Introduction: A Strategic Gateway into India

India continues to emerge as one of the most attractive destinations for foreign investment. From tech giants like Google and Amazon to fast-growing mid-sized enterprises, companies around the globe are looking to tap into India's expansive consumer base, skilled workforce, and dynamic market. But making a meaningful entry into India requires more than just ambition. It requires a legal, operational, and strategic foundation—often in the form of a subsidiary company.

In this guide, we will break down every critical aspect of registering a subsidiary in India in 2025, backed by real-world examples, procedural steps, documentation, compliance rules, and strategic insights.

Why Choose India for Business Expansion?

India, with its population of over 1.4 billion, offers a massive market with diverse economic opportunities. Some compelling reasons why companies opt for India include:

• A burgeoning middle class and rising consumer demand
• Competitive labor costs with high-skilled talent
• A pro-reform government encouraging FDI
• A rapidly evolving startup and innovation ecosystem
• Strong digital infrastructure

Case Example:
In 2023, a German automotive parts manufacturer established its wholly owned subsidiary in Pune. Within two years, they scaled their operations to serve the entire Asia-Pacific region, leveraging India’s manufacturing capabilities and favorable tax incentives.

Understanding the Subsidiary Model

A subsidiary company is an entity registered in India but controlled by a foreign parent company. When the foreign company owns 100% of the shares, it is called a Wholly Owned Subsidiary (WOS).

Advantages of a Subsidiary over Liaison or Branch Office:

Chapter 3: Pre-Incorporation Planning

1. Choosing the Right Business Structure

The most common form is a Private Limited Company, which offers:

• Limited liability
• Ease of operations
• Scalability
• Recognition among clients and vendors

Note: At least one director must be a resident in India, i.e., he/she has stayed in India for at least 182 days in the preceding financial year.

2. FDI Sector Mapping

Understand whether your business sector falls under:

• Automatic route (no prior approval required)

• Approval route (requires government/RBI approval)

Common sectors under automatic route:

• Manufacturing

• Wholesale Trading

• E-commerce (B2B)

• IT/ITeS

Example:
A UK-based fintech platform wanted to set up operations in India. Since financial services fall under the approval route, we helped them secure necessary RBI and SEBI clearances before incorporation.

Chapter 4: Step-by-Step Incorporation Process

Step 1: Obtain Digital Signature Certificates (DSC)

All directors must possess DSC to file forms electronically.

Step 2: Apply for Director Identification Number (DIN)

DIN is required for all directors. For foreign nationals, passport is a mandatory ID.

Step 3: Reserve the Company Name

File the RUN (Reserve Unique Name) form via MCA portal. Keep alternatives ready.

Step 4: Draft MOA and AOA

The Memorandum of Association (MOA) defines business objectives; the Articles of Association (AOA) defines internal rules.

Tip: Avoid generic templates. Align MOA with sector-specific FEMA rules.

Step 5: File SPICe+ Form (INC-32)

This integrated form covers:

• Company incorporation
• PAN & TAN
• GST, EPFO, ESIC registration
• Opening bank account

Attach supporting documents including:

• Passport, ID, address proof of directors
• Board Resolution from parent company
• Proof of registered office (rent agreement or sale deed)

Chapter 5: Post-Incorporation Regulatory Requirements

1. Opening a Bank Account

The capital investment must be remitted from abroad into the Indian entity’s bank account.

2. Filing Form FC-GPR

File Form FC-GPR with RBI via FIRMS portal within 30 days of share allotment.

3. Compliance with FEMA Regulations

Ensure all share capital, transfer pricing, and foreign investment guidelines are adhered to.

4. Additional Registrations

• GST Registration (if turnover exceeds threshold or inter-state supply exists)
• Shops and Establishment License
• Professional Tax (in applicable states)
• Labour law registrations (ESIC, EPFO)

Chapter 6: Documentation Checklist

Important: All foreign documents must be notarized and apostilled.

Chapter 7: Timelines and Cost Estimates

Chapter 8: Challenges and How to Overcome Them

1. FEMA Non-Compliance

Failure to file FC-GPR or delayed reporting can result in penalties.
Solution: Engage professionals with FEMA expertise.

2. Delay in Name Approval

Using restricted words or conflicting names can cause rejection.
Solution: Conduct a preliminary name check on MCA portal.

3. Difficulty Appointing Resident Director

Foreign companies may struggle to find reliable local directors.
Solution: TwoTax offers verified director appointment support.

4. Opening Bank Account Delays

Banks often require multiple verification rounds.
Solution: Choose banks familiar with FDI accounts and maintain complete documentation.

 Taxation Overview

1. Corporate Tax Rate

• 22% for domestic companies (under Section 115BAA)
• Plus surcharge and cess

2. Transfer Pricing

Applicable if Indian subsidiary transacts with foreign parent or affiliates. Maintain proper documentation and benchmarking.

3. Repatriation of Profits

Dividends and capital repatriation allowed post-tax, subject to RBI and FEMA rules.

4. Withholding Tax

Applicable on payments to foreign entities like royalties, interest, or technical fees.

 Real-Life Success Story

Client: Hale & Arrow (UK)
Industry: Health-Tech

• Objective: Launch wellness AI services in Tier-2 cities
• Challenges: Regulatory approval, data compliance, local partnerships
• TwoTax Solution: End-to-end subsidiary incorporation, RBI clearance, GST registration, and HR onboarding
• Outcome: Achieved INR 4.2 crore in first-year revenue with a 22-member team

 Why TwoTax is the Ideal Partner for Foreign Subsidiary Registration

We have successfully assisted clients from the US, UK, Germany, Singapore, and Israel in establishing Indian subsidiaries.

Our services include:

• Advisory on FDI & FEMA regulations
• Company incorporation (end-to-end)
• RBI and MCA filings
• Accounting and taxation setup
• Director onboarding & payroll assistance

 Connect with us: www.twotax.in | [email protected]

Conclusion: Building a Sustainable Business in India

India offers enormous potential for foreign companies, but entering the market requires strategic planning and legal compliance. A subsidiary model gives companies full access to India’s opportunities while ensuring operational flexibility and tax efficiency.

With the right guidance and regulatory adherence, setting up a subsidiary can be your launchpad to long-term success in one of the world's fastest-growing economies.

Looking to establish your presence in India?
Trust TwoTax to be your compliance, strategy, and execution partner.