Expanding your business to India means clearing four systems at once: foreign investment rules, company incorporation, tax registration, and labor law. Miss one and the whole entry stalls. This guide walks foreign parents and their finance leads through every requirement to set up and run an Indian subsidiary, from the Ministry of Corporate Affairs (MCA) portal filing to the annual compliance calendar.
You will learn which legal structure fits, how the Foreign Direct Investment route works, the step-by-step incorporation process, the taxes a subsidiary pays, and the ongoing filings it owes. Every figure below is dated to 2026 and cited to a primary source.
Why Should You Expand to India?
India is the world’s fastest-growing major economy and its emerging third-largest consumer market, a rare mix of scale and momentum. The International Monetary Fund (IMF) projects 6.4% growth for India in FY2026-27, far ahead of every other large economy. A young workforce and public digital infrastructure lower the cost of reaching customers.
| Economy | 2026 growth forecast | Source |
|---|---|---|
| India | 6.4% | IMF WEO Update, July 2026 |
| China | 4.6% | IMF WEO Update, July 2026 |
| United States | 2.3% | IMF WEO Update, July 2026 |
| Euro area | 0.9% | IMF WEO Update, July 2026 |
| World | 3.0% | IMF WEO Update, July 2026 |
India is set to become the world’s third-largest consumer market in 2026, overtaking Japan, per UBS’s India outlook; household consumption reached USD 2.1 trillion in 2023. Its working-age population (ages 15 to 64) was 68% of the total in 2023, per World Bank data. India ranks as the third-largest startup ecosystem globally, with 64 unicorns in the Hurun Global Unicorn Index 2025 and over 200,000 startups recognized by DPIIT as of December 31, 2025, per the Press Information Bureau (PIB). Digital public infrastructure like the Unified Payments Interface (UPI) and DigiLocker cuts the cost of transacting and onboarding.
What Are the Requirements for Expanding a Business to India?
Expanding to India requires six moves in order: choose a legal structure, confirm your Foreign Direct Investment (FDI) route, incorporate the entity, register for tax, meet Foreign Exchange Management Act (FEMA) reporting, and comply with the labor codes. Most foreign parents do this by forming a wholly owned subsidiary as a Private Limited company. The sections below detail each step and end with a full checklist.
What Legal Structures Can a Foreign Company Use in India?
Most foreign companies form a wholly owned subsidiary (WOS) as a Private Limited company, which allows 100% foreign ownership in automatic-route sectors and full commercial operations. Liaison, branch, and project offices suit narrower goals and need Reserve Bank of India (RBI) approval. The table compares each structure.
| Structure | Allowed activities | RBI approval | Tax treatment | Best for |
|---|---|---|---|---|
| WOS / Private Limited | Full commercial operations | No (automatic-route sectors) | Domestic company (22% under 115BAA) | Long-term market presence |
| Joint Venture | Full, with an Indian partner | Only if sector needs approval | Domestic company | Sectors with FDI caps or where a local partner adds access |
| LLP | Services, where 100% FDI is automatic with no performance conditions | No | LLP rate (30%) | Services firms |
| Branch Office | Export-import, consultancy, R&D | Yes | Foreign company (35%) | Existing foreign firm testing operations |
| Liaison Office | Liaison and market research only, no revenue | Yes | No taxable income | Representation, research |
| Project Office | Executing a specific contract | Yes | Foreign company (35%) | One-off project delivery |
What Are India’s FDI Rules and Approval Routes?
Foreign Direct Investment (FDI) is investment by a foreign entity into an Indian business, governed by the Foreign Exchange Management Act (FEMA). Most sectors allow 100% FDI under the automatic route with no prior approval. A shorter list needs government approval via the National Single Window System, and a few sectors (lottery, gambling) are prohibited, per DPIIT’s Consolidated FDI Policy.
| Sector | FDI cap | Route | Source |
|---|---|---|---|
| Most sectors | 100% | Automatic | DPIIT Consolidated FDI Policy |
| Insurance | 100% | Automatic | DPIIT press note, February 2026 |
| Telecom | 100% | Automatic | DPIIT Consolidated FDI Policy |
| Defence | 74% | Automatic (beyond via government route) | DPIIT Consolidated FDI Policy |
| Multi-brand retail trading | 51% | Government | DPIIT Consolidated FDI Policy |
| Print media (news) | 26% | Government | DPIIT Consolidated FDI Policy |
| Lottery, gambling, betting | Prohibited | Not permitted | DPIIT Consolidated FDI Policy |
India raised the insurance cap from 74% to 100% under the automatic route, notified through DPIIT’s February 2026 press note following the Insurance Laws (Amendment) Act, 2025.
How Do You Register a Company in India as a Foreign Company?
Incorporate a Private Limited subsidiary under the Companies Act, 2013 by filing the SPICe+ form on the MCA portal. The Certificate of Incorporation, carrying the company’s Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN), typically follows in days to a few weeks. A straightforward subsidiary takes about two to four weeks.
- Appoint at least 2 directors and 2 shareholders. At least one director must be an India-resident director (present in India 182 or more days in the prior financial year).
- Obtain a Digital Signature Certificate (DSC) for each proposed director.
- Obtain a Director Identification Number (DIN), available through the incorporation form.
- Reserve the company name via SPICe+ Part A. Confirm availability first with Commenda’s company name checker.
- File SPICe+ (INC-32) with the electronic Memorandum and Articles of Association (eMOA, eAOA) and AGILE-PRO-S, which bundles GST, EPFO, and ESIC registration.
- Receive the Certificate of Incorporation with the Corporate Identity Number (CIN), PAN, and TAN.
Foreign directors’ and corporate shareholders’ documents need notarization or apostille (the United States is a Hague Apostille Convention member). For a full walkthrough, see Commenda’s guide to registering a company in India for foreigners.
How Do You Open a Bank Account and Remit Share Capital?
Open an Indian current account using the Certificate of Incorporation, PAN, and know-your-customer (KYC) documents, then remit share capital from the parent through banking channels. Minimum balances vary by bank, and accounts run digitally from abroad. Shares must be allotted against the remittance, and Form FC-GPR filed with the RBI within 30 days of allotment.
The first credit into the new account must be the parent’s share subscription. FDI reporting routes through the RBI’s FIRMS portal under the Single Master Form. See Commenda’s guide to opening a business bank account in India for the account-opening steps.
What Taxes Does a Foreign Subsidiary Pay in India?
An Indian subsidiary is taxed as a domestic company, with a 22% base rate available under Section 115BAA. A foreign company taxed directly (a branch or permanent establishment) pays 35% from AY 2025-26, per the Finance Act 2024. Surcharge and a 4% cess apply on top, so quote effective rates.
| Taxpayer / regime | Base rate | Source |
|---|---|---|
| Domestic company, turnover up to ₹400 crore | 25% | Income Tax Department |
| Domestic company, other | 30% | Income Tax Department |
| Domestic company under Section 115BAA | 22% | Income Tax Department |
| New manufacturing company under Section 115BAB | 15% | Income Tax Department |
| Foreign company (branch / PE) | 35% | Income Tax Department |
| Limited Liability Partnership (LLP) | 30% | Income Tax Department |
The 15% Section 115BAB rate applied only to manufacturers that began production by March 31, 2024, so new entrants should confirm eligibility. Special Economic Zone (SEZ) units can still access duty benefits, though the income-tax holiday sunset for units set up after 2020.
When Do You Need GST Registration in India?
Goods and Services Tax (GST) registration is mandatory once turnover crosses ₹40 lakh for goods or ₹20 lakh for services in most states, and immediately for inter-state supply and most foreign-owned operations. India rationalized GST into three main slabs of 5%, 18%, and 40% (plus nil-rated essentials) from September 22, 2025, per the PIB.
Registered businesses file GSTR-1 and GSTR-3B monthly or quarterly, plus the annual GSTR-9 return.
What Is TDS and When Must You File Returns?
Tax Deducted at Source (TDS) requires the subsidiary to withhold tax on salaries, rent, contractor, and professional payments, deposit it monthly, and file quarterly returns using its TAN. TDS is a day-one obligation, not an afterthought.
| Form | Payments covered | Source |
|---|---|---|
| 24Q | Salaries | Income Tax Department |
| 26Q | Domestic non-salary payments | Income Tax Department |
| 27Q | Payments to non-residents | Income Tax Department |
Returns are due quarterly, on July 31, October 31, January 31, and May 31, per the Income Tax Department.
What Ongoing FEMA Compliance and Reporting Does a Subsidiary Need?
After the initial FC-GPR filing, the subsidiary files the annual Foreign Liabilities and Assets (FLA) return with the RBI by July 15 each year and reports further capital changes through the FIRMS portal. FEMA non-compliance carries penalties and can complicate profit repatriation.
| Filing | Trigger | Deadline | Source |
|---|---|---|---|
| FC-GPR | Shares issued to a foreign investor | Within 30 days of allotment | RBI FIRMS portal |
| FC-TRS | Share transfer between resident and non-resident | Within 60 days | RBI FIRMS portal |
| FLA return | Annual foreign assets and liabilities report | By July 15 each year | Reserve Bank of India |
What Is Permanent Establishment Risk in India?
A permanent establishment (PE) is a taxable presence India attributes to a foreign company that operates locally through employees, dependent agents, or a fixed place of business, without an entity. India then taxes attributable profits at the 35% foreign-company rate. This risk pushes most companies toward incorporating a subsidiary.
The India-US Double Taxation Avoidance Agreement (DTAA) governs how a US parent’s PE and cross-border payments are taxed. A Tax Residency Certificate and Form 10F are needed to claim treaty relief. Testing the market with local staff or agents before incorporating is the common way companies trigger PE and unexpected Indian tax.
How Do You Hire Employees in India?
Hire through your own entity, an Employer of Record (EOR), or contractors. An entity gives full control but needs incorporation and payroll registrations; an EOR gives speed without incorporating. India is consolidating 29 central labor laws into four Labour Codes, published at labour.gov.in.
| Obligation | Threshold or benefit | Source |
|---|---|---|
| Employees’ Provident Fund (EPF) | Establishments with 20 or more employees | EPFO |
| Employees’ State Insurance (ESI) | Establishments with 10 or more employees | ESIC |
| Maternity benefit | 26 weeks paid leave | Maternity Benefit Act |
EPF and ESI registration comes through AGILE-PRO-S at incorporation. Compare the two paths with Commenda’s entity vs EOR calculator, and read EOR vs. contractor vs. opening an entity to choose.
What Government Incentives Can Foreign Businesses Access in India?
Foreign manufacturers can tap the Make in India campaign, the Production-Linked Incentive (PLI) scheme across 14 sectors, India Semiconductor Mission support, and EV manufacturing schemes. PLI carries a roughly ₹1.97 lakh crore outlay, per the PIB.
| Scheme | What it offers | Who qualifies | Source |
|---|---|---|---|
| Make in India | Sector liberalization, manufacturing push | Manufacturers across opened sectors | Make in India / DPIIT |
| PLI (14 sectors) | Incentives on incremental sales, ~₹1.97 lakh crore outlay | Manufacturers in notified sectors | PIB |
| India Semiconductor Mission | Up to 50% fiscal support for fabs | Semiconductor and display fabs | India Semiconductor Mission |
| PM E-DRIVE (2024) | EV adoption and manufacturing support | EV makers | PIB |
| SPMEPCI | Incentives for EV passenger-car makers | Global EV manufacturers investing in India | PIB |
The PM E-DRIVE scheme (2024) and SPMEPCI replaced the earlier FAME program for electric vehicles.
Which Industries Offer the Best Opportunities in India?
Electronics and semiconductors, electric vehicles, renewable energy, and pharmaceuticals carry the strongest incentive stacks and the most open FDI rules, each at 100% under the automatic route. Every one pairs a national scheme with sizable public funding.
| Sector | Key scheme | FDI allowance | Source |
|---|---|---|---|
| Electronics and semiconductors | PLI plus India Semiconductor Mission | 100% automatic | PIB |
| Electric vehicles | PM E-DRIVE, SPMEPCI, ACC battery PLI | 100% automatic | PIB |
| Renewable energy | National Green Hydrogen Mission, 500 GW by 2030 target | 100% automatic | PIB |
| Pharmaceuticals | PLI for pharma and APIs, Make in India priority | 100% automatic (greenfield) | DPIIT / PIB |
How Do You Protect IP Rights in India?
Register trademarks, patents, and designs through India’s official e-filing portals at IP India; India is a signatory to the TRIPS agreement (Trade-Related Aspects of Intellectual Property Rights). File trademarks early, because India is largely first-to-file and brand squatting is a real risk.
Patents follow a national or Patent Cooperation Treaty route. Enforcement runs through commercial courts and dedicated IP divisions, and can be slow, so register before you launch.
Checklist for Expanding Your Business to India
Use this checklist to track every filing from structure choice to annual compliance.
| Step | What you file or get | Authority |
|---|---|---|
| Choose structure | WOS, branch, LLP, or JV decision | Internal |
| Confirm FDI route | Automatic vs. government route and sector cap | DPIIT |
| Incorporate | SPICe+, eMOA/eAOA, AGILE-PRO-S; get COI, PAN, TAN | MCA |
| Bank and capital | Current account, remit capital, file FC-GPR | Bank / RBI FIRMS |
| Tax registration | GST registration; set up TDS with TAN | GST / Income Tax Department |
| FEMA annual filing | FLA return by July 15 | RBI |
| Labor registration | EPF, ESI, professional tax | EPFO / ESIC / state |
| IP filing | Trademark, patent, design registration | IP India |
How Commenda Helps You Expand to India
Commenda gives you certainty of process on India entry. It handles Indian incorporation end to end, from the resident-director requirement and SPICe+ filing to the Certificate of Incorporation with PAN and TAN, and then manages the entity’s ongoing filings through entity management on one dashboard. Every India filing follows the same standardized workflow, so incorporation, tax registration, and annual filings run on a predictable schedule with no improvisation.
See the Commenda India country page for what’s covered, and track every deadline with Commenda’s compliance calendar across GST, TDS, FLA, and RoC filings. Book a demo to get a step-by-step India entity setup plan mapped to your sector and timeline.
