracted project | Taxed as a foreign company on project-related income |
Protecting Your Brand Name
A trademark registered in your home jurisdiction doesn't automatically extend to India - protecting your brand name and logo here needs a separate India trademark application, ideally filed alongside incorporation rather than after.
Frequently Asked Questions
Is 100% shareholding required for a foreign parent's Indian subsidiary, or can it be lower?
No, 100% isn't mandatory, and there's no minimum floor either - a foreign company can hold any percentage, including a minority stake. Under Section 2(87) of the Companies Act, 2013, the Indian entity is legally a subsidiary only once the foreign parent holds more than 50% of the voting power or controls the Board; between 20-50% it's an associate company under Section 2(6); below that, it's a minority-owned investee company.
Can a foreign company set up an LLP, partnership, or proprietorship in India instead of a Private Limited Company?
An LLP, yes - 100% FDI is permitted in LLPs under the automatic route, but only in sectors and activities where 100% FDI is already allowed with no FDI-linked performance conditions attached. Partnership firms and proprietorship concerns generally cannot accept foreign company or foreign national investment at all - that route is reserved for NRIs and OCIs, on specific terms.
What is the resident director requirement for a foreign-owned Indian subsidiary?
Under Section 149(3) of the Companies Act, 2013, every company - including one wholly owned by a foreign parent - must have at least one director who has stayed in India for a total of not less than 182 days during the financial year.
Is GST applicable on management fees charged by a foreign parent to its Indian subsidiary?
Yes, intercompany service fees and management charges between a foreign parent and its Indian subsidiary typically attract GST under reverse charge, in addition to being subject to transfer pricing documentation and benchmarking requirements.