Subsidiary Company
Registration in India — WOS,
Foreign Subsidiary & Compliance

What Is a Subsidiary Company?

A subsidiary company is defined under Section 2(87) of the
Companies Act 2013 as a company in which another company —
the holding company — holds control. Control can be exercised by:

(a) owning more than 50% of total voting power; or
(b) controlling the composition of the Board of Directors.

Despite being controlled by a parent, a subsidiary is a completely independent
legal entity — it has its own CIN, PAN, bank accounts, contracts, employees,
and balance sheet. The parent’s liability is strictly limited to its equity investment
in the subsidiary — the parent’s own assets and operations are legally insulated
from the subsidiary’s debts and liabilities.

For foreign companies entering India, setting up an Indian subsidiary
(typically as a Private Limited Company) is the most comprehensive and flexible route —
enabling full business operations, hiring, contracts, and revenue generation in India
as a locally incorporated entity, while the ultimate ownership remains with the foreign parent.

Defined Under
Section 2(87) — Companies Act 2013
Control Threshold
>50% voting power OR Board composition control
WOS Definition
100% shares held by parent — no external shareholders
Legal Identity
Separate legal entity — independent of parent company
Foreign Subsidiary
Incorporated as Indian Pvt Ltd / Public Ltd under Companies Act 2013
FDI Route
100% FDI under automatic route in most sectors
RBI Compliance
FC-GPR within 30 days of allotment + Annual FLA Return
Resident Director
Minimum 1 Indian resident director mandatory under Section 149(3)

Types of Subsidiary Companies in India

Subsidiary structures vary based on ownership percentage, parent origin, and business purpose.
Understanding these helps choose the right structure for your situation.

💯

Wholly Owned Subsidiary (WOS)

The parent company holds 100% of the equity shares. No external shareholders. Used by foreign companies entering India with full control — the most popular foreign entry mode.

Parent Ownership: 100%
📊

Majority / Partial Subsidiary

The parent holds more than 50% but less than 100% of shares. Remaining shares are held by other investors, strategic partners, or minority shareholders. Still classified as a subsidiary under Companies Act.

Parent Ownership: 51%–99%
🌍

Foreign Company Subsidiary in India

An Indian company (Pvt Ltd or Public Ltd) where more than 50% equity is held by a foreign company or foreign individual. Subject to FEMA, FDI Policy, and RBI compliance in addition to Companies Act 2013.

Foreign Parent: >50% equity in Indian company
🔗

Step-Down Subsidiary

An indirect subsidiary — a company that is a subsidiary of another subsidiary. The ultimate holding company controls it through an intermediate subsidiary. All related-party and transfer pricing rules apply across all tiers.

Indirect Control: Parent → Sub1 → Sub2 (step-down)
🤝

Associate Company (Not a Subsidiary)

Where the investor holds 20%–50% of total voting power — significant influence but not control. Not classified as a subsidiary under Section 2(87). Accounted for using the equity method in consolidated financial statements.

Investor Holding: 20%–50% (Significant Influence Only)
🏗️

Domestic Indian Subsidiary

An Indian company sets up a separate subsidiary company in India for a specific business division, project, or purpose — legal separation, limited liability, and independent funding while maintaining corporate group structure.

Indian Parent: >50% equity in Indian Subsidiary

Setting Up a Foreign Subsidiary in India — FDI & FEMA Guide

India is one of the world’s largest FDI destinations. A foreign company can incorporate
an Indian subsidiary and start full operations — here’s what you need to know
about FDI policy and FEMA compliance.

FDI in India — Automatic vs Government Route

India’s FDI policy has two routes for foreign investment:

Automatic Route: No prior government approval needed.
The foreign company invests, shares are allotted, and FC-GPR is filed
with RBI within 30 days. Applies to most sectors — including IT,
manufacturing, pharmaceuticals (greenfield), infrastructure, hospitality,
e-commerce marketplace, single-brand retail (up to 100%), and many more.

Government Route: Prior approval required from the
relevant Ministry or DPIIT before investment. Applies to
sensitive sectors — defence (above 74%), multi-brand retail,
banking (above 74%), insurance (above 74%), broadcasting, and print media.

Mitali Tita conducts a thorough FDI sector eligibility check
before subsidiary incorporation to ensure full compliance.

📋
FC-GPR: Filed within 30 days of allotting shares to the foreign parent — through the authorised dealer bank via RBI’s FIRMS portal
📅
FLA Return: Annual Foreign Liabilities & Assets return filed with RBI by July 15 every year while FDI balance exists
💰
Pricing: Share issuance price must comply with FEMA pricing guidelines — at or above Fair Market Value (FMV) using DCF or Net Asset Value method
🏦
FIRC: Foreign Inward Remittance Certificate from the bank — required to evidence receipt of foreign funds before FC-GPR filing
💸
Dividend Repatriation: Fully allowed after deducting withholding tax (20% or DTAA rate, whichever is lower) — no RBI approval required
⚖️
Transfer Pricing: All transactions between subsidiary and parent must be at arm’s length price — annual TP documentation and Form 3CEB mandatory if applicable
🚨
FEMA Penalty: Late FC-GPR filing or non-compliance attracts penalties up to 3 times the investment amount or ₹2 lakh per day

Advantages of Incorporating a Subsidiary Company in India

A subsidiary structure offers legal separation, liability insulation,
and independent business capability — for both domestic and foreign parent companies.

🛡️
Parent’s Liability is Limited

The parent’s liability is strictly capped at its equity investment. Debts, lawsuits, or operational failures of the subsidiary do not expose the parent’s assets.

⚖️
Separate Legal Identity in India

The subsidiary is a fully independent Indian legal entity — it can sign contracts, own property, hire employees, open bank accounts, and sue/be sued in its own name in India.

🌍
Full Business Operations in India

Unlike a Branch or Liaison Office, an Indian subsidiary can carry on any business activity permitted under FDI policy — including manufacturing, trading, services, and retail.

💰
Access to Indian Capital Markets

The subsidiary can borrow from Indian banks, issue debentures, and raise equity from Indian investors independently — without the parent providing guarantees.

📜
DTAA Tax Benefits

India’s Double Tax Avoidance Agreements with 90+ countries reduce withholding tax on dividends, royalties, and technical service fees between subsidiary and foreign parent.

🏆
Indian Identity & Government Contracts

Being incorporated as an Indian company enables the subsidiary to participate in government tenders, qualify for MSME benefits, and engage fully with Indian public sector clients.

🔄
Ring-Fenced Risk & Diversification

A parent can diversify into new business areas through separate subsidiaries — keeping business risks, tax positions, and liabilities legally separated.

👨‍💼
Independent ESOP & Talent Attraction

The subsidiary can create its own ESOP scheme to attract and retain Indian talent — offering equity in the subsidiary rather than the foreign parent entity.

💸
Profit Repatriation

After paying Indian corporate tax and withholding tax (or DTAA rate), dividends can be freely remitted to the foreign parent — no RBI approval required for dividend repatriation.

📈
Future IPO Potential

A mature Indian subsidiary can be separately listed on NSE/BSE — converting to a Public Limited Company and accessing India’s equity capital markets independently.

How to Register a Subsidiary Company in India

The incorporation process combines MCA’s SPICe+ route (same as any Indian company)
with additional FEMA/RBI requirements specific to foreign subsidiaries.

Documents Required for Subsidiary Company Registration

Foreign subsidiaries require both Indian director KYC and
apostilled parent company documents. All digital — no physical visits required.

🏢
Certificate of Incorporation — Parent Company

Official incorporation certificate of the holding company. For foreign companies: notarised and apostilled in the country of origin.

Foreign: Notarised + Apostilled
📑
MoA & AoA — Parent Company

Constitutional documents of the holding company. For foreign companies: apostilled copy required.

Foreign: Apostilled Required
📋
Board Resolution — Holding Company

Resolution from the parent company’s board authorising incorporation of the Indian subsidiary, equity stake, and authorised representative. Apostilled for foreign companies.

Foreign: Notarised + Apostilled
🪪
PAN Card — Indian Directors

Mandatory for all Indian resident directors. Must be linked to Aadhaar. At least one Indian resident director is mandatory under Section 149(3).

📋
Aadhaar / Address Proof — Indian Directors

Aadhaar Card and address proof not older than 2 months for each Indian resident director.

🌏
Passport — Foreign Directors

Notarised and apostilled copy of passport of all foreign national directors proposed for the subsidiary’s board.

Foreign Directors Only
📍
Registered Office Proof in India

Utility bill (electricity/water/telephone) not older than 2 months of the registered office address in India — NOC from property owner.

💹
Shareholding Structure

Proposed equity allocation between the holding company and any other shareholders, authorised share capital, and paid-up capital amount.

🏦
FIRC — Foreign Investment Receipt

Foreign Inward Remittance Certificate from the bank evidencing receipt of FDI — required before FC-GPR filing post-allotment.

Post-Allotment — FEMA
📄
FDI Approval Letter (If Government Route)

Prior approval from relevant Ministry/DPIIT for sectors requiring government route FDI — obtained before share allotment.

Govt. Route Sectors Only

Annual Compliance for a Subsidiary Company in India

Subsidiary compliance combines standard ROC obligations with FEMA/RBI-specific
requirements and transfer pricing rules — especially for foreign subsidiaries.

FC-GPR
FC-GPR Filing with RBI

Within 30 days of allotting shares to foreign parent. Filed through AD bank via RBI FIRMS portal. Required every time new FDI comes in and shares are allotted.

FLA Return
Annual FLA Return — RBI

Filed by July 15 every year as long as outstanding FDI balance exists. Reports foreign liabilities (FDI received) and foreign assets (ODI made). Penalty: ₹10,000 – ₹2 lakh for non-filing.

AOC-4
Annual Financial Statements — ROC

Filed within 30 days of AGM. Financials of subsidiary are also consolidated into the parent’s financial statements. Penalty: ₹100/day for delay.

MGT-7A
Annual Return — ROC

Filed within 60 days of AGM. Must disclose the holding company as the principal shareholder with percentage of shareholding.

AGM
Annual General Meeting

Mandatory by September 30 each year. For a WOS, the AGM resolutions can be passed more efficiently since the parent is the sole/majority shareholder.

Board Mtg
Minimum 4 Board Meetings / Year

Board meetings with proper notice (21 days or shorter with consent), agenda, and signed minutes. Can be held via video conference as per Companies Act 2013.

ITR-6
Corporate Income Tax Return

Filed annually. Corporate tax rate: 25% (for companies with turnover ≤ ₹400 crore) or 22% (new tax regime under Section 115BAA, with no exemptions).

Form 3CEB
Transfer Pricing Audit

Mandatory if international transactions with parent/associated enterprises exceed ₹1 crore. CA certifies in Form 3CEB. Maintain TP documentation throughout the year.

INC-20A
Commencement of Business

One-time filing within 180 days of incorporation. Must open Indian bank account and deposit subscribed capital before filing. Penalty: ₹50,000 if missed.

DIR-3 KYC
Annual Director KYC

All DIN holders (including any foreign directors with Indian DIN) must file annual KYC by September 30 each year.

💡 Transfer Pricing Alert: All transactions between the Indian subsidiary and its
foreign parent or group companies — including management fees, royalties, technical services,
purchase/sale of goods, loans, and guarantees — must be priced at
arm’s length (fair market) value and documented annually.
The Indian tax authorities (CBDT) actively scrutinise transfer pricing in subsidiary relationships.
Penalties for under-reporting: 2% of the transaction value + additional tax.
Mitali Tita assists with transfer pricing documentation compliance.

Subsidiary vs Branch Office vs Liaison Office vs Project Office

Foreign companies have four main options to establish a presence in India.
Choosing the right structure determines your permitted activities, liability,
tax treatment, and compliance obligations.

Subsidiary Company — All Your Questions Answered

Comprehensive answers to the most searched questions about subsidiary company
registration, FDI, FEMA compliance, transfer pricing, and profit repatriation in India.

🏢 Structure & Basics
What is a subsidiary company in India?
A subsidiary company in India is defined under
Section 2(87) of the Companies Act 2013 as a company in which
another company (the holding company) either:

• Controls the composition of its Board of Directors; or
• Exercises or controls more than 50% of the total voting power

A subsidiary is a separate legal entity — independently incorporated
under Companies Act 2013, with its own CIN, PAN, bank accounts, and employees.
A Wholly Owned Subsidiary (WOS) is where the parent holds
100% of the equity — the most common structure for foreign companies entering India.
What is a Wholly Owned Subsidiary (WOS) in India?
A Wholly Owned Subsidiary (WOS) is a company in which the parent
or holding company owns 100% of the equity shares — there are
no external shareholders. It is the most popular India entry structure for foreign companies because:

• 100% FDI is permitted under the automatic route in most sectors
• The parent retains complete control over the subsidiary’s operations and direction
• No joint venture partner or co-investor is required
• Profits, intellectual property, and strategic decisions are fully within the parent’s control

A WOS in India is incorporated as a Private Limited Company under
Companies Act 2013, with the foreign parent company as the sole shareholder.
What is the difference between a subsidiary and an associate company?
Subsidiary Company (Section 2(87)):

• Investor holds more than 50% of total voting power — effective control
• Financials are fully consolidated into parent’s accounts
• Parent controls board composition and major decisions

Associate Company (Section 2(6)):

• Investor holds 20% to 50% of total voting power — significant influence, not control
• Accounted for using the equity method (not full consolidation)
• Investor can influence but cannot control financial and operating policies

Key rule: >50% = Subsidiary · 20%–50% = Associate · <20% = Financial Asset/Investment
What is the difference between a subsidiary company and a branch office in India?
Subsidiary Company: A separately incorporated Indian company (Pvt Ltd or Public Ltd);
treated as an Indian entity for all regulatory purposes; can undertake any business;
generate revenue; hire employees; taxed at Indian corporate rates (25%);
requires FC-GPR and FLA compliance. No RBI approval needed for automatic route sectors.

Branch Office: An extension of the foreign company (not a separate legal entity);
requires prior RBI approval to establish; can only carry out activities same as the parent;
cannot undertake manufacturing; taxed at foreign company rates (40%);
must file Annual Activity Certificate (AAC) with RBI; limited to 3-year initial period (renewable).

For most full-scale India operations, a subsidiary is preferred over a Branch Office.

🌍 FDI, FEMA & RBI Compliance
Can a foreign company set up a 100% subsidiary in India?
Yes — in most sectors, 100% FDI is permitted under the
Automatic Route — no prior government approval needed.
The foreign company incorporates an Indian Private Limited Company,
holds 100% shares, and files FC-GPR within 30 days of share allotment.

Sectors permitting 100% FDI (automatic route): IT/software, manufacturing,
pharmaceuticals (greenfield), infrastructure, e-commerce marketplace,
single-brand retail, hospitality, education, and many more.

Sectors with caps/government approval: multi-brand retail (51%),
private banking (74%), defence (74% automatic; above that — government route),
insurance (74%), broadcasting, print media.
What is FC-GPR and when must it be filed?
FC-GPR (Foreign Currency – Gross Provisional Return) is the RBI
reporting form that an Indian company must file when it allots shares to a foreign investor.

Timeline: Filed within 30 days of the date of allotment of shares
(not the date of receipt of funds).

Filed through: The company’s authorised dealer (AD) bank via RBI’s
FIRMS (Foreign Investment Reporting and Management System) portal.

Required documents: Share allotment details, FIRC (Foreign Inward
Remittance Certificate), KYC of foreign investor, share certificate,
and CS/CA certificate on pricing compliance.

Penalty for non-compliance: Up to 3 times the investment amount
or ₹2 lakh per day of default — a FEMA violation.
What is the FLA Return and is it mandatory for a subsidiary?
The FLA (Foreign Liabilities and Assets) Return is an annual
RBI survey mandatory for all Indian companies with outstanding FDI or overseas investments.

Filing deadline: By July 15 each year for the preceding
financial year (April–March). Even if no new FDI was received during the year,
the FLA must be filed as long as the subsidiary has an outstanding FDI balance.

What it covers: Total FDI received (equity, retained earnings),
external commercial borrowings, overseas direct investment made.

Penalty for non-filing: ₹10,000 to ₹2 lakh under FEMA.
Mitali Tita files FLA Returns for all client subsidiaries on time.
Can a subsidiary company repatriate profits to its foreign parent?
Yes — freely, with withholding tax compliance.

• The subsidiary’s board declares dividend from distributable profits
• No RBI approval is required for dividend repatriation
• Withholding tax (TDS) must be deducted: 20% (domestic rate)
  or DTAA rate (whichever is lower)
• Most major DTAAs (UK, USA, Singapore, Mauritius, Netherlands, UAE)
  reduce withholding tax on dividends to 10–15%
• Net amount (after WHT) is remitted to the foreign parent via normal banking channels
• Royalties and technical service fees can also be repatriated — subject to
  FEMA, transfer pricing, and DTAA rules

Does a subsidiary company need an Indian director?
Yes — mandatory. Under Section 149(3) of Companies Act 2013,
every company incorporated in India — including a foreign company’s Indian subsidiary —
must have at least one director who is a resident of India
(stayed in India for 182 days or more in the previous calendar year).
This resident director must hold a valid DIN.
The other directors can be foreign nationals or NRIs.
The Indian resident director requirement ensures there is always an accountable
individual within Indian jurisdiction for regulatory compliance purposes.

📋 Compliance, Tax & Transfer Pricing
What are the annual compliance requirements for a subsidiary company?
Annual compliance for a subsidiary company in India:

ROC Compliance: AOC-4 (30 days from AGM), MGT-7/MGT-7A (60 days from AGM),
AGM (by Sept 30), minimum 4 board meetings, DIR-3 KYC, DPT-3, INC-20A (first year).

FEMA/RBI: FLA Return (July 15 annually), FC-GPR (within 30 days of any new share allotment).

Tax Compliance: ITR-6 (annual corporate tax), Transfer Pricing Audit —
Form 3CEB (if international transactions > ₹1 crore), advance tax payments,
TDS deduction and quarterly returns, GST returns (if registered).

Additional: Secretarial Audit MR-3 (if eligible), transfer pricing
documentation maintained annually.
What are the transfer pricing rules for a subsidiary company?
Transfer pricing rules under Sections 92–92F of the Income Tax Act
require that all transactions between the Indian subsidiary and its foreign parent
or group companies be at arm’s length price (fair market value).

Transactions covered: sale/purchase of goods, services, royalties, management fees,
technical fees, loans, guarantees, intellectual property transfers.

Mandatory compliance:

• Maintain Transfer Pricing Documentation annually
• File Form 3CEB (Transfer Pricing Audit Report by CA)
  if aggregate international transactions exceed ₹1 crore
• Disclose all related party transactions in financial statements

Penalty for non-compliance: 2% of the transaction value +
additional tax on under-reported income.
What documents are required to incorporate a foreign company subsidiary in India?
From the Foreign Parent Company (apostilled/notarised):

• Certificate of Incorporation of parent
• MoA & AoA of parent company
• Board Resolution authorising Indian subsidiary incorporation
• Registered address proof of parent

For Foreign Directors (apostilled):

• Passport copy; address proof; photograph

For Indian Resident Director (mandatory):

• PAN Card; Aadhaar; address proof; photograph

For Registered Office in India:

• Utility bill (not older than 2 months); NOC from property owner

Other: Proposed subsidiary name, shareholding structure,
business objects, FDI sector eligibility confirmation.

You May Also Need

From subsidiary incorporation to annual FEMA compliance, secretarial audit,
and branch/liaison office setup — complete India entry support by Mitali Tita.

Ready to Set Up Your Subsidiary Company in India?

Mitali Tita manages the complete process — FDI sector check, SPICe+ incorporation,
FC-GPR with RBI, FLA Return, transfer pricing documentation, and annual ROC compliance —
all in one comprehensive service. 100% digital. Pan-India.

🏢 Register My Subsidiary Now


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