A wholly owned subsidiary in India is a private limited company incorporated under Indian law where 100 percent of the shares are held by a foreign parent company, giving the parent full control over strategy, hiring, and profits while ring fencing liability inside the Indian entity. This structure suits a foreign founder or CFO who wants a real operating presence in India, direct control over IP, people and revenue, and a clean path to raising capital or exiting later without a local partner in the way.
If your India play is more than a sales rep or a short term trial, a wholly owned subsidiary is usually the structure you end up at anyway. The question is not whether it works. The question is whether you set it up correctly the first time, because most of the pain we see at Krystal7 comes from shortcuts taken in month one that surface as FEMA or tax problems in year two.
What a wholly owned subsidiary in India actually is
Legally, a wholly owned subsidiary is an Indian private limited company registered under the Companies Act, 2013, with two or more shareholders on paper, but where the foreign parent, directly or through its nominee, holds effectively all the equity. Indian company law requires a minimum of two shareholders for a private limited company, so in practice the parent holds close to 100 percent and a nominee, often a group entity or an individual holding one share in trust, holds the remainder.
The subsidiary is a distinct legal person under Indian law. It can own property, sign contracts, hire employees, open bank accounts, and be sued in its own name. The parent's liability is limited to the capital it has invested, which is the core reason most serious foreign investors prefer this route over a branch or liaison office. The subsidiary also gets access to sectors and activities that branch offices and liaison offices are restricted from, including full commercial trading, manufacturing, and services business, subject to India's foreign direct investment policy for that sector.
A wholly owned subsidiary is fully governed by Indian corporate, tax, labour and foreign exchange law from day one. That means Companies Act filings, income tax returns, GST if applicable, payroll compliance, and FEMA reporting on the foreign investment received. Most pain we see at Krystal7 comes from month one shortcuts that surface as FEMA or tax problems in year two. Get this right on day one.
Wholly owned subsidiary vs joint venture vs branch office
Foreign companies entering India usually choose between three structures: a wholly owned subsidiary, a joint venture with an Indian partner, and a branch office of the foreign company. Each has a different risk, control and tax profile, and the right choice depends on the sector, the capital you want to deploy, and how much control you want to give up.
| Factor | Wholly Owned Subsidiary | Joint Venture | Branch Office |
|---|---|---|---|
| Ownership | Up to 100 percent by foreign parent | Shared with Indian partner, often 26 to 74 percent split | Not a separate entity, extension of foreign parent |
| Liability | Limited to subsidiary's capital | Limited to each partner's stake | Extends to the foreign parent |
| Permitted activities | Broad, subject to sector FDI caps | Broad, depends on shareholder agreement | Restricted to specific approved activities such as export, import, research |
| Tax treatment | Taxed as a domestic Indian company | Taxed as a domestic Indian company | Taxed as a foreign company, generally higher rate |
| Exit | Sale of shares, buyback, winding up | Often constrained by shareholder agreement and exit clauses | Closure requires RBI and tax clearance, generally simpler than a full company wind up |
| Most founders who want full control, a clean cap table for future fundraising, and the lowest effective corporate tax rate end up at the wholly owned subsidiary. Joint ventures still make sense in sectors where a local partner brings distribution, licenses or relationships you cannot build yourself. Branch offices suit narrow use cases like liaison work or specific project execution, not full scale operations. |
The registration process step by step
Setting up a wholly owned subsidiary in India runs through a defined sequence of steps, most of which are now handled through a single integrated form called SPICe Plus, filed with the Ministry of Corporate Affairs. Here is the sequence in practice.
First, the proposed directors obtain a Digital Signature Certificate, or DSC, which is needed to sign all electronic filings. Second, you apply for Director Identification Number, or DIN, for the proposed directors, which can also be done through the SPICe Plus form itself for new directors. Third, you reserve the company name through the name approval part of SPICe Plus, checking availability against existing companies and trademarks. Fourth, you draft the Memorandum of Association and Articles of Association, which set out the company's objects, share capital, and internal governance rules. Fifth, you file the full incorporation application, including MoA, AoA, director and subscriber details, and registered office proof.
Once the Registrar of Companies approves the application, the company is incorporated and receives its Certificate of Incorporation, along with PAN and TAN, which are now issued together with incorporation itself. The next step is opening a current bank account in the company's name, which requires the incorporation documents and KYC of directors and shareholders. Once the parent company remits the share subscription money into this account, the subsidiary must file Form FC-GPR with the Reserve Bank of India through the FIRMS portal, reporting the foreign investment. This filing is due within 30 days of allotment of shares to the foreign parent.
| Step | What happens | Typical duration |
|---|---|---|
| DSC and DIN | Digital signature and director ID for proposed directors | 2 to 4 days |
| Name approval | Reserve company name via SPICe Plus | 2 to 5 days |
| Drafting MoA and AoA | Objects clause, share capital, governance rules | Parallel with name approval |
| Incorporation filing | SPICe Plus submission with all attachments | 5 to 10 working days for approval |
| PAN and TAN | Issued along with incorporation | Same as incorporation |
| Bank account opening | KYC and account activation | 5 to 10 working days |
| Share capital remittance and FC-GPR | Parent remits funds, FC-GPR filed with RBI | Within 30 days of share allotment |
| Done cleanly, a wholly owned subsidiary registration in India can be completed and the entity made revenue ready in roughly 6 to 8 weeks, though delays in name approval, document apostille from the parent's home country, or bank KYC can stretch this timeline if not managed proactively. |
Documents required
The document list splits cleanly into two buckets: what the foreign parent must provide from its home country, and what gets prepared inside India during incorporation. Getting the parent side documents apostilled or notarised correctly ahead of time is the single biggest lever for keeping the timeline tight.
| Provided by the foreign parent | Prepared in India |
|---|---|
| Certificate of incorporation of the parent company, apostilled or notarised | Draft MoA and AoA |
| Board resolution authorising the India subsidiary and subscription to shares | SPICe Plus form and attachments |
| Identity and address proof of proposed foreign directors, apostilled | Registered office proof such as lease deed or utility bill |
| Passport copies of foreign directors and authorised signatories | Consent and declaration forms for directors such as DIR-2 and INC-9 |
| Power of attorney authorising a local representative, where used | Bank account opening forms and KYC compliance documents |
| If the parent is based in a country that is a signatory to the Hague Apostille Convention, an apostille from the relevant authority is generally sufficient. If not, documents typically need consular legalisation through the Indian embassy in that country, which takes longer and should be started well before you plan to file for incorporation. |
What it costs
Cost estimates for a wholly owned subsidiary in India in 2026 vary by state, share capital, and whether you need additional registrations like GST or import export code alongside incorporation. As a planning range, separate government fees from professional fees and recurring compliance. That is where foreign parents often underbudget.
| Cost head | Typical range | Notes |
|---|---|---|
| Government and statutory fees | Low thousands of rupees to low tens of thousands | Depends on authorised share capital and state stamp duty |
| Professional fees for incorporation | Moderate, one time | Covers drafting, filing, DSC, DIN, and coordination |
| Bank account setup | Nominal to none | Varies by bank, some require minimum balance |
| FC-GPR and FEMA filing | Included in professional fees or billed separately | One time per share allotment event |
| Ongoing annual compliance | Recurring, annual | Covers ROC filings, tax returns, audit, and secretarial work |
| The honest answer for any founder asking what a wholly owned subsidiary costs is that incorporation itself is the smaller number. The larger recurring cost is annual compliance, statutory audit, tax filings, payroll compliance if you hire locally, and FEMA reporting. Budget for both, not just the one time setup fee, and be wary of any quote that only covers incorporation without spelling out what year one compliance will add on top. |
Press Note 3
Press Note 3 of 2020 requires that any foreign direct investment from an entity based in a country that shares a land border with India, or where the beneficial owner of the investment is situated in or is a citizen of such a country, must go through government approval rather than the automatic route, regardless of the sector. This applies to the initial investment and to subsequent changes in beneficial ownership of an existing Indian entity that bring it under such ownership.
There is no workaround through routing investment via a third country entity if the ultimate beneficial owner is still based in a bordering country. The Reserve Bank of India and the Ministry of Commerce look through the corporate structure to the actual beneficial owner, and structuring specifically to avoid Press Note 3 scrutiny is treated as circumvention. If your ownership chain touches a land border country anywhere, get this checked before you file anything. Government approval timelines and requirements are materially different from the automatic route most other foreign investors use, and finding this out after incorporation costs far more than checking it before.
Compliance calendar for year one
Once the subsidiary is incorporated and funded, a set of recurring compliance obligations kicks in immediately, and missing the early ones tends to compound into penalties and notices later. A working year one calendar looks like this.
- Within 30 days of share allotment, file Form FC-GPR with RBI reporting the foreign investment received.
- Within 30 days of incorporation, appoint a statutory auditor for the company.
- Hold the first board meeting within 30 days of incorporation, and subsequent board meetings at prescribed intervals through the year.
- File annual return and financial statements with the Registrar of Companies after the financial year end.
- File the company's income tax return, along with tax audit report if turnover thresholds are crossed.
- If registered for GST, file monthly or quarterly GST returns depending on turnover and scheme.
- Deduct and deposit TDS on salaries, professional fees, and other specified payments, and file quarterly TDS returns.
- If the company has employees, register for and comply with provident fund and ESI where applicable.
- Report any further foreign remittances, loans from the parent, or changes in shareholding through the relevant FEMA forms.
A lot of this can be managed with proper virtual CFO support rather than hiring a full finance team from day one, especially in the first 12 to 18 months when transaction volume is still building.
Repatriating profits
Once your subsidiary is profitable, you have three main routes to move money back to the parent, and each carries different tax and timing consequences worth planning around in advance rather than discovering at year end.
Dividends are the simplest route. India abolished dividend distribution tax at the company level some years back, so dividends are now taxed in the hands of the recipient. For a US or European parent, withholding tax on dividends typically runs at 20 percent plus applicable surcharge and cess under domestic law, though most tax treaties bring this down, often to 5 to 15 percent depending on the treaty and shareholding percentage. You will need a tax residency certificate from the parent's home jurisdiction and Form 10F to claim treaty benefits.
Buybacks work differently and the rules changed in late 2024, with buyback proceeds now taxed as dividend income in the hands of the shareholder rather than as capital gains at the company level. Timing matters here since a buyback needs board and shareholder approvals, a declaration of solvency, and cannot exceed prescribed limits relative to paid up capital and free reserves in a given year. It suits situations where you want to return accumulated cash in one go rather than as a recurring dividend stream.
Royalties for use of parent brand, technology, or IP require a formal agreement and must be benchmarked at arm's length under transfer pricing rules, with contemporaneous documentation including a transfer pricing study, Form 3CEB, and comparability analysis. Royalties are typically deductible for the Indian subsidiary, which makes this route attractive when the group wants to reduce Indian taxable profit legitimately while compensating the parent for genuine IP use. For a fuller walkthrough of sequencing these methods, see our guide on repatriating profits from India, and loop in our transfer pricing team before the first royalty invoice goes out.
Before the FAQ section, the relevant commercial support paths are: - foreign subsidiary registration service - FEMA compliance - transfer pricing - virtual CFO support - repatriating profits from India
Why parents pick Krystal7
We register wholly owned subsidiaries for foreign parent companies who want the process handled the way a CFO would want it handled: a fixed fee quoted before you sign anything, not an estimate that grows once the filing starts. No hourly surprises. No add on fees discovered midway through incorporation.
Our target is a 45 day runway to revenue ready, meaning incorporation, PAN, TAN, bank account, and FC-GPR filing complete, so your India entity can actually invoice, hire, and operate rather than sit incorporated but idle. Every statutory sign off, audit, tax filing, and compliance certificate goes through our associated Chartered Accountant practice, so the numbers your parent company relies on for consolidation and tax purposes are signed by qualified professionals, not just filed by a back office.
If you already know India is the right call and just need the entity set up correctly the first time, our foreign subsidiary registration service covers incorporation end to end. We also handle FEMA compliance for the ongoing reporting obligations that come with foreign investment, transfer pricing for intercompany transactions and royalty structures, and virtual CFO support once you need someone tracking the numbers month to month rather than just at year end.
Frequently Asked Questions
What is a wholly owned subsidiary in India?
Can a foreign company own 100 percent of an Indian subsidiary?
How long does it take to set up a wholly owned subsidiary in India?
What is the minimum capital for a wholly owned subsidiary in India?
Does a wholly owned subsidiary in India need an Indian director?
How is a wholly owned subsidiary taxed in India?
Facing this in your own entity?
Guides explain the rules. A conversation solves your specific case. Talk to a Krystal7 advisor about your India entry, FEMA, or compliance position.
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