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August 22, 2026
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BySteffy A
Indian Subsidiary in India: Smart Choice for Foreign Companies
Introduction
India has emerged as one of the world’s leading destinations for foreign investment, supported by its large consumer market, skilled workforce, improving infrastructure, and expanding economy. Establishing an Indian Subsidiary in India enables foreign companies to create a separate legal entity and build a long-term business presence in the country.
An Indian Subsidiary Company is incorporated under the Companies Act, 2013, while foreign investment in such companies is regulated under Section 6 of the Foreign Exchange Management Act, 1999 (FEMA), the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the applicable Consolidated FDI Policy issued by the Government of India. Setting up an Indian Subsidiary in India allows foreign businesses to establish operations in India while complying with the applicable legal and regulatory framework.
What is an Indian Subsidiary in India?
An Indian Subsidiary in India is a company incorporated under the Companies Act, 2013 that qualifies as a subsidiary based on the ownership or control criteria prescribed under Section 2(87) of the Companies Act, 2013. Subject to the applicable FDI Policy and sector-specific regulations, a foreign entity may establish a wholly owned or jointly owned Indian Subsidiary Company.
An Indian Subsidiary is a separate legal entity from its foreign parent company. It can own property, enter into contracts, open bank accounts, employ personnel, and carry on business activities in its own name, subject to applicable laws.
Why Should Foreign Companies Set Up an Indian Subsidiary in India?
1. Access to a Large and Growing Market
India is one of the world’s largest consumer markets, offering business opportunities across manufacturing, technology, healthcare, retail, financial services, and several other industries. Establishing an Indian Subsidiary in India enables foreign companies to strengthen their local presence and serve customers more effectively.
2. Growing Opportunities for Manufacturing in India
Government initiatives such as Make in India, investments in industrial corridors, and continued improvements in logistics and infrastructure have strengthened Manufacturing in India. Establishing an Indian Subsidiary in India enables foreign businesses to participate in India’s growing manufacturing ecosystem while serving both domestic and international markets.
3. Skilled and Cost-Competitive Workforce
India has a large pool of skilled professionals across manufacturing, engineering, information technology, pharmaceuticals, financial services, and research and development. This enables an Indian Subsidiary Company to recruit qualified talent and support long-term business growth.
4. Favourable Foreign Investment Framework
Foreign investment in an Indian Subsidiary in India is governed by Section 6 of the Foreign Exchange Management Act, 1999 (FEMA), read with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the applicable Consolidated FDI Policy.
Many sectors permit foreign investment under the Automatic Route, subject to applicable sectoral caps, conditions, and other applicable laws. Certain sectors require prior Government approval under the Government Route or are subject to specific investment conditions. Foreign investors should therefore verify the latest sector-specific FDI requirements before establishing an Indian Subsidiary in India.
5. Separate Legal Entity with Limited Liability
An Indian Subsidiary in India is legally distinct from its foreign parent company. It can own assets, enter into contracts, borrow funds, employ personnel, and conduct business in its own name. The liability of shareholders is generally limited to the unpaid amount, if any, on the shares held by them, subject to applicable laws.
Benefits of an Indian Subsidiary Company
|
Benefit |
Description |
|
Separate legal entity |
Operates independently from the foreign parent company. |
| Limited liability |
Shareholders’ liability is generally limited in accordance with applicable laws. |
|
Local market presence |
Helps establish a long-term business presence in India. |
| Business credibility |
Enhances confidence among customers, suppliers, and financial institutions. |
|
Access to skilled professionals |
Facilitates recruitment across various industries. |
| Long-term business expansion |
Supports sustainable growth and operational flexibility. |
Legal Considerations Before Setting Up an Indian Subsidiary in India
Before establishing an Indian Subsidiary in India, foreign companies should consider the applicable legal and regulatory requirements, including:
- Incorporation under the Companies Act, 2013.
- Compliance with Section 6 of the Foreign Exchange Management Act, 1999 (FEMA), the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the applicable Consolidated FDI Policy.
- Compliance with applicable sector-specific FDI limits and investment conditions.
- Appointment of at least one director who satisfies the resident director requirement under Section 149(3) of the Companies Act, 2013, read with the applicable rules.
- Completion of FEMA reporting through the RBI’s FIRMS Portal or any other reporting mechanism prescribed by the Reserve Bank of India from time to time, where applicable.
- Registration under GST and obtaining other statutory registrations or licences, depending on the nature of the business.
- Compliance with ongoing statutory requirements, including annual filings under the Companies Act, 2013, applicable tax laws, and other regulatory requirements.
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Conclusion
Establishing an Indian Subsidiary in India is a practical and legally recognized way for foreign companies to build a long-term business presence in the Indian market. With growing opportunities for Manufacturing in India, access to a skilled workforce, improving infrastructure, and a structured regulatory framework, India continues to attract global investment.
Before establishing an Indian Subsidiary in India, foreign businesses should carefully assess the applicable FDI regulations, sector-specific conditions, and statutory compliance requirements under the Companies Act, 2013, Section 6 of the Foreign Exchange Management Act, 1999 (FEMA), the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the applicable Consolidated FDI Policy. Professional guidance can help ensure a smooth, compliant, and efficient business setup in India.
Frequently Asked Questions
1. Which provision of the Companies Act defines an Indian Subsidiary Company?
An Indian Subsidiary Company is determined based on the definition of a “subsidiary company” under Section 2(87) of the Companies Act, 2013. A company is regarded as a subsidiary if its holding company controls the composition of its Board of Directors or exercises or controls more than one-half of its total voting power, either directly or together with one or more of its subsidiary companies.
2. Can a foreign company incorporate a wholly owned Indian Subsidiary?
Yes. A foreign company may incorporate a Wholly Owned Subsidiary (WOS) in India where 100% foreign investment is permitted under the applicable FDI Policy and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Where investment falls under the Government Route, prior approval is required before making the investment.
3. What FEMA regulations apply when setting up an Indian Subsidiary in India?
Foreign investment in an Indian Subsidiary is regulated under Section 6 of the Foreign Exchange Management Act, 1999 (FEMA), the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, applicable RBI directions, and the prevailing Consolidated FDI Policy issued by the Government of India.
4. Is Form FC-GPR mandatory after foreign investment is received?
Yes. Where applicable, an Indian company issuing equity instruments to a person resident outside India must file Form FC-GPR through the RBI’s FIRMS Portal within the prescribed timeline under the FEMA reporting framework.
5. Can an Indian Subsidiary acquire immovable property in India?
Yes. Since an Indian Subsidiary is incorporated under the Companies Act, 2013 and is treated as an Indian company, it may acquire immovable property in India in accordance with applicable laws, subject to any sector-specific restrictions and regulatory requirements.
6. What is the minimum director and shareholder requirement for an Indian Subsidiary Company?
A Private Limited Indian Subsidiary Company must have at least two directors and two shareholders, while a Public Limited Company requires a minimum of three directors and seven shareholders. Additionally, at least one director must satisfy the resident director requirement under Section 149(3) of the Companies Act, 2013.
7. Is FEMA reporting required even if 100% FDI is permitted under the Automatic Route?
Yes. Approval under the Automatic Route does not exempt a company from FEMA reporting obligations. After receipt of foreign investment and allotment of shares, the applicable RBI reporting requirements must still be complied with within the prescribed timelines.
8. What ongoing compliances apply to an Indian Subsidiary after incorporation?
An Indian Subsidiary Company must comply with annual ROC filings, maintenance of statutory registers, board and shareholder meetings, financial statement filing, income tax compliance, GST compliance (where applicable), FEMA reporting, and other sector-specific regulatory requirements.
9. How does Ebizfiling assist foreign companies with FEMA and RBI compliance?
Ebizfiling assists foreign investors with Indian Subsidiary Company incorporation, FEMA and FDI advisory, RBI reporting through the FIRMS Portal, GST registration, and post-incorporation ROC compliance to help ensure regulatory compliance throughout the investment lifecycle.
10. Can Ebizfiling assist if my business activity falls under the Government Route for FDI?
Yes. Ebizfiling assists foreign companies in evaluating sector-specific FDI regulations, identifying whether Government approval is required, preparing the necessary documentation, and supporting the incorporation and post-approval compliance process in accordance with the applicable legal framework.
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Amrish Ganatra
28 Nov 2017"Our Company being an Indian Subsidiary requires much compliance, but ebizfiling has provided us end to end services. They are very important part of our business. They handle all of the legal tasks in India. I highly recommend ebizfiling for non-residents thinking of starting a project in India."
Joel D’souza
18 Apr 2018My Company Annual Filling is very well looked after them and I am extremely satisfied and would definitely recommend them for the same.
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