Foreign businesses often start their India journey by incorporating a subsidiary. This post is a short, general overview for founders and finance teams who are still at the planning stage. It is not legal advice, and rules change, so always confirm current requirements.
Choose the entry vehicle
A foreign company can generally enter India in one of a few ways:
- A wholly owned subsidiary, usually a private limited company
- A joint venture with an Indian partner
- A branch, liaison or project office, which are permitted for specific activities and usually need approval from the Reserve Bank of India
Most businesses planning to employ staff, invoice customers and operate long term choose the private limited company, because it is a separate legal entity with limited liability.
Check the foreign investment rules
Foreign direct investment (FDI) is governed by the FDI policy and the Foreign Exchange Management Act (FEMA). Many sectors fall under the automatic route, where no prior government approval is needed, while some need approval, and a few have caps or conditions. Confirm which route applies to your sector before you commit.
Core incorporation requirements
- At least two directors, with at least one who has stayed in India for 182 days or more in the previous year
- At least two shareholders, which can include the foreign parent and a nominee
- A registered office address in India
- Digital signature certificates and director identification numbers for directors
- Identity, address and apostilled or notarised documents of foreign shareholders and directors, as per the rules
- A proposed company name approved by the Registrar of Companies
After incorporation
You will normally obtain PAN and TAN, open a bank account and receive the share capital from abroad through banking channels. FEMA then requires reporting of the inward remittance and of the share allotment to the Reserve Bank within the prescribed time. Skipping these filings is a common source of later penalties.
Ongoing compliance
An Indian subsidiary must appoint an auditor, hold board and general meetings, file annual financial statements and returns with the Registrar, and comply with tax, GST and payroll rules where applicable. Transactions with the foreign parent may also attract transfer pricing documentation, so plan intercompany agreements early.
A final tip
Map out your expected activities, funding route and timelines before incorporation. A short planning exercise usually saves months of rework.
Greenwolf Advisors helps founders with company registration, accounting and compliance in New Delhi.
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