How to Set Up a Company in India as a Foreign Business

A foreign business sets up in India by choosing an entity (usually a private limited subsidiary, sometimes an LLP, branch, liaison or project office), confirming its sector can take foreign investment under the automatic or government route, incorporating through the Ministry of Corporate Affairs' SPICe+ form, funding it through banking channels and reporting the investment to the Reserve Bank of India.

Key points

• Most foreign businesses use a wholly owned private limited company. It needs at least two shareholders, two directors and one director resident in India.

• 100% foreign ownership is allowed under the automatic route in most sectors. Some sectors, and investors from countries sharing a land border with India, need government approval.

• Liaison and branch offices are not companies. They are set up under RBI rules, cannot do everything a subsidiary can, and a branch is taxed as a foreign company.

• Shares issued to a foreign parent must be reported to the RBI on Form FC-GPR within 30 days of allotment.

• From 1 April 2026, Indian income tax runs under the Income-tax Act, 2025. The 22% concessional company rate continues under section 200.

What are the options for a foreign company in India?

A foreign company in India can operate through a subsidiary company, a limited liability partnership (LLP), or an office of the foreign entity itself (a liaison, branch or project office). The first two are Indian entities under Indian corporate law. The office options are extensions of the foreign company, permitted under the RBI's Master Direction on establishment of branch, liaison and project offices.

The choice turns on whether India will earn revenue locally, serve the group, or both, and how much liability the parent will carry directly.

Should you choose a subsidiary, a branch or a liaison office?

For most foreign businesses that plan to stay, a wholly owned subsidiary is the right default: it ring-fences liability, contracts and employs in its own name, and qualifies for the domestic tax rate.

A liaison office in India suits an early stage: promoting the parent and building relationships, funded entirely from abroad. It cannot invoice or earn income.

A branch office for a foreign company can earn income, but only in the categories the RBI lists, such as export and import, professional or consultancy services, research, IT and software services. Manufacturing and retail trading are generally outside its scope. Its profits are taxed at the 35% foreign company rate and the parent is directly liable.

An LLP looks flexible, but it is only open to foreign investment in sectors where 100% FDI is allowed under the automatic route without performance conditions, according to the RBI's Master Direction on Foreign Investment in India. Home-country tax treatment of an LLP can also be less predictable than a company.

Not ready for any entity yet? Many businesses first hire through an employer of record in India, then set up their own company once the team or the revenue justifies it. That route carries its own permanent establishment questions if Indian staff negotiate or conclude contracts for the parent.

Can a foreigner own 100% of a company in India?

Yes. Foreign individuals and companies can own 100% of an Indian private company in most sectors under the automatic route, which needs no prior government approval. The rules sit in the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 and DPIIT's Consolidated FDI Policy.

Three limits apply:

1. Sectoral caps and conditions. Some sectors are capped (for example insurance, defence or broadcasting) or need government approval above a threshold. A few are prohibited, such as lottery, gambling and certain real estate business.

2. Land border countries. An investor from a country sharing a land border with India (such as China, Bangladesh, Nepal or Myanmar), or one whose beneficial owner is a citizen of such a country, needs government approval under the rules introduced by Press Note 3 (2020). Press Note 2 (2026) eased this so that beneficial ownership of 10% or less from such a country no longer triggers approval on its own.

3. Pricing. Shares issued to a non-resident must be priced at or above fair value, determined under an internationally accepted pricing method. At incorporation, subscription at face value is generally accepted.

A second shareholder is still needed. A private company must have at least two members under the Companies Act, 2013, so a wholly owned subsidiary India structure usually has the parent holding all but one share and a group company or nominee holding the other.

How do you register a company in India as a foreign national or foreign parent?

You register through SPICe+, the MCA's integrated incorporation form, once foreign directors hold Digital Signature Certificates and the parent's documents are apostilled or notarised.

Step 1: Confirm the FDI route and plan the structure

Confirm the activity sits under the automatic route, then fix the shareholding, capital, registered office and resident director. Under section 149(3) of the Companies Act, at least one director must have stayed in India for at least 182 days in the financial year (proportionately in the year of incorporation).

If the parent sits in a wider group, decide now which entity should hold the shares; our note on holding versus operating companies explains why this is hard to change later.

Step 2: Digital signatures and DIN

Each director and subscriber needs a Class 3 Digital Signature Certificate; foreign nationals usually apply with apostilled or consularised passport and address proof. A Director Identification Number is allotted through SPICe+ itself for up to three proposed directors who do not already hold one.

Step 3: Name approval through SPICe+ Part A

SPICe+ Part A reserves the company name. Once approved, the reservation is generally valid for 20 days (extendable up to 60 days) for incorporation.

Step 4: Incorporation through SPICe+ Part B and AGILE-PRO-S

Part B covers incorporation, the electronic memorandum and articles of association (e-MoA and e-AoA), DIN allotment, and through the linked AGILE-PRO-S form, the company's PAN, TAN, EPFO and ESIC registrations, GSTIN if opted for, and the opening of a bank account. The Registrar then issues the Certificate of Incorporation.

On cost, the MCA filing fee for SPICe+ is nil for companies with authorised capital up to ₹15 lakh. Stamp duty on the MoA and AoA varies by state.

On timing, once documents are ready and the name is clear, incorporation commonly takes two to four weeks; apostilling documents abroad is usually the slowest part.

Step 5: Bring in the capital and file FC-GPR

The parent remits the subscription money through banking channels into the company's account. The company must issue the shares within 60 days of receiving the money, or refund it.

Within 30 days of allotting the shares, the company files Form FC-GPR on the RBI's FIRMS portal through its AD bank, Late filing attracts a late submission fee.

Step 6: Commencement of business, GST and payroll

Within 180 days of incorporation, a company with share capital files Form INC-20A declaring that subscribers have paid for their shares (section 10A of the Companies Act). GST registration is required once turnover passes the threshold or immediately for certain supplies, including most exports of services that want to be zero-rated under a Letter of Undertaking.

If you will employ people from the start, our guide to how a foreign company can hire employees in India covers payroll, PF and contracts.

What ongoing compliance does a foreign-owned company in India have?

A foreign-owned company has the annual cycle of any Indian company, plus foreign exchange reporting and transfer pricing:

• Companies Act: board meetings, statutory audit, financial statements (AOC-4), annual return (MGT-7/7A) and director KYC.

• Income tax: advance tax, withholding (TDS) returns, the annual return and, for related party transactions with the parent, an accountant's transfer pricing report. From tax year 2026-27 these run under the Income-tax Act, 2025, which replaced the 1961 Act from 1 April 2026.

• RBI: the Annual Return on Foreign Liabilities and Assets (FLA) by 15 July each year, and FC-GPR or FC-TRS for every later share issue or transfer.

• GST: monthly or quarterly returns and an annual return where applicable.

Liaison and branch offices have a lighter corporate law burden but their own: they register with the Registrar on Form FC-1 within 30 days of establishing a place of business under section 380 of the Companies Act, and file an Annual Activity Certificate from a Chartered Accountant with the AD bank by 30 September each year.

How is a foreign company's Indian business taxed?

An Indian subsidiary is a domestic company. It can opt into the 22% concessional rate under section 200 of the Income-tax Act, 2025 (formerly section 115BAA), giving an effective rate of about 25.17% after surcharge and cess, in exchange for most deductions and incentives, as shown on the Income Tax Department's rates page. A branch is taxed at the 35% foreign company rate plus surcharge and cess.

Dividends to the parent bear withholding tax, capped by the relevant treaty where the parent qualifies.

Where the Indian company provides services to the parent, the price must be at arm's length. For captive teams this is usually a cost-plus arrangement; our guide to transfer pricing for captive service centres in India explains margins and safe harbour.

Are the rules different for UK companies?

The process is the same for every country; treaties and trade terms differ. UK companies also weigh the India–UK tax treaty, the trade agreement in force since 15 July 2026 and the Double Contributions Convention for seconded staff, covered in our guide to setting up in India from the UK.

The Greenwolf view

Incorporation is the easy part. The harder question is what India is for: a customer market, a talent and delivery base, a global capability centre in India, an R&D base, or eventually a second operating engine of the group. Often it becomes both a market and a capability, and each role points to a different entity, contract and tax design.

We start with commercial design and let tax follow the functions, risks and substance India actually carries. The questions we work through:

• Stage: are you testing the market, already spending heavily on Indian vendors, or building a permanent team? A liaison office or partner-led entry may be right for the first; the second is often the point to own the team in India rather than rent it from a vendor.

• Contracts: will Indian customers contract with the Indian entity or the parent? That drives GST, withholding and permanent establishment exposure.

• Functions: is India performing routine services, or building product and IP? If the Indian team starts making core product decisions, a low cost-plus margin stops reflecting reality.

• People: who leads India, will staff be seconded from abroad, and what does that do to tax residency and social security?

• Exit and growth: could India later take external investment, acquire an Indian business or be sold? Moving shares later has tax and FEMA costs.

For why India is more than a cost play, see building in India for global founders.

Talk to Greenwolf about setting up in India

Greenwolf Advisors helps foreign businesses decide what India should do for them, then builds the entity, FDI filings, tax and transfer pricing around that decision. If you are weighing a subsidiary, a branch or your own team in India, book a call with Team Greenwolf and we will map the right entry model for your stage.

This article is general information, not advice for a specific case.