A German parent can leave India by selling the shares, having the company buy them back, winding the company up, or having it struck off if it is dormant. The sale route is the most common: the price must follow FEMA pricing rules, the Indian capital gains tax depends on the holding period (12.5% for unlisted shares held more than 24 months) and the treaty position, and the German parent's gain is generally 95% exempt if it is a qualifying corporation. Closing a company is slower and needs clearance of tax, labour and company law dues.
← Back to the complete guide: How to Set Up a Subsidiary in India from Germany
Key facts
| Share sale | Price must meet FEMA pricing rules; Indian buyer; Form FC-TRS where required |
|---|---|
| Capital gains (India) | 12.5% on long-term gains on unlisted shares (held more than 24 months); short-term gains at the normal rate; check the treaty |
| German side | Gain on shares in a foreign company generally 95% exempt for a corporation; hedged for a German adviser |
| Buyback | Companies Act limits and procedure; tax effect differs from a sale |
| Liquidation | Voluntary winding up under the Insolvency and Bankruptcy Code route or company law; takes time |
| Strike off | Quick route for a dormant company with no assets or liabilities |
| Employees | Retrenchment compensation, gratuity and notice rules apply on a closure |
The exit routes compared
| Route | Speed | Tax result in India | Notes |
|---|---|---|---|
| Sale of shares to an Indian or foreign buyer | Weeks to months | Capital gains tax on the seller | FEMA pricing, valuation report, reporting forms |
| Buyback of shares by the company | Months | Taxed under the rules for buybacks | Limits on size, solvency declaration and procedure |
| Voluntary liquidation | Months to years | Distributions after dues; gain or loss on capital reduction | Creditors, tax clearance, employees |
| Strike off (dormant) | Months | Only if no assets or liabilities | Not suitable if there is any activity or dues |
| Sale of the German parent's shares (indirect transfer) | Months | Possible Indian tax on indirect transfer if substantial Indian value | Review before any group restructuring |
Selling the shares
- Pricing: a transfer from a non-resident to a resident must be at or above fair value; a transfer from a resident to a non-resident must be at or below it. A valuation by a registered valuer or merchant banker supports the price.
- Capital gains: India taxes the gain; the treaty position on share gains has been described differently in different sources, so confirm the current text with your adviser. See the DTAA guide.
- Reporting: report the transfer on the prescribed form through the dealer bank, within the stated deadline.
- Warranties and escrow: price retention, indemnity caps and escrow are standard; align the governing law and arbitration choices. See contracts and arbitration.
- Withholding Tax by the buyer: an Indian buyer must deduct tax on the gain; get a certificate of lower deduction if justified.
Winding up
- Board and shareholders resolve to wind up, appoint a liquidator and declare solvency where applicable.
- Notify creditors, the Registrar and the tax authority.
- Clear tax, GST, provident fund, gratuity and other statutory dues. Obtain clearance where required.
- Settle employees under the relevant notice, retrenchment and gratuity rules.
- Sell or distribute assets. Repatriate remaining funds through the bank with the right forms.
- File final accounts and obtain the dissolution order.
The German side
- A sale of shares in a foreign subsidiary by a German corporation is generally 95% exempt, with the 5% treated as non-deductible expense; confirm the conditions.
- Losses on the shares and on loans to the subsidiary may not be deductible in the same way as domestic losses. Ask your German adviser before choosing between sale and liquidation.
- Closing a subsidiary after a restructuring can trigger consultation duties in Germany if German jobs are affected. See the capability centre guide.
Planning an exit
- Keep the FEMA file (FC-GPR, FLA returns and bank certificates) in order. An incomplete file slows a sale.
- Settle intercompany balances and transfer pricing positions before the sale.
- Consider tax in both countries before choosing between selling and closing.
- Keep a data room: statutory registers, tax returns, contracts and employment records.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Federal Central Tax Office (BZSt), Handelsregister and the Deutsche Bundesbank.
Frequently asked questions
How can a German parent exit an Indian subsidiary?
By selling the shares, buyback, voluntary liquidation or, for a dormant company, strike off. The sale route is the most common.
What pricing rules apply to a share sale?
A transfer from a non-resident to a resident must be at or above fair value; a transfer from a resident to a non-resident at or below it, supported by a valuation.
How is the gain taxed in India?
Long-term gains on unlisted shares held more than 24 months are taxed at 12.5%. Check the treaty position on share gains with your adviser.
How is the gain taxed in Germany?
Gains on shares in a foreign subsidiary are generally 95% exempt for a corporation, subject to the conditions. Confirm with your German adviser.
Is strike off available for an active subsidiary?
No. It is for dormant companies with no assets or liabilities.
What happens to employees on a closure?
Notice, retrenchment compensation and gratuity rules apply, and state rules may add requirements. Plan these costs before deciding to close.
Related guides
Funding an Indian Subsidiary from Germany: Equity, Convertible Instruments, ECB Loans and RBI Reporting
How a German parent funds an Indian subsidiary: equity pricing, compulsorily convertible instruments, external commercial borrowings, euro remittance, public-lender loans, FC-GPR and the annual FLA return.
Read the guide →Getting Money Out of India to Germany: Dividends, Service Fees, Royalties, Interest and Loan Repayments
How a German parent receives money from an Indian subsidiary: the flat 10% treaty rate, Section 393 withholding, Forms 41, 145 and 146, German 95% exemption, VAT on service fees and Indian GST reverse charge.
Read the guide →Contracts, Courts and Arbitration: Choosing Law and Seat, and Enforcing in India and Germany
How a German parent protects its Indian subsidiary contracts: choice of law, DIS and other arbitration, why German court judgments need a fresh suit in India, enforcing awards, stamping and the investment protection gap.
Read the guide →Common Mistakes German Companies Make in India and How to Avoid Them
The most frequent mistakes German companies make when setting up in India: late FEMA filings, missing forms for treaty relief, works council surprises, apostille errors, PE creation and transfer pricing gaps.
Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and German rules change often; confirm current requirements before acting.