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5 Things to Know Before Forming a Subsidiary Company in India (2026 Guide)
India is one of the fastest-growing economies in the world, attracting global businesses across technology, manufacturing, fintech, healthcare, and e-commerce sectors. If you are planning to expand your operations into India, forming a subsidiary company is often the most strategic entry route.
However, before proceeding with subsidiary company formation in India, there are several legal, financial, and regulatory aspects you must clearly understand.
Here are 5 important things to know before forming a subsidiary company in India.
1️⃣ Understand the Type of Subsidiary Structure
In India, most foreign companies establish their presence through:
A Wholly Owned Subsidiary in India means 100% of the shares are held by the foreign parent company (subject to FDI rules). In most sectors, 100% FDI is allowed under the automatic route, but some sectors require government approval.
Choosing the right structure impacts:
- Liability
- Taxation
- Compliance requirements
- Fund repatriation
For most foreign investors, a Private Limited Company registered as a wholly owned subsidiary is the preferred model due to limited liability and operational flexibility.
2️⃣ Check FDI Rules & Sectoral Restrictions
India regulates foreign investments under FEMA (Foreign Exchange Management Act) and FDI policy guidelines.
Before forming a subsidiary, you must check:
- Whether your sector allows 100% FDI
- Whether approval is required from RBI or Government of India
- Any minimum capital requirements
- Compliance reporting obligations
Sectors like defense, telecom, and insurance have restrictions. However, industries such as IT services, consulting, and manufacturing generally allow full foreign ownership.
Ignoring FDI rules can delay or reject your incorporation process.
3️⃣ Director & Shareholder Requirements
To form a subsidiary company in India:
- Minimum 2 Directors are required.
- At least one director must be an Indian resident (stayed in India for 182+ days in the previous financial year).
- Minimum 2 shareholders (can be corporate entities).
Documents required include:
- Passport copies
- Address proof
- Board resolution from parent company
- MOA & AOA drafting
- Registered office address in India
If you are forming a subsidiary in Delhi or Gurgaon, you must also arrange a local registered office address.
4️⃣ Taxation & Compliance Obligations
Once incorporated, your subsidiary company in India must comply with:
India has a Double Taxation Avoidance Agreement (DTAA) with many countries, which helps in reducing tax burden on profit repatriation.
Non-compliance can attract penalties and legal complications. Proper accounting and compliance management are crucial from day one.
5️⃣ Timeline & Cost of Incorporation
The process of forming a subsidiary company in India typically includes:
- Name approval(RUN/SPICe+ process)
- Digital Signature Certificates (DSC)
- Director Identification Number (DIN)
- Incorporation filing with MCA
- PAN & TAN issuance
- Bank account opening
- RBI reporting (for foreign investment)
Timeline: 10–15 working days (subject to documentation)
Cost: Depends on authorized capital, professional fees, and compliance services.
Working with an experienced company formation consultant in India ensures smooth documentation and faster approvals.
Why Choose India for Subsidiary Formation?
- Large domestic market
- Skilled workforce
- Competitive operational costs
- Growing startup ecosystem
- Ease of doing business reforms
Many global corporations prefer setting up their Indian operations in major business hubs like Delhi NCR due to infrastructure and connectivity advantages.
Final Thoughts
Forming a subsidiary company in India is a strategic decision that opens doors to one of the world’s most dynamic markets. However, proper planning regarding structure, FDI compliance, taxation, and documentation is essential.
If you are planning company formation in India, expert guidance can help you avoid regulatory delays and compliance risks.