Foreign Subsidiary Company Registration in India

India remains one of the most attractive destinations for global investors, offering immense growth potential. For foreign businesses aiming to establish operations in India, setting up a Foreign Subsidiary Company is the most structured and legally compliant approach under the Companies Act, 2013.

This guide covers everything you need to know—from eligibility and documentation to FDI compliance—in line with the latest regulations of the Ministry of Corporate Affairs (MCA), Reserve Bank of India (RBI), and Foreign Exchange Management Act (FEMA).

What is a Foreign Subsidiary Company?

A Foreign Subsidiary Company is an Indian company incorporated under the Companies Act, 2013, where a foreign company:

• Owns more than 50% of the share capital, or
• Controls the Board of Directors composition.

While the subsidiary is considered a domestic company for taxation and compliance, it remains under the control of its foreign parent.

Types of Subsidiaries

• Wholly Owned Subsidiary (WOS): 100% shares held by the foreign parent (allowed only in sectors permitting 100% FDI under the Automatic Route).
• Partly Owned Subsidiary: Foreign parent holds more than 50% but less than 100% of shares.

Key Benefits of Setting Up a Foreign Subsidiary in India

1. Full Ownership & Control:
   100% FDI is allowed under the automatic route in eligible sectors, requiring no prior government approval.
2. Separate Legal Entity & Limited Liability:
   The subsidiary is a distinct legal entity in India, with the parent company’s liability limited to its shareholding.
3. Access to the Indian Market:
   Direct entry into one of the fastest-growing consumer markets globally.
4. Tax Benefits & DTAA Relief:
   India’s Double Taxation Avoidance Agreements (DTAA) reduce the risk of double taxation.
5. Ease of Profit Repatriation:
   Dividends and royalties can be repatriated as per FEMA guidelines.

Eligibility & Basic Requirements

• Directors: Minimum two, with at least one resident in India (residing 182+ days in the previous calendar year).
• Shareholders: Minimum two (individuals or corporate entities), foreign parent can be one.
• Registered Office: Required in India; proof includes utility bills, rent agreement, or NOC.
• Capital: No minimum paid-up capital, but FDI valuation and pricing norms under FEMA must be followed.

Step-by-Step Registration Process

1. Obtain Digital Signatures (DSC): All directors need DSC to sign e-forms.
2. Apply for Director Identification Number (DIN): Through SPICe+ Form on the MCA portal.
3. Name Reservation: Reserve a company name via SPICe+ Part A (or RUN). Names should end with “Private Limited” or “Limited.”
4. Draft MOA & AOA: Prepare Memorandum and Articles of Association.
5. File SPICe+ Part B with Documents: Submit INC-32 with MOA, AOA, registered office proof, director/shareholder IDs, foreign parent board resolution, and notarised/apostilled foreign documents.
6. Certificate of Incorporation (COI): MCA issues COI along with PAN & TAN.
7. FDI Reporting to RBI: File Form FC-GPR within 30 days of share allotment through RBI’s FIRMS/SMF portal.

Documents Required

Foreign Parent Company:

• Certificate of Incorporation (notarised & apostilled)
• MOA & AOA
• Board Resolution approving investment

Directors & Shareholders:

• Passport (for foreign nationals)
• Address proof (utility bill or bank statement)
• Passport-size photograph

Registered Office:

• Recent electricity/water bill (within 2 months)
• Rent agreement & NOC (if rented)

Post-Incorporation Compliances

• Appoint Auditor: Within 30 days of incorporation
• First Board Meeting: Within 30 days
• Issue Share Certificates: Within 60 days
• File FC-GPR: Within 30 days of share allotment
• Annual Filings:
  
  • Form AOC-4: Financial Statements
  • Form MGT-7: Annual Return
  • FLA Return: Annual Foreign Liabilities & Assets return by 15 July (extended to 31 July 2025 for FY 2024–25)

Taxation of Foreign Subsidiaries

• Treated as a domestic company for tax purposes.
• Corporate Tax Rate:
  
  • 22% (+ surcharge & cess) under normal regime
  • 15% (+ surcharge & cess) for new manufacturing companies under Section 115BAB

FDI Routes in India

1. Automatic Route: No prior government approval (e.g., IT, manufacturing, consulting).
2. Government Route: Approval required for sectors like defense, telecom, or media.

Conclusion

Setting up a foreign subsidiary in India allows global businesses to tap into a high-growth market with full ownership (in eligible sectors) and a secure legal framework. By following MCA and RBI procedures, companies can ensure smooth incorporation and compliance.

Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.