Your US company, UK business, or Middle East group has identified India as the next market. You have done the market analysis. The numbers make sense. Now you need to actually set up in India — and you have probably been told it is straightforward.
It is not. India entry involves the RBI, MCA, GST authorities, employment regulators, and state-level filing requirements — simultaneously. Foreign companies that treat India like opening an office in another US state spend the next two years fixing what they got wrong in Year 1.
Here is an honest roadmap from an India entry consultant who has done this many times.
The First Question: Which Entity Structure?
For most foreign companies entering India, the right choice is a Wholly Owned Subsidiary (WOS) — a Private Limited Company incorporated under the Indian Companies Act, fully owned by the foreign parent.
A branch office is also an option, but it is only permitted for specific sectors and has significant restrictions: it cannot manufacture goods, and its losses are consolidated with the parent’s global P&L. A liaison office cannot generate any revenue at all — it exists only for relationship-building, and many foreign companies open one thinking they can do business through it. They cannot.
For the vast majority of US, UK, and European companies entering India to sell services or products: incorporate a Private Limited subsidiary. The liability stays separate from the parent. The compliance is manageable. The credibility with Indian clients and vendors is higher.
The Incorporation Timeline: What Actually Happens
A typical India incorporation for a foreign company takes 45 to 60 days when documentation is complete and clean. Here is the sequence:
- Name approval: Apply to the Ministry of Corporate Affairs (MCA) for name reservation. Turnaround: 2–4 working days.
- Director Identification Numbers (DIN): Each proposed director needs a DIN. At least one director must be an Indian resident. Turnaround: 3–5 working days.
- Memorandum and Articles of Association: Drafted based on your business activity, share structure, and governance requirements.
- Incorporation filing: Submitted to MCA. Certificate of Incorporation issued. Turnaround: 5–7 working days once documents are complete.
- PAN registration: Permanent Account Number — mandatory for any tax filing. Issued within 5 working days.
- GST registration: If your expected revenue exceeds ₹20 lakh (services) or ₹40 lakh (goods). Takes 7–10 working days.
- Bank account: Indian bank account for the subsidiary. Takes 2–4 weeks — this is often the slowest step.
What causes delays: incomplete documentation from the foreign parent (apostilled copies, board resolutions, address proof), director eligibility issues, and sector-specific FDI restrictions that were not checked in advance.
FDI Compliance: The RBI Requirement Most Companies Miss
When the foreign parent remits capital into the Indian subsidiary, that inflow must be reported to the Reserve Bank of India within 30 days. This is not optional. The form is FC-GPR (Foreign Currency — Gross Provisional Return).
If you miss this filing, the RBI has the authority to compel you to reverse the remittance and repatriate the funds. In practice they typically impose a late fee, but the fee can be significant and the process of regularising a late FC-GPR filing is burdensome.
Beyond incorporation: ongoing FEMA (Foreign Exchange Management Act) compliance is required every year. If there are any intercompany payments — management fees, royalties, software subscriptions billed from the parent to the Indian subsidiary — each one requires documentation and, in some cases, RBI approval in advance.
Transfer Pricing: The Surprise Bill in Year 2
The moment your Indian subsidiary starts paying the foreign parent for anything — IT services, use of brand, management support, IP licensing — transfer pricing applies. The price must be at arm’s length. If the Indian tax department believes the price is inflated (reducing taxable income in India), they will make an adjustment.
Transfer pricing adjustments in India have been aggressive. A multinational paying its parent a 10% management fee that the tax officer believes should be 5% will face a 50% additional tax assessment on the difference — plus interest and penalty.
The documentation requirement: a Transfer Pricing Study must be prepared by a qualified CA before you file your income tax return. If intercompany transactions exceed ₹1 crore, a Form 3CEB (transfer pricing audit certificate) from a CA is mandatory.
This cannot be done retroactively. The methodology must be decided before the transactions happen.
GST: Monthly Compliance from Month One
If your subsidiary is selling services in India, GST registration is mandatory above ₹20 lakh in annual revenue. Once registered, you file GSTR-3B every month (by the 20th), pay the GST liability, and file GSTR-1 (outward supply details) quarterly or monthly depending on your turnover tier.
Input Tax Credit (ITC) is a significant benefit: GST paid on your business purchases reduces your GST liability on sales. Foreign companies that do not set up their accounting system to track ITC correctly lose this benefit.
The penalty for a missing or incorrect GST filing: ₹50 to ₹5,000 per day, depending on the delay. For a company that has missed 6 months of filings, the penalty position can become material very quickly.
Staffing in India: Tax and Employment Law
India’s employment law is not particularly startup-friendly. Key obligations:
- Provident Fund (PF): 12% of basic salary contributed by employer, 12% by employee — mandatory for employees earning below ₹15,000/month basic. Practically, most companies extend it to all employees.
- ESI (Employee State Insurance): For employees earning up to ₹21,000/month gross — employer contributes 3.25%.
- Professional Tax: A small state-level tax on employee salaries — varies by state.
- TDS on salary: Monthly deduction and quarterly filing — Form 24Q.
If you are seconding a foreign executive to India: that person becomes a tax resident of India after 182 days in a financial year. After that, their global income is taxable in India. This surprises many multinationals.
The One Thing That Derails India Entry More Than Anything Else
It is not the paperwork. It is the assumption that India entry is a one-time task, not an ongoing compliance programme.
Companies that set up the subsidiary correctly but then assign a junior accountant to manage Indian compliance consistently find themselves with a backlog of unfiled returns, missed RBI obligations, and transfer pricing exposure by Year 2 or 3.
India entry should be treated as what it is: a new operating entity in a complex jurisdiction with annual statutory, tax, and regulatory obligations that require a dedicated CA partner who understands both Indian law and the foreign parent’s requirements.
If you are a foreign company planning India entry in the next 6–12 months — or if you are already operating in India and are not confident about your compliance position — WhatsApp us directly. We will tell you honestly what is in place, what is missing, and what needs to be fixed.