A Complete Guide for Setting Up a Subsidiary Company in India

Key Takeaways:

Growing economy, various government incentives, and an ever-expanding market make India an attractive destination for Western companies to establish subsidiaries.
India permits foreign companies to create Private Limited Liability Companies with certain regulatory and operational benefits for market entry.
Incorporation of an Indian subsidiary involves obtaining DSC, DIN, and incorporation filing which usually takes 15 to 30 days.
Compliance with Indian tax systems like corporate taxation, transfer pricing, employment law compliance, and DTAA advantages are mandatory.
Country-specific business practices and government incentives, such as SEZs, are ways in which companies take on risk and thrive in the active Indian market.

European and North American businesses are attracted to be a part of the fastest-growing economy worldwide —India. This is possible through the strategic establishment of a subsidiary company in India. Having a subsidiary company is a link to the enormously wide local market. It is also considered as an entry point to the Asian market.

India has become attractive for setting up subsidiaries as it maintains strong economic growth. And with the government’s constant effort, the ease of doing business in India has increased more than ever. It also possesses an increasingly skilled workforce and implements modern reforms. With a total FDI inflow of USD 70.95 Billion for FY 2023-24, India aims at boosting overseas investments. With this approach, companies can explore the potential for growth in the country. This is all while taking advantage of cheaper costs, appealing tax systems, and growing numbers of consumers.

This guideline will educate fellow readers on how to leverage India’s dynamic market for business needs. Simultaneously, how to form an Indian subsidiary according to the main compliances involved.

Market Trends to Form a Subsidiary Company in India

The Economic State

India has had an average annual GDP growth rate of 6.33% for the last two decades. This portrays quite a promising economic environment and provides an incentive for contemplating the establishment of a subsidiary company in India. Being among the advancing economies globally India presents extensive market opportunities. This is fueled by a growing middle class, rising consumer expenditures, and a vibrant entrepreneurial landscape.

Despite uncertainties, the nation’s GDP has displayed resilience and consistent expansion. This makes India an appealing prospect, for overseas investments. Companies establishing an Indian subsidiary can take advantage of the country’s economy. They can explore various industries such as technology, manufacturing, retail, and services that are experiencing significant growth.

Government Regulations

When a business is establishing a subsidiary company in India, it needs to know the country’s regulatory environment thoroughly. India has introduced changes to streamline business procedures. However, comprehending the essential regulatory frameworks is vital. Foreign businesses planning to set up a subsidiary company in India must adhere to certain laws. Especially those passed by the parliament like the Companies Act of 2013.

This law oversees the establishment and administration of companies in India. Furthermore, foreign corporations must comply with guidelines stipulated by the Reserve Bank of India (RBI). They must also comply with the secure requisite authorizations, under the Foreign Exchange Management Act (FEMA). It is important to have a grasp of tax laws and labor regulations to run a business smoothly. It also helps in avoiding potential risks in India’s market growth journey.

Types of Companies in India

Businesses must know the kinds of entities that can be established while setting up a wholly-owned subsidiary company in India. The kind of legal entity you pick will impact your operational flexibility. It will also affect the compliance requirements and tax obligations. Following is a look into the kinds of companies in India:

Proprietorship

A sole proprietorship is the most basic structure of a business. This is because it has one individual owner who has successfully identified the business activities. This single individual is responsible for the entire business. Secondly, it is very easy to set up because of the very few requirements of regulatory compliance. On the other hand, there is no separation between personal and business assets. Therefore, the owner will be personally liable for all the debts and obligations.

This kind of company is excellent for a small-scale business. However, it cannot act as a parent company to open a subsidiary company in India. This is because of its limited scope and no corporate identity.

Partnership

A partnership firm is an agreement in which two or more persons agree to share the profits and losses of a business. It is easier to form a partnership firm, and the requirement for regulatory compliance is minimal. However, the debts of the firm remain personally liable to the partners, similar to proprietorship.

Partnerships are not preferred for establishing a subsidiary company in India because of unlimited liability for the partners. This is accompanied by the absence of any separate legal entity.

Limited Liability Partnership

LLP, through definition, combines the features and characteristics of a partnership with the limited liability features of a company. Previous debts of a business are not their debts. Hence, they do not come calling for the partners’ heads beyond agreed contributions in case of failure. It makes the form quite ideal for professional services firms and small to medium-sized business units.

LLP is preferred by many businesses. This is because of the balance between ease of operation and limited liability protection. Growth and expected investments, which are possible in other structures, cannot be implemented in the case of LLPs. Again this type of company is not allowed to be used for forming a subsidiary.

Private Limited Company

This structure is comparatively popular and widely used for setting up a fully-owned subsidiary company in India. It provides a limited liability shield to its shareholders and has a separate entity from that of its owners. This will help foreign companies to hold 100% of their subsidiary. And will become an entirely wholly-owned subsidiary company in India.

Whereas the case of a private limited company is there which needs to comply with more regulatory compliance. The plus point is that they also offer overall multiple benefits. These are in terms of capital raising and investors as well as ease of operation. Thus, they are the most favored route for foreign businesses entering the Indian market.

Public Limited Company

A public limited company is a much more prominent business entity that can raise even more capital from the general public. It combines the advantages of limited liability and a separate legal body distinct from the owners. However, it comes with more regulation and higher regulatory demands.

Public Limited Companies are more suitingly used for large businesses with high capital needs. They typically raise debts or equities and are listed on the public stock exchange. This type of company structure does not find much favor in the making of a subsidiary company in India. At least for new businesses due to high complexity and regulatory burden.

Types of a Subsidiary Company in India

Before starting a company in India, the types of subsidiary company structures are critical to consider. Key ones are a Wholly Owned Subsidiary, a Joint Venture, and Setting up either a Branch Office or a Liaison Office. Each of these has its unique potential benefits and considerations.

Wholly Owned Subsidiary

This is a model in which a foreign parent company holds a full 100% stake in the Indian subsidiary. Without any joint venture, the parent company has absolute control of the operations. It is free to go about implementing any kind of strategy and policy that it may desire with so much ease. This would call for an upfront higher investment and 100% compliance with India’s regulations. However, this is not an easy task for any new entrant.

Joint Venture

By entering a Joint Venture, a business actually enters into the working fold directly with an Indian partner. This Indian partner individually owns and manages the establishment. This is a huge advantage as far as local knowledge and networks are concerned and market entry is localized. Even though a Joint Venture has shared control, this structure ensures equality with the local partner. This itself means that the chances of conflict are minimal.

Branch Office vs. Liaison Office

A branch office is an extension for performing trading or consulting-related business independently on behalf of the parent company. Whereas, a liaison office is only created for the non-commercial purpose. For instance, surveying the market. The branch office, however, could perform direct business activity. Thus, the requirements for it are naturally far more stringent compared to the liaison office.

The choice of the right Indian subsidiary structure depends on the business’s strategic aims. It also depends on the kind of control and investment the business wants to make.

Pros and Cons of Each Structure

Structure

Pros

Cons

Wholly Owned Subsidiary

Complete control, easier decision-making, and full profit retention.

High initial investment, full liability, complex compliance requirements.

Joint Venture

A PEO is solely responsible for managing the payroll, health benefits, onboarding, and other administrative tasks for local employees.

Potential for conflicts, shared profits, slower decision-making.

Branch Office

Direct access to the Indian market, and revenue generation.

Higher compliance, full tax liability.

Liaison Office

Minimal compliance, easy setup, no tax liability as no revenue generation.

Limited activities and no direct business operations.

Structure

Pros

Cons

Wholly Owned Subsidiary

Complete control, easier decision-making, and full profit retention.

High initial investment, full liability, complex compliance requirements.

Joint Venture

A PEO is solely responsible for managing the payroll, health benefits, onboarding, and other administrative tasks for local employees.

Potential for conflicts, shared profits, slower decision-making.

Branch Office

Direct access to the Indian market, and revenue generation.

Higher compliance, full tax liability.

Liaison Office

Minimal compliance, easy setup, no tax liability as no revenue generation.

Limited activities and no direct business operations.

Strategic Approach for a Subsidiary Company in India

While setting up a subsidiary in India, the strategy needs to be based on the purpose of the subsidiary. There are options for both by foreign companies. Usually, either a Cost Centre Subsidiary—-service-oriented, or a Revenue-Generating Subsidiary—-market-facing.

In the case of a Cost Centre Subsidiary, the overseas entity has to be serviced while ensuring that its costs are managed efficiently. Such a subsidiary often acts more like a support hub. It also provides important services such as IT, customer support, and back-office operations.

The important issue, therefore, would be integration with global operations. This is to ensure there is no disruption of services, cost structure optimization, and compliance with India’s regulatory framework. A cost center will hence demand a proper understanding of local labor laws. It is accompanied by taxation, and employment practices for its smooth operation and compliance with the same.

In contrast, a Revenue-Generating Subsidiary is focused on market entry and business expansion. This subsidiary type would target tapping the Indian emerging market. This would focus mainly on sales, distribution, and local partnerships.

The strategic planning would consist of tackling local sales regulations, consumer behavior, and the creation of a strong distribution network. In addition, certain Indian tax laws must be complied with to avoid legal hassles. These laws are pertaining to foreign companies, foreign exchange regulations, and corporate governance standards.

Both methods do require a lot of deliberation. Still, the right approach will help foreign companies in India to maximize subsidiary growth and operational efficiency.

Key Steps to Form a Subsidiary Company in India

The process of a subsidiary formation in India involves cascades of steps. This also involves some very critical steps that would set the tone for a business’s success. This will help businesses get an idea about how to create a company in India.

Initial Market Research and Feasibility Studies

Extensive market research and feasibility studies should be done before actually getting into the process. It will help a company understand the demand for its products or services. Additionally, to know the potential competitors and analyze the local business atmosphere. This becomes a very critical step in designing a subsidiary that stays tuned to the market needs and the company’s goals.

Selection of Location

The advantage here lies in the diverse cultures of different regions, and high-tech centers in the country. For instance, Bengaluru and Hyderabad, industrialized Gujarat, and the country’s financial hub, Mumbai. These infrastructural advantages should always be taken into consideration. Especially, in deciding on the right location, access to talent, suppliers, and local regulations. Its location can be so crucial as to make a difference in the operational efficiency and growth prospects of the subsidiary.

Legal and Regulatory Compliance

Knowing how to set up a company in India implies that the business should have an insight into the legal framework. Within which the various activities are supposed to fall. This may include subsidiary company registration in India, acquisition of licenses necessary, and compliance with taxation requirements. The regulatory environment in India can be rather complex. However, going through it is one very important step for the long-term success of the subsidiary.

Indian Subsidiary Incorporation Process in India

Step 1: Application for Digital Signature Certificate (DSC)

In turn, this will incorporate the process of obtaining a digital signature certificate. And, hence, elaborate on the methodology of how to register a subsidiary company in India. The digital signature certificate of the directors becomes their digital key in the validation and signing of electronic documents.

Step 2: Apply for a Director Identification Number (DIN)

As previously stated, an application for a Director Identification Number will have to be made by every director. It will be submitted, with the purpose of feeding a database of the directors. It is done in response to the Registry of Indian Corporate.

Step 3: Name Reservation

The name of the company needs to be reserved first and that can be done by applying through an online service. The service is called RUN (Reserve Unique Name). It is provided by the Registrar of Companies or facilities available with the MCA (Ministry of Corporate Affairs). While forwarding the name, one must ensure that the proposed name is unique. And accordingly complies with the naming guidelines stipulated by the MCA.

Step 4: Filing for Incorporation

Please take note that the name for the registration of any company can be done through the SPICe+, form. Further, the company must file and upload a number of documents. This should be in relation to the Memorandum of Association and the Articles of Association.

Step 5: PAN and TAN Application

Once the Company has received the acceptance of its incorporation, it proceeds to further steps. The company must apply to get a permanent Account Number, Tax deduction, and Collection Account Number. This is to operate legally in the region of India.

Step 6: Open Bank Account

For foreign companies in India to operate, a local bank account is a necessity. An account cannot be opened immediately. It can only be done strictly after the certificate of incorporation has been issued. One of the very first steps a business can take towards establishing a foreign business in India is opening a bank account.

Step 7: Post-Incorporation Compliance

After incorporation, it is of prime importance to undertake compliance under the provisions of India. It includes filing annual returns along with regular meetings of the board, following tax laws, etc.

Time Prescribed

Generally, it takes from 15 to 30 days to incorporate a private limited company in India. It would pretty much depend on how promptly documents are submitted. Additionally, how correctly information is furnished, and how efficiently things are processed by the government. It may take a little while longer in a case where any inconsistency in the documents comes to notice. Also, if some unseen legal requirement arises at the last minute, or there is a backlog at the Ministry of Corporate Affairs.

Cost of Incorporation

Registration of the subsidiary in India will require government fees. Such as name reservation, incorporation filing, DIN application, PAN/TAN filing, etc. The cost of the government fee for undertaking each of those activities should generally be INR 7,000-20,000.

Professional Fees: Such fees would be paid to a lawyer and an accountant. This personnel would take care of documentation, compliance, and filing processes. These professional fees, on average, fall between INR 10,000 and 50,000. It depends on the number and complexities of the process of incorporation.

Other miscellaneous head expenses include notarization charges, and stamp duty on the Memorandum and Articles of Association. It also involves the expenses of getting one registered office address. Costs in the miscellaneous headings would range from INR 5,000 to INR 10,000 exactly.

Thus, the minimum and maximum cost of a company incorporated in India would finally be between 15,000 and about 50,000 rupees. Again, it depends on the requirements of the company.

Need and Role of a Local Director for an Indian Subsidiary

Appointing a local director is of immense importance while establishing a subsidiary company in India.

Legal Requirement: Under existing Indian law, it is a must to have a local resident director in each subsidiary company incorporated in India. This would ensure compliance locally and provide a local point of contact for Indian authorities.
Representative: The local director represents the subsidiary before all regulatory bodies. The director ensures that all the compliances, particularly legal and financial, are followed up. All while maintaining the governance as per corporate requirements. Acting as a link between the parent office and local operations helps in sailing through the complexities of Indian business regulation.
Appointment and Qualifications: The selection of a local director for the subsidiary becomes very important for foreign companies. The individual should have the right kind of qualifications and knowledge of corporate law in the country. This person should have a good working knowledge of local business practices and legal frameworks. And be in a position to conduct the affairs of the subsidiary as required. It not only serves the purpose of legal compliance but will also strengthen the operational base of the subsidiary company in India.

Documents Required for Incorporation of a Subsidiary Company in India

For Directors and Shareholders

Proof of Identity: Scanned copy of valid Passport of Foreign Company’s Director and Shareholder.

Proof of Address: Bank statement or Utility bill of not more than two months old.

Photographs: Scanned passport-size photographs of each one of them.

Registered Office Proof

Address Proof: Copy of the rental agreement with or proof of premises ownership in respect of proposed registered office premises in India.

NOC: No Objection Certificate from the landlord of the registered office, for allowing the use of the said premises as the registered office.

Utility Bills: Latest Electricity or Water Bill towards Address Verification

Company Documents

Certificate of Incorporation: Proof from Home Country about the legal existence of the Overseas Parent Company.

MoA and AoA: The Chartered Documents describing the Scope and Rules of the Company.

Board Resolution: The Resolution passed by the Parent Company for Opening a Subsidiary in India.

Selection Criteria of Vendor for Indian Subsidiary Incorporation

Experience and Expertise

In the process of incorporation of foreign subsidiary in India, one has to decide on the right vendor for incorporation. First of all, their experience and expertise in dealing with overseas entities have to be judged. The vendor with a proven record will know all the minute details about how to set up a company in India.

Reputation and References

Check the testimonials and case studies of other overseas companies that have been successfully set up with their subsidiaries in India. A good vendor will have a proven track record of highly satisfied clients. They will also have strong relationships within the industry.

Transparency in Pricing

It has to be made sure the vendor clearly lays out all the involved costs. And does not include hidden charges so that the company knows exactly what it is paying for.

Comprehensive Service Offerings

Also, check if the vendor has integrated end-to-end service offerings. It should not just end with the process of incorporation. But go on to provide support for legal compliance, taxation, and follow-up administration, making it absolutely hassle-free.

Local Presence and Support

Finally, a vendor with a local presence and support in India becomes very crucial. He will understand the local regulations firsthand. And be able to guide and assist on the ground to make the establishment of your subsidiary totally hassle-free.

Taxes and Financial Considerations

The awareness of the corporate tax structure is crucial for businesses planning to launch a subsidiary company in India. Generally, in India, the corporate tax rate is approximately 25% for domestic companies. This also includes certain reliefs for companies with lower turnovers. For foreign companies in India, the tax rate is normally approximately 30%.

The transfer pricing regulations in India are strict. This is to ensure the entity undertakes transactions with other related entities at arm’s length. More so, this is an international imperative for foreign subsidiaries. Otherwise, non-compliance attracts hefty penalties.

Profits declared by the subsidiary may be repatriated subject to specified conditions and taxes. Dividends distributed by the subsidiary are, at independence, taxed directly at the source. This is generally at a rate of 20% unless there is a Double Taxation Avoidance Agreement (DTAA). DTAAs often reflect substantial tax relief. Yet are needed to ensure that foreign companies do not suffer double taxation in the two jurisdictions on the same income.

This understanding of the financial considerations is key to managing operations properly for various types of subsidiary companies in India.

Human Resources and Talent Acquisition

During the process of setting up a subsidiary company in India, one should adopt a strategic approach towards Human Resources. This also applies in the case of acquiring talent. One of the most significant recruitment challenges faced in India is how to deal with the vast, diversified pool of candidates. It is essential to be aware that the competitive scenario might demand a lucrative compensation package. This comes with the growth prospects of hiring the best workforce. However, this diversity does offer a great opportunity as India has a large, skilled workforce covering most sectors.

While hiring in your Indian subsidiary, employment laws, and compliance do play a huge role. These companies shall consider plenty of regulations—labor laws, taxation, and employee benefits. These laws need to be understood to avoid legal difficulties and ensure smooth operations.

Another critical aspect of workforce management would be cultural considerations. With the rich diversity of India’s culture, HR policies have to be inclusive and sensitive to regional differences. Effective management could bind the team into a cohesive and productive unit. This makes the incorporation of a foreign subsidiary in India not just a legal process but the foundation for long-term success.

Local Business Culture and Practices

Understanding Indian business etiquette is the key to establishing and running a subsidiary company in India. The local business culture is based on establishing personal acquaintance and trust before any formal negotiation can take place. Meetings usually start with informal conversations. Indeed, the development of rapport appears to be a serious selection criterion for further cooperation.

Businesses must keep patience while discussing deals or contracts. It is very important, as negotiations in India take much longer time than in Western practices. The final decisions are often taken after rounds of discussions. And hierarchical structures mean that the last call may rest with senior management.

Hierarchy and titles are to be respected. Because respect—let alone politeness toward elders and senior executives is bound to make a difference in business. Also, it will help to know local customs, holidays, and religious practices to plan operations and keep the goodwill of workers and partners.

Foreign companies, many of whom are planning to form a company in India, should be sensitive to these cultural nuances. That can be quite rewarding for the prospects of the subsidiary company in India. One having such insight will ensure smoother operations. It will ensure stronger bonds with local partners or clients and set the path toward long-term success.

Managing Risks and Challenges

Opening a subsidiary company in India has its own set of problems. Bureaucracy is the first big challenge that most companies face in this country. The regulatory environment in India is complex and full of vast numbers of compliance requirements. Knowing what a subsidiary company is and getting all the paperwork right can help avoid delays or fines. This can be achieved more easily with local expertise or through hiring a consultant.

Dealing with local competition is yet another challenge. In India, foreign companies should be prepared to face domestic players who are more established in their home ground. This will require them to conduct thorough market research. Following competitive strategies drafted in accordance with the Indian market is also a mandate.

Equally important is the mitigation of operational risks associated with supply chain disruptions. Understanding cultural nuances, and compliance regarding labor laws are other such necessary factors. Several subsidiary company examples in India have followed a proactive approach to risk management. This clearly helped in the growth and success of a subsidiary. It is by struggling head-on with these challenges that foreign companies in India will strongly establish themselves. And will gain sustainability in the Indian market.

Leveraging Government Incentives

There are plenty of government incentives in India for luring foreign companies to set up their subsidiary companies. A proper understanding of these incentives will go a long way in helping reduce operational costs. This will also improve profitability considerably.

Overview of Government Schemes and Benefits

The Indian government has introduced several initiatives to help industries, such as the Make in India initiative. This helps in exemptions of taxes and subsidizing industries to make the processes easier. Secondly, there is a production-linked incentive that provides support for promoting local manufacturing and reaping foreign investment.

Incentives Based on Sectors

It identifies and categorizes certain incentives for various sectors like IT, pharmaceuticals, and renewable energy. For instance, foreign companies investing in India in the field of renewable energy enjoy facilities of tax holidays. Further, they enjoy capital subsidies and soft loans, and that will show India as a financially viable market.

Special Economic Zones (SEZs) and Industrial Corridors

The SEZs and Industrial Corridors are developed strategy-wise with infrastructure and tax benefits. One can very well set up a subsidiary company in these zones to avail the duty-free imports, tax exemptions, and more logistics support.

These above incentives must be clearly explained while describing what is a subsidiary company. And searching for subsidiary company examples in India.

Future Trends in the Indian Market

Considering setting up a subsidiary company in India, it is important to understand some of the emerging trends. Especially the ones that are likely to shape operations in the future. The gravitation of technology forms one of the latest trends. Mainly in areas such as AI, machine learning, and digital infrastructure. These innovations are smoothing the way business processes are conducted. They are even opening up new markets for agile and forward-thinking companies.

The economic changes in the form of middle-class growth are an excellent opportunity. Further, the increased consumer spending in India gives scope to enterprises targeting this growing demographic. Secondly, government policies such as Digital India could be other encouraging factors for foreign businesses to set up an Indian subsidiary. This will guarantee industrial growth and digital adoption.

Regulatory changes will also occur, with reforms making it easier to do business in India. Knowing about such changes will be vital for companies that study how to set up a company in India. Perhaps factors that affect compliance, taxation, and efficiency in general operations.

The subsidiary company in India should align corporate strategy with these trends. Hence, they will be well-placed to take advantage of this dynamic market environment.

Case Studies

Successful Subsidiary Formations in India

The formation of a subsidiary company in India has been successful for many multinational companies. One such company is Artson Engineering Limited which formed a subsidiary in India. They benefited from the skilled manpower and low operational costs available in the country.

This subsidiary expanded the company’s geographical boundary and emerged as a hub for innovation and engineering excellence. This points to the fact that the subsidiary’s goals should be aligned with the demand of the local market. They should also devotedly follow the cultural dimension of the country.

Lessons to be Learnt from Unsuccessful Ventures

Not all of these ventures have been successful. The fact that Tesco took a while to break into the Indian market when first trying through its subsidiary underlined a number of lessons. It involved challenges related to regulatory hurdles, non-understanding of local markets, and poor supply chain networks which prevented the process. Failure has been described with the importance of appropriate market research and well-formulated strategy. These are the factors every business would seek in determining how to set up a company in India.

They also learn how to conquer the complications of setting up an Indian subsidiary. And not repeat some of the mistakes by studying successful and unsuccessful attempts.

General Compliances and Formalities

The mere incorporation of a subsidiary company in India would invite the following compliances. And the related formalities for its legality and smooth functioning.

AGM: Every Indian subsidiary is supposed to hold at least one general meeting in each financial year. This should be within six months from its financial year-end. Minutes of the meeting along with requisite resolutions are to be filed with the RoC.
Financial Statements and Audit: Audited financial statements of its Indian subsidiaries shall be filed annually. This should be duly supported by a balance sheet, profit and loss account, and cash flow statement. The audited documents so filed shall be certified by an independent auditor.
Statutory Filings: The filing to RoC is done in a timely manner. This can be in the form of annual filings. Such as annual returns, director KYC, and forms that may be applicable under the Companies Act.
Tax Compliance: Most importantly, there is compliance with the tax laws in India. This includes registration under GST, corporate filings of taxes, and advance tax. Failure at this ground leads to penalties.
Employee Compliance: Compliance with Indian labor laws is a mandate. This includes the contribution of EPF and other such allied employment laws.

Assistance in maintaining these regular compliances will keep anyone in good books and ensure hassle-free, fast-functioning tendencies.

Process for Closure of the Entity

This is a process that would eventually guarantee the successful closure of the entity. The shutdown of a subsidiary entity in India refers to the methods that could be systematic. This applies from a legal, financial, or statutory point of view.

Voluntary Closure

This is followed by the filing and settling terms including debts and tax matters to obtain the closure certificate. The winding up of the subsidiary company in India is carried out by obtaining the necessary approvals. It commences with a board resolution, where the directors of the Indian subsidiary mutually decide on closure.

The next step towards approval from the board is the shareholders’ approval. The special resolution should be passed with a general meeting having at least three-fourths of the total shareholders. This is a very important step because it virtually represents the pooled decision of the shareholders. This step is in relation to the winding up of the company voluntarily.

Application for Closure

Thereafter, upon receiving the above two approvals, the application for closure is made to the RoC. The application shall be accompanied by attachments. Such as the board resolution, shareholder resolution, statement of assets and liabilities, and indemnity bond. The company shall inform other concerned authorities. Such as the Income Tax Department and MCA, regarding the closure of the company.

Closure of Debts and Liabilities

The subsidiary company should retire every debt and liability of the Company to process for closing. In other words, the company should ensure its financial obligation is met before it ceases operation. This applies to everything else that the owner (shareholders) is obliged to pay and claim to this asset.

Final Payments of Taxes

Final returns are to be filed by the subsidiary company. Here, all incomes earned and expenses incurred by it up to the date of closing have to be shown. The company has to obtain a tax clearance certificate from the Income Tax Department, showing that there is no pending tax due.

Issue of Closure Certificate

It would be followed by the closure certificate from the RoC. A closure certificate is the last certificate to be obtained. This is after all the required sets of documents have been submitted. And ROC is satisfied that the company has complied with all its obligations. This certificate means the official de-registration of the subsidiary company in India. And that it is no longer a legal entity anymore.

This process, when successfully addressed, ensures that the Indian subsidiary is wound up properly. And is with due compliance with the law— with no liabilities that may arise in the future.

Conclusion

Expanding into India represents one of the greatest growth opportunities for most international businesses. The times are ripe to set up a subsidiary company in India. India poses itself as an optimistic economy with a large consumer base and government policies. This enables and facilitates foreign investment with a strategic advantage in long-term corporate success. Setting up an Indian subsidiary will let businesses jump right into the fastest-growing economies in the world.

An Indian subsidiary will be the most influencing factor in setting the path for business growth. No matter if the business is driven by cost-effective operations, market expansions, or innovative opportunities. Getting into the Indian market at a time when the global business template is altering can be a business-enhancing experience.

FAQs

Let us discuss some commonly asked questions regarding subsidiary company in India.

How to start a subsidiary in India?

The incorporation of any Indian subsidiary would be by selecting the type of company, and then getting it registered with the MCA, taking all necessary licenses, and following all regulations in general. It normally takes approximately 4-6 weeks.

Do subsidiary companies pay tax in India?

Yes, companies having subsidiaries operating in India are liable for corporate taxation on income as derived from the revenue of their business. The tax rate is similar to that of domestic companies and is chargeable based on the revenues of the company. Other taxes include GST, TDS, and MAT, which are further liabilities based on the activity of the company.

What are the rules for subsidiary companies in India?

In India, the incorporation and management of subsidiary companies are dealt with under the Companies Act 2013, together with compliance matters. Foreign ownership is welcomed, but regulations in terms of the industry and structure apply.

What is a subsidiary company in India?

In India, it would be considered a subsidiary company when a business belongs to a foreign parent company, having the majority share in it. As it operates under Indian law, it thus enables the parent company to extend its operations in India with substantial control.

What are the advantages of registering a subsidiary company in India?

Registration of a subsidiary in India provides a whole gamut of benefits related to huge and continuously expanding markets, income-friendly tax regimes, fewer regulatory hurdles, etc. This will ensure total control over the business activities, easier repatriation of profits, and a well-diversified and skilled workforce for conducting cost-effective operations with long-term growth potential.

How many subsidiaries can a company have in India?

An Indian company can have any number of subsidiaries, with no particular limit. In return, every subsidiary will be obliged to follow all corporate laws of India and their implementation such as that concerning registration, financial reporting, and taxation.

What is a fully owned subsidiary in India?

A wholly-owned subsidiary in India is a company whose total share capital is owned by a foreign parent company. Thus, the latter fully controls it in every field of operation, management, and decision. It is one of the most popular structures for foreign companies present in the Indian market.

How do I start my own company in India?

The foreign business will have to select a proper form of business organization for incorporating the venture in India. Private limited company is a good option. First and foremost, it is necessary to get the company incorporated with MCA, get licenses, and follow all possible legal and tax compliances. Experts’ consultation is recommended to make this process very easy.

How much does it cost to build a company in India?

The total cost of incorporation of a company in India requires approximately INR 50,000 to INR 2,50,000 for government fees on registration, legal and professional charges, and miscellaneous expenses regarding the type and specific business requirement.

What are the requirements for a subsidiary company?

The minimum statutory requirements for setting up a subsidiary company in India are at least two directors, shareholders, one registered office address, and compliance with the laws and regulations of India. The incorporation involves filing of certain documents with the RoC.

What are the compliances for subsidiary of a foreign company in India?

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Rajendra Vaidya

Rajendra Vaidya is the CEO and founder of Remunance Group, a leading provider of Employer of Record (EOR) services. A serial entrepreneur with over 40 years in technology, outsourcing, and HR services, he has a strong record of scaling businesses and driving growth. Known for his strategic vision and operational expertise, Rajendra has led large projects and remote teams, ensuring seamless service delivery even in challenging times. He holds a Bachelor’s degree in Engineering and is an avid high-altitude mountaineer, having climbed peaks across the Himalayas, Africa, and Europe.