A Chinese company can set up an Indian subsidiary, but not through the Automatic Route. Under Press Note 3 (2020), an investor from a country that shares a land border with India needs the Government of India's prior approval in every sector, and the 2026 amendments, which let passive land-border ownership of up to 10% in a non-land-border investor use the Automatic Route, do not help an investor incorporated in China. Once approval is in hand, the mechanics are standard: a private limited company, documents notarised, authenticated and attested by the Indian mission (there is no apostille between China and India), digital signatures and director IDs, one SPICe+ filing, a bank account, and capital remitted from China and reported to the RBI. The 1994 tax treaty caps Indian withholding at 10% on dividends, interest, royalties and technical fees. There is no social security agreement.
This guide is written for the founders, finance heads and operations leads of Chinese companies deciding how to enter India, including manufacturers, technology groups and trading firms. It follows the order of the decisions: approval, structure, set-up, money, tax, Chinese-side duties, compliance and people. Each section links to a deeper guide. Indian tax law changed on 1 April 2026, when the Income-tax Act, 2025 replaced the 1961 Act; where a form has a new name, we show the new name with the earlier one in brackets.
India subsidiary at a glance
| Item | What to know |
|---|---|
| Typical structure | Private limited company under the Companies Act, 2013, wholly owned or as a joint venture |
| Foreign investment route | Government route: prior approval under Press Note 3 for an investor from China; the sector cap still applies |
| Directors and shareholders | At least two directors and two shareholders; a wholly owned subsidiary uses a nominee or group company as the second shareholder |
| Resident Director | At least one director who has stayed in India 182 days or more in the financial year; Chinese directors need Ministry of Home Affairs clearance |
| Minimum capital | None by law; plan 12 to 18 months of costs |
| Registered office | A physical address in India |
| Documents | Chinese notary, Chinese authentication and Indian Embassy or Consulate attestation; English translation; no apostille |
| Chinese approvals | NDRC, MOFCOM and SAFE approval, filing or registration for outbound investment |
| RBI reporting | Form FC-GPR within 30 days of share allotment; allotment within 60 days of receiving funds |
| Financial year | 1 April to 31 March, which differs from the common 31 December year end of Chinese parents |
| Governing laws | Companies Act, 2013; FEMA, 1999 and the Non-Debt Instruments Rules, 2019; the Income-tax Act, 2025; GST laws |
Step one: government approval under Press Note 3
Approval comes before incorporation and funding. Plan the project around it.
- Who needs it: a company incorporated in China, a Chinese citizen, or an investor whose Chinese beneficial owners hold more than 10% or control it. See Press Note 3: government approval.
- What the 2026 easing does: Cabinet approved amendments on 10 March 2026. A non-land-border investor with up to 10% passive, non-controlling land-border beneficial ownership can use the Automatic Route with reporting. It does not apply to an investor incorporated in China.
- Timeline: approvals have taken months; a 60-day target is reported for specified manufacturing sectors such as capital goods, electronic components, polysilicon and ingot-wafer. Indian majority ownership and control is reportedly expected in those sectors.
- Directors: Chinese citizens proposed as directors need Ministry of Home Affairs clearance. Sector rules and procurement limits are covered in Sectors, procurement and trade rules.
What has changed in 2025 and 2026
India–China relations have thawed in practical ways, but the rules remain tight and are still being written.
- Press Note 3 easing: the March 2026 amendments, with the FEMA rules reported as amended on 1 May 2026, add a beneficial-owner definition and a 10% test. Pending items such as the RBI reporting format and the fast-track procedure were reported as still being finalised.
- Visas: in December 2025 the press reported that business visas for Chinese professionals were being processed in about four weeks, with wider e-visa access for company-sponsored staff, though the scope appears limited.
- Chinese outbound rules: new State Council regulations on overseas investment were reported to take effect on 1 July 2026.
- Technology and equipment: press reports in 2025 described difficulties for some manufacturers moving equipment and Chinese engineers to India.
- Data: China's certification route for personal information exports took effect on 1 January 2026, and India's DPDP duties start on 13 May 2027. See Data protection: PIPL and DPDP.
What is specific to Chinese companies
| Investment approval | Press Note 3: prior Government approval for any investment by a Chinese entity or with a Chinese beneficial owner |
|---|---|
| Tax treaty | India-China DTAA (1994, amended by the 2018 protocol): 10% on dividends, interest, royalties and fees for technical services |
| Service permanent establishment | Services through employees for more than 183 days |
| Tax residency certificate | Chinese tax residence certificate, with Form 41 (previously Form 10F) |
| Social security agreement | None |
| Documents | No apostille between China and India: notary, Chinese authentication and Indian Embassy attestation |
| Directors | Chinese citizens need Ministry of Home Affairs security clearance |
| Parent's financial year | 31 December, against India's 31 March |
| Time difference | India is 2.5 hours behind China |
| Court judgments | China is not a reciprocating territory under Section 44A CPC; awards from China, Hong Kong and Macao are enforceable under the New York Convention |
| Chinese outbound filings | NDRC, MOFCOM and SAFE approvals or filings before the money leaves China |
Already invested without the right filings? See how we handled FEMA compounding for a Chinese-owned Indian subsidiary.
Which structure should a Chinese company choose?
Most choose a private limited company, either wholly owned or as a joint venture with an Indian partner. A branch or liaison office needs RBI approval and track-record tests; an Employer of Record fits a first pilot but not a way around approval.
| Structure | Best for | Key limits |
|---|---|---|
| Wholly owned subsidiary | Sales, development, assembly, captive teams | Government approval for 100% Chinese ownership; two directors (one resident); audit and ROC compliance |
| Joint venture with an Indian partner | Manufacturing, distribution and local access | Approval covers the Chinese stake; shareholder agreement must match it; Indian control expected in fast-track sectors |
| Branch office | The parent's own activities such as consultancy or trade | RBI approval with security review; net worth USD 100,000 and a five-year profit record |
| Liaison office | Market research and liaison | No income or invoicing; RBI approval; USD 50,000 net worth and three years |
| LLP | Partnership-style set-ups in eligible sectors | Tax and FEMA review; approval still applies |
| Employer of Record | First hires without an entity | The EOR is the legal employer; not a long-term substitute |
Full comparison: Subsidiary, joint venture, branch or EOR and Manufacturing and joint ventures.
How to incorporate, step by step
Nine steps take a Chinese parent from board decision to a compliant subsidiary. The sequence matters because each step feeds the next.
- Check the sector and structure. Match your activity to the FDI Policy for the cap, and map the ownership chain to the ultimate owners.
- Apply for Press Note 3 approval and start the Chinese outbound filings in parallel.
- Prepare and legalise the Chinese documents. Business licence, articles, resolution and identity papers: Chinese notary, Chinese authentication, Indian mission attestation, English translation.
- Choose the Resident Director. An Indian hire, a relocating colleague or an adviser-nominated director; add Chinese directors after clearance.
- Get DSCs and DINs. Digital signatures and director IDs for each proposed director.
- Reserve the name and file SPICe+. The Registrar issues the Certificate of Incorporation with the CIN, PAN and TAN.
- Open the bank account and send the capital. From the parent's own account, after SAFE registration and the Indian approval.
- Allot shares and report to the RBI. Allot within 60 days; file Form FC-GPR within 30 days of allotment.
- Commence business. File INC-20A within 180 days, appoint the auditor and register for GST, provident fund and ESI.
Typical timeline: 4 to 6 weeks to incorporate from complete documents, after the approval. Deeper guides: Incorporation: who does what and Documents: notary and legalisation.
How money moves between China and the Indian subsidiary
Money goes in through shares or a loan, and comes out through dividends, fees, royalties, interest and loan repayments. Each route has its own tax, paperwork and Chinese result.
- Going in: equity or compulsorily convertible instruments, priced at or above fair value, with an ECB for loans; SAFE registration in China first.
- Reporting in: Form FC-GPR and the annual FLA return by 15 July.
- Coming out: dividends at 10% under the treaty; fees and royalties priced at arm's length at up to 10%; interest at up to 10%; China taxes the receipt with credit for Indian tax.
- Paperwork out: Form 145, and Form 146 where a Chartered Accountant certifies the payment. Payments to Chinese related parties receive closer checks.
Related guides: Funding and FEMA and Getting money out of India.
The tax treaty, documents and what is missing
Three points matter to a Chinese parent: a tax treaty exists, an apostille does not, and there is no social security agreement.
| Instrument | What it does | Key points | Guide |
|---|---|---|---|
| India-China tax treaty (signed 18 July 1994, in force November 1994, with protocols) | Caps Indian withholding, sets permanent establishment tests and allocates income | Dividends, interest, royalties and fees for technical services 10%; PE tests of 183 days for sites and services, as reported | India-China tax treaty, article by article |
| Hague Apostille Convention | Not in operation between China and India because India objected to China's accession (8 September 2023) | Use Chinese notary, authentication and Indian mission attestation | Documents: notary and legalisation |
| Social security agreement | None between India and China | Chinese staff fall under EPF international worker rules as generally applied | Chinese employees: tax and provident fund |
| Free trade or investment treaty | No free trade agreement; investment treaty position must be checked | India terminated many older treaties from 2016 and 2017 | Contracts, courts and arbitration |
Tax and transfer pricing: what the Chinese parent should know
An Indian subsidiary pays Indian tax on its Indian profits, and the parent's exposure comes from payments, people, pricing and the conditions of the approval.
- Transfer pricing: Indian rules apply with no small-company exemption, and component, equipment and technology flows from China must also match the customs value.
- Withholding Tax: payments to the Chinese parent suffer Indian withholding under Section 393 of the Income-tax Act, 2025, reduced by the treaty where the documents are in place.
- Permanent establishment: Chinese staff days and contract authority can create a taxable presence; sites and services over 183 days are a PE trigger, as reported.
- Chinese result: China generally taxes the receipt with credit for Indian tax; your Chinese adviser must confirm the position, including indirect credit.
Related guides: Transfer pricing, India-China tax treaty, article by article and Getting money out of India.
Chinese law that follows the group into India
Chinese duties do not stop at the border. They shape what the parent can send and what it must be able to show.
- Outbound investment: NDRC, MOFCOM and SAFE approval, filing or registration, with new State Council regulations reported effective 1 July 2026.
- Technology and people: export-control rules can affect machinery, designs and engineers going to India.
- Data: export of personal information and important data needs a security assessment, standard contract or certification.
- Tax: worldwide taxation with foreign tax credit, controlled foreign company rules and related-party documentation.
- State groups: state-owned enterprises may need extra approvals for investment and disposal.
See Chinese parent obligations and Data protection: PIPL and DPDP.
Annual compliance: what the subsidiary files
The subsidiary has monthly, quarterly and annual filings on a 31 March year end, which often differs from the parent's own year end.
| Filing | Frequency | Typical timing | Authority |
|---|---|---|---|
| Statutory audit and financial statements | Annual | Before the AGM | Companies Act |
| Annual General Meeting | Annual | Within 6 months of the year end | Companies Act |
| AOC-4 and MGT-7 | Annual | 30 and 60 days after the AGM | MCA |
| Income tax return and Form 48 | Annual | By the due date; transfer pricing cases later | Income-tax Act, 2025 |
| Advance tax | Quarterly | 15 June, 15 September, 15 December, 15 March | Income-tax Act, 2025 |
| TDS deposit and returns | Monthly and quarterly | 7th of the next month; quarterly returns | Income-tax Act, 2025 |
| GST returns | Monthly or quarterly | 11th and 20th | GST |
| Provident fund and ESI | Monthly | By the 15th | EPFO, ESIC |
| FLA return | Annual | By 15 July | RBI |
| Form FC-GPR | Per share issue | Within 30 days of allotment | RBI |
| Approval conditions | As stated | Per the Press Note 3 approval letter | DPIIT / RBI |
The maintained version, with the Chinese dates beside it, is in the Compliance calendar.
People: hiring, visas and provident fund
Indian employment is contract and statute driven. Chinese staff on assignment need the right visa, security clearance, a tax plan and a provident fund budget, because there is no social security agreement.
- Hiring locally: provident fund, ESI, gratuity, the labour codes and state rules. See Hiring in India.
- Sending Chinese staff: visa category, clearance, registration and day counts. See Relocating Chinese staff and Chinese employees: tax and provident fund.
- Records: inspectors look closely at foreign-owned factories, so keep wage, provident fund and contract records complete.
What it costs and how long it takes
Cost has three parts: one-time setup, recurring compliance and variable items such as approvals, transfer pricing and disputes.
- One-time: government fees and stamp duty (by state and authorised capital), professional fees, the valuation, Chinese document legalisation and translation, and the approval application.
- Recurring: accounting, statutory audit, GST, TDS, payroll and ROC filings.
- Variable: transfer pricing documentation, tax notices, secondments, visas and legal work.
Indicative setup fee: AU Corporate's fee for setting up the subsidiary is USD 750 to USD 1,000 for share capital up to ₹10 lakh (about CNY 70,000 at an indicative ₹14.30 per yuan, July 2026 rate). The costing depends on your plan, and it does not include the Press Note 3 approval work, which depends on the sector and structure.
Tell us what you plan to set up and we will prepare a costing and book a call.
Six mistakes Chinese companies make
- Investing before approval. Press Note 3 approval comes first, and the structure must match it.
- Using a third-country vehicle to hide Chinese ownership. The policy looks at beneficial ownership and control.
- Seeking an apostille. India objected to China's accession, so use the consular legalisation chain.
- Missing the 60-day and 30-day RBI clocks. Late reporting costs fees or compounding.
- Sending engineers on business visas. Hands-on work needs the right visa and clearance.
- Thin records. Foreign-owned factories are inspected; keep contracts, wages and filings complete.
More detail: 12 common mistakes.
The full guide series
Press Note 3: government approval
Who needs approval, what the 2026 easing changes, and the 60-day sectors.
Read the guide →India-China tax treaty, article by article
Rates, permanent establishment, share gains and relief.
Read the guide →Chinese employees: tax and provident fund
No social security agreement, the 183-day test and EPF.
Read the guide →Chinese parent obligations
NDRC, MOFCOM and SAFE steps, technology and tax credit.
Read the guide →Documents: notary and legalisation
Why there is no apostille between China and India.
Read the guide →Incorporation: who does what
The Chinese side and the Indian side, step by step.
Read the guide →Subsidiary, joint venture, branch or EOR
Choose the structure with approval in mind.
Read the guide →Funding and FEMA
Equity, ECB loans, SAFE remittance and Form FC-GPR.
Read the guide →Getting money out of India
Dividends, fees, royalties and loans to China.
Read the guide →Transfer pricing
Form 48, components, technology and customs value.
Read the guide →Hiring in India
Contracts, payroll, labour codes and mixed teams.
Read the guide →Data protection: PIPL and DPDP
Chinese export routes and the new Indian law.
Read the guide →Contracts, courts and arbitration
Awards, judgments and the investment protection position.
Read the guide →Compliance calendar
Indian dates beside the Chinese parent's dates.
Read the guide →Manufacturing and joint ventures
Fast-track sectors, JV terms and technology licences.
Read the guide →Relocating Chinese staff
Visas, clearance, FRRO registration and directors.
Read the guide →Selling, restructuring or closing
Options, FEMA pricing and Chinese approvals.
Read the guide →12 common mistakes
And the fix for each.
Read the guide →Sectors, procurement and trade rules
Government contracts, app blocks and customs duties.
Read the guide →147 FAQs on setting up an India subsidiary
From pre-incorporation to closure.
Read the guide →How AU Corporate can help
AU Corporate is a New Delhi-based advisory firm, established in 2016, that supports foreign companies at every stage of an Indian subsidiary. We work with Chinese finance teams and advisers so that the Indian and Chinese positions agree.
Set up
Choose the structure and incorporate.
- Entity structuring
- Wholly owned subsidiary
- SPICe+ incorporation
- Bank account support
Fund and FEMA
Bring capital in and report it.
- FEMA
- FC-GPR
- Share valuation
- ECB
Operate
Books, payroll and indirect taxes, with a Chinese reporting pack.
- Accounting and bookkeeping
- GST
- Withholding Tax
- Payroll
- Monthly MIS
- Chinese consolidation support
People and relocation
Hire, pay and relocate your team.
- Employer of Record
- HR services
- Expat visa
- Visa and EPF planning
Repatriate funds
Move money to China with the paperwork and treaty position in order.
- Forms 145 and 146
- India-China treaty relief
- Dividends
- Royalties and service fees
- Intercompany agreements
Tax and transfer pricing
Keep the India position defensible.
- Direct and indirect tax
- Transfer pricing
- Form 48
- PE review
- CbCR filing (parent-prepared report)
Audit and assurance
Satisfy Indian law and your Chinese auditors.
- Statutory audit
- Internal audit
- Internal financial controls
- GST and tax audit
Legal, disputes and arbitration
Defend your position and protect contracts.
- Tax litigation
- Arbitration support
- Agreement drafting and vetting
Restructure and exit
Scale, reorganise or leave.
- Restructuring
- Mergers and acquisitions
- Due diligence
- Valuation
- Winding up
Scope note: we handle the Indian side. Chinese tax, Chinese company law, outbound investment filings and regulatory advice come from your Chinese advisers, and we coordinate with them.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, MOFCOM (China), SAFE (China) and the Ministry of External Affairs (India).
Frequently asked questions
Can a Chinese company own 100% of an Indian subsidiary?
Only with the Government of India's prior approval. Under Press Note 3 (2020), an investor from a country sharing a land border with India, including China, needs approval to invest in any sector. The sector's own cap still applies.
Did the 2026 changes remove the need for approval for Chinese investors?
No. The 2026 amendments let a non-land-border investor with up to 10% passive, non-controlling land-border beneficial ownership use the Automatic Route with reporting. An investor incorporated in China still needs approval whatever the amount.
Does a Chinese company need to send anyone to India to set up a subsidiary?
No. Filing is online. Directors need Digital Signature Certificates, and Chinese documents go through notarisation, Chinese authentication and Indian mission attestation. A Chinese director needs Ministry of Home Affairs clearance before appointment.
How long does it take to set up an Indian subsidiary from China?
Incorporation takes four to six weeks from complete documents, but the Press Note 3 approval comes first and can take months, except for a reported 60-day target in specified manufacturing sectors. Plan the approval into the project calendar.
What does it cost to set up a subsidiary in India?
AU Corporate's fee for setting up the subsidiary is USD 750 to USD 1,000 for share capital up to ₹10 lakh (about CNY 70,000 at an indicative ₹14.30 per yuan, July 2026 rate). The costing depends on your plan, and it does not include the Press Note 3 approval work, which depends on the sector and structure.
How long does Press Note 3 approval take?
Historically several months. A 60-day target is reported for specified manufacturing sectors such as capital goods and electronic components, subject to the final procedure.
Is there a tax treaty between India and China?
Yes. It was signed on 18 July 1994 and came into force in November 1994, and has been amended by protocols, including one signed on 26 November 2018.
What is the treaty rate on royalties and technical fees?
10% of the gross amount under Article 12, where the Chinese company is the beneficial owner and has no PE in India connected with the payment.
Can Chinese documents be apostilled for use in India?
No. India objected to China's accession to the Apostille Convention, so the Convention does not apply between them. Use the consular legalisation chain instead.
Is there a social security agreement between India and China?
No. There is none, so a certificate of coverage is not available for Chinese staff.
Can a Chinese company send personal data from China to its Indian subsidiary?
Only through an approved route unless an exemption applies: a security assessment, a standard contract filing or certification, depending on the type and volume of data.
Can a Hong Kong or Singapore arbitral award be enforced in India?
A foreign award from a notified New York Convention territory can be enforced in India under Part II of the Arbitration and Conciliation Act, 1996, on narrow grounds. Awards made in China, Hong Kong and Macao are covered by a 19 March 2012 notification.
How do I fund an Indian subsidiary from China?
Remit equity from the parent's own account after the Press Note 3 approval and the Chinese SAFE registration, then allot shares within 60 days and file FC-GPR within 30 days of allotment.
How is a dividend from India taxed on its way to a Chinese parent?
India withholds at 10% under the treaty on receipt of the Chinese tax residence certificate and Form 41. China generally taxes the receipt with credit for Indian tax, subject to Chinese rules.
Sources and how this page is maintained
This guide is based on Press Note 3 (2020) and the March 2026 amendments, the Companies Act, 2013, FEMA and the Non-Debt Instruments Rules, 2019, the Consolidated FDI Policy, the Income-tax Act, 2025, the India-China tax treaty and its protocols, public statements on China's outbound investment regulations, and India's Digital Personal Data Protection Rules, 2025. Rules change often. We review this page at least quarterly and show the review date at the top.
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and Chinese rules change often; confirm current requirements before acting.