Indian Subsidiary of Foreign Company

An Indian subsidiary is a private limited company incorporated in India in which a foreign company or foreign nationals hold shares. It is the most common vehicle for foreign direct investment (FDI) into India and is incorporated through the MCA's SPICe+ form, subject to the RBI's FDI rules.

Who needs this: A foreign company/individual can hold up to 100% under the automatic route in most sectors. At least one director must be a resident Indian (stayed 182+ days in the previous financial year). Minimum two directors and two shareholders.

Government portal: MCA (mca.gov.in) for incorporation; RBI FIRMS portal (firms.rbi.org.in) for FDI reporting.

Indicative fees: ₹25,000–₹75,000 professional + government fees (higher than a domestic Pvt Ltd due to apostille/notarisation of foreign documents and FDI reporting).

Timeline: 15–30 working days, depending on apostille of foreign documents and name approval.

Documents required

Step-by-step process

  1. Obtain Digital Signature Certificates (DSC) for all proposed directors
  2. Reserve the company name via SPICe+ Part A (RUN)
  3. Get foreign directors' documents apostilled (Hague-convention countries) or consularised
  4. Draft MoA and AoA reflecting the foreign shareholding
  5. File SPICe+ Part B with INC-33/INC-34, AGILE-PRO (GST/EPF/ESI) and obtain the Certificate of Incorporation, PAN and TAN
  6. Open a company bank account and bring in share capital through banking channels
  7. File the FC-GPR on the RBI FIRMS portal within 30 days of allotting shares to the foreign investor
  8. Complete post-incorporation compliance: appoint auditor within 30 days, file INC-20A commencement, maintain FEMA/FDI records

Penalty for non-compliance

Late FC-GPR filing attracts a Late Submission Fee (LSF) under FEMA; non-reporting of FDI can invite compounding penalties up to 3× the amount involved.

FDI: automatic route or government approval

Most sectors permit foreign investment under the automatic route, requiring no prior approval, while a defined list requires government approval and a few are prohibited outright. Separately, investment from countries sharing a land border with India requires government approval regardless of sector. Establishing which route applies is the first question, because it determines whether you can incorporate and fund immediately or must wait for an approval.

At least one director must be resident in India

Every company must have a director who has stayed in India for the prescribed number of days in the financial year. For a foreign parent this is often the binding practical constraint, and appointing a nominee purely to satisfy it carries real risk, since directors owe duties and bear liabilities personally. Plan the board around someone who will genuinely act, not merely sign.

Reporting to the RBI is not optional and is time-bound

Receipt of share application money and the allotment of shares to a non-resident must be reported through the prescribed filings on the RBI's FIRMS portal within specified periods, and late reporting attracts a late submission fee. Valuation of the shares must be supported by a report where required, and the issue price cannot be below the fair value determined under the pricing guidelines. These filings are missed far more often than the incorporation steps.

Transfer pricing applies from the first transaction

Any transaction with the foreign parent or a group company — management fees, royalty, cost allocation, intra-group loans, or simply goods and services — is an international transaction between associated enterprises. It must be at arm's length, documented contemporaneously, and reported in the prescribed accountant's report where thresholds are crossed. Businesses often set up intra-group charges informally in year one and find the documentation impossible to reconstruct in year three.

Subsidiary, branch or liaison office

A subsidiary is a separate Indian company that can trade freely and is the usual choice for real operations. A liaison office may only carry on representative activities and cannot earn income. A branch office can undertake specified activities but its scope is narrower than a subsidiary's and it is taxed at a higher rate. Both branch and liaison offices require RBI or AD-bank approval. If the plan is to trade, hire and invoice in India, the private limited company route is normally the right one.

📘 Company & LLP registration in India — full guide

Frequently asked questions

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

Yes, in most sectors under the automatic route (no prior government approval). Some sectors — defence, media, multi-brand retail, insurance — have caps or require government-route approval.

Is a resident Indian director mandatory?

Yes. Section 149(3) of the Companies Act requires at least one director who has stayed in India for 182 days or more in the previous financial year.

What FDI reporting is required after incorporation?

Form FC-GPR must be filed on the RBI's FIRMS portal within 30 days of issuing shares to the foreign investor, along with the FIRC and KYC from the authorised dealer bank. Annual FLA return is also due by 15 July each year.

What is the minimum capital for an Indian subsidiary?

There is no prescribed minimum paid-up capital under the Companies Act, 2013. Capital is decided commercially, but it must actually be brought in through banking channels and reported to the RBI.

How long does incorporation take?

Typically 15–30 working days; the variable is how quickly foreign documents are apostilled/consularised in the investor's home country.

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