What Is an Indian Subsidiary Company?
An Indian subsidiary company is an Indian private limited company or public limited company in which a foreign company or foreign individual (or NRI) holds majority equity — making the Indian company a wholly owned subsidiary (WOS) or a jointly-owned subsidiary of the foreign parent or investor. Indian subsidiary company setup is the most common entry mode chosen by foreign companies seeking to conduct full business operations in India — hire employees, sign contracts with Indian clients, receive Indian rupee payments, own Indian assets, and build a genuine long-term India presence. Unlike a liaison office (which cannot conduct business or earn revenue) or a branch office (which is treated as an extension of the foreign parent with no separate legal entity), the Indian subsidiary is a fully independent Indian legal entity that operates under the Companies Act 2013, pays Indian corporate tax on its India income, and is fully capable of conducting any business permitted under India's FDI policy in the relevant sector.
Indian subsidiary company setup by foreign companies has grown dramatically in recent years as India has risen as a global hub for IT services, business process outsourcing, manufacturing, financial services, and consumer markets. Whether a US technology company setting up a development centre in Pune, a European manufacturing group establishing an India production facility in Maharashtra, a Singapore trading company seeking to access the Indian consumer market, or a UK professional services firm setting up an India delivery centre, Indian subsidiary company setup through the FDI automatic route is typically the fastest, simplest, and most operationally effective market entry mode available. N D Savla & Associates has deep experience in Indian subsidiary company setup — providing end-to-end support from FDI eligibility analysis and SPICe+ incorporation through FC-GPR filing, resident director service, transfer pricing advisory, and ongoing FEMA and corporate compliance management.
? Key Fact: Indian subsidiary company setup = separate Indian legal entity + full operational capability + FDI automatic route for most sectors + tax at 22% domestic corporate rate + separate from foreign parent's liabilities.
What Is the FDI Policy Framework for Indian Subsidiary Setup?
India's FDI policy is administered jointly by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, and the Reserve Bank of India (RBI). The FDI policy classifies activities into three categories based on the route through which foreign investment is permitted: the Automatic Route, where foreign investment up to the applicable sectoral cap does not require any prior government or RBI approval; the Government Route, where foreign investment requires prior approval of the Ministry of Finance (FIPB was abolished in 2017, and approvals are now given by the competent authority in the relevant administrative ministry); and Prohibited Activities, where FDI is not permitted at all.
For Indian subsidiary company setup, the vast majority of sectors and activities are open under the Automatic Route with 100% FDI permitted — including IT services, business process management, manufacturing, trading (wholesale and single-brand retail), e-commerce (B2B), construction development, hospitality, education, pharmaceutical manufacturing, and professional services. The key sectors where government route approval or sectoral caps apply include: insurance (74%), defence (above 74%), telecom (above 49% in certain activities), banking (74% for private sector banks), media and broadcasting (various caps by sub-sector), and civil aviation (49% for scheduled air transport). Government Route approval applications are filed on the Foreign Investment Facilitation Portal (FIFP) maintained by the Ministry of Finance. N D Savla & Associates advises on the applicable FDI route and conditions before Indian subsidiary company setup commences.
What Is the Step-by-Step Process for Indian Subsidiary Company Setup?
Indian subsidiary company setup involves a combination of the standard MCA company incorporation process and the FEMA/RBI compliance framework for foreign investment. N D Savla & Associates manages every step of the Indian subsidiary company setup — from the initial FDI eligibility opinion through SPICe+ incorporation, FC-GPR filing, and post-incorporation compliance setup.
- FDI Eligibility Analysis and Structure Advisory — Confirm that the proposed business activity is eligible for FDI, identify the applicable route (automatic or government) and sectoral cap, and advise on the optimal corporate structure — wholly owned subsidiary, joint venture, or step-down subsidiary. N D Savla & Associates provides a written FDI eligibility opinion at this stage.
- Company Name Reservation and DSC/DIN Procurement — Reserve the company name through MCA RUN or SPICe+ Part A. Obtain Class 3 DSC for all proposed directors — including foreign national directors who need notarised or apostilled identity documents for DSC issuance. Obtain DIN for new directors through SPICe+.
- SPICe+ Incorporation Filing — File SPICe+ (with INC-33 MOA and INC-34 AOA) naming the foreign parent company as the subscriber/shareholder. N D Savla & Associates drafts the MOA to reflect the Indian subsidiary's business objects, which must be consistent with both the FDI policy conditions and the business plan of the foreign parent.
- Share Allotment and FC-GPR Filing — After incorporation, shares are allotted to the foreign parent and the investment consideration is remitted from overseas through the authorised dealer bank. Within 30 days of share allotment, the Indian subsidiary must file FC-GPR (Foreign Currency — Gross Provisional Return) with the RBI through the foreign exchange management (FEM) reporting portal. FC-GPR filing is mandatory FEMA compliance — non-filing within 30 days is a FEMA violation.
- Post-Incorporation Regulatory Setup — File Form INC-20A (Commencement of Business) within 180 days of incorporation. Apply for PAN, TAN, GST registration, and any sector-specific licences. Open a current bank account. Arrange for the mandatory Indian resident director (see below).
- Ongoing Compliance Setup — Establish the transfer pricing framework for inter-company transactions with the foreign parent, set up the payroll for India employees, and arrange for annual FLA Return filing and other FEMA compliance obligations.
What Is the Resident Director Requirement for Indian Subsidiaries?
Section 149(3) of the Companies Act 2013 requires that every Indian company — including a wholly owned Indian subsidiary of a foreign company — must have at least one director who is a resident of India. A resident director is defined as a person who has stayed in India for a total period of not less than 182 days during the immediately preceding calendar year. For a foreign company's WOS where all founders, shareholders, and initially proposed directors are overseas — which is very common for Indian subsidiary company setup by foreign companies — the 182-day residency requirement means the foreign parent must arrange for an Indian resident director from the beginning.
N D Savla & Associates provides a qualified Local Resident Director (LRD) service specifically for Indian subsidiary company setup by foreign companies. Under this service, one of our qualified Chartered Accountants or designated professionals serves as the statutory resident director of the Indian subsidiary, meeting the Section 149(3) requirement while the foreign parent establishes its India operations, builds its management team, and eventually transitions the resident director role to an India-based employee or manager. The Local Resident Director service is available from N D Savla & Associates on a retainer basis and includes the statutory director responsibilities — DIN eKYC compliance, board meeting participation, and directorial filings — while clearly allocating operational decision-making authority to the foreign parent's representatives through the company's governance documents. See our Local Resident Director Service page for full details.
What Are the FEMA Compliance Obligations for an Indian Subsidiary?
FEMA (Foreign Exchange Management Act 1999) compliance is a permanent ongoing obligation for any Indian company with foreign investment — it does not end after the initial FC-GPR filing. The most important ongoing FEMA compliance obligations for an Indian subsidiary are: the Annual Return on Foreign Liabilities and Assets (FLA Return) filed with the RBI through the FLAIR portal by 15 July each year, reporting all outstanding foreign investment and overseas liabilities as at 31 March; the FC-TRS filing required whenever shares in the Indian subsidiary are transferred between a resident and a non-resident (or vice versa); the filing of the Annual Performance Report if the Indian subsidiary itself holds any overseas investments; and compliance with FEMA pricing guidelines whenever the Indian subsidiary issues new shares to its foreign parent (shares must be issued at or above Fair Market Value under Section 5 of FEMA Non-Debt Instrument Rules 2019).
Transfer pricing compliance is another critical FEMA-adjacent obligation for Indian subsidiaries. Any transaction between the Indian subsidiary and its foreign parent or affiliated entities — whether management fees, IT service charges, royalties, inter-company loans, or purchase/sale of goods — must be conducted at arm's length prices under the transfer pricing provisions of Sections 92-92F of the Income Tax Act. If the aggregate value of international transactions with associated enterprises exceeds Rs. 1 crore in a financial year, the Indian subsidiary must obtain a transfer pricing accountant's report in Form 3CEB by 31 October and maintain contemporaneous transfer pricing documentation. N D Savla & Associates provides comprehensive transfer pricing advisory and Form 3CEB certification for Indian subsidiaries of foreign companies.
Frequently Asked Questions — Indian Subsidiary Setup
Can a 100% foreign-owned WOS be set up in India without RBI approval?
Yes — for all sectors under the Automatic Route, a 100% foreign-owned wholly owned subsidiary can be incorporated in India without any prior RBI or government approval. The RBI compliance is post-facto: the FC-GPR must be filed within 30 days of share allotment to report the FDI to the RBI. For restricted or government-route sectors, the competent ministry's prior approval must be obtained before incorporating the subsidiary and receiving the investment.
What is the FC-GPR and what happens if it is not filed within 30 days?
FC-GPR (Foreign Currency — Gross Provisional Return) is the RBI reporting form that must be filed within 30 days of the Indian company allotting shares to the foreign investor. Non-filing within 30 days is a violation of FEMA regulation, compoundable under FEMA with a penalty that can reach the amount involved in the transaction. N D Savla & Associates files FC-GPR as a standard part of the Indian subsidiary company setup service — ensuring timely compliance immediately after share allotment.
What is the FLA Return and who must file it?
The Annual Return on Foreign Liabilities and Assets (FLA Return) is an annual RBI reporting obligation for all Indian companies and LLPs that have received FDI or made ODI (Overseas Direct Investment). It must be filed with the RBI through the FLAIR portal by 15 July each year, covering the position as at 31 March. The FLA Return captures all outstanding foreign equity investment, foreign debt, and overseas investment. Penalty for non-filing is up to Rs. 10,000 per day under FEMA. N D Savla & Associates files the FLA Return annually for all Indian subsidiary clients.
What are the typical ongoing annual compliance costs for an Indian subsidiary?
Annual compliance for a typical Indian subsidiary includes: statutory audit, income tax return (ITR-6), transfer pricing (Form 3CEB if applicable), GST returns, TDS returns, MCA annual filings (AOC-4 and MGT-7), board meetings and AGM documentation, FLA Return with RBI, director DIN eKYC, and any other event-based compliance triggered during the year. N D Savla & Associates provides an all-inclusive annual compliance package for Indian subsidiaries at a transparent fixed annual fee — contact us for a fee quote based on your subsidiary's size and activity level.
Contact N D Savla & Associates for Indian Subsidiary Company Setup
N D Savla & Associates provides end-to-end Indian subsidiary company setup services for foreign companies entering India — from FDI eligibility analysis and company incorporation through FC-GPR filing, local resident director service, transfer pricing advisory, and complete annual compliance management. Our Indian subsidiary setup team has established subsidiaries for companies from the USA, UK, Singapore, UAE, Netherlands, Japan, and many other countries. Contact us for a free initial consultation.
Related services: Private Limited Company Registration | Local Resident Director Service | FDI Filing with RBI | FLA Return Filing | Transfer Pricing Services | Foreign Subsidiary Setup