Put the key terms in writing before work starts: an intercompany agreement with the parent, customer and vendor contracts, and employment and IP terms. Use an arbitration clause that names the seat, the rules and the language. India is a party to the New York Convention, which helps foreign awards be enforced here, subject to the conditions of Indian law.
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Key facts
| Core contracts | Intercompany services agreement, customer and vendor agreements, employment and IP agreements, shareholder terms |
|---|---|
| Stamp duty | Applies to many agreements; the rate depends on the state and the document |
| Arbitration law | Arbitration and Conciliation Act, 1996 |
| Foreign awards | Enforceable under Part II of the Arbitration and Conciliation Act, 1996, with conditions; India and the US are both parties to the New York Convention |
| Time limit | A domestic arbitration award must be made within 12 months of completion of pleadings, extendable by 6 months with the parties' consent (Section 29A); international commercial arbitration is not covered |
| Domestic challenges | Challenge to an award under Section 34; enforcement under Section 36 |
| Dispute choice | Court, arbitration or mediation, set in the contract |
Which contracts an Indian subsidiary needs
| Contract | Why it matters |
|---|---|
| Intercompany services agreement | Supports transfer pricing, Withholding Tax positions and the permanent establishment analysis |
| Customer agreements | Scope, payment, liability, data protection and governing law |
| Vendor and landlord agreements | Lease terms, stamp duty and local compliance |
| Employment and IP agreements | Confidentiality, IP assignment and notice terms. See hiring and payroll |
| Shareholder or investment terms | Governance, funding, transfer and exit |
Writing a good arbitration clause
- Name the seat of arbitration; it decides which court supervises the process.
- Choose institutional rules or specify the appointment process for the arbitrators.
- State the language and the number of arbitrators.
- Choose the governing law of the contract.
- Add a step for negotiation or mediation before arbitration, if you want one.
- Check stamping and signature formalities so the clause is enforceable.
Enforcing an award
A foreign award from a country that India has notified as a reciprocating party under the New York Convention can be enforced in India, subject to the grounds in the law. An award made in India can be challenged on limited grounds under Section 34 and is enforced like a court decree under Section 36. Public policy, procedural fairness and jurisdiction are the main grounds raised.
Seat in India or abroad
Many US parents prefer a neutral or foreign seat for disputes with the subsidiary's customers, while others choose an Indian seat for speed of enforcement against local assets. Both are possible. The right choice depends on where the counterparty's assets are and on the cost and speed of each route. We help you decide with counsel.
What this means for a US parent
- Intercompany agreements should be signed by authorized signatories on both sides and match the invoices and the payments.
- Match your US contract templates to Indian law: stamp duty, data protection and employment terms often need local changes.
Mistakes to avoid
- Signing without stamp duty and then finding the document inadmissible or delayed in evidence.
- An arbitration clause with no seat or rules.
- Using a US template with Indian employees unchanged.
- No written agreement between the parent and the subsidiary.
How AU Corporate handles this
We support contracts, arbitration and dispute resolution, and work with Indian and US counsel.
Related services: Arbitration services
Official sources
Rules on this page can be verified at the primary sources: Ministry of Corporate Affairs, Reserve Bank of India, Income Tax Department and the GST portal.
Frequently asked questions
Is a written agreement needed between parent and subsidiary?
Yes. It supports transfer pricing, tax and legal positions and should be in place before services begin.
Can US law be chosen for a contract with an Indian customer?
US law can often be chosen for a contract with an Indian customer, but certain Indian laws apply regardless. Advice should be taken on the clause.
Are foreign arbitral awards enforceable in India?
Awards from notified reciprocating countries can be enforced under the New York Convention framework, subject to the conditions in Indian law.
What is Section 34?
The section of the Arbitration and Conciliation Act that allows an award made in India to be challenged on limited grounds.
Does stamp duty apply to agreements?
Stamp duty applies to many agreements in India, with rates set by the state. Unstamped documents can cause trouble in evidence.
Can disputes with the parent or vendors go to arbitration?
Disputes with the parent or vendors can go to arbitration if the contract has an arbitration clause. The seat, rules and governing law should be chosen carefully. India and the US are both parties to the New York Convention, so a foreign arbitral award is generally enforceable in India under Part II of the Arbitration and Conciliation Act, 1996, subject to its conditions.
Which intercompany transactions must be at arm's length?
Service fees, royalties, cost sharing, loans and interest, guarantees, reimbursements, and the purchase or sale of goods or assets between the subsidiary and any group company abroad. Each needs a written agreement and a pricing method you can defend.
What are MAP and APA?
The Mutual Agreement Procedure lets the Indian and US tax authorities resolve double taxation under the treaty. An Advance Pricing Agreement fixes your transfer pricing method with the authority in advance for several years, giving certainty on large or recurring intercompany transactions.
Who controls the Indian subsidiary: the board or the US parent?
The Board of Directors manages the company, and the parent controls the board by appointing and removing directors as its shareholder. Matters that need parent approval can be written into the Articles or an intercompany agreement. Directors still owe legal duties to the Indian company.
Can an intercompany loan be repaid to the US parent?
An intercompany loan can be repaid to the US parent under the ECB terms. Principal and interest are paid through the bank, interest attracts Withholding Tax subject to treaty relief, and the repayment is reported to the RBI. Repaying outside the approved terms can be a FEMA violation, so the schedule should be followed.
Does the subsidiary reimburse the parent for ESOP costs?
An Indian subsidiary often reimburses the parent for ESOP costs through a cost recharge under an agreement. Deductibility, transfer pricing and Withholding Tax on these recharges are frequently disputed, so the arrangement should be documented carefully from the start.
Is there a time limit for arbitration awards in India?
A domestic arbitration award in India must be made within 12 months of the completion of pleadings, extendable by 6 months with the parties' consent (Section 29A of the Arbitration and Conciliation Act, 1996). International commercial arbitration is not covered by this limit.
Related guides
Transfer Pricing in India: A Guide for US Parents and Their Indian Subsidiaries
How transfer pricing works for an Indian subsidiary of a US company: arm's length pricing, documentation, Form 48, methods, safe harbour and audits.
Read the guide →Tax Notices and Disputes in India: What US Companies Should Do
What to do on receiving an Indian income tax, GST or transfer pricing notice: first steps, appeal routes, DRP, ITAT, MAP and Advance Pricing Agreements.
Read the guide →Hiring and Payroll in India for US Companies: Contracts, PF, ESI and Gratuity
How US companies hire in India: employment contracts, provident fund, ESI, gratuity, professional tax, payroll steps and India's labour codes.
Read the guide →Restructuring, Mergers and Exit: Your Options for an Indian Subsidiary
Options to restructure, sell, merge or close an Indian subsidiary: share sale, slump sale, merger, buyback, strike-off and liquidation, with tax and RBI steps.
Read the guide →Sources
Last updated 14 October 2026. General information only, not legal or tax advice. Indian rules change often; confirm current requirements before acting.