A foreign company that wants a permanent, fully-owned business base in India usually sets one up through an Indian subsidiary. It is the most common route for global businesses entering the Indian market because it gives the parent company full operational control while keeping the Indian entity legally separate — so the parent's balance sheet stays insulated from the subsidiary's liabilities.
LegalDev handles the complete registration process for foreign businesses: name approval, incorporation filing, PAN and TAN, and the RBI/FEMA reporting that foreign shareholding brings with it. Below is everything you need to know before you start.
An Indian subsidiary is a company incorporated in India where a foreign company (the holding or parent company) owns a controlling stake. Under Section 2(87) of the Companies Act, 2013, a company is treated as a subsidiary of another (the holding company) if the holding company controls the composition of its Board of Directors, or holds more than half of its total voting power — either directly or through other subsidiaries it controls.
In practice, once a foreign entity holds more than 50% of an Indian company's shares, that Indian company is its subsidiary. Because it is incorporated under Indian law, the subsidiary is treated as a domestic Indian company for almost every legal and tax purpose, even though its ownership sits abroad.
Before filing anything with the Ministry of Corporate Affairs (MCA), a foreign company should confirm it meets these baseline requirements:
If your business activity falls outside the automatic FDI route — defence beyond the automatic cap, multi-brand retail, print media, or certain telecom and insurance thresholds, for example — you will need prior approval from the Department for Promotion of Industry and Internal Trade (DPIIT) before incorporation can proceed.
Every document executed outside India needs to be notarised and apostilled under the Hague Apostille Convention before it can be filed with the MCA. Where the parent company's home country hasn't signed the Convention, the document must instead be attested by the Indian consulate or embassy there.
Most straightforward incorporations, where documents arrive apostilled and complete, are approved by the MCA within 2 to 4 weeks of filing. Delays usually come from document apostille timelines in the parent company's home country, not from the Indian filing itself.
Foreign investment into an Indian subsidiary comes in through one of two routes:
Automatic route: No prior government approval needed. Most sectors — manufacturing, IT and software services, e-commerce (B2B), most professional services — allow up to 100% FDI automatically.
Government route: Prior approval from the DPIIT is mandatory. This applies to sectors considered sensitive, such as defence beyond the automatic-route cap, multi-brand retail trading, print media, and certain telecom and private banking thresholds. Applications are filed online through the Foreign Investment Facilitation Portal (FIFP).
A point foreign investors from India's neighbouring countries should note: investment from an entity or individual based in a country that shares a land border with India (or where the beneficial owner is a citizen of such a country) requires prior government approval regardless of the sector, under the framework introduced by Press Note 3. A 2026 relaxation now allows a narrow automatic-route exception for non-controlling stakes of up to 10% from such investors in specified sectors, subject to conditions — but this is an exception, not the rule, so it's worth getting sector- and investor-specific advice before assuming your FDI qualifies for the automatic route.
Once incorporated, an Indian subsidiary is taxed exactly like any other domestic Indian company — its foreign ownership does not change its tax residency or rates.
Corporate tax: 22% (plus applicable surcharge and cess) under the concessional regime for existing domestic companies that forgo certain exemptions, or 15% for new manufacturing companies meeting specified conditions. Companies that don't opt for the concessional regime are taxed at the regular slab rates applicable to domestic companies.
Dividend taxation: Dividends paid by the subsidiary to its foreign parent are subject to withholding tax (TDS) in India, at rates reduced under the applicable Double Taxation Avoidance Agreement (DTAA), where one exists between India and the parent's home country.
Transfer pricing: All transactions between the subsidiary and its foreign parent — royalty payments, management fees, purchase or sale of goods — must be priced at arm's length and reported under the Income Tax Act's transfer pricing rules, including Form 3CEB where applicable.
GST: Mandatory once annual turnover crosses the prescribed threshold, or where the subsidiary's business activity requires registration regardless of turnover. See our GST Registration service for details.
Minimum Alternate Tax (MAT): Applies at 15% of book profits where the tax computed under the concessional regime would otherwise be lower, for companies that haven't opted into the new regime.
Because an Indian subsidiary receives foreign capital, it takes on reporting obligations that a purely domestic company doesn't have:
Form FC-GPR: Must be filed with the RBI through the FIRMS portal within 30 days of share allotment to the foreign parent, reporting the equity inflow. Shares themselves must be allotted within 60 days of the funds being received; missing that window means the funds have to be refunded.
Form FC-TRS: Required whenever shares are transferred between a resident and a non-resident shareholder, filed within 60 days of the transfer or the fund movement, whichever is earlier.
Annual FLA Return: A yearly return to the RBI reporting the subsidiary's outstanding foreign liabilities and assets as of 31st March, due by 15th July every year. This is a census-based filing — it's mandatory for any company that has ever received FDI, whether or not there was any transaction in the reporting year.
Late filings attract a Late Submission Fee and can, in serious cases, require compounding of the FEMA contravention with the RBI — so tracking these deadlines matters as much as the incorporation itself.
Registration is the starting point; an Indian subsidiary carries the same ongoing compliance load as any private limited company, plus the FEMA filings above.
Directors who miss the annual DIR-3 KYC filing get their DIN deactivated, and companies that skip MGT-7 or AOC-4 face daily penalties under the Companies Act — so it's worth setting these dates as recurring reminders from day one, not something to think about only at year-end.
Setting up an Indian subsidiary involves the MCA, the RBI, and the Income Tax department all at once, and a single missed step — an unapostilled document, a late FC-GPR filing, an incorrect DIN application — can hold up the whole process. LegalDev manages the registration end to end:
If a wholly-owned structure isn't the right fit for your entry strategy, we also register LLPs, private limited companies, and can advise on drafting a joint venture agreement or shareholders' agreement if you're bringing in a local partner instead. Once your subsidiary is operational, you may also want to protect your brand with Trademark Registration or your inventions with Permanent Patent Registration.
It is a company incorporated in India under the Companies Act, 2013, in which a foreign parent company holds more than 50% of the share capital or otherwise controls the composition of the Board of Directors.
In a wholly owned subsidiary, the foreign parent holds 100% of the shares and retains full control. In a joint venture, an Indian partner also holds equity and shares control and profits, which usually means shared decision-making on strategic matters.
Yes. Every company incorporated in India, including a subsidiary, must have at least one director who has stayed in India for a total period of not less than 120 days in the financial year.
No. The Companies Act, 2013 does not prescribe a minimum paid-up capital for incorporating a subsidiary, though most companies start with a nominal amount for practical purposes.
Where all documents, including apostilled papers from the parent company, are ready, incorporation is typically completed within 2 to 4 weeks. The apostille process abroad is usually the longer step, not the MCA filing itself.
Not for sectors under the automatic route — no prior RBI or government approval is needed. The subsidiary only needs to report the investment to the RBI through Form FC-GPR within 30 days of share allotment.
It's taxed as a domestic Indian company, at 22% under the concessional regime for existing companies, or 15% for eligible new manufacturing companies, plus applicable surcharge and cess.
No — a subsidiary and a branch office are structurally different entry modes. A branch is an extension of the foreign company itself (no separate legal identity), while a subsidiary is a distinct Indian legal entity. Moving between the two means winding up one and setting up the other, not converting.