A Hong Kong company can set up an Indian subsidiary, but should plan for government approval. India's Press Note 3 (2020) requires prior approval for investors from countries sharing a land border with India, and India treats Hong Kong together with China: after the March 2026 Cabinet easing, a DPIIT official was reported to say that firms registered in China and Hong Kong still need prior approval. Take written Indian advice on your exact ownership and structure. Once approval is in hand, the mechanics are standard: a private limited company, notarised and apostilled documents (confirm acceptance with the Indian mission), digital signatures and director IDs, one SPICe+ filing, a bank account, and capital remitted from Hong Kong and reported to the RBI. The 2018 tax treaty caps Indian withholding at 5% on dividends and 10% on interest, royalties and technical fees. There is no social security agreement.
This guide is written for the founders, finance heads and operations leads of Hong Kong companies deciding how to enter India, including trading groups, regional headquarters, manufacturers and technology firms. It follows the order of the decisions: approval, structure, set-up, money, tax, Hong Kong-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 is expected for a Hong Kong-registered investor; 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 |
| Minimum capital | None by law; plan 12 to 18 months of costs |
| Registered office | A physical address in India |
| Documents | Hong Kong notary, High Court apostille (confirm acceptance with the Indian mission), consular legalisation as fallback; English documents |
| Hong Kong approvals | None for outbound investment; board resolution, registers and tax review |
| 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 may differ from the Hong Kong parent's year end |
| 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: an investor from a land-border country, or with beneficial owners from one, and, as reported, a company registered in Hong Kong. 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. The government statement reported afterwards said Chinese and Hong Kong-registered firms still need approval.
- 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.
- Hub structures: if a Hong Kong company will hold the Indian subsidiary, build the approval time into the plan. See Hong Kong as a regional hub and Goods via Hong Kong.
What has changed in 2025 and 2026
The Indian rules for land-border investors are being rewritten, the tax law has been replaced, and two data regimes now apply to Hong Kong-India groups.
- 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. Hong Kong-registered firms were reported to be outside the relief.
- New Indian tax law: the Income-tax Act, 2025 applies from 1 April 2026, so sections and form names have changed (Section 393 for withholding, Section 392 for salary).
- Labour codes: reported in force from 21 November 2025; confirm state rules.
- Data: India's DPDP Rules were notified on 13 November 2025, with main duties from 13 May 2027, alongside Hong Kong's PDPO. See Data protection: PDPO and DPDP.
- Hong Kong tax: the foreign-sourced income exemption regime and the Hong Kong Minimum Top-up Tax affect how a Hong Kong parent receives Indian income; ask your Hong Kong adviser.
What is specific to Hong Kong companies
| Investment approval | Press Note 3: prior Government approval is expected for a Hong Kong-registered investor |
|---|---|
| Tax treaty | India-Hong Kong DTAA (signed 2018, in force 30 November 2018, effective in India from 1 April 2019): 5% on dividends, 10% on interest, royalties and fees for technical services |
| Service permanent establishment | Services through employees for more than 183 days |
| Tax residency certificate | Tax Residency Certificate from the Hong Kong Inland Revenue Department, with Form 41 (previously Form 10F) |
| Social security agreement | None; MPF is 5% each on income up to HK$30,000 a month |
| Documents | Hong Kong notary and High Court apostille; consular legalisation as fallback |
| Directors | Citizens of land-border countries need Ministry of Home Affairs clearance |
| Parent's financial year | Often 31 December or 31 March, against India's 31 March |
| Time difference | India is 2.5 hours behind Hong Kong |
| Court judgments | Hong Kong is a reciprocating territory under Section 44A CPC; HKIAC awards are enforceable under the New York Convention |
| Trade agreement | None; goods keep their country of origin when routed through Hong Kong |
Which structure should a Hong Kong 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.
| Structure | Best for | Key limits |
|---|---|---|
| Wholly owned subsidiary | Sales, services, trading, captive teams | Approval for a Hong Kong-registered investor; two directors (one resident); audit and ROC compliance |
| Joint venture with an Indian partner | Manufacturing, distribution and local access | Shareholders' agreement must match the approval; pricing rules on transfers |
| Branch office | The parent's own activities such as trade or consultancy | RBI approval; 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 |
| Project office | A specific contract | Conditions on funding and life |
Full comparison: Subsidiary, LLP, branch or JV.
How to incorporate, step by step
Nine steps take a Hong Kong 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 prepare the Hong Kong board resolution in parallel.
- Prepare and authenticate the Hong Kong documents. Certificate of incorporation, business registration, articles, resolution and identity papers: notary, apostille, and consular legalisation if refused.
- Choose the Resident Director. An Indian hire, a relocating colleague or an adviser-nominated director.
- 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 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: 2 to 3 weeks to incorporate from complete documents, after the approval. Deeper guides: Incorporation: step by step and Documents: notary and apostille.
How money moves between Hong Kong 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 and paperwork.
- Going in: equity or compulsorily convertible instruments, priced at or above fair value, with an ECB for loans. Hong Kong has no exchange controls.
- Reporting in: Form FC-GPR and the annual FLA return by 15 July.
- Coming out: dividends at 5% under the treaty; fees, royalties and interest at up to 10%; Hong Kong generally does not tax Indian dividends, subject to the foreign-sourced income rules.
- Paperwork out: Form 41, Form 145, and Form 146 where a Chartered Accountant certifies the payment. Related-party payments 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 Hong Kong parent: a tax treaty exists, an apostille is expected to work but should be confirmed, and there is no social security agreement.
| Instrument | What it does | Key points | Guide |
|---|---|---|---|
| India-Hong Kong tax treaty (signed 19 March 2018, in force 30 November 2018) | Caps Indian withholding, sets permanent establishment tests and allocates income | Dividends 5%; interest, royalties and fees for technical services 10%; service PE over 183 days; principal purpose test | India-Hong Kong tax treaty, article by article |
| Hague Apostille Convention | Hong Kong applies it separately; India is a party; India objected to China's accession | Hong Kong apostille expected to work; confirm with the Indian mission | Documents: notary and apostille |
| Social security agreement | None between India and Hong Kong | Hong Kong staff fall under EPF international worker rules as generally applied | Hong Kong employees: tax, EPF and MPF |
| Free trade or investment treaty | No free trade agreement; no investment protection agreement was found | Hong Kong judgments enforceable in India under Section 44A; awards under the New York Convention | Contracts, courts and arbitration |
Tax and transfer pricing: what the Hong Kong 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 substance of any Hong Kong hub.
- Transfer pricing: Indian rules apply to Hong Kong related parties; trading and re-invoicing hubs need real functions.
- Withholding Tax: payments to the Hong Kong 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: Hong Kong staff days and contract authority can create a taxable presence; service PE over 183 days in any 12-month period.
- Hong Kong result: territorial taxation; foreign-sourced income exemption rules for group members; your Hong Kong adviser must confirm.
Related guides: Transfer pricing, India-Hong Kong tax treaty, article by article and Hong Kong as a regional hub.
Hong Kong rules that follow the group into India
Hong Kong imposes fewer outbound controls than most places, but company law, tax and data rules still travel with the group.
- No outbound approval: no exchange controls; a board resolution and the constitution govern the decision.
- Corporate housekeeping: company secretary, registers including the significant controllers register, annual return and audit.
- Tax: profits tax is territorial; the foreign-sourced income exemption regime and Pillar Two top-up tax can apply to groups.
- Data: the PDPO applies to personal data handled from Hong Kong.
- Pensions: MPF may continue for Hong Kong employees sent to India.
See Hong Kong parent obligations and Data protection: PDPO and DPDP.
Annual compliance: what the subsidiary files
The subsidiary has monthly, quarterly and annual filings on a 31 March 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 Hong Kong dates beside it, is in the Compliance calendar.
People: hiring, visas and provident fund
Indian employment is contract and statute driven. Hong Kong staff on assignment need the right visa, 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 Hong Kong staff: visa category, registration and day counts. See Relocating Hong Kong staff and Hong Kong employees: tax, EPF and MPF.
- Records: keep wage, provident fund and contract records complete for inspections.
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, Hong Kong document authentication, 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 HK$83,000 at an indicative ₹12.07 per Hong Kong dollar, 15 October 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 Hong Kong companies make
- Assuming the Automatic Route. Hong Kong-registered investors are reported to need approval; funding first is a FEMA contravention.
- Building a thin Hong Kong hub. Treaty benefits and transfer pricing need substance.
- Claiming the 5% rate without paperwork. Form 41 and the residency certificate come first.
- Missing the 60-day and 30-day RBI clocks. Late reporting costs fees or compounding.
- Ignoring double provident fund cost. There is no social security agreement.
- Unstamped contracts. Stamp before relying on them in India.
More detail: 12 common mistakes.
The full guide series
Press Note 3: government approval
Why Hong Kong-registered investors are reported to need approval.
Read the guide →India-Hong Kong tax treaty, article by article
Rates, permanent establishment, share gains and the principal purpose test.
Read the guide →Hong Kong employees: tax, EPF and MPF
No social security agreement and the day-count test.
Read the guide →Hong Kong parent obligations
Company secretary, registers, profits tax and FSIE.
Read the guide →Documents: notary and apostille
Hong Kong apostille, legalisation fallback and checklist.
Read the guide →Incorporation: step by step
Approval, SPICe+, bank account and first filings.
Read the guide →Subsidiary, LLP, branch or JV
Choose the structure with approval in mind.
Read the guide →Funding and FEMA
Equity, ECB loans, pricing rules and Form FC-GPR.
Read the guide →Getting money out of India
Dividends at 5%, fees, royalties and loans to Hong Kong.
Read the guide →Transfer pricing
Hubs, re-invoicing, services and documentation.
Read the guide →Hiring in India
Contracts, payroll and labour codes.
Read the guide →Data protection: PDPO and DPDP
Two regimes and cross-border transfers.
Read the guide →Contracts, courts and arbitration
HKIAC, Section 44A and the New York Convention.
Read the guide →Compliance calendar
Indian dates beside the Hong Kong parent's dates.
Read the guide →Hong Kong as a regional hub
Holding, trading and treasury structures and substance.
Read the guide →Relocating Hong Kong staff
Visas, registration and dependants.
Read the guide →Selling, restructuring or closing
Options, FEMA pricing and tax on exit.
Read the guide →12 common mistakes
And the fix for each.
Read the guide →Goods via Hong Kong
Origin, customs value and procurement limits.
Read the guide →157 FAQs on setting up an India subsidiary
From pre-incorporation to closure.
Read the guide →How AU Corporate can help
AU Corporate is a pan-India advisory firm, established in 2016, that supports foreign companies at every stage of an Indian subsidiary. We work with Hong Kong finance teams and advisers so that the Indian and Hong Kong 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 Hong Kong reporting pack.
- Accounting and bookkeeping
- GST
- Withholding Tax
- Payroll
- Monthly MIS
- Hong Kong 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 Hong Kong with the paperwork and treaty position in order.
- Forms 145 and 146
- India-Hong Kong 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 Hong Kong 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. Hong Kong tax, Hong Kong company law and regulatory advice come from your Hong Kong 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, Inland Revenue Department (Hong Kong), Companies Registry (Hong Kong) and the Ministry of External Affairs (India).
Frequently asked questions
Can a Hong Kong company own 100% of an Indian subsidiary?
Yes, in sectors that allow 100% foreign investment, but a Hong Kong-registered investor is reported to need the Government of India's prior approval under Press Note 3, because India treats Hong Kong with China. The sector cap still applies.
Did the 2026 changes remove the need for approval for Hong Kong investors?
No, as reported. After the March 2026 Cabinet decision a DPIIT official was reported to say that firms registered in China and Hong Kong still need prior approval. The 10% passive-ownership easing is for investors from non-land-border countries.
Does a Hong Kong company need to send anyone to India to set up a subsidiary?
No. Filing is online. Directors need Digital Signature Certificates, and Hong Kong documents are notarised and apostilled or legalised. A director who is a land-border country citizen needs Ministry of Home Affairs clearance first.
How long does it take to set up an Indian subsidiary from Hong Kong?
Incorporation takes two to three 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.
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 HK$83,000 at an indicative ₹12.07 per Hong Kong dollar, 15 October 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.
My Hong Kong company is owned by non-Chinese shareholders. Do I still need approval?
The reported government position is that Hong Kong-registered firms need approval. Take written advice from Indian counsel on your facts before assuming otherwise.
Is there a tax treaty between India and Hong Kong?
Yes. It was signed on 19 March 2018, entered into force on 30 November 2018 and applies in India from 1 April 2019.
What are the treaty rates on interest, royalties and technical fees?
10% of the gross amount for each, with 0% on interest paid to the government, the RBI and designated bodies such as the HKMA.
Does India accept a Hong Kong apostille?
Hong Kong applies the Apostille Convention in its own right and India is a party, so it is generally expected to work. Because India objected to China's accession, confirm with the Indian mission or the receiving authority before relying on it.
Is there a social security agreement between India and Hong Kong?
No. A certificate of coverage is not available, so Hong Kong staff in India fall under the Indian provident fund rules for international workers as generally applied.
Does the PDPO apply to my Indian subsidiary?
The PDPO applies to data users who control the collection, holding, processing or use of data in or from Hong Kong. Indian processing for a Hong Kong group still needs contractual protections. Take Hong Kong advice on scope.
Can a Hong Kong arbitral award be enforced in India?
Yes. India has notified Hong Kong for the New York Convention route, so an award with a Hong Kong seat is enforced as a foreign award, subject to the limited grounds for refusal.
How can a Hong Kong company fund its Indian subsidiary?
By equity, compulsorily convertible preference shares or a compliant external commercial borrowing, always through a bank.
What is the withholding tax on dividends paid from India to a Hong Kong parent?
5% of the gross amount under the treaty if the Hong Kong company is the beneficial owner and the paperwork is in place. The domestic rate on dividends to non-residents is about 20% plus surcharge and cess.
Sources and how this page is maintained
This guide is based on Press Note 3 (2020) and the March 2026 amendments with reported government statements, the Companies Act, 2013, FEMA and the Non-Debt Instruments Rules, 2019, the Consolidated FDI Policy, the Income-tax Act, 2025, the India-Hong Kong tax treaty, 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 Hong Kong rules change often; confirm current requirements before acting.