A Spanish parent normally funds an Indian subsidiary with equity, because equity is the simplest route under the Foreign Exchange Management Act. The shares must be issued at or above fair value, allotted within 60 days of receiving the money and reported on Form FC-GPR within 30 days of allotment. A later transfer of shares between a resident and a non-resident is reported on FC-TRS within 60 days, and the company files the Foreign Liabilities and Assets return by 15 July each year. Loans are possible but carry rules on the lender, the cost, the minimum maturity and the use of funds, so they are harder than equity. On the Spanish side, an investment of 10% or more and an intra-group loan above EUR 1 million over a year are declared to the Registro de Inversiones Exteriores. A late or wrong filing is easy to avoid and expensive to correct.
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Key facts
| Equity | Shares issued at or above fair value under the Automatic Route in permitted sectors |
|---|---|
| Allotment deadline | Within 60 days of receiving the money; otherwise refund rules apply |
| FC-GPR | Within 30 days of allotment |
| FC-TRS | Within 60 days of a transfer between resident and non-resident |
| Annual return | Foreign Liabilities and Assets return by 15 July |
| Pricing rule | Issue to a non-resident at or above fair value; sale by a non-resident at or below fair value; purchase from a non-resident not above it |
| Loans | External commercial borrowing rules on lender, cost, maturity and end use |
| Spanish declarations | Form D-5A within one month for 10% or more; intra-group loans above EUR 1 million and over one year |
Equity: the normal route
Under the FDI Policy and the Non-Debt Instruments Rules, a non-resident may subscribe to equity shares of an Indian company in a sector under the Automatic Route without prior permission, provided the pricing and reporting rules are followed. Funds come through an authorised dealer bank from the Spanish parent's account, with the purpose stated as capital contribution. The bank issues a foreign inward remittance certificate and a know-your-customer report on the remitter, and the company needs both to file FC-GPR.
Pricing is the key legal point. A new issue to a non-resident cannot be below fair value, which for an unlisted company is determined by a valuation from a Chartered Accountant or merchant banker under internationally accepted methods. At incorporation, shares are usually issued at face value, because the face value is the fair value of a company with no history. For a later round the valuation is needed before the board resolves to issue.
Which instruments are available
| Instrument | Treatment | Notes for a Spanish parent |
|---|---|---|
| Equity shares | Capital account; Automatic Route in most sectors | Simplest; no repayment; dividend tax of 15% under the treaty |
| Compulsorily convertible preference shares and debentures | Treated as equity if fully and mandatorily convertible | Pricing set at issue; conversion formula must comply with the pricing rule |
| Optionally convertible or redeemable instruments | Treated as debt | Fall under external commercial borrowing rules |
| Shareholder loan | External commercial borrowing | Eligible lender, minimum average maturity, cost ceiling and end-use limits; loan registration number |
| Trade credit | Import payables with limits on amount and tenor | Suits supplies of equipment and materials from Spain |
| Guarantees | Subject to FEMA rules on guarantees | Check before a Spanish bank gives a guarantee for an Indian borrowing |
The deadlines that cannot slip
| Event | Deadline | Form or action | Who acts |
|---|---|---|---|
| Receive the money from Spain | Allot within 60 days | Board resolution and allotment | Company |
| Allot shares | File within 30 days of allotment | FC-GPR on the Reserve Bank portal | Company with a Chartered Accountant certificate |
| Transfer of shares between resident and non-resident | Within 60 days of the transfer or receipt of the money, whichever is earlier | FC-TRS | Resident party or its bank |
| Each financial year | By 15 July | Foreign Liabilities and Assets return | Company |
| Loan drawn | As per ECB process | Loan registration number and monthly returns | Company and bank |
| Spanish investment | Within one month | D-5A declaration in Spain | Spanish parent |
The pricing rule in both directions
The pricing rule works in opposite directions depending on who is buying. When a non-resident buys or subscribes for shares, the price must not be below fair value. When a non-resident sells to a resident, the price must not be above fair value. In other words, the foreign investor cannot bring money in cheaply or take it out expensively. The rule is why valuations are needed for new issues, for transfers within the group and for exits. Where the parties want a different price, for example an earn-out or a deferred payment, the structure should be agreed with the authorised dealer bank in advance. See exit and restructuring.
Loans from the Spanish group
A Spanish company can lend to its Indian subsidiary under the external commercial borrowing framework, but the loan must come from an eligible lender, meet a minimum average maturity, stay within the all-in cost ceiling and be used for permitted purposes. The loan is registered with the Reserve Bank, interest is subject to Indian withholding tax at the treaty rate of 15%, and each repayment needs the right documents. Interest is deductible in India only within limits set by the interest limitation rule and by transfer pricing. Loans therefore suit bridging needs, not permanent funding, and many groups use convertible preference shares instead. On the Spanish side, a loan above EUR 1 million with a term over a year is declared.
Matching the Spanish declarations
The Spanish parent declares the acquisition of 10% or more of the Indian company to the Registro de Inversiones Exteriores within one month, through form D-5A, and later reports the annual position on form D-8 where the thresholds apply. The dates and amounts in the Spanish declaration should agree with the Indian FC-GPR filing, because the two will be read together if either authority asks a question. See Spanish parent obligations.
Common funding mistakes
- Remitting before the bank account has the right purpose code.
- Allotting after 60 days because the board did not meet.
- Issuing shares below fair value in a later round without a valuation.
- Using an optionally convertible instrument and discovering that it is debt.
- Paying a founder or employee in shares of the parent without Indian reporting. See hiring in India.
- Filing FC-GPR without the bank's inward remittance certificate.
How much to send and when
Send enough to cover the first period in one remittance if you can, because each remittance generates its own paperwork and exchange-rate risk. If you phase the funding, plan the tranches against the cash plan and make each one a separate allotment with its own 60-day clock. ₹10 lakh is about EUR 9,400 at an indicative ₹106 per euro (2 November 2026 market rate; check the live rate before remitting). See the cost guide.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Agencia Tributaria (Spain), Spanish Ministry of Economy, Trade and Business and the Ministry of External Affairs (India).
Frequently asked questions
How should a Spanish parent fund an Indian subsidiary?
Usually with equity shares under the Automatic Route, issued at or above fair value, with the money sent through an authorised dealer bank.
By when must shares be allotted after the money arrives?
Within 60 days. After that the money may have to be refunded or regularised.
What is Form FC-GPR?
The filing that reports the allotment of shares to a foreign investor, due within 30 days of allotment.
What is Form FC-TRS?
The filing for a transfer of shares between a resident and a non-resident, due within 60 days.
What is the pricing rule?
A non-resident cannot buy or subscribe below fair value, and cannot sell above it. Fair value is supported by a valuation.
Can the parent lend instead of investing?
Yes, under the external commercial borrowing rules, with limits on lender, cost, maturity and use. Interest bears 15% withholding under the treaty.
Are convertible instruments equity?
Only if fully and mandatorily convertible. Optionally convertible or redeemable instruments are treated as debt.
What is the FLA return?
An annual return of foreign liabilities and assets to the Reserve Bank, due by 15 July.
Does Spain need to be told?
Yes. A Spanish investor declares an acquisition of 10% or more within one month on form D-5A, and intra-group loans above EUR 1 million over a year.
What if the filing is late?
A late submission fee applies and, for larger delays, compounding with the Reserve Bank. Avoid it by diarising each date.
Related guides
What a Spanish Parent Must Do at Home: Registro de Inversiones Exteriores Filings, Participation Exemption, CFC Rules and Corporate Records
The Spanish-side steps for a parent investing in India: declarations to the Registro de Inversiones Exteriores (forms D-5A and D-8), board and notarial formalities, the participation exemption, CFC rules, related-party documentation and the beneficial ownership register.
Read the guide →Taking Money Out of India to Spain: Dividend, Management Fee, Royalty, Interest and Capital Reduction Routes Compared, with the Treaty Rate and Spanish Relief
A comparison of the five routes a Spanish parent can use to take cash from an Indian subsidiary, with the Indian withholding tax, Indian conditions, Spanish tax treatment, documents, timing and the traps in each route.
Read the guide →Exiting an Indian Subsidiary: Sale of Shares, Buyback, Voluntary Liquidation, Strike-Off and Merger, with the 10% Treaty Rule, FEMA Pricing and Spanish Declarations
How a Spanish parent can sell, wind up or restructure an Indian subsidiary: the tax on share gains under the India-Spain treaty, FEMA pricing, buyback and capital reduction, liquidation and strike-off, mergers and conversions, repatriating the proceeds and the Spanish filings that close the loop.
Read the guide →Step-by-Step Incorporation of an Indian Private Limited Company by a Spanish Parent: From Name Approval to the Foreign Investment Filing
The exact steps to incorporate an Indian private limited company when the shareholder is Spanish: name, DIN and DSC, the SPICe+ form with AGILE-PRO-S, charter documents, PAN and TAN, bank account, share allotment, FC-GPR, first auditor and commencement of business.
Read the guide →Sources
Last updated 2 November 2026. General information only, not legal or tax advice. Indian and Spanish rules change often; confirm current requirements before acting.