A US company can own up to 100% of an Indian subsidiary in most sectors without prior government approval (the Automatic Route). The usual vehicle is a private limited company, incorporated through the MCA's SPICe+ form, funded by share capital, and reported to the RBI within 30 days of share allotment. At least one director must be a resident of India.
This guide is for US founders, CFOs and COOs deciding how to enter India. It explains the structure, the process, the flow of money, tax, and the compliance an Indian subsidiary carries every year, in plain terms and with the form names your advisers will use. Each section links to a deeper guide.
India subsidiary at a glance
| Item | What to know |
|---|---|
| Typical structure | Wholly owned subsidiary incorporated as a private limited company under the Companies Act, 2013 |
| Foreign ownership | Up to 100% in most sectors under the Automatic Route. A few sectors have caps, conditions or approval requirements. |
| Directors and shareholders | At least two directors and two shareholders. In a wholly owned subsidiary the second shareholder is usually a nominee or group entity holding one share. |
| Resident Director | At least one director who has stayed in India for 182 days or more in the financial year |
| Minimum capital | No statutory minimum. The practical amount depends on your activity, funding needs and the bank. |
| Registered office | A physical address in India is mandatory |
| Incorporation route | MCA's SPICe+ integrated form, which can also apply for PAN, TAN, GST, EPFO, ESIC and a bank account |
| Travel to India | Not required. The process runs online using apostilled documents and digital signatures. |
| RBI reporting | Form FC-GPR within 30 days of allotting shares to the US parent, filed on the RBI's FIRMS portal |
| Annual obligations | Statutory audit, ROC filings, income tax return, GST and Withholding Tax where applicable, payroll compliance, the FLA return to the RBI, and transfer pricing reporting where applicable |
| Governing laws | Companies Act, 2013; FEMA, 1999 and the Non-Debt Instruments Rules, 2019; Consolidated FDI Policy; Income-tax Act, 2025 (replacing the Income-tax Act, 1961 from 1 April 2026) and GST law |
What is specific to US companies
| Tax treaty | India-US DTAA: 15% on dividends (10%+ voting power; 25% otherwise), 10% to 15% on interest, 15% on royalties and fees for included services (10% for equipment) |
|---|---|
| Service permanent establishment | More than 90 days of services in India in any 12-month period |
| Tax residency certificate | IRS Form 6166, with Form 41 (previously Form 10F) |
| Social security agreement | None: secondees can face Indian provident fund and US Social Security |
| Apostille | Secretary of State of the issuing or notarizing state; US Department of State for federal documents |
| Parent's financial year | Usually 31 December, against India's 31 March |
| Time difference | India is 9.5 to 13.5 hours ahead of the mainland US |
| Court judgments | The US is not a reciprocating territory under Section 44A CPC; arbitration awards are enforceable under the New York Convention |
| FDI route | Automatic Route in most sectors; Press Note 3 does not apply |
Which structure should a US company choose in India?
Most US companies choose a wholly owned subsidiary (a private limited company). It is a separate legal entity, can carry on full business operations, limits the parent's liability and is taxed as a domestic company. Branch offices, liaison offices and LLPs exist but suit narrower situations.
| Structure | Best for | Key limits |
|---|---|---|
| Wholly owned subsidiary (private limited) | Operations, sales, development centers, Global Capability Centers | Two directors (one resident), annual audit and ROC compliance |
| Branch office | Specific activities of the parent, such as export and import, consultancy, R&D or IT services | Needs RBI approval; acts as an extension of the US company and is taxed as a foreign company |
| Liaison office | Market research and liaison with no revenue | Cannot earn income or invoice; costs are funded from abroad; needs RBI approval |
| LLP | Certain partnership-style set-ups | FDI allowed only in eligible sectors; US tax treatment can be complex, so check with your US adviser |
| No entity (Employer of Record) | Hiring quickly or testing the market | The EOR is the legal employer; not a long-term substitute at scale |
Not sure which fits? Read the full comparison: Subsidiary vs. branch vs. liaison office vs. LLP.
How to incorporate an Indian subsidiary, step by step
Incorporation takes eight steps: confirm FDI eligibility, prepare apostilled US documents, obtain digital signatures, file SPICe+, open a bank account, transfer the funds for share capital, allot shares and report to the RBI, then begin formal operations. The longest delays usually come from US document apostille.
- Confirm FDI eligibility. Check your business activity against the FDI Policy. Most services and technology activities are on the Automatic Route; some sectors have caps or conditions.
- Prepare the US parent's documents. Typically the Certificate of Incorporation and good standing, a board resolution authorizing the investment and signatories, and identity and address proofs of the directors and authorized signatory. US documents are usually notarized and apostilled before use in India.
- Get digital signatures. Each proposed director needs a Digital Signature Certificate (DSC) to sign the incorporation forms electronically.
- Reserve the name and file SPICe+. The name is approved on the MCA portal, and SPICe+ is filed with the Memorandum and Articles of Association. A registered office address in India, with proof, is required.
- Receive the Certificate of Incorporation. The MCA issues it with the Corporate Identification Number (CIN), along with the company's PAN and TAN.
- Open the bank account and transfer the funds for share capital. The US parent transfers the subscription money to the company's Indian bank account by inward remittance through an authorized dealer bank, which issues the foreign inward remittance certificate.
- Allot shares and report to the RBI. Shares must be allotted within 60 days of receiving the funds, otherwise the money must be refunded. Form FC-GPR is filed within 30 days of allotment, with a valuation certificate and a Company Secretary's certificate.
- Commence business. File Form INC-20A (declaration of commencement) within 180 days of incorporation, appoint the first Statutory Auditor, and complete the GST, payroll and other registrations that apply to you.
Typical end-to-end timeline: 4 to 6 weeks from receipt of complete documents. Deeper guides: Incorporation process and Documents and apostille.
How money moves between the US parent and the Indian subsidiary
The US parent invests by subscribing to shares, or convertible instruments, in the Indian company through banking channels. Each investment is reported to the RBI under FEMA, with the share price supported by a valuation. Money returns to the US as dividends, service fees, royalties or loan repayments, each with its own tax and compliance steps.
- Going in: equity shares are the most common route. Convertible preference shares, convertible debentures and external commercial borrowings have their own rules. Shares issued to a non-resident cannot be priced below fair value, certified by an eligible professional.
- Reporting: Form FC-GPR for share issues, within 30 days of allotment, and the annual FLA return (due by 15 July) for foreign assets and liabilities.
- Coming out: dividends, which attract Withholding Tax; service fees and royalties, which are subject to transfer pricing and Withholding Tax; and loan repayments under ECB rules. Remittances abroad typically need Form 145 (previously Form 15CA) and, where required, a Chartered Accountant's Form 146 (previously Form 15CB).
- Treaty relief: the India-US tax treaty (DTAA) can reduce withholding rates, subject to conditions such as a US Tax Residency Certificate.
Related guides: Funding and FC-GPR, Share valuation, Repatriating profits.
Tax and transfer pricing: what the US parent should know
An Indian subsidiary pays Indian tax on its Indian profits. Any transaction between it and the US parent, such as service fees, royalties, cost sharing or loans, must be priced at arm's length and documented. This is called transfer pricing, and it is one of the most reviewed areas in Indian tax audits.
- Transfer pricing documentation: where international transactions with associated enterprises exist, the company needs a transfer pricing study and a Chartered Accountant's report in Form 48 (previously Form 3CEB) under Section 172 of the Income-tax Act, 2025 (previously Section 92E of the Income-tax Act, 1961). Arm's length pricing itself is governed by Section 161 (previously Section 92).
- Withholding Tax: payments to the US parent may attract Withholding Tax under Section 393 of the Income-tax Act, 2025 (previously Section 195 of the Income-tax Act, 1961), which the treaty can reduce.
- Permanent establishment (PE) risk: US employees working in India, or contracts negotiated by the parent's staff, can create a taxable presence for the US company. Structure and agreements matter.
- GST: services provided to the US parent can qualify as zero-rated exports if the conditions are met, but registration, invoicing and refund rules must be followed.
- US-side reporting: a US company that owns a foreign subsidiary may have US filings such as Form 5471. Our India team coordinates with your US CPA, who confirms the US position.
Related guides: Transfer pricing, Tax treaty and PE risk, US parent obligations.
Annual compliance: what an Indian subsidiary files
An Indian subsidiary has monthly, quarterly and annual filings across the Ministry of Corporate Affairs, the income tax and GST authorities, the RBI and labour law agencies. Missing a deadline usually triggers late fees or penalties, and some defaults also affect the directors.
| Filing | Frequency | Typical timing | Authority |
|---|---|---|---|
| Statutory audit and financial statements | Annual | Completed before the AGM | Companies Act |
| Annual General Meeting | Annual | Within 6 months of year end (first AGM within 9 months of the first year end) | Companies Act |
| AOC-4 (financial statements) | Annual | Within 30 days of the AGM | MCA |
| MGT-7 (annual return) | Annual | Within 60 days of the AGM | MCA |
| Income tax return | Annual | By the due date set for the tax year; companies needing a tax audit or transfer pricing report have a later date (confirm each year) | Income-tax Act, 2025 |
| Advance tax | Quarterly | 15 June, 15 September, 15 December, 15 March | Income-tax Act, 2025 |
| Tax audit report: Form 26 (previously Forms 3CA/3CB and 3CD) | Annual, if applicable | With the income tax return due date | Income-tax Act, 2025 |
| Form 48 (previously Form 3CEB), transfer pricing report | Annual, if applicable | Before the income tax return due date (confirm each year) | Income-tax Act, 2025 |
| Withholding Tax payment and returns | Monthly and quarterly | Deposit by the 7th of the next month; quarterly statements in Forms 138, 140 and 144 (previously Forms 24Q, 26Q and 27Q) | Income-tax Act, 2025 |
| GST returns | Monthly or quarterly | As per registration | GST |
| Provident fund and ESI | Monthly | By the 15th of the next month | EPFO, ESIC |
| FLA return | Annual | By 15 July | RBI |
| Form FC-GPR | Per share issue | Within 30 days of allotment | RBI |
The complete, maintained version of this table is in our Annual compliance calendar.
Hiring in India: your own subsidiary or an Employer of Record?
An Employer of Record (EOR) legally employs your team in India on your behalf, so you can hire without an entity. A subsidiary gives you full control, a local contracting vehicle and a base for long-term growth. Many US companies start with an EOR and convert to a subsidiary once the team or investment grows.
- Choose an EOR when you want to start within weeks, are testing the market, or need a handful of hires.
- Choose a subsidiary when you plan a larger team, need to sign contracts or hold assets in India, or want direct control over employment terms and IP.
- Either way, employment brings statutory obligations: provident fund, ESI, gratuity, professional tax, state establishment rules and India's labour codes.
Related guides: EOR vs. subsidiary and Hiring and payroll.
What it costs and how long it takes
Total cost has two parts: one-time setup (government fees, stamp duty, professional fees, registered office) and recurring running cost (accounting, audit, tax and payroll compliance, plus any Resident Director or office arrangement). The timeline depends mainly on how quickly the US documents are apostilled.
- One-time: MCA and stamp duty (varies by state and authorized capital), professional fees, digital signatures, registered office set-up and bank charges.
- Recurring: accounting and bookkeeping, statutory audit, GST, Withholding Tax and income tax filings, payroll, RBI filings, and any Resident Director or virtual office service.
- Variable: transfer pricing documentation, tax notices, ESOPs, valuation and legal work as the entity grows.
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 USD 10,300 at ₹96.77 per US dollar on 7 October 2026). The final quote depends on your structure, state and scope of services.
Tell us what you plan to set up and we will prepare a costing and book a call to walk you through it.
Six mistakes US companies make when setting up in India
- Starting documents late. Notarization and apostille lead times can hold up the whole process.
- Missing RBI timelines. Allotting shares late, or filing FC-GPR late, leads to fees or compounding.
- Skipping the pricing check. Shares issued to non-residents need a compliant valuation. Getting it wrong creates a FEMA issue.
- No intercompany agreement or transfer pricing file. Fees and royalties without agreements and benchmarking are what tax officers review first.
- Overlooking the Resident Director rule. Plan it before filing, not after.
- Posting staff or negotiating contracts from the US without a PE review. Check the permanent establishment position before seconding executives.
More detail: Common mistakes.
Beyond setup: audit, disputes, contracts and restructuring
An Indian subsidiary needs support well after incorporation. These guides cover what US parents usually ask about next.
- Audit of a US company's Indian subsidiary (statutory, internal and ICOFR) for US-listed parents and their Auditors
- Tax notices and disputes before the TPO, DRP and ITAT
- Intercompany agreements, arbitration and court litigation
- ESOPs for Indian employees of a US parent
- Restructuring, mergers and exit
- Sending US executives to India: visa, housing and tax
- Global VAT for SaaS and AI companies
India-US tax treaty and social security for US expats
Two separate systems decide what a US company and its people pay in India. The India-US tax treaty (DTAA) can reduce Withholding Tax on dividends, interest, royalties and fees paid to the US parent. Social security works differently: we are not aware of a US-India totalization agreement in force, so a US expat can owe both Indian provident fund and US Social Security tax.
- India-US tax treaty and social security: the complete guide
- The India-US Tax Treaty (DTAA) Explained
- India-US DTAA Withholding Tax Rates
- How to Claim India-US Treaty Benefits
- Tax Residency for US Expats in India
- Social Security for US Expats in India
- EPF for International Workers in India
- US Social Security and FICA for Americans Working in India
- Treaty and social security FAQs
The full guide series
Subsidiary vs. branch vs. liaison office vs. LLP
Compare the four structures and choose.
Read the guide →Incorporation process, step by step
Forms, sequence and realistic timelines.
Read the guide →Documents and apostille by US state
What the US parent must prepare first.
Read the guide →Resident Director rules
Who can act and how to plan for it.
Read the guide →Funding the subsidiary: FEMA and FC-GPR
Capital infusion and RBI reporting.
Read the guide →Share valuation for foreign investment
Pricing rules and valuation certificates.
Read the guide →Repatriating profits to the US
Dividends, royalties, fees, Forms 145 and 146, treaty relief.
Read the guide →EOR vs. subsidiary in India
When to use each, and how to convert.
Read the guide →Transfer pricing for US parents
Form 48, benchmarking and audits.
Read the guide →Tax treaty and PE risk
DTAA, withholding and permanent establishment.
Read the guide →India-US tax treaty and social security
Treaty rates, expat tax, EPF and FICA.
Read the guide →US parent obligations
Form 5471, FBAR and other US-side reporting.
Read the guide →Annual compliance calendar
Every filing, owner and deadline.
Read the guide →216 FAQs on setting up an India subsidiary
From pre-incorporation to closure.
Read the guide →Treaty and social security FAQs
50 answers on the DTAA, expat tax, EPF and FICA.
Read the guide →How AU Corporate can help
AU Corporate is a pan-India advisory firm, established in 2016, that supports foreign companies across the India lifecycle. One team covers every stage below, so your US team deals with one point of contact.
Set up
Choose the right structure and incorporate your Indian entity.
- Entity structuring
- Wholly owned subsidiary
- Branch and liaison office
- SPICe+ incorporation
- MCA compliance
- Business strategy
- Bank account support
Fund and FEMA
Bring capital in legally and report it to the RBI.
- FEMA
- RBI reporting
- FC-GPR
- Share capital
- Share valuation
- Capital increase
- ESOP valuation
Operate
Keep books, payroll and indirect taxes in order every month, for India and for the US parent.
- Accounting and bookkeeping
- Tally
- Busy
- QuickBooks
- Xero
- GST
- Withholding Tax
- Payroll
- Monthly MIS
- US-parent reporting
People and expats
Hire, pay and relocate your team.
- Employer of Record (EOR)
- HR services
- Payroll compliance
- Expat visa
- Accommodation
- Expat tax filings
- Expat social security
- Bank account operations
Repatriate funds
Move money back to the US parent, with the paperwork and tax position in order.
- Form 145 and Form 146 (previously Form 15CA and 15CB)
- DTAA treaty relief
- Withholding Tax
- Dividends
- Royalties and service fees
- Contract with the US parent
- Transfer pricing alignment
Tax and transfer pricing
Keep the group's India tax position defensible.
- Direct tax
- Indirect tax
- Transfer pricing
- International taxation
- Tax treaty (DTAA) relief
- Form 48 (previously Form 3CEB)
- Tax advisory
- CbCR filing (parent-prepared report)
Audit and assurance
Satisfy Indian law and your US Auditors.
- Statutory audit
- Internal audit
- ICOFR audit
- Companies Act audit
- GST audit
- Income tax audit
- Certifications
Legal, disputes and arbitration
Defend your position and protect your contracts.
- Tax litigation (TPO, DRP, ITAT)
- Arbitration, from claims to expert witness
- Court litigation
- Agreement drafting and vetting
- In-house legal team
Restructure and grow
Scale, reorganize or exit.
- Business restructuring
- Mergers and acquisitions
- Due diligence
- Business valuation
- Strategy advisory
- Exit and winding up
Beyond India
Indirect tax for digital businesses worldwide.
- Global VAT
- SaaS and AI companies
- 100+ jurisdictions
Scope note: we file Country-by-Country Reports (CbCR) in India when the global report has been prepared by the parent group. We do not prepare the global CbCR report itself.
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
Can a US company own 100% of an Indian subsidiary?
A US company can own 100% of an Indian subsidiary in most sectors. India permits 100% foreign ownership under the Automatic Route, which needs no prior government approval. A few sectors have ownership caps, conditions or an approval requirement, so the sector position should be checked against the business activity before choosing a structure.
What is the best way for a US company to enter India?
For most operating businesses, a wholly owned subsidiary incorporated as a private limited company is the standard route. It is a separate legal entity with limited liability and can carry on full business. Branch and liaison offices have restricted activities, and an Employer of Record works well as a first step before you incorporate.
Does the Indian subsidiary need a director who lives in India?
An Indian subsidiary needs at least one director who has stayed in India for 182 days or more in the financial year (Section 149(3) of the Companies Act, 2013). A private limited company also needs at least two directors in total (Section 149(1)). Directors can be foreign nationals, but at least one must meet the residency test.
How long does it take to set up a subsidiary in India?
Typically 4 to 6 weeks from receipt of complete documents. The MCA incorporation is usually the shortest step, and the main variable is how quickly the apostilled US documents are ready. No travel to India is required.
How much does it cost to set up an Indian subsidiary?
The cost of incorporating a subsidiary in India has three parts: government fees (MCA filing fees and state stamp duty, which depend on the authorized capital and the state), the cost of notarizing and apostilling US documents, and professional fees. AU Corporate's indicative setup fee is USD 750 to USD 1,000 for share capital up to ₹10 lakh (about USD 10,300). Annual running costs are additional.
What is Form FC-GPR and when is it due?
Form FC-GPR is the report an Indian company files with the RBI after issuing shares to a foreign investor. It must be filed within 30 days of the share allotment through the RBI's FIRMS portal, with supporting valuation and Company Secretary certificates. Late filing attracts a Late Submission Fee or compounding.
How can profits be repatriated from India to the US?
Profits can be repatriated from India to the US through dividends, service fees, royalties and loan repayments. Each involves Indian Withholding Tax (Section 393 of the Income-tax Act, 2025, previously Section 195 of the Income-tax Act, 1961), which the India-US tax treaty can reduce, and fees and royalties must meet transfer pricing rules. Remittances abroad usually need Form 145 and, where required, Form 146 (previously Forms 15CA and 15CB).
Should we use an Employer of Record or our own subsidiary?
Use an Employer of Record (EOR) if you want to hire quickly or test the market without an entity. Set up a subsidiary if you plan a larger team, need to contract directly in India, or want long-term control. Many companies begin with an EOR and move the team into a subsidiary later.
Does an Indian subsidiary create US tax obligations for the parent?
An Indian subsidiary can create US tax obligations for the parent. A US company that owns a foreign subsidiary may have US reporting such as Form 5471, and its income may be affected by US international tax rules. These depend on the structure, so the position should be confirmed with a US tax adviser.
Can we sell or close the Indian subsidiary later?
A US parent can sell or close the Indian subsidiary later by selling the shares or the business, merging the subsidiary into another group company, or closing it through strike-off or voluntary liquidation. Each route has its own tax and RBI reporting steps, so the exit should be planned before investing.
Can US executives be directors of the Indian subsidiary?
US executives can be directors of the Indian subsidiary. Foreign nationals can be directors once they obtain a digital signature and a Director Identification Number, but at least one director must be a resident of India. Directors carry statutory duties and liabilities, so they should be chosen with that in mind.
Is there a US-India social security (totalization) agreement?
We are not aware of a US-India totalization agreement in force as of October 2026, so a US expat in India can owe both Indian provident fund and US Social Security tax. The India-US tax treaty does not cover social security taxes. See the treaty and social security guide for how to plan.
Sources and how this page is maintained
This guide is based on the Companies Act, 2013, the Foreign Exchange Management Act, 1999 and the Non-Debt Instruments Rules, 2019, the Consolidated FDI Policy, and guidance from the Ministry of Corporate Affairs and the Reserve Bank of India. Indian rules, forms and due dates change often. We review this page at least quarterly and after major budget or RBI changes, and show the date of the last review at the top. This page is general information, not legal or tax advice.
Last updated 14 October 2026. General information only, not legal or tax advice. Indian rules change often; confirm current requirements before acting.