Types of Subsidiaries in India
A foreign subsidiary is an Indian entity established with investment or ownership from a foreign parent company. The appropriate structure depends on the investment model, business objectives and applicable FDI regulations.
Foreign businesses entering India can evaluate different structures depending on the level of ownership, control, local participation and applicable sectoral requirements.
Wholly Owned Subsidiary
A structure in which the foreign parent owns the permitted shareholding in the Indian company, providing a high degree of control over Indian operations, subject to applicable FDI rules.
Joint Venture
A structure where a foreign investor works with an Indian partner. This may provide access to local expertise, infrastructure and market knowledge.
Associate Company
An entity in which another company has significant influence but does not exercise the level of control associated with a subsidiary, subject to the applicable corporate-law definitions.
Advantages of an Indian Subsidiary Company
Establishing an Indian subsidiary can provide a foreign business with a dedicated legal entity through which it can conduct eligible business activities in India.
Direct Market Presence
Unlike certain representative structures, an eligible subsidiary can conduct business activities in India within the scope permitted by law.
Limited Liability
A subsidiary is a separate legal entity and generally provides a distinct liability structure for the Indian business.
FDI Framework
Foreign investment can be made subject to the applicable sectoral caps, entry routes and conditions under India's FDI policy.
Business Growth
An Indian subsidiary can provide an organised platform for expanding operations, employees, customers and business activities in India.
Tax Planning Opportunities
The Indian entity may be subject to the applicable corporate tax framework and can evaluate legitimate tax planning opportunities.
Perpetual Existence
The company's existence is separate from changes in its shareholders, directors or management, subject to applicable law.
Regulatory Authorities
Establishing and operating an Indian subsidiary can involve multiple regulatory authorities depending on the business activity, investment structure and compliance requirements.
Requirements & Key Facts
Before setting up a subsidiary, a foreign parent should evaluate the proposed ownership structure, directors, registered office and investment requirements.
Directors
A private company generally requires at least two directors, with the applicable resident-director requirement to be considered.
Shareholders
A private company generally requires at least two members. The exact foreign ownership structure depends on the applicable FDI rules and sectoral requirements.
Registered Office
An Indian registered office address is required for statutory correspondence and corporate records.
Capital & Funding
The proposed capital should be planned according to the business model and funding requirements, with foreign investment received through permitted banking channels and reported as required.
Procedure for Indian Subsidiary Registration
GKS & Associates assists foreign businesses through the incorporation and post-incorporation process with a structured approach.
Name Reservation
We assist in selecting and reserving a company name aligned with the foreign parent's brand while considering the applicable MCA naming requirements.
Digital Signature Certificates
Digital signatures are arranged for the relevant proposed directors and authorised persons. Foreign documents may require appropriate notarisation, apostille or consular/legalisation formalities depending on the country and applicable requirements.
SPICe+ Integrated Incorporation
The applicable integrated incorporation application is prepared for incorporation and associated registrations such as DIN, PAN and TAN, wherever applicable.
Inward Remittance & FDI Reporting
After incorporation, foreign investment is received through the permitted banking channels and the applicable RBI/FEMA reporting requirements are completed.
Compliance Requirements
Incorporation is only the beginning. An Indian subsidiary must maintain ongoing corporate, tax and foreign exchange compliance according to the nature of its operations.
Appointment of First Auditor
The first auditor should be appointed within the applicable statutory timeline after incorporation.
Board Meetings
The company must comply with the applicable requirements relating to board meetings and maintenance of statutory records.
Annual Filings
Financial statements, annual returns and other applicable forms are required to be filed with the Registrar of Companies.
Statutory Audit
The company's accounts are subject to statutory audit in accordance with applicable Indian corporate and auditing requirements.
FEMA Compliance
Foreign-owned entities must consider applicable FEMA and RBI reporting obligations, including foreign investment related filings.
Taxation of Indian Subsidiary Companies
An Indian subsidiary is generally treated as an Indian company for domestic tax purposes. The actual tax treatment depends on the company's activities, income, applicable tax regime and prevailing laws.
Corporate Tax
The subsidiary is subject to the applicable corporate income-tax regime, together with applicable surcharge and cess.
Dividend & Withholding Tax
Payments to a foreign parent may attract applicable withholding-tax obligations. A Double Taxation Avoidance Agreement may affect the applicable rate where its conditions are satisfied.
Transfer Pricing
Transactions between the Indian subsidiary and associated foreign enterprises may be subject to Indian transfer-pricing provisions and arm's-length requirements.
FDI in Private Limited Companies
India's FDI framework provides different entry routes and sector-specific conditions. The applicable route depends on the sector, investment structure and prevailing FDI policy.
Automatic Route
Certain sectors permit foreign investment under the automatic route, subject to applicable sectoral caps, conditions and reporting requirements.
Government Route
Certain sectors or investments may require prior government approval. The applicable requirements should be checked before investment.
Prohibited Activities
Foreign investment is prohibited in specified activities under India's FDI policy. The current sector-specific restrictions should be reviewed before establishing the structure.
Why Register Your Company Through GKS & Associates?
GKS & Associates provides cross-border consulting support for international businesses looking to establish and operate an Indian subsidiary with a structured compliance approach.
FEMA Expertise
We assist with foreign investment documentation and applicable FEMA/RBI reporting requirements to help maintain a compliant investment structure.
Resident Director Support
Where required, we can assist businesses in understanding and arranging appropriate resident-director support.
Strategic Tax Planning
We help businesses evaluate applicable domestic tax and DTAA considerations while planning their cross-border operations.
One-Stop Business Support
From incorporation and compliance to payroll, accounting and audit coordination, we provide integrated support for Indian operations.
Build Your Indian Presence With Confidence
Whether you are establishing a wholly owned subsidiary, exploring a joint venture or planning foreign investment in India, GKS & Associates can help you navigate incorporation, FEMA, taxation and ongoing compliance through a structured approach.
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