Subsidiary Company
Registration in India β WOS,
Foreign Subsidiary & Compliance
Set up a subsidiary in India β domestic or foreign. Mitali Tita, practising Company Secretary in Mumbai, handles complete subsidiary incorporation, FEMA compliance (FC-GPR, FLA), FDI advisory, and ongoing annual compliance.
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 more than 50% of the total voting power. A Wholly Owned Subsidiary (WOS) is where the parent holds 100% of the equity shares. A foreign company can set up a WOS in India by incorporating an Indian Private Limited Company under the Companies Act 2013 β with 100% FDI permitted under the automatic route in most sectors. After share allotment, the company must file FC-GPR with RBI within 30 days and an annual FLA Return by July 15 every year.
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 β
the holding company β 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 β 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 β 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 β 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.
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 β 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%β99%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 companyStep-Down Subsidiary
An indirect subsidiary β 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 β Sub1 β Sub2 (step-down)Associate Company (Not a Subsidiary)
Where the investor holds 20%β50% of total voting power β 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%β50% (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 β legal separation, limited liability, and independent funding while maintaining corporate group structure.
Indian Parent: >50% equity in Indian SubsidiarySetting Up a Foreign Subsidiary in India β 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 β here's what you need to know about FDI policy and FEMA compliance.
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 β 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 β 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.
Advantages of Incorporating a Subsidiary Company in India
A subsidiary structure offers legal separation, liability insulation, and independent business capability β for both domestic and foreign parent companies.
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.
The subsidiary is a fully independent Indian legal entity β it can sign contracts, own property, hire employees, open bank accounts, and sue/be sued in its own name in India.
Unlike a Branch or Liaison Office, an Indian subsidiary can carry on any business activity permitted under FDI policy β including manufacturing, trading, services, and retail.
The subsidiary can borrow from Indian banks, issue debentures, and raise equity from Indian investors independently β without the parent providing guarantees.
India's Double Tax Avoidance Agreements with 90+ countries reduce withholding tax on dividends, royalties, and technical service fees between subsidiary and foreign parent.
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.
A parent can diversify into new business areas through separate subsidiaries β keeping business risks, tax positions, and liabilities legally separated.
The subsidiary can create its own ESOP scheme to attract and retain Indian talent β offering equity in the subsidiary rather than the foreign parent entity.
After paying Indian corporate tax and withholding tax (or DTAA rate), dividends can be freely remitted to the foreign parent β no RBI approval required for dividend repatriation.
A mature Indian subsidiary can be separately listed on NSE/BSE β 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.
Verify FDI Policy & Sectoral Eligibility
For foreign company subsidiaries, first verify that the proposed business activity is permitted under India's FDI Policy β check whether the sector falls under the Automatic Route (no prior approval) or the Government Route (prior approval required). Confirm the permissible FDI percentage for the sector. Mitali Tita conducts a thorough sectoral FDI eligibility assessment before any filing.
π FEMA Step β Mandatory for Foreign SubsidiariesObtain Board Resolution from the Holding Company
The holding/parent company's board must pass a formal Board Resolution authorising: the incorporation of an Indian subsidiary, the equity stake to be held, the authorised representative(s) to act on behalf of the parent during incorporation, and the nominated directors for the subsidiary's board. For foreign parent companies: this resolution must be notarised and apostilled in the country of incorporation.
π Foreign Company: Notarise + Apostille all parent documentsCompany Name Search & Reservation (RUN / SPICe+)
Search the proposed subsidiary name on mca.gov.in for uniqueness. For a subsidiary incorporated as a Private Limited Company, the name must end with "Private Limited". Reserve via RUN form (up to 2 names, βΉ1,000 fee, 1β3 days) or directly within SPICe+. Also conduct a trademark pre-check on IP India portal to ensure the name doesn't infringe existing brands.
π€ Name need not match parent company β independent identityObtain DSC & DIN for All Proposed Directors
All proposed directors need Class 3 DSC. For Indian directors: obtained via Aadhaar OTP online. For foreign directors: obtained using passport and apostilled identity documents. DIN for up to 3 directors is allotted automatically via SPICe+. At least one director must be an Indian resident (stayed 182+ days in India in the previous calendar year) β mandatory under Section 149(3).
β οΈ Min. 1 Indian Resident Director β Mandatory for All Indian CompaniesDraft MoA & AoA Specific to the Subsidiary
Draft the Memorandum of Association (MoA) β identifying the parent company as the primary shareholder and specifying the subsidiary's business objects. Draft the Articles of Association (AoA) β including provisions governing the parent-subsidiary relationship, approval thresholds for major decisions, inter-company transaction governance, and dividend policy.
π AoA should reflect parent-subsidiary governance arrangementFile SPICe+ on MCA21 Portal
Submit SPICe+ with all required documents β including the parent company's board resolution, apostilled KYC (for foreign parent), director KYC, e-MoA, e-AoA, and registered office proof. SPICe+ simultaneously processes: name approval Β· DIN Β· PAN & TAN Β· GST Β· ESIC & EPFO. Upon ROC approval, the Certificate of Incorporation (COI) is issued.
π SPICe+: One integrated form β subsidiary incorporatedCapital Infusion & FC-GPR Filing with RBI
For Foreign Subsidiaries: After incorporation, the parent remits the investment amount to the subsidiary's Indian bank account through normal banking channels. Obtain an FIRC (Foreign Inward Remittance Certificate) from the bank. Allot shares to the parent. Within 30 days of allotment, file FC-GPR with RBI via the authorised dealer (AD) bank through RBI's FIRMS portal. Also file INC-20A (Commencement of Business) within 180 days.
π¨ FC-GPR within 30 days of allotment β FEMA violation if missedAnnual FLA Return & Ongoing Compliance
File the Annual FLA Return with RBI by July 15 every year as long as the subsidiary has an outstanding FDI balance. Maintain all ROC compliances (AOC-4, MGT-7, board meetings, AGM, DIR-3 KYC), tax compliances (ITR-6, Transfer Pricing documentation, Form 3CEB if applicable), and GST filings. Maintain transfer pricing documentation for all related-party transactions with the parent.
π FLA Return: July 15 annually β ongoing FEMA obligationDocuments Required for Subsidiary Company Registration
Foreign subsidiaries require both Indian director KYC and apostilled parent company documents. All digital β no physical visits required.
Official incorporation certificate of the holding company. For foreign companies: notarised and apostilled in the country of origin.
Foreign: Notarised + ApostilledConstitutional documents of the holding company. For foreign companies: apostilled copy required.
Foreign: Apostilled RequiredResolution from the parent company's board authorising incorporation of the Indian subsidiary, equity stake, and authorised representative. Apostilled for foreign companies.
Foreign: Notarised + ApostilledMandatory for all Indian resident directors. Must be linked to Aadhaar. At least one Indian resident director is mandatory under Section 149(3).
Aadhaar Card and address proof not older than 2 months for each Indian resident director.
Notarised and apostilled copy of passport of all foreign national directors proposed for the subsidiary's board.
Foreign Directors OnlyUtility bill (electricity/water/telephone) not older than 2 months of the registered office address in India β NOC from property owner.
Proposed equity allocation between the holding company and any other shareholders, authorised share capital, and paid-up capital amount.
Foreign Inward Remittance Certificate from the bank evidencing receipt of FDI β required before FC-GPR filing post-allotment.
Post-Allotment β FEMAPrior approval from relevant Ministry/DPIIT for sectors requiring government route FDI β obtained before share allotment.
Govt. Route Sectors OnlyAnnual Compliance for a Subsidiary Company in India
Subsidiary compliance combines standard ROC obligations with FEMA/RBI-specific requirements and transfer pricing rules β especially for foreign subsidiaries.
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.
Filed by July 15 every year as long as outstanding FDI balance exists. Reports foreign liabilities (FDI received) and foreign assets (ODI made). Penalty: βΉ10,000 β βΉ2 lakh for non-filing.
Filed within 30 days of AGM. Financials of subsidiary are also consolidated into the parent's financial statements. Penalty: βΉ100/day for delay.
Filed within 60 days of AGM. Must disclose the holding company as the principal shareholder with percentage of shareholding.
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 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.
Filed annually. Corporate tax rate: 25% (for companies with turnover β€ βΉ400 crore) or 22% (new tax regime under Section 115BAA, with no exemptions).
Mandatory if international transactions with parent/associated enterprises exceed βΉ1 crore. CA certifies in Form 3CEB. Maintain TP documentation throughout the year.
One-time filing within 180 days of incorporation. Must open Indian bank account and deposit subscribed capital before filing. Penalty: βΉ50,000 if missed.
All DIN holders (including any foreign directors with Indian DIN) must file annual KYC by September 30 each year.
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.
| Feature | Subsidiary Company β | Branch Office | Liaison Office | Project Office |
|---|---|---|---|---|
| Regulatory Body | MCA + RBI/FEMA | RBI (FEMA) | RBI (FEMA) | RBI (FEMA) |
| Legal Entity | Separate β Indian Company | Extension of foreign parent | Extension of foreign parent | Extension of foreign parent |
| Business Activities | Any β per FDI Policy | Same as parent β no manufacturing | Only liaison β no revenue | Only specific project work |
| Revenue Generation | Yes β full operations | Yes β limited activities | No β cannot earn revenue | Only from specific project |
| Tax in India | Indian corporate tax (25%) | Taxed as foreign company (40%) | Not taxable β no revenue | Taxed at foreign company rates |
| Profit Repatriation | Freely β after WHT/DTAA | Freely β net of tax | NA β no profit | Only on completion of project |
| FDI/RBI Approval | FDI Policy (Auto/Govt Route) | RBI approval required | RBI approval required | RBI approval (via AD bank) |
| Annual Compliance | Moderate-High (MCA + FEMA) | Moderate (FEMA AAC) | Low (FEMA AAC) | Low (project duration) |
| Hiring Employees | Yes β any number | Yes β limited | Very limited | Project-specific only |
| Duration | Perpetual | 3-year initial; renewable | 3-year initial; renewable | Duration of project only |
| Best For | Full-scale India operations, long-term market entry, manufacturing, services | Export/import, testing, consulting β same as parent's business | Market research, promoting parent, liaising β no revenue | Specific infrastructure / construction projects awarded by Indian entity |
Subsidiary Company β 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.
- Controls the composition of its Board of Directors; or
- Exercises or controls more than 50% of the total voting power
- 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
- Investor holds more than 50% of total voting power β effective control
- Financials are fully consolidated into parent's accounts
- Parent controls board composition and major decisions
- Investor holds 20% to 50% of total voting power β significant influence, not control
- Accounted for using the equity method (not full consolidation)
- Investor can influence but cannot control financial and operating policies
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.
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 β government route), insurance (74%), broadcasting, print media.
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 βΉ2 lakh per day of default β a FEMA violation.
Filing deadline: By July 15 each year for the preceding financial year (AprilβMarch). 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: βΉ10,000 to βΉ2 lakh under FEMA. Mitali Tita files FLA Returns for all client subsidiaries on time.
- 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 10β15%
- Net amount (after WHT) is remitted to the foreign parent via normal banking channels
- Royalties and technical service fees can also be repatriated β subject to FEMA, transfer pricing, and DTAA rules
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 β Form 3CEB (if international transactions > βΉ1 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.
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 βΉ1 crore
- Disclose all related party transactions in financial statements
- Certificate of Incorporation of parent
- MoA & AoA of parent company
- Board Resolution authorising Indian subsidiary incorporation
- Registered address proof of parent
- Passport copy; address proof; photograph
- PAN Card; Aadhaar; address proof; photograph
- Utility bill (not older than 2 months); NOC from property owner
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India Entry βReady to Set Up Your Subsidiary Company in India?
Mitali Tita manages the complete process β FDI sector check, SPICe+ incorporation, FC-GPR with RBI, FLA Return, transfer pricing documentation, and annual ROC compliance β all in one comprehensive service. 100% digital. Pan-India.
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