Choosing the right entry structure
The vehicle you choose decides what you can do in India, how income is taxed and how much compliance follows. We look at your business plan, sector and investor country before recommending a route.
| Point | Wholly owned subsidiary (private limited) | LLP with FDI | Liaison office | Branch office | Project office |
|---|---|---|---|---|---|
| Legal status | Indian company | Indian LLP | Extension of foreign company | Extension of foreign company | Extension for a specific contract |
| Can earn income in India | Yes | Yes | No | Yes, only permitted activities | Yes, for the project |
| Approval needed | Company law and FDI rules | LLP law; only sectors open under the automatic route without conditions | Through AD bank under RBI framework | Through AD bank under RBI framework | Through AD bank, on conditions |
| Local resident requirement | At least one resident director | At least one resident designated partner | Authorised representative | Authorised representative | Authorised representative |
| Typical use | Long-term operations, hiring, sales | Professional and service businesses | Market study, liaison | Export, import, consultancy | Construction or turnkey projects |
| Income-tax | Indian company rates | Firm rate | Not taxable as no income, reporting still required | Foreign company rates | Foreign company rates |
Most groups that intend to sell, invoice and hire in India choose a wholly owned subsidiary. A liaison office suits companies still testing the market, but it cannot invoice customers. Details of subsidiary incorporation are on our company registration page, and LLP formation is explained on our LLP registration page.
FDI: automatic route or government route
Under India’s FDI policy and the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, sectors fall into three groups:
- Automatic route. No prior approval; the investment is reported after the event. Most manufacturing, IT services, trading through wholesale and many service sectors fall here.
- Government route. Prior approval of the concerned ministry through the foreign investment facilitation portal is needed, for example in certain sectors with caps or conditions.
- Prohibited sectors. Foreign investment is not allowed, such as in lottery, gambling and certain real estate activities.
Investment from an entity in a country sharing a land border with India, or where the beneficial owner is situated in or is a citizen of such a country, requires government approval regardless of sector. Pricing guidelines also apply: shares issued to a foreign investor cannot be priced below the fair value worked out by an internationally accepted method.
Setting up a wholly owned subsidiary, step by step
- Sector and route check under the current FDI policy.
- Documents from abroad. Parent’s incorporation documents, board resolution and directors’ passports are notarised and apostilled or consularised.
- Digital signatures and DIN for the proposed directors, including foreign directors.
- Name reservation and SPICe+ on the MCA portal with e-MOA, e-AOA and AGILE-PRO-S, which links PAN, TAN, GST where opted, EPFO, ESIC and the bank account.
- Bank account and capital inflow. The parent remits share capital through banking channels; the bank issues the foreign inward remittance certificate and KYC.
- Allotment of shares within 60 days of receiving the funds.
- FC-GPR on the FIRMS portal within 30 days of allotment, after creating the entity master and business user.
- Commencement of business declaration within 180 days of incorporation, and appointment of the first auditor within 30 days.
Liaison, branch and project offices
Applications for these offices are made in Form FNC through an Authorised Dealer Category-I bank under the RBI framework. For a liaison office, the parent generally needs a profit-making track record of three years in its home country and a minimum net worth set by the RBI; a branch office has higher thresholds. Applicants from certain neighbouring countries and offices in restricted sectors need prior approval of the RBI or the government. Once approved, the office must:
| Task | Time limit or frequency |
|---|---|
| Register with the Registrar of Companies in Form FC-1 | Within 30 days of establishing the place of business |
| Obtain PAN and, where applicable, GST registration | Before starting activity |
| Annual Activity Certificate to the AD bank and RBI | Every year after the accounts close |
| Annual report to the Income-tax Department | Within 60 days of the end of the financial year, for liaison offices |
| ROC filings of accounts and annual return | Every year |
Compliance after set-up
| Area | What applies |
|---|---|
| FEMA | FC-GPR for each allotment, FC-TRS for share transfers, Annual Return on Foreign Liabilities and Assets |
| Company law | Board meetings, statutory audit, AOC-4, MGT-7, DIR-3 KYC; see ROC compliance |
| Transfer pricing | Arm’s length pricing for group transactions, with an annual report and certification where required |
| GST | Registration, monthly returns, and export of services under LUT where applicable |
| Income-tax and TDS | Corporate tax return, TDS on payments to the parent and others, and tax treaty benefits with proper documents |
| Accounting | Indian accounting standards, books maintained in India; see CFO services |
Why foreign groups work with KSV in Gurugram
- One local point of contact for incorporation, banking, FEMA reporting, GST and income tax.
- Clear document checklists for apostille and courier, so documents are prepared once.
- Gurugram presence close to Delhi airport and the corporate hubs where many foreign companies take their first office.
- Plain-English updates by email and WhatsApp for overseas founders.
KSV is a tax and accounting consultancy run by Kailash Vashisht (B.Com, MBA Finance). It is not a firm of chartered accountants or company secretaries; certificates and forms that require certification by a chartered accountant or company secretary, such as valuation reports and FC-GPR certificates, are issued by associated practising professionals. Call or WhatsApp +91 88606 30505 or write through our contact page.
Frequently asked questions
Can a foreign company own 100 percent of an Indian company?
Yes, in most sectors foreign investment up to full ownership is allowed under the automatic route, meaning no prior government approval is needed. Some sectors have caps, conditions or need government approval, and a few are prohibited. We check the current FDI policy for your sector before anything is filed.
Does an Indian subsidiary need an Indian director?
Every Indian company must have at least one director who has stayed in India for at least 182 days during the financial year, with a proportionate period for a newly incorporated company. Foreign groups usually appoint a trusted local professional or an employee based in India to meet this requirement.
What documents are needed from the foreign parent?
Typically the certificate of incorporation, constitutional documents, a board resolution approving the investment and naming an authorised signatory, and proof of address. Personal documents of foreign directors, such as passport and address proof, are also required. Documents from abroad must be notarised and apostilled, or consularised where the country is not part of the Hague Convention.
When must FC-GPR be filed?
Shares must be allotted within 60 days of receiving the foreign remittance, and FC-GPR must be filed on the RBI FIRMS portal within 30 days of the allotment. The filing is supported by the investor's KYC from the bank, a valuation report and a certificate from a company secretary. Delays attract a late submission fee.
What is the difference between a liaison office and a branch office?
A liaison office can only promote the parent's business, act as a communication channel and explore opportunities. It cannot earn any income in India. A branch office can carry on specified activities such as exporting, importing, providing professional or consultancy services and representing the parent, and it can earn income, which is taxed in India.
Who approves a liaison or branch office?
The application is made in Form FNC through an AD Category-I bank, which processes it under the RBI framework. Cases involving restricted sectors or applicants from certain countries need prior approval of the RBI or the Government of India. After approval, the office must register with the Registrar of Companies within 30 days of establishment.
Can investors from a country sharing a land border with India invest under the automatic route?
No. Investment from an entity, or with a beneficial owner, in a country that shares a land border with India needs prior government approval under the current FDI policy. This must be checked before planning the timeline.
Do transfer pricing rules apply to a new Indian subsidiary?
Yes. Dealings between the Indian entity and its foreign parent or group companies, such as service fees, royalties, purchase of goods or loans, are international transactions that must be at arm's length. A transfer pricing report and certification are needed every year when such transactions exist.
Kya foreign company Gurgaon mein virtual office se start kar sakti hai?
A registered office address is required for incorporation and must be able to receive communications. Many companies start in a co-working space in Gurugram with a proper rent agreement and NOC. For GST, the actual place of business must be verifiable, so a pure mail-handling address may not be accepted.
How long does it take to set up a subsidiary?
Once apostilled documents and digital signatures are in place, name approval and incorporation usually take a few weeks in total, depending on document quality and Registrar queries. Courier time for apostilled documents is often the longest step, so we start with a document checklist on day one.