- Most captives are private limited wholly owned subsidiaries.
- That company needs at least 2 directors, and one of them must have stayed in India for 182 days or more in the financial year.
- IT services captives can opt for a 15.5% safe harbour margin on operating cost from tax year 2026-27.
- A domestic company paying tax under s.200 bears an effective rate of about 25.17%.
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How is a captive centre different from outsourcing?
You own it. In outsourcing, a vendor owns the company, employs the team and sells you an output.
| Feature | Captive centre | Outsourcing |
|---|---|---|
| Who employs staff | Your Indian company | The vendor |
| Who owns knowledge and IP | You, directly | You, only by contract |
| How you pay | Cost plus a margin, inside your group | Vendor price, with its profit inside |
| Indian tax you file | Corporate tax, TDS, transfer pricing report | None for the work itself |
| Exit | Close or sell the unit | Serve notice on the contract |
Today many groups rebrand a captive as a global capability centre. Same law. Bigger mandate. Our piece on outsourcing vs offshoring explains where each fits.
How is a captive taxed in India?
On its margin. The parent’s revenue never enters the Indian tax return, and that is the whole point of the cost-plus model.
Let’s say your Pune captive spends ₹10 crore a year on salaries, rent and overheads. At the 15.5% safe harbour, it bills the parent ₹11.55 crore. The ₹1.55 crore margin is the captive’s taxable profit before other adjustments. At 22% under s.200, plus surcharge and cess, tax comes to about ₹39 lakh.
Choosing safe harbour buys certainty. The tax officer accepts the margin for five tax years, as KPMG’s note on the 2026 safe harbour rules sets out.
Price the margin too low, and the officer adjusts it upwards. Then come tax, interest and a dispute.
One more trap. Let the captive’s managers sign customer deals for the parent, and the parent itself risks a permanent establishment in India, with its own profits taxed here.
Do you need a captive before you can hire?
Not at all. Many groups start on an employer of record and convert later.
The EOR is the legal employer while the captive’s entity, bank account and FDI reporting come together. Then staff move across. Our GCC setup guide maps the entity steps.
How does Remunance get your captive centre staffed early?
Remunance can employ your first captive hires on its own Indian entity while you incorporate. We are Startup India (DPIIT) recognised, ISO/IEC 27001:2022 certified, and handle EPF, ESIC, TDS and Professional Tax from day one. Once your entity is live, our India subsidiary formation team moves the people over. To map that switch-over date, book a captive set-up call with us.
What else do people ask about captive centres?
What is a captive unit in BPO?
It is a back-office or service unit owned by the company it serves. It does not sell to outside clients.
Is a captive centre a cost centre?
Usually, yes. It recovers its costs plus a margin from the parent and is judged on capability, not on external sales.
What is the difference between captive and non-captive?
A captive serves only its own group. A non-captive provider sells the same services to many unrelated clients.
Planning a hire in India?
Our founding team has run payroll and hiring in India for 22+ years, first as Remunance Systems, which was later acquired by ADP.