Setting Up in India from the UK

For most UK technology and professional services firms, India is a market, a capability base, or both, and the entry vehicle should follow whichever role comes first. The scale is real: India recorded gross FDI inflows of about US$94.5bn in 2025-26, according to RBI data, with computer software and hardware the largest sector for equity inflows (DPIIT).

Not a UK business? Our general guide on how to set up a company in India as a foreign business covers the same steps for any country.

Key points

• Decide India's role first (customer market, delivery base, capability centre or all three), then pick the vehicle: partner, liaison office, branch, subsidiary, employer of record (EOR) or acquisition.

• Most technology and professional services activity is open to 100% FDI under the automatic route, but you still have to file and report with the RBI.

• A wholly owned private limited subsidiary is the usual end-state for a team or a revenue base; an EOR is a bridge, not a permanent structure.

• Transfer pricing, permanent establishment (PE) and GST follow what the Indian team actually does, not what the contracts say.

• From 15 July 2026, the UK–India CETA and the Double Contributions Convention both apply, which changes the economics of trade and of sending UK staff to India.

Is India a market, a capability base, or both?

India can be a revenue thesis before it is a cost thesis. For a UK technology or professional services firm, the first strategic decision is which of these roles India plays, because each implies a different entity, tax profile and set of people.

The cost-arbitrage story is the familiar one: build a team in Bengaluru or Pune because engineers cost less. It is also the least interesting reason to go.

The UK Department for Business and Trade lists Indian demand for UK capability in fintech, AI and data, cloud and SaaS, cybersecurity and Industry 4.0, and for professional services in regulatory, engineering, financial, sustainability and risk advisory work. India's companies are becoming large, international and regulated enough to buy expertise a UK firm already has.

In practice, we see five roles, and a firm can hold several at once:

• Customer market. A £20m UK cybersecurity firm selling fraud detection to Indian banks. The question is whether India becomes one of its largest markets.

• Delivery base. A £15m UK consultancy with 40 contractors through an Indian vendor and £2m of annual outsourced spend. The question is whether to own that capability.

• Capability centre. Finance, analytics, cybersecurity and customer operations alongside engineering. India becomes an operating centre, not "the offshore team".

• R&D and product. The Indian team starts building core product. That changes who owns IP and how India must be paid.

• Second operating engine. UK leads global commercial work; India runs engineering, delivery and Indian customers. The firm becomes a UK–India business, not a UK business with an Indian office.

When India is both market and capability, the investment has two independent justifications, revenue and capability, which makes it far easier to defend at board level. Our longer take on this is in building in India for global founders.

What are the entry options for a UK company: export, partner, liaison office, branch, subsidiary, EOR or acquisition?

A UK company has seven practical ways into India, and the right one depends on how much conviction it has and what it needs to do on the ground. Exporting and partnering need no Indian presence; a liaison office cannot earn revenue; a branch can, but is taxed as a foreign company; a subsidiary is the flexible default; an EOR lets you hire before you incorporate; and acquisition buys a team and customers at once.

Liaison office. Under the RBI's Master Direction on branch, liaison and project offices, a liaison office can represent the parent, promote exports and imports, promote technical or financial collaboration and act as a communication channel. It cannot trade or earn income, and its expenses must be met by remittances from abroad.

To qualify under the current framework, the parent needs a profit-making track record in the immediately preceding three financial years and net worth of at least US$50,000. Approval is generally valid for three years. Our explainer on what a liaison office in India can and cannot do covers the detail.

Branch office. A branch can carry out a defined list of activities, including professional or consultancy services, IT services and software development, research, technical support, and acting as buying or selling agent. It cannot manufacture outside special economic zones or carry on retail trading.

The parent needs five consecutive profitable years and net worth of at least US$100,000. The procedure for opening a branch office in India by a foreign company runs as follows: application in Form FNC through an Authorised Dealer Category-I bank, approval and a unique identification number from the RBI, registration with the Registrar of Companies as a foreign company within 30 days of establishing a place of business, then PAN, GST and bank accounts.

Each year an annual activity certificate goes to the AD bank and the income-tax authorities. See our guide to a branch office in India.

Reform is pending. In October 2025 the RBI published draft Foreign Exchange Management (Establishment in India of a branch or office) Regulations, 2025, which would drop the net worth and profit track record tests and regroup the categories into "branch" and "office".

As of May 2026 the 2016 framework still applied.

Subsidiary. A private limited company under the Companies Act, 2013, wholly owned by the UK parent (with a nominee holding one share where two shareholders are needed). It needs at least two directors, one of whom must be resident in India.

It can do anything its objects and the FDI rules allow, contract with Indian and overseas customers, and pay dividends home. For most firms building a team or a revenue base, this is where they end up.

The trade-offs between all three vehicles are set out in our comparison of a subsidiary, a branch office or a liaison office.

Acquisition. A £30m UK technology firm can build from zero, or acquire an Indian company with ₹30–100 Cr of revenue that already has the team, customers and local management. The second route needs FDI compliance, valuation within pricing guidelines, due diligence and post-deal transfer pricing, but can save two years of building.

What FDI rules apply to UK companies setting up in India?

A UK company investing in an Indian subsidiary makes foreign direct investment, governed by the DPIIT's Consolidated FDI Policy, the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the RBI's Master Direction on Foreign Investment in India (updated up to 15 June 2026). Most technology and professional services activity sits under the automatic route at 100%, meaning no prior government approval.

The points that matter in practice:

• Route and cap. Sectors not specifically listed are generally open to 100% FDI under the automatic route, subject to applicable laws. Specific caps and approval requirements apply in areas such as defence, broadcasting, banking and digital news media. Insurance moved to 100% under the automatic route through Press Note 1 (2026 Series).

• Pricing. Shares issued to a non-resident in an unlisted company must be priced at or above fair value under an internationally accepted pricing methodology, certified by a Chartered Accountant, a SEBI-registered merchant banker or a practising cost accountant.

• Timelines. Shares must be issued within 60 days of receiving the money, and the Indian company files Form FC-GPR on the RBI's FIRMS portal within 30 days of issue.

• Annual return. The Annual Return on Foreign Liabilities and Assets is due by 15 July each year.

• Downstream investment. If the Indian subsidiary later invests in another Indian company, that counts as indirect foreign investment and must follow the same entry and pricing rules, with its own reporting.

The rules are moving. The DPIIT and RBI issued several changes in 2026, and draft Foreign Exchange Management (Foreign Investment) Rules, 2026 were released for consultation in July 2026 to replace the NDI Rules. Our cluster guide to FDI in India for UK companies covers routes, sector caps and reporting step by step.

Building your Indian team: EOR, vendor or own entity?

The answer depends on headcount, how strategic the work is and how long you will stay. Use a vendor when you are buying an outcome, an employer of record when you need a few named people quickly, and your own entity once the team is core to the business or past roughly 10 to 20 people.

Back to the £15m consultancy with 40 contractors and £2m of outsourced spend. The naive question is whether an Indian office saves money. The better question is whether India has become strategic enough to own rather than rent.

Owning brings direct talent, lower vendor margin, retention, dedicated capacity and control of IP and knowledge. Our piece on whether to build an offshore team in India or keep the vendor works through the break-even.

If the plan is a 30 to 100 person centre covering engineering, finance, analytics and operations, that is a capability centre whether or not you call it a GCC. Our guide to global capability centres in India explains how mid-sized UK firms build one.

Employment law has also changed. India's four Labour Codes came into force on 21 November 2025, replacing 29 central labour laws, and the central rules were notified on 8 May 2026.

Many provisions depend on state rules, and most states had not notified theirs by mid-2026, so older laws still apply in those states. Separately, the EPF wage ceiling rose from ₹15,000 to ₹25,000 a month from 17 September 2026, which increases mandatory provident fund contributions for many junior salaries.

For the mechanics, see can a foreign company hire employees in India and our guide to the employer of record in India model, including costs and when to switch.

How is a UK company's India operation taxed: transfer pricing, PE, GST, withholding and the DTAA?

Tax follows functions. An Indian subsidiary is taxed on its own profits, the price it charges the UK for services must be at arm's length, and the UK parent can be taxed in India only if it has a permanent establishment there. Since 1 April 2026 the Income-tax Act, 2025 has replaced the 1961 Act, so section numbers in older guidance have changed.

• Corporate tax. A domestic company opting for the concessional regime pays a 22% base rate; with the 10% surcharge and 4% cess the effective rate is about 25.17%. A branch is taxed as a foreign company at a 35% base rate plus surcharge and cess.

• Transfer pricing. A captive Indian service centre is usually paid cost plus a mark-up. The Budget 2026-27 changes merged software development, IT-enabled services, KPO and contract R&D into one "information technology services" safe harbour category at a 15.5% margin on operating costs, for groups with Indian operating revenue up to ₹2,000 Cr, with automated approval and a five-year block. If the Indian team moves into core R&D and product decisions, a routine cost-plus return may no longer fit. Our guide to transfer pricing in India for captive centres covers this.

• Permanent establishment. Under Article 5 of the India–UK tax treaty, a UK company can have a service PE in India if its employees or other personnel furnish services in India for more than 90 days in a 12-month period, or for a related enterprise. A dependent agent who habitually concludes contracts can also create a PE.

• GST. Services supplied by an Indian subsidiary to its UK parent can generally qualify as zero-rated exports if the IGST conditions are met, including place of supply outside India and payment in convertible foreign exchange. Domestic supplies generally attract 18%.

• Withholding and the DTAA. Under the treaty, dividends from an Indian company to a UK parent are generally capped at 10% (15% where paid out of income from immovable property by certain investment vehicles), and fees for technical services that meet the treaty's "make available" test at 15%. A tax residency certificate and Form 10F are generally needed. See our India UK DTAA explainer for royalties and capital gains.

Planning an India entry? Get the UK→India corridor checklist, or book a 30-minute structuring call with Greenwolf. We map India's role, the vehicle and the tax profile before anything is incorporated.

What changed in July 2026: CETA and the social security agreement?

Two treaties took effect on 15 July 2026: the UK–India Comprehensive Economic and Trade Agreement (CETA), signed on 24 July 2025, and the UK–India Double Contributions Convention. For services firms, the CETA adds a framework on market access, business mobility and digital trade; the DCC removes double social security contributions for qualifying secondees.

CETA. The trade in services chapter sets out treatment for service suppliers, the professional services annex encourages work on recognising qualifications, the digital trade chapter supports electronic transactions, and the mobility provisions lock in access for temporary business travel. It does not change corporate tax, transfer pricing or the DTAA. Our India UK free trade agreement guide separates what changed from what did not.

Double Contributions Convention. According to GOV.UK, a UK employee sent to work temporarily in India on or after 15 July 2026 remains subject to UK National Insurance if the work is not expected to exceed 60 months, evidenced by a certificate of coverage (applied for from HMRC on form CA9107). Employees already posted before that date fall under the host country's rules.

In practice, a UK technical director sent to Pune for 18 months to set up a delivery centre can stay in the UK system rather than paying into both. Read our guide to the double contribution convention between India and the UK.

The Greenwolf view: commercial design first, tax follows functions

India entry goes wrong when the first decision is "incorporate a Pvt Ltd". The first decision is what India is for. The vehicle, the contracts, the transfer pricing and the tax outcome then follow from what the Indian team actually does, the risks it carries and the substance it has. There is no shortcut around that, and we do not promise one.

A typical path looks like this: partner-led entry, then your own Indian sales team, then a subsidiary, then delivery and R&D in India, and eventually a business run from two operating geographies. A firm can enter at any stage. Our role is to work out which stage you are actually at, and to design for the next one without overbuilding.

The questions we work through with UK founders and CFOs:

1. Is India a customer market, a capability base, or both, and which comes first?

2. Who will contract with Indian customers: the UK company or an Indian entity?

3. What will India do for the UK, and how will it be paid?

4. Who owns the IP, and where are the decisions about it really made?

5. Will any UK staff or sales people spend long periods in India, and could that create a PE?

6. Are you building for 10 people or 100, and when does a vendor or EOR stop making sense?

7. How will cash come back: service fees, dividends or interest, and at what withholding cost?

8. If you acquired rather than built, what would the exit or reorganisation look like in five years?

The UK firm understands the UK. We understand India. The proposition is simple: you keep the UK client, and Greenwolf owns the India piece.

Ready to plan your India entry?

If you are weighing a branch, a subsidiary, an EOR or an acquisition, book a 30-minute structuring call or ask for the UK→India corridor checklist. Greenwolf designs the commercial model first and then handles FDI, incorporation, tax and compliance in India end to end.

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