Incorporation of a Foreign Subsidiary Company in India

Expanding into India can be a smart move for a foreign company. India recorded over $58.85 billion in FDI inflows in FY2025-26 alone, an 18% increase over the prior year (DPIIT data via India Briefing, June 2026). One of the most common ways to establish a presence is incorporation of a foreign subsidiary in India: a separate legal entity, owned and controlled by the parent company, that lets the parent operate in India without building an entirely new company from scratch.

Key Takeaways

• A subsidiary is a company with more than 50% of its voting stock controlled by a parent (holding) company. Once incorporated in India, it must follow Indian law, not the parent's home-country law.

• FDI cannot flow into a proprietorship, partnership, or One Person Company under FEMA; a Private Limited Company or LLP is the practical route for a foreign subsidiary.

• Incorporation is only the first step: within 30 days of receiving investment, the subsidiary must file Form FC-GPR with the RBI, and every July 15 it must file an annual FLA Return for as long as it holds foreign investment.

What Is a Subsidiary Company?

A subsidiary is a company with more than 50% of its voting stock controlled by another company, usually called the parent or holding company. A subsidiary incorporated in a foreign country must follow the laws of the country where it's incorporated and operates, so a subsidiary incorporated in India has to comply with Indian company law, tax law, and FEMA/RBI regulations, regardless of where its parent is based.

Choosing the Right Entity Structure for Incorporation

Under FEMA guidelines, Foreign Direct Investment is not permitted into proprietorships, partnership firms, or One Person Companies: an OPC's sole shareholder must be an Indian resident under the Companies Act, so a non-resident parent simply can't hold one. Investment into an LLP is allowed, but only in sectors on the 100% automatic route with no FDI-linked conditions attached; LLPs in sectors that require government approval, or that carry performance conditions, cannot accept FDI at all.

That leaves incorporation of a Private Limited Company as the fastest and most common route for NRIs and foreign entities setting up in India, with an LLP as a narrower alternative depending on sector.

Minimum Requirements

Documents Required for Incorporation

Step-by-Step Incorporation Procedure

The video below walks through the incorporation process end to end; the written steps follow underneath.

Step 1: Name Approval

The first step is reserving the company name. For a subsidiary, it's permissible to use the same name as the parent company with the word "India" added to it. The name is approved provided it isn't identical to an existing entity or otherwise considered undesirable by law.

Step 2: Procurement of DSC

In parallel, a Digital Signature Certificate (DSC) is procured for each proposed director. The DSC is required to submit the incorporation application digitally and is used again for future compliance filings.

Step 3: Incorporation Application

This is the final step: filing the Memorandum and Articles of Association, along with the other documents duly executed by the proposed directors and shareholders, with the Ministry of Corporate Affairs.

Documents typically executed at this stage include:

Executing Documents as a Foreign National or NRI

Once the incorporation application is approved, the Registrar issues a Certificate of Incorporation bearing a Corporate Identification Number (CIN), with PAN, TAN, and the applicable labour-law registration numbers allotted at the same time.

Post-Incorporation Compliance: RBI Reporting Requirements

Incorporation is the easy part. The ongoing FEMA/RBI reporting obligations are where most foreign subsidiaries actually need help. Foreign investment into Indian companies is regulated by FEMA and the Reserve Bank of India; whenever the parent company invests in the subsidiary's share capital, that investment has to be reported correctly and on time.

Filing Form FC-GPR

On receiving the remittance, the Indian subsidiary must report it to the RBI as Foreign Direct Investment via Form FC-GPR, filed on the RBI's FIRMS portal within 30 days of the date shares are allotted to the foreign investor. Supporting documents typically required alongside the filing include:

Filing FC-GPR late doesn't automatically mean a formal penalty proceeding: RBI applies a standard Late Submission Fee for filings made within three years of the due date, calculated as ₹7,500 plus 0.025% of the investment amount per year of delay (minimum ₹7,500, capped at the amount involved), per its uniform late-fee circular (RBI/FED/2024-25/78, effective October 2025). Filings delayed beyond three years, or genuine non-reporting, are handled through formal FEMA compounding instead.

The Annual FLA Return

Separately, any Indian entity that has received FDI, this subsidiary included, must file the Foreign Liabilities and Assets (FLA) Return every year by July 15, based on audited or provisional financials, through the RBI's FLAIR portal. This is an annual, ongoing obligation for as long as the subsidiary holds foreign investment on its books; it isn't a one-time filing at incorporation.

Sectoral Caps Can Change

FDI caps aren't fixed forever. As one recent example, the insurance sector's automatic-route FDI cap was raised from 74% to 100% in a policy amendment effective February 9, 2026 (Skadden, February 2026), and the defence sector's automatic-route cap moved from 49% to 74% around the same period. Always confirm the current cap and approval route for your specific sector before finalizing an investment structure. This guide is educational, not a substitute for sector-specific advice at the time you invest.

At VenturEasy, our team helps foreign companies incorporate subsidiaries in India and stay compliant with FEMA and RBI reporting requirements afterward. See our subsidiary registration service or get in touch with your requirements. We also regularly assist clients with ongoing compliance for a Private Limited Company and FEMA/RBI compliance.