A Chinese parent can fund its Indian subsidiary with equity, compulsorily convertible instruments or an external commercial borrowing, and each route has its own pricing, reporting and tax result. For a Chinese investor, funding has two extra steps: the Press Note 3 approval must be in hand, and the Chinese SAFE registration must allow the remittance. Once the money lands in India, shares must be allotted within 60 days and Form FC-GPR filed within 30 days of allotment. ₹10 lakh is about CNY 70,000 at an indicative ₹14.30 per yuan (July 2026 rate; check the live rate before remitting).
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Key facts
| Equity | Equity shares and compulsorily convertible preference shares or debentures are FDI instruments |
|---|---|
| Pricing | Unlisted shares issued at or above fair value, supported by a valuation from a registered valuer or Chartered Accountant |
| ECB loans | Loans from a foreign equity holder or recognised lender subject to minimum maturity, cost ceilings and registration |
| Chinese side | Approval and SAFE registration through the Chinese bank before remittance |
| Indian side | Press Note 3 approval; inward remittance certificate; purpose code |
| 60 / 30 clocks | Allot within 60 days of receipt; FC-GPR within 30 days of allotment |
| FLA return | Annual return by 15 July |
| Currency | CNY converted to INR by the bank; remit in a freely convertible currency as the bank and SAFE require |
The three routes
| Route | How it works | Reporting | Tax effect |
|---|---|---|---|
| Equity share capital | The parent subscribes for shares at or above fair value | FC-GPR; valuation certificate | Dividends, with Withholding Tax at the treaty rate; no deduction for the subsidiary |
| Compulsorily convertible preference shares or debentures | Fixed return, must convert to equity; pricing fixed at the start | FC-GPR; valuation at issue | Coupon taxed as dividend or interest depending on the instrument |
| External commercial borrowing | Loan with a minimum average maturity and an all-in cost ceiling set by the RBI | Loan registration number; monthly returns | Interest deductible subject to limits; Withholding Tax at the treaty rate |
The money flow from China
- Chinese outbound approvals and SAFE registration are complete, and the Indian Press Note 3 approval is in hand.
- The Chinese parent remits from its own account to the Indian company's account through the authorised dealer bank. Funds should not come from a third party.
- The Indian bank issues a foreign inward remittance certificate that records the purpose code and the sender. Keep it with the allotment file.
- The Indian company allots shares within 60 days of receipt, or refunds the money.
- It files Form FC-GPR within 30 days of allotment, with the valuation certificate and the bank certificate.
- It files the FLA return by 15 July each year.
Points specific to Chinese funding
- Amount and use: the amount remitted and the use of funds should match the Chinese filings and the Indian approval. A mismatch invites questions from both banks.
- Exchange timing: fix the exchange rate on the date of conversion; the rupee price per share on allotment drives the reporting.
- Third-party payments: do not accept funds from related companies that are not on the approved ownership chart.
- Loans from Chinese banks or group companies: an ECB must meet the Indian rules on lender eligibility and cost, and be consistent with Chinese outbound rules. Check the lender is eligible before agreeing terms.
- Convertible loans: optionally convertible instruments are debt and must meet the ECB rules.
Pricing and valuation
- Shares issued to a non-resident must be priced at or above fair value. A valuation report from a Chartered Accountant or merchant banker supports the price.
- Transfers of shares between residents and non-residents follow the same pricing principle, in opposite directions for buy and sell.
- Keep the valuation date close to the allotment date. Old valuations may be rejected.
- For a JV, the price paid by the Chinese party should match the approved terms.
Late filing and compounding
A late FC-GPR, a late allotment, a missing FLA return or an investment without approval is a FEMA contravention. Late submission fees apply for delays in reporting. Serious breaches need compounding, which takes months, and in the worst case the investment is unwound. Build the clocks into the project calendar from the day funds are sent. See compliance calendar.
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
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.
Does the Chinese side need to approve the remittance?
Yes. Outbound investment needs NDRC and MOFCOM approval or filing and foreign exchange registration through the bank before funds go out. Confirm with Chinese counsel.
What is the pricing rule for shares issued to a Chinese parent?
At or above fair value, supported by a valuation from a Chartered Accountant or merchant banker.
Can the Indian subsidiary borrow from the Chinese parent?
Yes, as an ECB, within the RBI's rules on lender, maturity and cost, and subject to the Press Note 3 and Chinese rules.
What happens if I miss the 60-day allotment limit?
The funds must be refunded through the same channel, otherwise the receipt is a FEMA contravention to be regularised.
Is the FLA return required every year?
Yes. The annual return on foreign liabilities and assets is due by 15 July.
Can funds come from a related company that is not the investor?
Not safely. Remit from the approved investor's own account, to match the approval and the bank records.
Related guides
Press Note 3 for Chinese Companies: When Government Approval Is Needed and What the 2026 Easing Changes
How India's Press Note 3 (2020) applies to a Chinese parent: prior government approval for investors incorporated in China, the 2026 easing for passive minority land-border ownership, the control test, the 60-day sectors, director clearance and planning.
Read the guide →What a Chinese Parent Must Do at Home: Outbound Investment Filings, SAFE Registration and Tax Credit for Indian Tax
The Chinese-side steps for a parent investing in India: NDRC and MOFCOM outbound investment approval or filing, SAFE foreign exchange registration through the bank, state-owned enterprise approvals, export controls on technology and tax credit.
Read the guide →Getting Money Out of India to a Chinese Parent: Dividends, Service Fees, Royalties, Interest and Loan Repayments
How a Chinese parent receives money from an Indian subsidiary: 10% treaty withholding, Section 393, Forms 41, 145 and 146, Chinese tax credit, scrutiny of related-party payments and the documents banks ask for.
Read the guide →Compliance Calendar: Indian Deadlines and the Chinese Filings They Feed
A month-by-month compliance calendar for an Indian subsidiary of a Chinese parent: TDS, GST, PF and ESI, advance tax, AGM, AOC-4, MGT-7, FLA return, approval conditions and the Chinese-side reports.
Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and Chinese rules change often; confirm current requirements before acting.