Indian Subsidiary With No Revenue: Compliance Requirements

A newly incorporated Indian subsidiary may take several months to hire staff, open its bank account, receive funding or begin invoicing. It may also remain dormant while the US parent finalises its India plans. Having no revenue does not, by itself, mean that the company has no compliance responsibilities. The obligations depend on its legal status, transactions, registrations, funding and activities during the year.

1. Company-law filings can continue without sales

An incorporated company remains a legal entity even if it has not started trading. Its board, statutory records and annual filing obligations must be considered independently of revenue. Depending on the company’s circumstances and current rules, this may include:

• Holding and documenting board meetings and maintaining statutory registers.
• Preparing financial statements and arranging the statutory audit.
• Filing annual financial statements and annual returns with the Registrar of Companies.
• Reviewing event-based filings when directors, registered office, share capital or ownership details change.
• Checking whether commencement-of-business requirements apply and have been completed.

Do not rely on a general “nil activity” assumption. Ask the company secretary or compliance adviser to map the filings based on incorporation date, shareholding and events during the year.

2. Accounting records are still important

A company with no sales may still have transactions: incorporation expenses, bank charges, professional fees, director reimbursements, capital received from the parent, payments for software or rent, and intercompany balances. These should be captured and supported by appropriate records.

Agree how the Indian books will be maintained, how costs paid by the US parent will be treated, how balances will be reconciled, and what reporting the parent needs. Keep invoices, bank statements, remittance advice, expense approvals and intercompany correspondence. If the parent pays expenses on the subsidiary’s behalf, determine the correct accounting and tax treatment rather than treating the payment informally.

3. Income tax and audit checks

No revenue does not automatically remove the need to assess an income-tax return or statutory audit. The company’s legal status, income, expenses, transactions and applicable filing rules determine the requirements. A loss or a period with only setup costs may still need to be reflected correctly in the accounts and tax return.

Confirm the applicable financial year, return form, audit position and filing due dates with the company’s tax adviser. If there are related-party payments, cross-border service charges, royalties, loans or reimbursements, review the relevant withholding-tax and transfer-pricing questions even if the company has not yet invoiced customers.

4. GST registration and nil returns

Whether GST registration is required depends on the company’s supplies, registrations, turnover and the applicable rules. If the company is already registered, filing obligations may continue for periods with no outward supplies. A nil return should only be filed when it is correct for that period and registration type.

Review whether any registration is active, whether returns are due, and whether input tax credit or invoices have been recorded. If the business has not started operating, confirm the appropriate position with the GST adviser rather than simply ignoring the portal or assuming the registration has no effect.

5. Foreign investment and parent-company funding

A foreign-owned subsidiary may receive share capital before it earns revenue. The funding and share issue should be documented, and any applicable foreign-exchange reporting should be checked against the transaction and the rules in force at that time. Keep bank remittance evidence, share subscription documents, allotment records and valuation support where relevant.

Annual foreign-liability reporting may also need to be assessed. The exact requirement depends on the company’s foreign investment and outstanding liabilities or assets; it should not be decided solely by whether the company made sales. See our guides on funding an Indian subsidiary and FC-GPR and the annual compliance calendar.

6. A practical monthly and annual checklist

• Monthly: record bank movements and expenses, reconcile intercompany balances, preserve invoices and review any payroll or withholding activity.
• Quarterly or periodic: check applicable GST, withholding-tax and payroll filings, including nil-return requirements where relevant.
• Annual: plan the statutory audit, financial statements, income-tax return and company-law filings.
• Event-based: review share allotments, director changes, funding, cross-border payments, new registrations and commencement of business.
• Before dormancy or closure: assess whether the company will remain active, apply for an available dormant status if eligible, or follow the formal closure route if it will not be used.

7. When should the parent reassess the setup?

If the company will remain inactive for an extended period, the parent should compare the cost and obligations of keeping it active with the rules and eligibility for a dormant status or formal closure. Dormant status is not automatic, and it does not erase every filing or record-keeping requirement. Obtain advice before stopping filings or closing bank accounts.

Questions to discuss with your adviser

• What filings are due based on the incorporation date and financial year?
• Has the company received foreign capital or incurred any cross-border transactions?
• Is a GST registration active, and are nil returns required?
• Which costs were paid by the US parent and how should they be recorded?
• Should the entity remain active, seek dormant status if eligible, or be closed?

AU Corporate supports foreign-owned Indian companies with accounting, tax, GST, payroll, company-law and foreign-investment compliance planning. The applicable scope and deadlines should be confirmed from the company’s actual records and current regulations.

Related guides

• Post-incorporation compliance checklist
• Cost of running an Indian subsidiary
• Closing an Indian subsidiary: strike-off vs liquidation
• India entry guides for US companies

This article is general information, not legal, tax or accounting advice for a particular company. Filing requirements and deadlines can change; confirm the current position with your advisers.