An Indian subsidiary of a foreign company is registered as an Indian private limited company through SPICe+, with the foreign parent holding more than half the voting power, or all of it in a wholly owned subsidiary. It needs two shareholders and two directors, one of whom stays in India for 182 days or more in the financial year. In sectors not listed in India's FDI rules, foreign investment up to 100% needs no prior government approval, but a parent from a country sharing a land border with India needs it.
What counts as an Indian subsidiary of a foreign company?
Under section 2(87) of the Companies Act, a company is a subsidiary if the holding company controls the composition of its board or more than one-half of its total voting power. For this test "company" includes any body corporate, so a foreign parent qualifies. The test has used voting power, not share capital, since 7 May 2018.
- Wholly owned subsidiary (WOS). The parent holds 100%. A private company needs at least two members, so the second share can be held by a nominee for the parent, and section 89 then requires declarations of who holds the beneficial interest, with any change declared within 30 days.
- Never a small company. Section 2(85) excludes holding and subsidiary companies from the small-company definition. A subsidiary pays the full registration fee above ₹15 lakh (the incorporation fee and stamp duty calculator shows it), files the full MGT-7 and, unless it is a recognised start-up, prepares a cash flow statement and holds four board meetings a year.
- No OPC route. Only an Indian citizen can form a One Person Company, so that route is closed to a foreign parent. The general process is on private limited company registration.
Which FDI route applies to an Indian subsidiary?
Many service and manufacturing businesses fall under the automatic route: under para 5.2.3 of the RBI Master Direction on Foreign Investment, sectors not listed in Schedule I of the FEMA (Non-debt Instruments) Rules allow 100% foreign investment without prior approval, except financial services. Listed sectors carry caps and conditions, and a few are closed.
- Prohibited. Lottery, gambling and betting, chit funds, Nidhi companies, trading in transferable development rights, real estate business or farm houses, and cigarette and cigar manufacturing; atomic energy and railway operations are not open to private investment.
- Land-border countries. An entity or citizen of China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar or Afghanistan, or an investment whose beneficial owner is there, needs the government route. Since Press Note 2 of 2026, a non-controlling beneficial interest within the PMLA threshold (10% for companies) held through a third-country investor can use the automatic route, subject to reporting to DPIIT before the money arrives.
- In the form. SPICe+ asks every subscriber to declare whether government approval under the Non-debt Instruments Rules is needed, and to attach it if so.
Check your sector and stake with the FDI route checker before you file.
Documents a foreign parent needs
The parent provides its certificate of incorporation and a board resolution approving the subsidiary and authorising a signatory, who signs the memorandum and articles on its behalf. For a subscriber who is a foreign national living abroad, rule 13(5) sets how the signature, address and identity proof are authenticated.
| Where the foreign national lives | Rule 13(5) of the Incorporation Rules |
|---|---|
| A Commonwealth country | Notarised by a notary public there |
| A Hague Apostille Convention country | Notarised and apostilled |
| Any other country | Notarised, then certified by an Indian diplomatic or consular officer |
- Foreign directors. A foreign national gives a passport as identity proof, together with a residential proof. A foreign national who travels to India to incorporate the company needs a valid business visa; this does not apply to a person of Indian origin or an OCI.
- Land-border nationals. A proposed director from a country sharing a land border with India needs Ministry of Home Affairs security clearance, attached to SPICe+.
- Memorandum format. MCA's SPICe+ guide says that where a non-individual first subscriber is based outside India, the MoA and AoA are attached as PDF documents rather than filed as the linked e-forms.
- Indian office and name. The registered office in India needs the usual title or tenancy proof, owner's NOC and a utility bill not older than two months. Test a name built on the parent's brand with the company name checker.
Capital: pricing, banking channels and the 60-day rule
Shares taken by subscribing to the memorandum are issued at face value. Later issues to the parent must be priced at not less than fair value, worked out on an internationally accepted method and certified by a CA, a SEBI-registered merchant banker or a practising cost accountant. The money must arrive through banking channels.
- Inward remittance. Consideration comes as an inward remittance through banking channels or from a repatriable foreign currency or rupee account.
- 60 days, then 15. Shares must be issued within 60 days of receiving the money, or the money refunded within the next 15 days.
- FC-GPR. The share issue is reported on RBI's FIRMS portal within 30 days of allotment.
- Pre-incorporation expenses. A WOS in a 100% automatic sector with no FDI-linked conditions may issue shares to the parent against pre-incorporation or pre-operative expenses up to 5% of authorised capital or USD 500,000, whichever is less, reported on FC-GPR within 30 days and no later than one year from incorporation, with a statutory auditor's certificate.
Example. Bluepeak Robotics India Private Limited, a made-up WOS, has ₹1 crore of authorised capital. Its parent spent money on market research before incorporation. At most ₹5,00,000 of that, 5% of authorised capital, can be converted into shares, because 5% is far below USD 500,000.
Subsidiary, branch office or liaison office?
A subsidiary is an Indian company that can run any business the FDI rules allow. A branch or liaison office is an office of the foreign company itself, set up with approval from an authorised dealer bank, or from RBI in specified cases, and limited to the activities RBI permits.
| Point | Subsidiary | Branch office | Liaison office |
|---|---|---|---|
| Legal status | Separate Indian company with perpetual succession | Office of the foreign company | Office of the foreign company |
| Parent's track record | No such RBI test | Profit in the previous five years, net worth of at least USD 100,000 | Profit in the previous three years, net worth of at least USD 50,000 |
| Activities | Any business allowed under FDI rules | Listed activities such as import and export, consultancy and IT services | Representation and liaison only |
The limits come from RBI's Master Direction on branch, liaison and project offices, which also gives a liaison office a validity of generally three years. A branch or liaison office files an Annual Activity Certificate as at 31 March with its bank and the income tax authorities.
Compliance after the subsidiary is registered
The subsidiary follows the full company calendar plus FEMA reporting. The first auditor is appointed within 30 days and INC-20A, confirming the subscription money has been received, is due within 180 days, before the company starts business or borrows.
- Every year. AGM, AOC-4 and MGT-7 (never MGT-7A), an annual return on foreign liabilities and assets (FLA) to RBI, and the income tax return. The ROC compliance calendar lists the company law dates.
- Every share issue. FC-GPR within 30 days of allotment.
- Resident director. Keep at least one director who stays in India for 182 days or more in each financial year; the rule applies proportionately in the year of incorporation.
- Foreign directors. They hold DINs like any director, so DIR-3 KYC applies to them once every three years.
How Ofin sets up your Indian subsidiary
Ofin's CAs, CSs and legal professionals handle the setup 100% online: name approval, MoA and AoA drafting, a Class 3 digital signature, DINs for two directors, PAN and TAN, PF and ESI registration, the government fee and stamp duty, and help opening the bank account. Packages start at ₹24,999; higher ones add INC-20A, GST and annual compliance. Reply within 24 hours: get a fixed-price proposal.
