US Subsidiary Formation in India
Entity structuring, incorporation, and RBI/FEMA reporting for US parent companies setting up an Indian subsidiary.
Why US Companies Set Up in India
Setting up a wholly-owned subsidiary in India is the most common route for US companies expanding into the Indian market. The process runs under the Companies Act, 2013, with foreign direct investment (FDI) from the US permitted under the automatic route in most sectors - meaning no prior RBI or government approval is needed before incorporation.
India offers a large domestic market, a skilled and cost-effective workforce, and - for a subsidiary structured as a domestic Indian company - an effective corporate tax rate of approximately 25.17% under Section 200 of the Income-tax Act, 2025 (the erstwhile Section 115BAA). US technology and services companies are among the largest users of Indian subsidiaries for engineering centres and Global Capability Centres (GCCs), drawing on India's scale of technical talent.
Entity Options for a US Parent
The right structure depends on the parent's objectives, funding plans, and how much local operational control is needed.
Wholly Owned Subsidiary (Private Limited Company)
The most common route - a Private Limited Company under the Companies Act, 2013, with the US parent holding up to 100% of the shares. Offers full operational control, limited liability, and the ability to raise further funding or bring in an Indian JV partner later if needed.
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. US parents more commonly use the LLP route for a lighter-weight India presence such as a liaison-style support function, while reserving the Private Limited structure for revenue-generating operations.
Branch or Liaison Office
For parents wanting a 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.
Incorporation Process
The core steps stay the same regardless of the parent's country - what changes is the DTAA position and the paperwork on the US side (board resolutions, apostille/notarisation of documents, and so on).
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 US 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.
Key Considerations for US Parent Companies
- DTAA PositionThe India-US DTAA governs withholding tax treatment on royalty, technical fee, and management fee remittances back to the US parent.
- Check-the-Box ElectionMany US parents elect to treat the Indian subsidiary as a disregarded entity or partnership for US tax purposes under the entity classification rules, affecting how its income flows into the US parent's tax return.
- Entity Choice on the US SideWhether the parent is a Delaware C-Corp, LLC, or another structure, the Indian incorporation route and RBI reporting stay the same.
- US-Side Tax PositionsNCTI (Net CFC Tested Income, the regime formerly known as GILTI, renamed under the One Big Beautiful Bill Act for tax years beginning after 31 December 2025), Subpart F, and other US-side tax positions need coordination with the parent company's US tax advisor - we handle the Indian entity's compliance end.
Protecting Your Brand Name
A trademark registered in your home country doesn't automatically extend to India - protecting your brand name and logo here needs a separate India trademark application, ideally filed alongside incorporation.
Frequently Asked Questions
Can a US company set up a wholly-owned subsidiary in India?
Yes. A US parent company can set up a wholly-owned subsidiary in India as a Private Limited Company under the Companies Act, 2013, with 100% FDI permitted under the automatic route in most sectors. The subsidiary needs at least one director who is a resident in India under Section 149(3).
Should a US parent make a check-the-box election for its Indian subsidiary?
Many US parents elect to treat the Indian subsidiary as a disregarded entity or partnership for US tax purposes under the entity classification rules, which affects how the subsidiary's income flows into the US parent's tax return. This decision should be made jointly with the parent's US tax advisor before incorporation.
Does a Delaware C-Corp need a different incorporation route in India?
No - regardless of whether the US parent is a Delaware C-Corp, LLC, or another entity type, the Indian subsidiary is formed the same way, as a Private Limited Company under the Companies Act, 2013.
What US-side tax rules apply to income earned by the Indian subsidiary?
Provisions such as NCTI - Net CFC Tested Income, the regime formerly called GILTI before it was renamed under the One Big Beautiful Bill Act for tax years beginning after 31 December 2025 - and Subpart F can apply to a US parent's share of the Indian subsidiary's income. These are US-side positions that need coordination with the parent company's US tax advisor - we handle the Indian entity's compliance end.
Why does the check-the-box election need to be made early, rather than "whenever is convenient"?
An Indian Private Limited subsidiary defaults to being treated as a corporation for US tax purposes unless the parent actively elects otherwise on Form 8832. If that election is filed effective from the subsidiary's formation date, it isn't subject to any lock-in period. But if the parent lets the default classification apply and only decides later to switch, that later election triggers the 60-month restriction under Treas. Reg. §301.7701-3(c)(1)(iv) - generally locking the classification in place for five years before it can be changed again. Getting this decision right at formation, rather than after the fact, avoids being stuck with a less favourable US tax position for years.