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A Virginia-based SaaS company set up its Indian subsidiary with AU Corporate in 2018 as a captive centre billing the parent on a cost-plus basis. Today more than 40 people work there, and AU Corporate runs its finance and HR function.
AU Corporate, a New Delhi firm of Chartered Accountants, Company Secretaries and lawyers serving foreign parents since 2016, set up the Indian subsidiary of a Virginia-based SaaS company in 2018 as a captive centre that bills its US parent on a cost-plus basis. The subsidiary now has more than 40 staff in India, which is all of the company's staff except its US sales team, and it has no in-house finance or HR team because AU Corporate runs both functions.
| Item | Detail |
|---|---|
| Parent company | A SaaS company headquartered in Virginia, USA (name withheld) |
| Indian entity | An Indian subsidiary set up with AU Corporate in 2018 |
| Operating model | Captive centre that bills its parent on a cost-plus basis |
| People in India | More than 40 staff, which is all staff except the US sales team |
| AU Corporate's role | Subsidiary set-up, then the subsidiary's finance function and HR function |
| Client since | 2018 |
The parent is a SaaS company headquartered in Virginia. In 2018 it set up an Indian subsidiary with AU Corporate, built as a captive centre: an Indian company that works for its parent and is paid by its parent for the work, on a cost-plus basis.
Apart from the US sales team, all of the company's staff now work in India, so the Indian subsidiary is where most of the company's people are employed and paid.
General background for foreign parents, not a description of this client's accounts.
A captive has one customer, its parent. Its charges are normally set as its costs plus a markup, which must be at arm's length and supported by an intercompany agreement and a transfer pricing study.
Share capital from the parent, any loans and the annual foreign liabilities and assets return are reported to the RBI, and payments to the parent need the right tax and bank paperwork.
The subsidiary pays corporate tax, deducts TDS on its payments and, as an exporter of services, can claim refund of unused GST input credit.
Salaries, provident fund, state insurance, professional tax, tax on salary and labour law compliance apply to every employee, along with tax and FRRO rules for any foreign staff.
An annual statutory audit, board and shareholder meetings, and annual filings with the Registrar of Companies are required whatever the size of the captive.
The facts of this engagement, and the service lines AU Corporate uses for a subsidiary of this kind.
The scope is agreed with each client. These are the service lines AU Corporate uses for subsidiaries of this kind, and not a list of what was done for this client.
The Indian subsidiary now has more than 40 staff, which is all of the company's staff except its US sales team. It has no in-house finance or HR team, because AU Corporate runs both functions, so the US management does not have to build or manage a finance or HR department in India.
AU Corporate has been the company's adviser since 2018.
40+
Staff in India
2018
AU Client Since
General guidance for a parent company planning an Indian captive subsidiary.
Put the intercompany agreement and the cost-plus invoicing in place from the first month, and not at year end.
When one team handles books, tax, FEMA and payroll, the figures agree across every filing.
India revised its safe harbour rules from 1 April 2026, so check whether an election suits your captive.
Audit, ROC, tax, GST, TDS, RBI and payroll dates are fixed, so track them on one calendar.
Payroll, labour law and FRRO work grow with headcount, so choose a provider that can scale with the team.
An Indian company owned by a foreign parent that provides services only to the parent and its group companies.
A captive unit of a multinational that delivers IT, engineering, finance or other work for the group from India.
A pricing method in which the captive charges its costs plus an agreed markup.
The price that independent parties would agree on, which related companies must use under transfer pricing rules.
The Indian tax rules that require transactions between related companies to be at arm's length and documented.
The Foreign Exchange Management Act, 1999, under which foreign investment, loans and remittances are reported to the RBI.
Each service has its own page with the process, the deadline calendar and answers to common questions.
Straight answers to questions foreign finance teams ask about captive centres. Can't find yours? Ask us in the form below.
Written and reviewed by Abhishek Jaiin, Chartered Accountant (ICAI Membership No. 544646) · Last reviewed:
This is general guidance based on Indian law and practice as at the date above. It is not advice for your specific case, and rules can change.
In India, a captive subsidiary is an Indian company owned by a foreign parent that provides services, such as software development, support or back-office work, only to the parent and its group companies, and earns its revenue from them. The case study on this page is about the captive subsidiary of a US SaaS company.
A Global Capability Centre (GCC) is a captive unit of a multinational company that delivers work such as IT, engineering, finance or research for the group from India. The term is often used for larger or broader centres, and many GCCs are set up as Indian subsidiaries, so the compliance is the same as for any other captive subsidiary.
A captive subsidiary gives a foreign company direct control over its India team, its processes, its data and its intellectual property, access to India's pool of IT, engineering and finance talent, and a cost base that is usually lower than in the parent's country. It can also grow with the business. The benefits depend on the size and length of the engagement, so AU Corporate reviews the numbers with you first.
Foreign companies choose India for captive centres mainly because of its large pool of IT, engineering, finance and analytics talent, its time-zone overlap with Asia, Europe and part of the US working day, and a mature ecosystem of global capability centres and service providers. The choice of India still depends on your function, team size and budget.
A foreign company can run software development, IT support, engineering and research, finance and accounting, HR and payroll, customer support, analytics and other shared services through a captive subsidiary in India. The subsidiary works for the parent and its group companies. AU Corporate sets up the compliance for the functions you choose.
With a captive subsidiary, the foreign parent owns the Indian company and employs the team directly, so it controls hiring, processes, data and intellectual property. With outsourcing, a vendor employs the team and serves several clients. A captive needs more set-up and compliance, and outsourcing needs less commitment and less control.
A captive can be cheaper over the long term for a stable, larger team, because the parent pays costs plus a markup instead of a vendor's margin, but a small or short-term team may cost less through a vendor. The captive also carries set-up and compliance costs. AU Corporate helps you compare both options on your own numbers.
There is no fixed team size at which a captive makes sense, because the answer depends on how long you plan to stay, how much control you need and what compliance costs. Some companies start with outsourcing or an employer-of-record arrangement and set up a captive subsidiary as the team grows. AU Corporate can help you plan the move.
The parent should own the intellectual property that the Indian captive creates, and this is set out in the intercompany agreement and in the employment contracts, which assign the work to the subsidiary and then to the parent. The assignment affects transfer pricing and tax, so it should be drafted with your lawyers. AU Corporate coordinates the accounting and tax side.
A captive subsidiary employs its own staff and runs on the parent's systems, so the parent controls access, security policies and confidentiality terms in employment contracts. The subsidiary must also follow India's data protection law for personal data. AU Corporate prepares the employment contracts and policies, and your IT and legal teams set the security standards.
The main risks are transfer pricing disputes if the markup is not at arm's length, tax exposure for the parent if the structure is poorly built, FEMA and ROC penalties for missed filings, staff attrition, and the cost of closing the subsidiary later. AU Corporate builds the documentation and the compliance calendar to reduce these risks.
A subsidiary is a separate Indian company with limited liability for the parent. A branch office is an extension of the foreign company that can carry out specified activities with RBI permission. A liaison office can only promote the parent's business and cannot earn income. A captive is almost always set up as a subsidiary. AU Corporate recommends the structure for your plan.
Foreign companies usually compare cities such as Delhi NCR, Bengaluru, Hyderabad, Pune, Chennai and Mumbai on the talent available, salary levels, office costs, infrastructure and state rules, such as professional tax and Shops and Establishments law. AU Corporate explains the compliance differences for each state, and you choose based on your hiring plan.
Most income tax holidays that once applied to new software and service export units have ended, so a captive decision should rest on operating economics, not tax savings. Some duty or procedural benefits may be available depending on the location and scheme. AU Corporate checks the current schemes for your location and activity.
Services supplied by an Indian captive subsidiary to a foreign parent are generally treated as exports and zero-rated under GST, if the conditions are met, such as receipt of payment in foreign currency. The captive can claim a refund of unused input tax credit. AU Corporate handles the GST registration, the export records and the refund application.
An Indian captive subsidiary adds an agreed markup to its operating costs, such as salaries, rent and overheads, and invoices the parent regularly, usually in foreign currency. The markup must be at arm's length and is supported by an intercompany agreement and a transfer pricing study. AU Corporate keeps the accounts behind the invoices and prepares the transfer pricing report.
A captive subsidiary has one customer, its foreign parent, so all of its revenue comes from a related party and the Indian tax authorities test whether the markup is at arm's length. A low markup can lead to a tax adjustment and penalty. AU Corporate prepares the documentation and the accountant's report each year.
India revised its transfer pricing safe harbour rules with effect from 1 April 2026, and an eligible captive may elect the safe harbour margin instead of a full benchmarking study. The election is optional, has eligibility conditions, and does not bind the US tax authorities. AU Corporate compares the safe harbour with a full study for your subsidiary.
A US company can outsource accounting, tax, payroll and HR compliance for its Indian subsidiary to a provider in India, as in this case study. The subsidiary and its directors stay legally responsible, so the provider should work to a clear scope, with a named manager and regular reporting to the parent.
Monthly accounting and bookkeeping with AU Corporate starts at USD 240 per month. The final fee depends on the number of transactions, bank accounts and employees and the reporting your parent needs. AU Corporate charges reasonable fees for its HR and compliance services and confirms a written quote before work begins.
AU Corporate's standard timeline is 4 to 6 weeks from signed documents to the FC-GPR report for the share capital. It can be faster when the foreign documents are signed and apostilled quickly. AU Corporate then starts accounting, payroll and tax compliance as soon as the subsidiary is incorporated.
Each year, a captive subsidiary in India must get its accounts audited, file its annual returns with the ROC, file its income tax return and transfer pricing report, file GST and TDS returns, report foreign investment and loans to the RBI, including the annual FLA return, and meet payroll and labour law obligations. AU Corporate tracks all of these on one calendar.
AU Corporate does not publish client names or performance figures without the client's approval. If you are considering a similar captive set-up, AU Corporate can discuss the structure with you on a call, and may be able to arrange a reference where the client agrees.
AU Corporate has served parent companies from more than 10 countries, including the USA, UK, Singapore, Australia, Germany, Japan, China, Hong Kong, Spain, France and the UAE. The Indian rules are the same for every parent, and the reporting is set up in your group's framework, chart of accounts and calendar.
Tell us where your parent company is, the size of the team you plan in India and what you need help with. We will reply with a clear quote.