Setting up a foreign subsidiary company in India means incorporating a Private Limited Company under the Companies Act, 2013, where a foreign parent holds majority shares. It is open to most foreign businesses through the Automatic FDI Route, requires no prior RBI approval in most sectors, and can be fully operational in 15 to 25 working days. Key requirements include a minimum of two directors (one must be an India-resident), two shareholders, and a registered Indian office address.

• India ranked 63rd in the World Bank Ease of Doing Business Index, with ongoing reforms making entry faster
• 100% FDI is permitted in most sectors under the Automatic Route per the DPIIT FDI Policy
• India attracted over USD 44 billion in FDI equity inflows in 2024-25 according to the Reserve Bank of India

What is a Foreign Subsidiary Company in India?

A foreign subsidiary is an Indian Private Limited Company (Pvt Ltd) where more than 50% of the equity shares are owned by a foreign parent company or foreign nationals. It is a separate legal entity incorporated under the Companies Act, 2013, governed by the Ministry of Corporate Affairs (MCA), and must also comply with FEMA (Foreign Exchange Management Act) regulations and RBI guidelines for Foreign Direct Investment.

This structure gives the parent company full operational control while limiting its liability to the capital invested in India. It is distinct from a Branch Office or Liaison Office, which have restricted activity permissions and cannot generate profits in India.

Foreign Subsidiary vs. Branch Office vs. Liaison Office

Feature	Foreign Subsidiary (Pvt Ltd)	Branch Office	Liaison Office
Legal Status	Separate Indian entity	Extension of parent	Extension of parent
Business Activities	All permitted sectors	Limited (same as parent)	Only liaison / marketing
Revenue Generation	Yes	Yes (limited)	No
FDI / RBI Approval	Mostly Automatic Route	RBI approval required	RBI approval required
Tax Rate (AY 2026-27)	22% (base) under Section 115BAA	40% (foreign company rate)	Not applicable
Repatriation of Profits	Allowed (after tax)	Allowed (limited)	Not allowed

What Are the FDI Routes for Setting Up in India?

Foreign investment in an Indian subsidiary flows through two routes defined by the RBI under FEMA regulations. The Automatic Route covers 90%+ of sectors and requires no prior government permission. The Approval Route applies to sensitive sectors like defence, media, and financial services, where the Foreign Investment Facilitation Portal (FIFP) under DPIIT must be approached.

Sectors Under the Automatic Route (100% FDI)

• IT and Software Services
• Manufacturing
• E-commerce (B2B marketplace model)
• Hospitality and Tourism
• Education and Training
• Healthcare and Pharmaceuticals (greenfield)
• Renewable Energy

Sectors Requiring Government Approval

• Defence manufacturing (beyond 74%)
• Broadcasting and print media
• Multi-brand retail trading
• Satellite establishment and operations
• Banking (private sector beyond 74%)

Key Requirements to Set Up a Foreign Subsidiary

Before beginning incorporation, ensure these mandatory prerequisites are in place. Missing any one of these will delay MCA registration.

• Minimum 2 Directors: At least one director must be an Indian resident (physically present in India for 182+ days in the previous calendar year)
• Minimum 2 Shareholders: Can be individuals or corporate entities; the foreign parent company can hold up to 100% shares
• Registered Office Address: A valid Indian address (commercial or residential) for official MCA and tax correspondence
• Digital Signature Certificate (DSC): Mandatory for all proposed directors to sign MCA e-forms electronically
• Director Identification Number (DIN): Every director must obtain a DIN from MCA
• Unique Company Name: Must comply with MCA naming guidelines and be pre-approved via the RUN (Reserve Unique Name) service
• Minimum Authorised Capital: No statutory minimum, but INR 1 lakh is standard practice
• Foreign Investment Reporting: FC-GPR form to be filed with the RBI within 30 days of share allotment

Steps to Incorporate a Foreign Subsidiary in India (2026)

Step 1: Obtain DSC for All Proposed Directors

All directors, including foreign nationals, must obtain a Class 3 Digital Signature Certificate from a government-authorised DSC issuer. For foreign directors, this requires passport copy, overseas address proof, and video verification. This typically takes 2 to 4 working days.

Step 2: Apply for Director Identification Number (DIN)

File the SPICe+ (Simplified Proforma for Incorporating Company Electronically) form with MCA, which simultaneously allots DINs to proposed directors. No separate application is needed if DIN is applied through SPICe+.

Step 3: Reserve the Company Name

Apply for a unique company name through the MCA portal using the RUN (Reserve Unique Name) service or as part of the SPICe+ form. The name must include "Private Limited" and cannot be identical or similar to an existing company or trademark.

Step 4: Draft Memorandum and Articles of Association

Prepare the MOA (Memorandum of Association) defining the company's objects and the AOA (Articles of Association) governing internal rules. For foreign subsidiaries, the MOA must clearly state the business activities permitted under the applicable FDI sector.

Step 5: File SPICe+ Form on MCA Portal

The SPICe+ form is an integrated form that covers company incorporation, DIN allotment, PAN, TAN, GSTIN, EPFO/ESIC registration, and bank account opening in a single submission. Supporting documents include MOA, AOA, identity and address proofs of directors and shareholders, and the registered office proof.

Step 6: Receive Certificate of Incorporation

Upon MCA approval, the Registrar of Companies (RoC) issues the Certificate of Incorporation (CoI) along with the Company Identification Number (CIN). This is the legal birth of your Indian subsidiary. Average timeline: 10 to 20 working days from DSC issuance.

Step 7: Open a Bank Account and Receive Foreign Remittance

Open a current account with an authorised dealer bank in India. Remit the initial share capital from the parent company abroad. The Indian bank will issue a Foreign Inward Remittance Certificate (FIRC), which is a critical compliance document.

Step 8: File FC-GPR with RBI

Within 30 days of share allotment, file Form FC-GPR (Foreign Currency - Gross Provisional Return) on the RBI's FIRMS (Foreign Investment Reporting and Management System) portal. This is a mandatory FEMA compliance step and reports the foreign equity inflow to the RBI.

Step 9: Post-Incorporation Registrations

Register for GST (if turnover exceeds INR 20 lakhs or for inter-state supply), Professional Tax (state-specific), Shops and Establishments Act (state-specific), and Import Export Code (IEC) if the subsidiary will engage in cross-border trade.

Documents Required for Foreign Subsidiary Registration

For the Foreign Parent Company

• Certificate of Incorporation of the parent company (apostilled and notarised)
• Board Resolution authorising the investment in India
• Memorandum and Articles of the parent entity
• Latest audited financial statements

For Foreign Director(s)

• Passport (self-attested)
• Overseas residential address proof (bank statement or utility bill not older than 2 months)
• Passport-size photograph
• All documents must be notarised and apostilled by the competent authority in the home country

For Indian Resident Director

• PAN Card
• Aadhaar Card
• Address proof (bank statement, electricity bill)
• Passport-size photograph

For the Registered Office in India

• Latest electricity bill or property tax receipt
• No-Objection Certificate (NOC) from the property owner
• Rent agreement (if rented premises)

What Does it Cost to Set Up a Foreign Subsidiary?

Total costs depend on authorised capital, professional fees, and state-specific stamp duty. Below is a realistic estimate for 2026.

Cost Component	Approximate Amount (INR)
MCA Government Fees (SPICe+)	2,000 - 10,000
Stamp Duty on MOA / AOA	1,000 - 5,000 (state-dependent)
DSC for 2 Directors	2,000 - 4,000
Professional / CA / CS Fees	15,000 - 40,000
Apostille and Notarisation (Foreign Docs)	5,000 - 20,000
GST Registration (if applicable)	Nil (government fees)
Total Estimated Cost	25,000 - 80,000

Annual Compliance for Foreign Subsidiaries in India

A foreign subsidiary in India carries multiple annual compliance obligations under the Companies Act, Income Tax laws, FEMA, and GST. Non-compliance attracts significant penalties and can lead to the company being struck off the MCA register.

• MCA Annual Return (MGT-7): Filed within 60 days of the Annual General Meeting (AGM)
• Financial Statements (AOC-4): Filed within 30 days of AGM, must be audited by a practising Chartered Accountant
• Annual Performance Report (APR): Filed with the RBI on the FIRMS portal by 31 December each year, reporting FDI details. See our guide on APR filing for foreign subsidiaries
• FC-TRS: Filed within 60 days on every transfer of shares between a resident and non-resident
• Income Tax Return: Filed by 31 October (for companies requiring audit) under the Direct Tax Code 2025 (applicable from AY 2026-27)
• GST Returns: Monthly or quarterly, depending on turnover and scheme opted
• TDS Returns: Quarterly (Forms 24Q, 26Q, 27Q)
• Statutory Audit: Mandatory every financial year regardless of turnover

You can explore the complete annual compliance calendar for foreign subsidiaries and the APR filing due date guide for detailed timelines.

How is a Foreign Subsidiary Taxed in India?

As of AY 2026-27, an Indian subsidiary is taxed as a domestic company under the Direct Tax Code 2025. The base corporate tax rate is 22% under the concessional regime (Section 115BAA equivalent), plus applicable surcharge and cess, bringing the effective rate to approximately 25.17%. New manufacturing companies incorporated after 1 October 2019 can opt for 15% (base) under the 115BAB equivalent, with an effective rate near 17.01%.

Dividend Repatriation

Dividends paid by the Indian subsidiary to its foreign parent are subject to a 20% withholding tax under Section 115A (plus surcharge and cess). However, if a Double Taxation Avoidance Agreement (DTAA) is applicable, the rate may be reduced. Common DTAA rates for dividends include 10% for UAE, Sweden, and China, among others.

Transfer Pricing

All transactions between the Indian subsidiary and its foreign parent are "international transactions" and must comply with Transfer Pricing (TP) regulations. An annual TP audit (Form 3CEB) by a Chartered Accountant is mandatory if the aggregate value of international transactions exceeds INR 1 crore.

Why Choose Taxocity for Foreign Subsidiary Setup?

Taxocity has supported businesses with incorporation, compliance, and scaling for over three decades. With a 4.8/5 rating from 5,000+ clients, the firm offers end-to-end support, from name reservation and MCA filings to RBI FC-GPR reporting and ongoing statutory compliance.

• 100% Compliance Guarantee: Every filing is reviewed by qualified professionals before submission
• Real Human Experts: Dedicated CA and CS professionals handle your case, not bots
• Foreign Document Apostille Support: Guidance on getting parent company and foreign director documents legally valid for Indian filings
• Ongoing Compliance: From GST registration to GST compliance for foreign companies, bank account opening, and annual RBI/MCA filings
• Transparent Pricing: No hidden charges; fixed professional fee packages

Frequently Asked Questions

Can a foreign company own 100% of an Indian subsidiary?

Yes. In most sectors, 100% Foreign Direct Investment (FDI) is permitted under the Automatic Route without any prior government or RBI approval. Sectors like defence (beyond 74%), multi-brand retail, and broadcasting require government approval before foreign shareholding exceeds specific thresholds.

Does a foreign subsidiary need an Indian resident director?

Yes. The Companies Act, 2013 mandates that every Indian company must have at least one director who has stayed in India for a total of not less than 182 days in the previous calendar year. The foreign parent can appoint a local professional director to fulfil this requirement.

How long does it take to set up a foreign subsidiary in India?

From the time all documents are ready, the typical timeline is 15 to 25 working days. This includes DSC procurement (2 to 4 days), name approval (1 to 2 days), SPICe+ processing by MCA (7 to 12 days), and bank account opening (3 to 7 days). Apostille of foreign documents is the most common cause of delays.

Is there a minimum capital requirement for a foreign subsidiary?

There is no statutory minimum paid-up capital prescribed under the Companies Act, 2013 for a Private Limited Company. However, the authorised and paid-up capital should be practically sufficient to demonstrate genuine business intent, especially when the RBI reviews the FC-GPR filing.

What is FC-GPR and when must it be filed?

FC-GPR (Foreign Currency - Gross Provisional Return) is a mandatory FEMA compliance form to be filed with the Reserve Bank of India within 30 days of allotting shares to a foreign investor. It reports the amount of foreign equity received, the type of instruments issued, and the valuation basis for the shares.

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Disclaimer: This article is for general informational purposes only and does not constitute tax, legal, or professional advice. Laws, regulations, and compliance requirements are subject to change. Please consult a qualified Chartered Accountant, Company Secretary, or legal advisor for advice specific to your situation before making any business or financial decisions.