How to Set Up a Foreign Subsidiary in India: Complete 2026 Guide
Setting up a foreign subsidiary in India is one of the most effective ways for an overseas company to establish a long-term presence in one of the world’s fastest-growing markets. A subsidiary gives the parent company a separate Indian legal entity, limited liability, and the freedom to carry on commercial activity, hire staff, raise invoices, and repatriate profits within the framework of Indian law. This guide walks you through the entire 2026 process — from choosing the right structure to incorporation, banking, and ongoing compliance.
What Is a Foreign Subsidiary in India?
A foreign subsidiary is an Indian company in which a foreign company or foreign nationals hold shares. When the overseas parent holds more than 50% of the share capital, the Indian company is treated as a subsidiary; when it holds 100%, it is a wholly owned subsidiary (WOS). In most sectors, India permits up to 100% foreign ownership under the automatic route, which means no prior government approval is required.
The most common vehicle is a private limited company incorporated under the Companies Act, 2013. It is recognised globally, easy to scale, and ring-fences the parent’s liability to the extent of its shareholding.
Why Foreign Companies Choose the Subsidiary Route
- 100% ownership and control in most sectors under the automatic route.
- Limited liability — the parent’s exposure is capped at its investment.
- Full commercial freedom — unlike a liaison office, a subsidiary can trade, manufacture, and earn revenue in India.
- Easier funding and repatriation of dividends and capital, subject to FEMA.
- Perpetual succession — the company continues regardless of changes in directors or shareholders.
If you are still deciding between entity types, read our comparison of an Indian subsidiary versus a branch and liaison office.
FDI Routes: Automatic vs Government Approval
Foreign Direct Investment (FDI) into the subsidiary flows through one of two routes:
- Automatic Route — permitted in most sectors (IT, manufacturing, trading, consulting, e-commerce marketplace, and more) with no prior approval. Only post-investment reporting to the Reserve Bank of India (RBI) is required.
- Government Route — required for sensitive sectors such as defence, multi-brand retail, print media, and some others, where prior approval from the concerned ministry is needed.
Understanding which route applies is the first compliance checkpoint. Our detailed note on the automatic route vs the government route explains sectoral caps and prohibited sectors.
Step-by-Step Process to Set Up a Foreign Subsidiary in India
Step 1: Decide the Structure and Shareholding
A private limited company needs a minimum of two shareholders and two directors. The parent company and a second shareholder (which can be a nominee holding even one share) typically hold the equity. At least one director must be a resident of India — someone who has stayed in India for at least 182 days in the previous financial year.
Step 2: Obtain Digital Signature Certificates (DSC)
Every proposed director and authorised signatory needs a DSC to sign electronic forms. Foreign directors must submit notarised and apostilled identity and address proof.
Step 3: Apply for Name Approval (RUN / SPICe+ Part A)
Reserve the company name through the SPICe+ Part A facility on the MCA portal. Choose a unique name that is not identical to an existing company or a registered trademark.
Step 4: File SPICe+ Part B, e-MoA and e-AoA
SPICe+ is an integrated incorporation form that combines name reservation, DIN allotment, PAN, TAN, EPFO, ESIC, and GST registration. File it along with the Memorandum (e-MoA) and Articles of Association (e-AoA), and the declarations from directors and the parent company.
Step 5: Certificate of Incorporation
Once approved, the Registrar of Companies (ROC) issues the Certificate of Incorporation along with the company’s CIN, PAN, and TAN. The company is now a live legal entity.
Step 6: Open a Bank Account and Bring in Capital
Open a current account, remit the subscription money from the parent through normal banking channels, and obtain the Foreign Inward Remittance Certificate (FIRC).
Step 7: Report the Investment to RBI (FC-GPR)
After share allotment, file Form FC-GPR on the RBI FIRMS portal within 30 days. This is a critical FEMA compliance and missing it attracts penalties.
Documents Required
For the foreign parent and foreign directors, the core documents are the certificate of incorporation of the parent, board resolution authorising the investment, passport, and proof of address — all notarised and apostilled (or consularised, depending on the country). Our complete document checklist for a foreign subsidiary sets out the exact requirements.
Timeline and Cost
With documents in order, incorporation usually takes 10 to 20 working days. The biggest variable is the time taken to notarise and apostille foreign documents in the home country. For a realistic breakdown, see our guides on the incorporation timeline and the cost of setting up a subsidiary in India.
After Incorporation: Ongoing Compliance
A foreign subsidiary must appoint an auditor within 30 days, file annual returns (AOC-4 and MGT-7), hold board meetings, maintain statutory registers, and comply with GST and income tax. The first year carries additional FEMA reporting. Read our checklist of post-incorporation compliances so nothing slips.
Frequently Asked Questions
Can a foreign company own 100% of an Indian subsidiary?
Yes. In most sectors, 100% FDI is allowed under the automatic route. A few sensitive sectors have caps or require government approval.
Is a resident director mandatory?
Yes. At least one director must have stayed in India for 182 days or more in the previous financial year. Professional firms can assist with a compliant resident director where needed.
How much capital is required?
There is no prescribed minimum paid-up capital. You can start with a modest amount, though the capital should be realistic for your planned operations and any visa or sectoral requirements.
Can the subsidiary repatriate profits to the parent?
Yes. Dividends and capital can be repatriated through authorised dealer banks after paying applicable taxes and completing FEMA reporting.
Set Up Your Indian Subsidiary with Expert Help
Incorporating a foreign subsidiary touches company law, FEMA, RBI reporting, and tax all at once — getting it right from day one saves time and penalties later. At S. Choudhary & Co., we handle end-to-end incorporation, FDI reporting, and ongoing compliance for foreign companies entering India. Explore our business incorporation services or get in touch at +91 90248 28295 or sushil@sushilchoudhary.com.
