India has emerged as one of the most attractive destinations for foreign direct investment. From technology and manufacturing to fintech and pharmaceuticals, global companies are increasingly looking to set up a subsidiary of a foreign company in India to tap into a consumer base of over 1.4 billion people. The country's improving ease of doing business ranking, liberalized FDI policies, and skilled workforce make it a compelling choice for multinational corporations.
Foreign subsidiary registration in India involves incorporating a new company under the Companies Act, 2013, where the parent entity holds more than 50% of the total share capital. The subsidiary operates as a separate legal entity, governed by Indian laws, while the foreign parent retains control over strategic decisions. This structure offers limited liability protection, tax treaty benefits, and full operational autonomy within the Indian market.
Whether you are a US-based tech company, a European manufacturer, or a Singapore-based holding entity, this guide walks you through the entire process of setting up a wholly owned subsidiary (WOS) or a majority-held subsidiary in India, covering legal requirements, FDI compliance, documentation, and post-incorporation obligations.
What is a Foreign Subsidiary Company in India?
A foreign subsidiary is an Indian company where more than 50% of the equity share capital is held by a foreign company or a foreign body corporate. Under Indian law, this entity is incorporated as a private limited company or a public limited company under the Companies Act, 2013, and is treated as an Indian company for all regulatory and tax purposes.
The key distinction between a subsidiary and other forms of foreign presence, such as a liaison office, branch office, or project office, lies in the degree of control and permissible activities. A subsidiary can carry out full-fledged commercial operations, generate revenue, enter into contracts, own property, and hire employees without the restrictions that apply to liaison or branch offices.
For instance, a liaison office is only permitted to act as a communication channel between the parent company and Indian parties. It cannot earn any income in India. A branch office has slightly broader permissions but still faces limitations on manufacturing and trading activities. A subsidiary, on the other hand, operates with complete commercial freedom, subject to sectoral FDI caps and Indian regulations.
Why Foreign Companies Choose the Subsidiary Route
Several strategic and legal advantages make the subsidiary structure the preferred entry mode for most multinational corporations entering India:
- Separate legal identity: The subsidiary is an independent legal entity. Its liabilities do not extend to the parent company, providing a clean liability shield for the foreign promoter.
- Full commercial operations: Unlike liaison or branch offices, a subsidiary can manufacture goods, sell products, provide services, and generate profits in India without restrictions.
- Tax treaty benefits: India has Double Taxation Avoidance Agreements (DTAAs) with over 90 countries. A properly structured subsidiary can leverage these treaties to minimize cross-border tax burdens.
- Easier funding and banking: Indian banks and financial institutions prefer lending to Indian-incorporated companies. A subsidiary can open current accounts, avail working capital facilities, and access government incentive programmes.
- Brand and market credibility: An Indian-registered company builds stronger trust with local customers, vendors, and government agencies compared to a foreign-registered entity operating through a branch or liaison office.
- Government incentives: Subsidiaries may qualify for sector-specific incentives under schemes like Make in India, Startup India, Production Linked Incentive (PLI), and Special Economic Zone (SEZ) benefits.
FDI Policy and Sectoral Caps for Foreign Subsidiaries
Before initiating foreign subsidiary registration in India, the parent company must verify whether the proposed business activity falls under the automatic route or the government approval route for FDI. The Consolidated FDI Policy, issued by the Department for Promotion of Industry and Internal Trade (DPIIT), governs these norms.
Under the automatic route, no prior government approval is needed. The foreign investor simply needs to comply with sectoral conditions and file the required post-investment declarations with the Reserve Bank of India (RBI). Most sectors in India, including IT, manufacturing, e-commerce (marketplace model), healthcare, and infrastructure, allow 100% FDI under the automatic route.
Certain sectors require prior approval from the concerned ministry. These include multi-brand retail, print media, broadcasting, mining, and defence beyond specified thresholds. A few sectors, such as lottery, gambling, chit funds, and real estate (except certain permitted categories), are entirely prohibited from receiving FDI.
It is essential to map your business activity to the correct NIC code and verify the applicable FDI cap before proceeding with incorporation. Incorrect classification can lead to regulatory complications later.
Step-by-Step Procedure for Foreign Subsidiary Registration in India
Step 1: Obtain Digital Signature Certificate (DSC)
Every proposed director must obtain a Class 3 DSC from a licensed Certifying Authority. For foreign nationals, the DSC application requires a valid passport, proof of address in the home country, and email/mobile verification. The DSC is necessary for digitally signing all MCA forms and incorporation documents.
Step 2: Apply for Director Identification Number (DIN)
Each director of the proposed subsidiary needs a DIN. For first-time directors, the DIN is allotted through the SPICe+ incorporation form itself. At least one director must be an Indian resident, meaning a person who has resided in India for at least 182 days in the preceding calendar year. The remaining directors can be foreign nationals.
Step 3: Reserve the Company Name
Apply for name reservation through the RUN (Reserve Unique Name) service on the MCA portal or through Part A of the SPICe+ form. Two names can be proposed in order of preference. The name must be unique, not identical or similar to existing company or trademark names, and must comply with the naming guidelines prescribed by the MCA.
Step 4: Prepare Incorporation Documents
Draft the Memorandum of Association (MOA) and Articles of Association (AOA) for the proposed subsidiary. The MOA defines the company's objects, authorized capital, and subscriber details. The AOA outlines the internal governance rules. For foreign subscribers, the MOA and AOA must be notarized and apostilled in the country of origin. If the parent company is a corporate entity, a board resolution authorizing the investment and appointment of an authorized signatory is also required.
Step 5: File SPICe+ (INC-32) with the ROC
Submit the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form along with the required attachments. This single application covers name approval, incorporation, DIN allotment, PAN, TAN, EPFO, ESIC, and bank account opening. Supporting documents include the foreign parent's certificate of incorporation, board resolution, passport copies of foreign directors, address proof of the registered office, and the notarized and apostilled MOA and AOA.
Step 6: Obtain Certificate of Incorporation
Upon verification and approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation along with the company's PAN, TAN, and CIN (Corporate Identification Number). From this date, the subsidiary exists as a legal entity and can commence its operations after completing the remaining post-incorporation compliances.
Step 7: Post-Incorporation Compliance
After incorporation, the subsidiary must complete several mandatory steps within prescribed timelines. These include opening a bank account in the company's name, receiving the FDI capital from the foreign parent into this account, filing Form FC-GPR with the RBI within 30 days of share allotment, applying for GST registration, appointing a statutory auditor within 30 days, and filing INC-20A (Declaration for Commencement of Business) with the MCA.
Documents Required from the Foreign Parent Company
Gathering the correct documentation is often the most time-consuming part of the process. Here is what you need:
- Certificate of Incorporation of the parent company (notarized and apostilled)
- Board Resolution of the parent company authorizing investment in India and appointing authorized signatories
- Passport copies of all proposed directors (foreign nationals)
- Address proof of foreign directors (utility bill, bank statement, or government-issued ID from the home country)
- PAN and Aadhaar of the Indian resident director
- Proof of registered office address in India (rent agreement, NOC from the landlord, and a utility bill not older than two months)
- MOA and AOA (notarized and apostilled if signed outside India)
- Power of Attorney, if any authorized representative is handling the incorporation on behalf of the foreign parent
All documents originating from outside India must be notarized by a public notary in the country of origin and apostilled (for Hague Convention countries) or consularized (for non-Hague countries) before submission.
Subsidiary vs. Branch Office vs. Liaison Office: Key Differences
| Parameter | Subsidiary | Branch Office | Liaison Office |
| Legal status | Separate Indian entity | Extension of parent | Extension of parent |
| Revenue generation | Yes, fully permitted | Limited activities | Not permitted |
| Liability | Limited to subsidiary | Extends to parent | Extends to parent |
| Governing law | Companies Act, 2013 | RBI regulations | RBI regulations |
| Approval route | MCA incorporation | RBI approval needed | RBI approval needed |
| Tax treatment | Indian corporate tax | 40% + surcharge | Not taxable (no income) |
For most foreign companies planning long-term operations in India, the subsidiary route offers the best combination of operational freedom, liability protection, and tax efficiency.
Conclusion
Foreign subsidiary registration in India is a well-defined process that gives global companies full commercial access to one of the world's fastest-growing economies. By incorporating a private limited company under the Companies Act, foreign entities gain a separate legal identity, limited liability protection, and the ability to operate independently within the Indian market.
From obtaining DSC and DIN to filing SPICe+ and completing RBI reporting, the process requires careful planning and proper documentation. If you are a multinational company, global founder, or investment holding entity looking to set up a subsidiary of a foreign company in India, reach out to Patron Accounting for end-to-end incorporation support, FDI advisory, and ongoing compliance management.
