Guide to Registering an Indian Subsidiary

1. What is an Indian Subsidiary?

An Indian subsidiary is a company incorporated in India that is owned and controlled by a foreign parent company. It is a separate legal entity under the Companies Act, 2013, and is treated as an independent Indian company for legal, tax, and compliance purposes.

Key Features:

• The parent company holds more than 50% of the shares.

• It is liable for Indian laws, including tax, labor, and corporate compliance.

• Can enter into contracts, borrow funds, and conduct business in India independently.

2. Advantages of Setting Up a Subsidiary in India

1. Limited Liability: Parent company’s liability is limited to the shareholding.

2. Full Market Access: Ability to operate under Indian regulations and access local markets.

3. Separate Legal Entity: Contracts and operations are independent of the parent.

4. Favorable Taxation: Can claim tax benefits under Indian law and DTAA (Double Tax Avoidance Agreements).

5. Brand Presence: Enhances credibility in India and helps in building long-term operations.

3. Types of Companies for Subsidiary Setup

A foreign parent can establish the subsidiary in India under these forms:

Note: Private Limited Company is the most preferred structure for foreign subsidiaries.

4. Step-by-Step Process for Indian Subsidiary Registration

Step 1: Obtain Digital Signature Certificate (DSC)

• Required for directors to sign electronic documents.

• Can be obtained from certified authorities in India.

Step 2: Obtain Director Identification Number (DIN)

• Mandatory for all directors.

• Apply via the Ministry of Corporate Affairs (MCA) portal.

Step 3: Name Approval

• File RUN (Reserve Unique Name) application on MCA portal.

• Ensure the name follows Companies Act rules (no similarity with existing companies).

Step 4: Drafting of Documents

• Memorandum of Association (MoA) – Defines the objectives of the company.

• Articles of Association (AoA) – Governs the internal rules and regulations.

Step 5: Filing Incorporation Forms

• File SPICe+ Form (INC-32) on MCA portal.

• Attach:

  1. MoA & AoA

  2. Proof of registered office

  3. Identity and address proof of directors

  4. Declaration of compliance by directors

Step 6: PAN and TAN Application

• Apply for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) for tax purposes.

Step 7: Opening a Bank Account

• Open a current account in India in the subsidiary’s name.

• Deposit initial capital.

Step 8: RBI Approval (if applicable)

• If the subsidiary receives foreign direct investment (FDI), file FIR (Foreign Investment Reporting) with RBI under the Foreign Exchange Management Act (FEMA).

5. Documentary Requirements

6. Compliance Requirements After Incorporation

1. Annual Filing with MCA (Form AOC-4, MGT-7)

2. Tax Filing (Income Tax Return, GST Registration if applicable)

3. Statutory Audit by a Chartered Accountant (mandatory for companies with turnover above threshold)

4. Labor Law Compliance if hiring employees in India

5. Other licenses depending on industry (FSSAI, Import-Export, RBI approval for NBFC, etc.)

7. Advisory Notes for Foreign Companies

1. Choose the right structure: Private limited company is easier for most foreign subsidiaries.

2. Plan FDI carefully: Ensure compliance with sectoral caps under FEMA and automatic/approval route.

3. Maintain proper accounting records: MCA and Income Tax filings are mandatory.

4. Get professional support: Local company secretary and CA can help navigate complex regulations.

5. Understand tax obligations: Corporate tax rates in India, GST, withholding taxes, and transfer pricing rules.

8. Timeline for Registration

Total estimated time: 2–4 weeks (can vary depending on documentation and approvals)

9. Costs Involved (Approximate)

• Government fees: ₹7,000 – ₹15,000

• Professional fees: ₹15,000 – ₹50,000 (depends on service provider)

• Additional costs: Stamp duty on MoA/AoA, registration of office

1. Industry-Specific Approvals

• Certain sectors require special licenses or approvals before starting operations, even after company registration. Examples:

  • Financial services / NBFCs – RBI license required

  • Food & beverages – FSSAI license

  • Healthcare / pharmaceuticals – DCGI approvals

  • Import-export – IEC (Import Export Code) from DGFT

  • Telecom / IT – TRAI / MeitY compliance

• Non-compliance can lead to penalties even if the company is registered.

2. Foreign Investment Compliance (FEMA & RBI)

• Foreign Direct Investment (FDI) Reporting:

  • If a foreign parent invests >₹1 crore, filing FIRC (Foreign Inward Remittance Certificate) is needed.

  • Annual reporting in Form FC-GPR (if fresh shares issued to foreign parent) and FC-TRS (if shares transferred) is required.

• Certain sectors have automatic route for FDI; others need government approval.

3. Taxation Details

• Corporate Tax:

  • Base rate ~25% for domestic companies with turnover <₹400 Cr (plus surcharge & cess)

  • 30%+ for larger companies

• Withholding Taxes (TDS) on payments to foreign parent/subsidiary.

• Transfer Pricing rules: intercompany transactions must be at arm’s length.

• GST Registration: Mandatory if turnover exceeds ₹20 lakh (or ₹10 lakh in special states) or for interstate supply.

4. Intellectual Property (IP) Considerations

• Register trademarks, patents, and copyrights in India to protect your brand.

• Indian subsidiaries do not automatically inherit IP rights from the parent company.

5. Employment Law Compliance

• Hiring employees in India requires:

  • PF (Provident Fund) registration

  • ESI (Employee State Insurance) registration

  • Compliance with the Shops & Establishment Act (state-specific)

  • Labor law adherence (working hours, leave policies, social security)

6. Accounting and Reporting

• Indian companies must maintain books of accounts according to Indian Accounting Standards (Ind AS).

• Audit by a Chartered Accountant is mandatory if:

  • Turnover > ₹1 crore

  • Paid-up capital > ₹50 lakh

7. Permanent Establishment (PE) Risk

• Even with a subsidiary, the parent company could have PE exposure if Indian operations generate income for the foreign entity.

• Proper structuring is needed to avoid unnecessary tax liabilities in India.

8. Corporate Governance

• Indian companies must comply with the Companies Act, 2013, including:

  • Board meetings and minutes

  • Annual general meetings (AGM)

  • Appointment of auditors

  • Maintaining statutory registers

9. Bank & Financial Operations

• Indian subsidiary bank account is mandatory for capital infusion.

• Foreign loans or funding require FEMA compliance and RBI reporting.

• Remittance of profits back to parent company is allowed but requires FC-GPR / FC-TRS filings and tax clearance.

10. Exit Strategy

• Closing or selling a subsidiary requires:

  • Strike-off / liquidation process under Companies Act

  • Clearance of all taxes

  • Proper return of foreign capital under FEMA

• Important to plan exit strategy before starting operations.

11. Optional Considerations

• Virtual Offices vs Physical Offices – some foreign companies use a virtual office for initial setup.

• Local Director Requirement – sometimes recommended to have at least one resident Indian director.

• Trade Licenses / Local Approvals – depending on city/state, municipal trade license may be needed.