An Indian Subsidiary is a company incorporated in India under the Companies Act, where a foreign company holds more than 50% of the shareholding. Though owned or controlled by a foreign parent, the subsidiary is treated as an Indian company for legal and taxation purposes.
In simple terms, it allows foreign businesses to operate in India with a local corporate identity, while retaining control through ownership.
Why Foreign Companies Choose an Indian Subsidiary
India is one of the fastest-growing markets with a strong consumer base and skilled workforce. Setting up a subsidiary provides:
- Independent legal status in India
- Access to Indian markets and customers
- Eligibility for Foreign Direct Investment (FDI)
- Easier compliance with local laws
- Better credibility with banks and clients
Types of Indian Subsidiaries
- Wholly Owned Subsidiary (WOS): 100% foreign ownership (subject to FDI policy)
- Partially Owned Subsidiary: Foreign company holds majority shares with Indian partners
Most foreign companies prefer a Private Limited Company structure for flexibility.
Eligibility & FDI Rules
Before incorporation, it is important to check:
- Sector-wise FDI limits
- Whether FDI is allowed under Automatic Route or Government Approval Route
- Compliance with FEMA and RBI guidelines
Many sectors allow 100% FDI under the automatic route.
Step-by-Step Process to Set Up an Indian Subsidiary
Step 1: Decide Company Structure
Choose between Private Limited or Public Limited Company based on business goals and compliance comfort.
Step 2: Obtain Digital Signature Certificate (DSC)
DSC is required for directors to sign incorporation documents electronically.
Step 3: Director Identification Number (DIN)
Apply for DIN for proposed directors, including foreign nationals (with apostilled documents).
Step 4: Name Approval
Apply for company name approval ensuring it aligns with the foreign parent’s brand and MCA guidelines.
Step 5: Draft MOA & AOA
Prepare Memorandum and Articles of Association reflecting:
- Business objectives
- Shareholding structure
- Rights and control of foreign parent
Step 6: File Incorporation Application
Submit incorporation forms along with required documents to the Registrar of Companies.
Step 7: Receive Certificate of Incorporation
Once approved, the company receives its Certificate of Incorporation and becomes a legal entity in India.
Step 8: Post-Incorporation Compliances
- PAN & TAN registration
- Bank account opening
- FDI reporting to RBI
- GST and other licenses (if applicable)
Documents Required for Indian Subsidiary Registration
- Certificate of Incorporation of foreign parent
- Board resolution approving Indian subsidiary
- Identity & address proof of directors
- Apostilled documents of foreign nationals
- Registered office address proof in India
Benefits of an Indian Subsidiary
- Separate Legal Entity: Limits parent company liability
- FDI Benefits: Easier capital infusion
- Tax Planning: Access to Indian tax treaties
- Operational Control: Independent management with parent oversight
- Market Expansion: Long-term presence in India
Indian Subsidiary vs Branch Office
| Particulars | Indian Subsidiary | Branch Office |
|---|---|---|
| Legal Status | Separate entity | Extension of parent |
| FDI | Allowed | Restricted |
| Taxation | As Indian company | Higher exposure |
| Business Scope | Wide | Limited |
Conclusion
Setting up an Indian subsidiary is the most preferred and legally robust way for foreign companies to enter the Indian market. With clear ownership, regulatory compliance, and operational flexibility, it offers long-term growth opportunities. Following a structured step-by-step approach ensures smooth incorporation and compliance in India.
Disclaimer
This article is published for general informational purposes only and does not constitute legal, financial, or professional advice. FDI policies, FEMA regulations, and incorporation procedures are subject to change. Readers are advised to consult qualified professionals or relevant authorities before setting up an Indian subsidiary.