What is an Indian Subsidiary of a Foreign Company?
An Indian subsidiary is a company incorporated in India under the Companies Act, 2013 that is controlled by another company, including a company incorporated outside India. Under section 2(87), a company is a subsidiary where the holding company controls the composition of its Board or exercises or controls more than one-half of its total voting power, either by itself or together with one or more subsidiaries.
A wholly owned subsidiary (WOS) is an Indian company in which the foreign parent ultimately holds the entire beneficial ownership, subject to the minimum-member requirements of company law and the applicable FDI/FEMA framework.
Companies Act, 2013 - India Code Ministry of Corporate Affairs
FDI Rules for an Indian Subsidiary
Important legal point
Foreign investment is governed by the sector, activity, investor, beneficial ownership, sectoral cap, entry route and attached conditions. A foreign parent may hold 100% in an Indian subsidiary only where the applicable framework permits that level of foreign investment.
- Automatic route: investment may be made without prior Government approval where the sector and investment level fall within the automatic route and all applicable conditions are satisfied.
- Government route: prior Government approval is required where the applicable FDI policy or sectoral rules place the investment under the Government route.
- Prohibited sectors: foreign investment is not permitted in activities expressly prohibited under the applicable FDI framework.
- Land-border rule: under Press Note 3 (2020), an entity of a country sharing a land border with India, or an investment whose beneficial owner is situated in or is a citizen of such a country, may invest only under the Government route, subject to the policy and subsequent amendments/clarifications.
Foreign investment in equity instruments of an Indian company is regulated by FEMA, 1999, the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, RBI's reporting regulations and the prevailing FDI policy.
Consolidated FDI Policy - DPIIT Press Note 3 (2020) - DPIIT RBI Master Direction - Foreign Investment in India
Benefits of Incorporating an Indian Subsidiary
Separate legal entity and limited liability
The Indian subsidiary has a legal identity separate from its shareholders. Shareholder liability is ordinarily limited according to the terms of the shares held, subject to applicable law and exceptional circumstances such as fraud or personal guarantees.
Perpetual succession
Changes in shareholders or directors do not by themselves terminate the company's existence. The company continues until lawfully struck off, wound up or otherwise dissolved.
Local operating platform
An Indian company can employ personnel, contract with customers and vendors, hold assets and conduct permitted business activities in its own name, subject to sector-specific laws and licences.
Funding flexibility
Funding may include permitted equity instruments, internal accruals and debt, subject to the Companies Act, FEMA, foreign investment rules, external commercial borrowing rules where relevant, taxation and lender requirements.
Repatriation
Dividends and permitted sale proceeds may generally be remitted to non-resident investors after applicable taxes and subject to FEMA, pricing, banking and other regulatory conditions.
Requirements to Register an Indian Private Subsidiary
| Requirement | Current position |
|---|---|
| Minimum members | At least 2 members for a private company. |
| Minimum directors | At least 2 directors for a private company. |
| Resident director | At least one director must stay in India for not less than 182 days during the financial year, subject to section 149(3). |
| Minimum paid-up capital | No general statutory minimum paid-up capital for a private company; sector-specific capital/net-worth conditions may still apply. |
| Registered office | A registered office in India is required in accordance with the Companies Act. |
| DIN / DSC | DIN and digital-signature requirements apply to the proposed directors/signatories as provided in the MCA incorporation process. |
| FDI eligibility | The proposed foreign shareholding must comply with the applicable sectoral cap, entry route, conditions, beneficial-ownership restrictions and FEMA rules. |
Steps to Register an Indian Subsidiary of a Foreign Company
- Check the FDI route and sector: identify the proposed business activities, sectoral cap, automatic/Government route and any sector regulator approval.
- Finalise the Indian company structure: proposed name, authorised capital, subscribers/shareholding, directors, registered office and objects.
- Arrange DSC and DIN: obtain or use the required digital signatures and DINs in accordance with MCA requirements.
- Reserve name / complete SPICe+ Part A: apply for the proposed company name through MCA where required.
- File SPICe+ Part B and linked forms: complete incorporation details and linked filings, including the applicable MoA, AoA, AGILE-PRO-S and declarations.
- Attach authenticated foreign documents: documents executed outside India must satisfy the applicable notarisation, apostille or consularisation requirements.
- Obtain Certificate of Incorporation: after approval, the Registrar of Companies issues the Certificate of Incorporation and corporate identity details.
- Complete post-incorporation requirements: bank account, share subscription, issue of securities, tax registrations and business licences, as applicable.
- Complete FEMA reporting: foreign investment must be received, securities issued and reported within the applicable RBI/FEMA timelines.
Documents Required for Indian Subsidiary Registration
The exact documents depend on the subscribers, directors, country of execution and incorporation structure. Common requirements include:
- certificate of incorporation / constitutional document of the foreign corporate subscriber;
- board resolution of the foreign parent approving the Indian subsidiary, number of shares subscribed and authorised representative;
- charter, memorandum/articles or equivalent constitutional documents of the foreign subscriber where required;
- passport and address proof of foreign individual subscribers/directors;
- PAN or prescribed undertaking where PAN is not available/applicable in the MCA process;
- identity and residential-address proof of proposed directors and subscribers;
- registered-office proof in India, owner NOC and recent utility bill, as applicable;
- draft/linked Memorandum of Association and Articles of Association;
- DSC and DIN details for the relevant directors/signatories;
- beneficial ownership and other declarations required by company law, FDI/FEMA rules or the MCA filing;
- sectoral approval or Government-route approval, where applicable.
MCA guidance specifically requires foreign subsidiary incorporation documents to be properly notarised/apostilled/consular-attested as applicable. Where a non-individual first subscriber is based outside India, physical MoA/AoA attachments with the prescribed authentication may be required instead of eMoA/eAoA.
FDI Funding and FEMA/RBI Reporting
After incorporation, foreign subscription money and issue of equity instruments must comply with the NDI Rules, RBI reporting regulations, applicable pricing guidelines and the permitted mode of payment.
| Compliance | General current timeline / rule |
|---|---|
| Receipt of foreign investment | Consideration is generally received through permitted banking channels / permitted accounts under FEMA. |
| Issue of equity instruments | Equity instruments are generally to be issued within 60 days from receipt of consideration. |
| Refund where securities are not issued | If equity instruments are not issued within 60 days, the consideration is generally to be refunded within 15 days after completion of that 60-day period. |
| FC-GPR | Where issue of equity instruments is treated as FDI, Form FC-GPR is generally filed within 30 days from the date of issue. |
| FLA Return | An Indian company that has received FDI is generally required to submit the annual Foreign Liabilities and Assets return to RBI on or before 15 July, subject to the applicable reporting framework. |
| FC-TRS | Specified transfers of equity instruments between resident and non-resident persons are reportable in Form FC-TRS under the applicable rules. |
Reporting is undertaken through RBI's FIRMS / Single Master Form system for the applicable forms. Delayed reporting can attract a late submission fee and may constitute a FEMA contravention requiring corrective action.
RBI FIRMS Portal FEMA Reporting Regulations - RBI 2025 Amendment to Reporting Regulations - RBI
Tax and Transfer Pricing
An Indian subsidiary is generally taxed as an Indian company under the Income-tax Act, 1961. Transactions with the foreign parent and other associated enterprises may be subject to India's transfer-pricing provisions, documentation and reporting requirements. Withholding tax, treaty eligibility, permanent-establishment issues, GST and customs may also be relevant depending on the transactions.
Dividend distribution tax is no longer imposed on companies under the earlier DDT regime; dividends are taxed in the hands of shareholders subject to the Income-tax Act, applicable withholding provisions and relevant tax treaty relief.
Ongoing Statutory Compliances of an Indian Subsidiary
- Companies Act, 2013 and MCA/Registrar of Companies filings, including financial statements and annual return;
- maintenance of statutory registers, minutes, beneficial ownership records and corporate governance records as applicable;
- statutory audit and accounting requirements;
- Income-tax return, tax audit/transfer pricing compliance where applicable, TDS and other tax obligations;
- GST registration and returns where applicable;
- FEMA, NDI Rules and RBI reporting for foreign investment and subsequent share transactions;
- annual FLA reporting where applicable;
- sectoral licences and approvals relevant to the company's business;
- employment, labour and social-security compliance according to employee strength and applicable law;
- SEBI compliance only where the company or transaction falls within SEBI's regulatory jurisdiction.
Frequently Asked Questions
Is 100% FDI automatically allowed in every Indian subsidiary?
No. Some sectors permit 100% FDI under the automatic route, while other sectors have caps, conditions, Government-route requirements or prohibitions. The investor's country and beneficial ownership can also affect the route.
Can a foreign company own 100% of an Indian private company?
A wholly owned subsidiary can be structured where the sector and FDI rules permit it. The company must still satisfy the Companies Act requirement for a minimum of two members for a private company, so the shareholding structure and any nominee holding must be properly documented.
How many directors must the Indian subsidiary have?
A private company requires at least two directors, and every company must have at least one director meeting the statutory India-stay requirement under section 149(3).
Is minimum share capital required?
There is no general statutory minimum paid-up capital for a private company. However, sector-specific or licence-specific capital and net-worth rules may apply.
When must FC-GPR be filed?
For an issue of equity instruments treated as FDI, FC-GPR is generally due within 30 days from the date of issue.
Does every Indian subsidiary have to file with SEBI?
No. SEBI compliance applies only where the company, securities or transaction is within SEBI's regulatory framework.
Official Resources
Ministry of Corporate Affairs Companies Act, 2013 - India Code DPIIT - FDI Policy RBI Master Direction - Foreign Investment RBI FIRMS
FDI limits, entry routes, reporting rules and sectoral conditions are amended from time to time. Verify the exact sector and investor-specific position before accepting foreign investment.