How a Foreign Company Sets Up a Subsidiary in India

Last reviewed: 28 October 2026. By NRAM & Co., Chartered Accountants, Hyderabad (ICAI FRN 023031S).

In short: Most foreign companies enter India through a wholly owned private limited company. Setting it up takes a few weeks; the bigger commitment is the yearly compliance under company law, FEMA, income tax and GST.

Choosing the entity

The main options are:

• Private limited company (subsidiary): a separate Indian company owned by the parent. The usual choice for running a business, hiring staff and invoicing in India.
• LLP: possible in some sectors, with lighter company-law compliance, but less familiar to foreign investors and banks.
• Branch or liaison office: an extension of the foreign company rather than a separate entity. These need approval under FEMA rules and are limited in what they can do; a liaison office cannot earn income in India.

Foreign direct investment is allowed up to 100% under the automatic route in most sectors. Some sectors have caps, conditions or need government approval, so check the sector first.

Steps to incorporate

1. Check the sector rules for foreign investment.
2. Choose at least two directors. At least one must be resident in India.
3. Obtain digital signatures and director identification numbers for the directors.
4. Reserve the company name and file the incorporation application with the Ministry of Corporate Affairs, together with the constitution documents. Documents signed abroad usually need notarisation and apostille.
5. Receive the certificate of incorporation, PAN and TAN.
6. Open a bank account and bring in the share capital from the parent through normal banking channels.

Reporting after shares are issued

When the Indian company issues shares to the foreign parent, the issue price must meet FEMA pricing rules, usually supported by a valuation. The company must then report the share issue to the Reserve Bank of India through its authorised bank within 30 days of allotment.

Each year, a company with foreign investment files an annual return on foreign liabilities and assets with the RBI, due by 15 July.

Ongoing compliance each year

• Company law: board meetings, statutory audit, annual general meeting and annual filings with the Registrar of Companies.
• Income tax: corporate tax return, advance tax, and TDS on salaries and payments to vendors.
• Transfer pricing: transactions with the parent and group companies must be at arm’s length and documented, with an accountant’s report filed each year.
• GST: registration and returns. Services billed to the overseas parent can usually be zero-rated as exports.
• Payroll: provident fund, ESI where applicable, professional tax and labour registrations.

How NRAM & Co. can help

We incorporate Indian subsidiaries for foreign companies and handle their accounting, tax, GST, transfer pricing and FEMA filings remotely. See Services for US and International Clients, or email info@nramco.com.

This article is general information, not advice for any specific situation. Indian tax and FEMA rules change often; check the current position with a professional before acting.