Can a US Company Own 100% of an Indian Subsidiary?

A US business does not always need an Indian co-shareholder to establish a company in India. In many sectors, a foreign parent may own all the shares in an Indian subsidiary. The answer depends on the activity the Indian company will carry on and the foreign-investment rules that apply to it.

1. Start with the proposed business activity

India’s foreign direct investment (FDI) framework is activity-specific. Before deciding the shareholding, describe what the Indian entity will actually do: for example, software development, consulting, manufacturing, distribution, financial services or another activity. A broad company-object description may not be enough where the business spans activities governed by different rules.

The Department for Promotion of Industry and Internal Trade (DPIIT) publishes India’s FDI policy materials. The Reserve Bank of India (RBI) also sets out the applicable foreign-investment framework under the Foreign Exchange Management Act (FEMA) and the Non-Debt Instruments Rules. Use the current rules for the proposed activity rather than relying on a general statement that foreign ownership is permitted.

2. Understand the ownership cap and entry route

Two questions should be answered separately: what percentage of foreign investment is permitted, and what process must be followed to make that investment? A sector may permit investment up to 100% but attach operating conditions. Another activity may have a lower cap or require prior government approval for some or all of the proposed investment.

The DPIIT foreign direct investment resource and the RBI’s foreign-investment regulations are useful starting points. Because rules can be amended and sector conditions differ, confirm the position at the time of the proposed investment.

3. What a wholly owned subsidiary means

A wholly owned subsidiary (WOS) is an Indian company whose shares are held entirely by its parent or other permitted shareholder(s). If the relevant foreign-investment rules allow 100% foreign investment, a US parent may be able to hold all the shares directly. The Indian company remains a separate legal entity incorporated under Indian law, with its own records, bank account, contracts and compliance responsibilities.

Full share ownership does not remove the need to comply with Indian company law, tax, employment, licensing, data, sector or foreign-exchange requirements. Nor does it automatically mean that every operational decision should be taken without regard to the Indian entity’s own legal duties.

4. Check the practical setup requirements too

Once the proposed ownership is found to be permitted, the incorporation plan should address more than the shareholding percentage. In particular, confirm:

• The parent company’s approvals and documents for making the investment.
• Identity, address and consent documents for the proposed directors and shareholders.
• The Indian company’s registered-office evidence and proposed business objects.
• The resident-director requirement and the board’s planned responsibilities.
• Bank account opening, inward remittance evidence and the process for issuing shares.
• Applicable tax, accounting, audit, payroll, company-law and foreign-investment reporting.

Our guides explain the subsidiary incorporation process, the documents commonly required, and the funding and FC-GPR reporting considerations.

5. Ownership percentage is not the only structuring decision

A 100% subsidiary may be appropriate where a US business wants a separate Indian operating company, local contracts, employees or a long-term presence. A different arrangement may need to be evaluated if the planned activities are limited, the sector has special conditions, or the business is not ready to establish a company. The comparison should be based on intended activities, commercial control, tax, liability, funding and future plans.

It is also important to review proposed shareholder rights and intercompany arrangements. Ownership, voting rights, board appointments and reserved matters should be documented consistently with the intended structure and applicable law. If you are deciding whether to bring in a local partner, compare this with ourguide to an Indian subsidiary versus a joint venture.

Practical checklist before choosing 100% ownership

• Describe the Indian entity’s planned activities in specific terms.
• Check the current FDI cap, entry route and any sector-specific conditions.
• Confirm whether any investor-specific restriction or approval applies.
• Review the proposed shareholding, board rights and parent-subsidiary arrangements.
• Map the funding route and applicable reporting before transferring capital.
• Prepare a post-incorporation calendar for tax, accounting and company compliance.

FAQs: US ownership of an Indian company

This article is general information, not legal, tax or investment advice. The applicable position depends on the proposed activity, investor, transaction and rules in force at the relevant time.