India has emerged as one of the world’s most attractive destinations for international expansion. With its booming economy, vast consumer base, and skilled workforce, global businesses are increasingly looking to establish a presence in India. Among the various entry strategies, setting up a subsidiary company in India is one of the most effective ways to build a long-term, scalable presence.
This complete guide walks you through the benefits, setup process, legal requirements, taxation, and compliance for subsidiaries in India.
What Is a Subsidiary Company in India?
A subsidiary company is a corporate entity in which a foreign parent company owns more than 50% of the shareholding. While controlled by its parent, the subsidiary is treated as a separate legal entity under Indian law.
Types of subsidiaries:
Wholly-Owned Subsidiary (WOS): The foreign parent owns 100% of shares.
Partially-Owned Subsidiary: The parent owns a majority stake, but local investors hold minority shares.
Why Should Global Businesses Set Up a Subsidiary in India?
1. Access to a Vast Market
India’s 1.4+ billion population, combined with a fast-growing middle class, makes it a lucrative market across industries like technology, healthcare, retail, manufacturing, and finance.
2. Skilled Workforce at Competitive Costs
India is home to one of the world’s largest pools of engineers, IT professionals, and finance experts, offering high-quality talent at lower costs.
3. Government Support for FDI
Initiatives like Make in India, Startup India, and sector-specific incentives encourage foreign direct investment (FDI).
4. Legal and Financial Independence
A subsidiary can independently enter contracts, hire employees, and manage operations while still being controlled by the parent company.
5. Limited Liability Protection
The liability of the foreign parent company is restricted to its investment in the subsidiary, safeguarding global businesses from excessive risks.
Step-by-Step Process to Set Up a Subsidiary in India
1. Select the Entity Type
Most global businesses register their subsidiaries as Private Limited Companies due to flexibility and lower compliance requirements. Public limited companies are less common unless large-scale fundraising is required.
2. Appoint Directors
Minimum of two directors required.
At least one must be an Indian resident.
3. Obtain DIN and DSC
Director Identification Number (DIN) is mandatory for directors.
Digital Signature Certificate (DSC) is required for filing incorporation documents online.
4. Reserve the Company Name
File an application with the Ministry of Corporate Affairs (MCA) to secure a unique company name.
5. Draft MoA & AoA
Memorandum of Association (MoA): Defines company objectives.
Articles of Association (AoA): Outlines internal governance.
6. File Incorporation Documents
Submit incorporation forms and documents to the Registrar of Companies (RoC). Once approved, you’ll receive the Certificate of Incorporation.
7. Register for Taxation
PAN (Permanent Account Number)
TAN (Tax Deduction and Collection Account Number)
GST (Goods and Services Tax) Registration
8. Open a Corporate Bank Account
An Indian bank account is essential for investment inflow and business operations.