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Foreign Company Setup in India — Complete Guide
India’s market scale, growing consumer base, and improving infrastructure make it one of the most actively targeted destinations for foreign business entry. That said, foreign company setup in India is governed by the Companies Act, 2013 and the Foreign Exchange Management Act (FEMA), both of which carry mandatory compliance requirements that apply from the moment a foreign company establishes any form of presence here. At Naveen Pandey & Associates, CA Naveen Pandey holds CA, CS, and CMA qualifications simultaneously — covering company law, tax, and cost compliance under one firm — with 14+ years of experience handling cross-border structuring matters for 500+ clients. This page covers every entry route available to a foreign company and the compliance obligations that follow.
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Legal Definition
What Is a Foreign Company Under Indian Law
Indian law defines a foreign company as any company or body corporate incorporated outside India that has a place of business in India — whether physically or electronically, directly or through an agent — and conducts business activity in India in any manner. Even a significant digital presence can bring a company within this definition.
A separate but related structure is the Indian subsidiary — a company incorporated in India under the Companies Act, 2013, where 50% or more of the equity is held by a foreign parent. Unlike a branch or liaison office, the subsidiary is a distinct Indian legal entity and is not itself a “foreign company” under Indian law. This distinction has significant tax implications, as explained below.
Entry Routes
Ways to Set Up a Foreign Company in India
Four recognised structures exist for a foreign company to establish a presence in India. Each serves a different commercial purpose, carries different regulatory requirements, and is taxed differently. Choosing the right structure at the outset avoids costly restructuring later.
Wholly Owned Subsidiary / Indian Subsidiary
For most foreign companies planning long-term operations in India, an Indian subsidiary — typically a Private Limited Company with up to 100% foreign shareholding — is the most commonly recommended route. The subsidiary is incorporated in India via the SPICe+ system of the Ministry of Corporate Affairs under the Companies Act, 2013. Because it is a domestic Indian company, it is taxed at domestic company rates rather than the higher foreign company rate. That difference is material and often drives the structure decision. Our company registration service covers subsidiary incorporation end to end.
In fact, the subsidiary route also gives the foreign parent the fullest operational flexibility — it can generate revenue, hire employees, hold property, and retain or repatriate profits within FEMA guidelines. For companies exploring the tax treatment of cross-border transactions between the parent and its Indian subsidiary, our international taxation overview and transfer pricing and DTAA services are directly relevant.
Branch Office
A branch office (BO) is suited to a foreign company that wants to conduct actual business activity in India without incorporating a separate Indian entity. The branch is not a separate legal entity — it is the foreign company operating in India directly, which is why it is taxed at foreign company rates.
To open a branch office, the foreign parent must demonstrate a profit-making track record for the last five financial years and a net worth of at least USD 100,000. RBI approval under FEMA is mandatory before the branch can begin operations. Once approved, a branch office is generally registered for two to three years, subject to renewal.
Because the branch is the foreign company itself operating here, its income is taxed as foreign company income — discussed in detail in the compliance section below.
Liaison Office
A liaison office (LO) is the most restricted structure. It exists solely for representative or coordination activity — market research, facilitating communication between the Indian market and the foreign parent, promoting the parent’s products or services. A liaison office cannot generate income, accept orders, or conduct any commercial transaction in India.
As a result, it is not subject to Indian income tax. The parent company must show a profit-making track record for the last three financial years and maintain a net worth of at least USD 50,000. RBI approval is required. Validity is three years (two years for foreign companies in the financial services sector or with construction-related activities), renewable subject to RBI review.
Project Office
A project office (PO) is a structure specifically for foreign companies that have secured a contract to execute a specific project in India — infrastructure, engineering, EPC, or similar. The RBI permits a project office to be opened to facilitate the execution of that particular contract. On top of that, it must be closed once the contracted project is completed. It is not designed for ongoing or general business presence.
Project offices are commonly used by foreign EPC contractors, construction companies, and technical service providers undertaking defined Indian government or private infrastructure contracts.
Quick Overview
Comparing Your Options — Subsidiary, Branch, Liaison, and Project Office
| Structure | Taxability | RBI Approval | Validity | Best Fit |
|---|---|---|---|---|
|
Wholly Owned Subsidiary |
Domestic company tax rate |
Not required (FDI route) |
Ongoing |
Long-term India operations |
|
Branch Office |
Foreign company rate (~36.4%–38.2% effective) |
Required |
2–3 years, renewable |
Active business, no separate Indian entity |
|
Liaison Office |
Not taxable (no income) |
Required |
3 years, renewable |
Representative/coordination only |
|
Project Office |
Foreign company rate |
Required |
Duration of project |
Specific contracted project execution |
ROC Procedure
Foreign Company Registration Process in India
Once a foreign company establishes a place of business in India — regardless of the structure — it must register with the Registrar of Companies (ROC). Under the Companies Act, 2013, Form FC-1 must be filed with the Registrar within 30 days of establishing the place of business.
Documents required for FC-1 filing:
- Charter documents (Memorandum and Articles of Association or equivalent), translated into English
- Address of the registered or principal office of the foreign company
- Full list of directors and secretaries
- Name and address of at least one person resident in India authorised to receive statutory notices on behalf of the company
- Address of the Indian place of business
- Details of any previous place of business in India
- Declaration that no director or authorised representative has been convicted or debarred from forming or managing companies
- Any other information required under the Rules
Per the Companies (Registration Offices and Fees) Rules, 2014, all FC-1 documents must be delivered to the Registrar of Companies, New Delhi, regardless of where in India the company actually operates. On successful filing, a Foreign Company Registration Number (FCRN) is generated and a certificate of registration is issued. The FCRN is the company's permanent registration reference for all future ROC filings in India.
KYC Requirements
Director and Secretary Information Required
For each director and secretary of the foreign company, the following information must be submitted as part of the FC-1 and maintained on record:
- Full name and any previous name used
- Date of birth
- Nationality and whether resident or non-resident
- Passport details
- Membership number (for company secretaries)
- Father’s, mother’s, or spouse’s name
- Residential address
- PAN, if available
- Occupation & other directorships/positions
- Email ID
On DIN: A Director Identification Number is not required for directors of a foreign company that operates only through a branch office in India. This is specific to the branch structure. Directors of an Indian subsidiary, by contrast, do require a DIN — standard company law applies to all directors of Companies Act entities.
Critical Legal Steps
Ongoing Compliance After Registration
Registration is the beginning, not the end. Foreign companies operating in India carry ongoing compliance obligations under the Companies Act, 2013 and FEMA, and these must be maintained consistently. Our annual company compliance service covers post-registration filings in full.
On DIN: A Director Identification Number is not required for directors of a foreign company that operates only through a branch office in India. This is specific to the branch structure. Directors of an Indian subsidiary, by contrast, do require a DIN — standard company law applies to all directors of Companies Act entities.
Form FC-2 — Alterations in Documents
Any change to the documents originally filed must be notified to the ROC within 30 days via Form FC-2. Attachments typically include a certified copy of the board resolution, general meeting resolution if required, and approval letters for any regulatory changes. Changes in the Indian place of business, director or secretary details, and authorised representative details all require FC-2 updates.
Form FC-3 — Financial Statements and Audit
A foreign company must file financial statements of its Indian business operations within six months of the end of each financial year (extendable by the Registrar by up to three months on application). These statements must comply with Schedule III of the Companies Act and be filed using Form FC-3. Accounts must be audited by a practising chartered accountant or CA firm/LLP registered in India.
Mandatory FC-3 attachments: consolidated financial statements, balance sheet and profit and loss account, related party transaction details, details of repatriation or fund transfers to the foreign parent, any applicable approval letters.
Form FC-4 — Annual Return
The annual return must be filed within 60 days of the end of the financial year. It covers promoter, director, and KMP details; remuneration; meetings and attendance records; member and debenture holder information; details of holding, subsidiary, and associate companies; and any penalties or compounding proceedings during the year.
Taxation of Branch and Project Offices
Branch offices and project offices are taxed as foreign companies. Under current law for AY 2026-27, the base income tax rate on a foreign company’s Indian business income is 35%. Surcharge applies at 2% where total income exceeds ₹1 crore but does not exceed ₹10 crore, and at 5% where total income exceeds ₹10 crore. Health and Education Cess applies at 4% on the tax and surcharge amount. As a result, the effective tax rate works out to approximately 36.4% to 38.2% depending on the surcharge tier. This is materially higher than the domestic company rate paid by an Indian subsidiary — a key reason why the subsidiary structure is more tax-efficient for most long-term operations.
For cross-border tax planning, particularly where a DTAA between India and the parent company’s home country may reduce withholding or establish permanent establishment thresholds, see our DTAA advisory services. For NRI shareholders or directors with Indian tax obligations, our NRI taxation services are also relevant.
RBI FEMA regulations govern fund transfers, repatriation, and cross-border transactions throughout the entity’s lifecycle — non-compliance with FEMA carries significant penalties.
Why Choose Us
Why Foreign Companies Work With Naveen Pandey & Associates
All-in-One Cross-Border Expertise
Foreign company setup in India is not a single-service requirement. It spans company law (entity registration, ROC compliance, MOA/AOA drafting), tax law (structuring to minimise effective tax rate, transfer pricing, DTAA application), and foreign exchange compliance (FEMA, RBI approvals, repatriation documentation). Most CA firms cover tax. Most CS firms cover company law. Few cover all three under the same roof.
CA + CS + CMA Under One Roof
CA Naveen Pandey holds CA from ICAI, CS from ICSI, and CMA from ICMAI — simultaneously. Because of this, company incorporation, ROC compliance, cost audit, and tax structuring are all handled within one firm without referring clients to separate professionals for connected requirements. He personally reviews every complex international structuring file before work begins.
Trusted Local & Global Presence
Naveen Pandey & Associates is ICAI registered, with 14+ years of practice and 500+ clients across Delhi NCR, including foreign companies, NRI-held entities, and Indian subsidiaries of overseas parents. Our office is in Vikaspuri, New Delhi — open all seven days — with direct WhatsApp and phone access. No platform intermediary, no intake form routing.
Got Questions?
Frequently Asked Questions
A branch office can conduct business and generate revenue in India. A liaison office cannot — it is limited to coordination and representation only, and earns no income here.
Yes. Under India's FDI policy, foreign companies can hold up to 100% equity in an Indian Private Limited Company in most sectors, subject to sector-specific caps and government approval requirements where applicable.
Yes. A branch office requires prior RBI approval under FEMA before commencing operations in India. The parent company must also meet the five-year profit track record and minimum net worth criteria.
At the foreign company rate: 35% base tax, plus 2% or 5% surcharge depending on income level, plus 4% Health and Education Cess. The effective rate is approximately 36.4% to 38.2%.
No. A project office is specifically tied to the contract or project for which RBI approval was granted. It must cease operations once that project is complete and cannot expand into general business activity.
Directors of a foreign company operating through a branch office in India do not require a DIN. Directors of an Indian subsidiary — which is incorporated as an Indian company — are required to hold a DIN as per the Companies Act, 2013.
Get Help With Your Foreign Company Setup in India
Whether you are evaluating the right entry structure, need help with RBI approval documentation, or are managing ongoing ROC and FEMA compliance — contact us for a consultation.
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