§ 1
What an Indian subsidiary is, and why it is the usual route
An Indian subsidiary is a company incorporated in India under the Companies Act, 2013, in which the foreign parent holds more than half of the shares (often all but a nominal holding). In law it is an Indian resident company: it can employ people, sign contracts, invoice customers in India and abroad, own assets and borrow, while the parent's liability stays limited to the capital it has put in.
Compared with a branch or liaison office, a subsidiary has two practical advantages. First, its permitted activities are set by the FDI policy for its sector rather than by a narrow list approved by a bank. Second, it is taxed as a domestic company, which under the concessional regime means an effective rate of about 25.17%, below the rate on a foreign company's branch income.
The trade-off is a heavier compliance load. A subsidiary has its own board, statutory audit, annual filings with the Registrar of Companies, foreign investment reporting under FEMA and, almost always, transfer pricing documentation for its dealings with the parent. Planning for those obligations from the first week is what keeps the company out of late fees and compounding later.
§ 2
Who this is for
Foreign parents opening in India
Companies that want to hire, sell or build a delivery or capability centre in India through their own legal entity.
Founders restructuring abroad
Groups that have flipped their holding company overseas and need an Indian operating subsidiary under it.
Joint ventures
A foreign partner and an Indian partner forming a new company, where shareholding, board rights and FDI conditions must be set out from the start.
Branch or liaison offices converting
Foreign companies whose office in India has outgrown its RBI-approved activities and needs a full operating entity.
§ 3
The law that applies
| Companies Act, 2013 and Companies (Incorporation) Rules, 2014 | Incorporation through SPICe+, the memorandum and articles, directors, registered office, commencement of business and share certificates. |
|---|---|
| FEMA, 1999 and FEMA (Non-debt Instruments) Rules, 2019 | Whether the sector is under the automatic or government route, sectoral caps, pricing of shares issued to a non-resident. |
| FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 | Receipt of share capital through banking channels and the FC-GPR report within 30 days of allotment. |
| Consolidated FDI Policy and Press Note 3 (2020) | Prior government approval where the investor, or its beneficial owner, is from a country sharing a land border with India. |
| Companies (Prospectus and Allotment of Securities) Rules, Rule 9B | A subsidiary cannot be a 'small company', so its shares must be issued and held in dematerialised form. |
| Income-tax Act, 2025 | PAN and TAN, choice of tax regime, withholding on payments abroad and transfer pricing with the parent. |
§ 4
Issues and how we solve them
The problems that most often hold up or complicate this work, and how we deal with each.
Issue 1
Parent company documents are rejected because they are not in a form Indian authorities accept.
Our approach
We send the parent a country-specific checklist before anything is signed, showing exactly which documents need notarisation and apostille (or consular legalisation where the country is not in the Hague Convention), and how names and addresses must match across the board resolution, passports and corporate certificates. Drafts are checked by us before they are apostilled, so nothing is legalised twice.
Issue 2
No director who meets the 182-day Indian residence requirement.
Our approach
Every Indian company needs at least one director who stayed in India for 182 days or more in the financial year. Where the group has no one in India, we explain the options: relocating an employee, appointing a trusted Indian professional as a non-executive resident director with a clear board mandate and indemnity, or timing the appointment around an expatriate's arrival.
Issue 3
The investor has a beneficial owner from a land-border country, triggering Press Note 3.
Our approach
We trace the ownership chain up to the ultimate beneficial owners before filing. If any owner falls under Press Note 3, the investment needs prior government approval through the Foreign Investment Facilitation Portal, and we plan the timeline and application around that rather than discovering it at the bank or at FC-GPR stage.
Issue 4
Share capital arrives but shares are not allotted, or are allotted late, breaching FEMA timelines.
Our approach
Shares must be allotted within 60 days of receiving the money, and the allotment reported in FC-GPR within 30 days. We hold the allotment board meeting as soon as the bank issues the foreign inward remittance certificate and KYC, prepare the valuation certificate if the shares are not being issued at face value on subscription, and file FC-GPR on the FIRMS portal in the same week.
Issue 5
Shares issued in physical form, which a subsidiary is no longer allowed to do.
Our approach
Because a subsidiary is excluded from the 'small company' definition, Rule 9B requires its securities to be in demat form. We arrange the ISIN with a depository through a registrar and share transfer agent, open demat accounts for the shareholders, and issue the shares directly in electronic form.
Issue 6
The company is incorporated but cannot operate because the bank account and INC-20A are pending.
Our approach
The declaration of commencement of business (INC-20A) can only be filed once subscribers have paid for their shares into the company's bank account, and it must be filed within 180 days. We start the bank's onboarding in parallel with incorporation, so the account, capital receipt and INC-20A follow in quick succession.
§ 5
Process and timeline
- 1
Structure and route check
Week 1Confirm the sector's FDI route and cap, the shareholding (parent and a second shareholder, often a group company or nominee), directors, authorised and paid-up capital, and the financial year.
- 2
Name and documents
Weeks 1–3Shortlist names that pass the Companies (Incorporation) Rules, draft the parent's board resolution, memorandum and articles, and send the apostille checklist.
Filing: SPICe+ Part A (name reservation)
- 3
Signatures
Weeks 2–3Digital signature certificates for the directors and subscribers, with video verification for foreign nationals.
- 4
Incorporation
Weeks 3–5File the integrated incorporation form with e-MoA, e-AoA and AGILE-PRO-S. PAN and TAN are issued with the certificate of incorporation.
Filing: SPICe+ Part B · INC-33 · INC-34 · AGILE-PRO-S
- 5
Bank account and capital
Weeks 4–6Open the current account, receive the share capital from the parent with the inward remittance certificate and the remitter's KYC.
- 6
Allotment and demat
Weeks 5–7First board meeting, appointment of the first auditor, ISIN and demat credit of shares.
- 7
Reporting
Weeks 6–8Report the foreign investment and declare commencement of business.
Filing: FC-GPR (within 30 days of allotment) · INC-20A
§ 6
Documents
What we usually ask for. The exact list depends on the facts.
From the parent company
- Certificate of incorporation and current constitutional documents
- Board resolution approving the subsidiary, the investment and the authorised signatory
- Proof of registered address
- Details of ultimate beneficial owners
From each director and subscriber
- Passport (foreign nationals) or PAN and Aadhaar (Indians)
- Recent proof of residential address
- Photograph, email and mobile number
- Consent to act as director (DIR-2) and declarations
For the registered office
- Lease or rent agreement, or owner's consent
- Recent utility bill for the premises
- No-objection certificate from the owner
For capital and FEMA
- Foreign inward remittance certificate and KYC of the remitter
- Valuation certificate where shares are issued above face value
- Board resolution for allotment
§ 7
Ongoing obligations
| Obligation | Basis | When |
|---|---|---|
| Statutory audit of annual financial statements | Companies Act, 2013 | Every year |
| Annual general meeting | Companies Act, 2013 | Within six months of year end (by 30 September) |
| Financial statements and annual return to the ROC | AOC-4 · MGT-7 | Within 30 and 60 days of the AGM |
| Annual return on foreign liabilities and assets | FEMA · FLA return | By 15 July |
| Transfer pricing report on transactions with the parent | Income-tax Act, 2025 | With the tax return |
| Monthly TDS payment and quarterly TDS returns | Income-tax Act, 2025 | 7th of each month · quarterly |
| GST returns, where registered | CGST Act, 2017 | Monthly or quarterly |
§ 8
Our scope of work
Included
- FDI route and Press Note 3 check
- Name application and drafting of memorandum and articles
- Country-specific document checklist and review before apostille
- Digital signatures and director identification numbers
- SPICe+ incorporation with PAN, TAN and AGILE-PRO-S registrations
- Bank account coordination and capital receipt
- First board meeting, first auditor and statutory registers
- ISIN and demat issue of shares
- FC-GPR on the FIRMS portal and INC-20A
Not included (quoted separately)
- Government approval applications (FIFP)
- Valuation by a SEBI-registered merchant banker where needed
- Apostille and courier costs in the parent's country
- Government fees and stamp duty
§ 9
Practical notes
§ 10
Questions
Can a foreign company own 100% of an Indian company?
Yes, in most sectors foreign investment up to 100% is allowed under the automatic route, without prior approval. Some sectors have caps or need government approval, and investors with beneficial owners in a country sharing a land border with India always need approval.
Does the foreign parent need a PAN or Indian registration?
The parent does not need to register in India to subscribe to shares. It will need a PAN later if it earns income from India, for example dividends, royalties or service fees, so that tax can be withheld at the treaty rate.
Can foreign nationals be the only directors?
Foreign nationals can be directors, but at least one director must have stayed in India for 182 days or more in the financial year. All directors need a director identification number and a digital signature.
How soon after incorporation can the company start trading?
It can open its bank account and hire immediately, but it should file the declaration of commencement of business (INC-20A) after the capital is received and before it starts business or borrows. The filing is due within 180 days of incorporation.
What is FC-GPR and what happens if it is filed late?
FC-GPR is the report to the RBI of shares issued to a foreign investor, due within 30 days of allotment through the authorised dealer bank on the FIRMS portal. Late filing attracts a late submission fee, and long delays may need compounding.
Is a statutory audit required in the first year?
Yes. Every company must have its accounts audited, including in its first financial year. The board appoints the first auditor within 30 days of incorporation.
Prepared by CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375, SU and Company · Last reviewed 4 November 2026. General information only, based on the law as it stood on that date; it is not advice for any particular case.