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How to Set Up a Wholly Owned Subsidiary in India: A Complete Guide

How to Set Up a Wholly Owned Subsidiary in India: A Complete Guide

India has emerged as one of the most attractive destinations for foreign investment due to its robust economy, skilled workforce, and favourable business environment. Many foreign companies prefer to establish a Wholly Owned Subsidiary (WOS) in India to gain full control over operations while taking advantage of local opportunities.

This guide explains everything you need to know — from legal requirements to registration procedures — for setting up a wholly owned subsidiary in India.

What is a Wholly Owned Subsidiary (WOS)?

A Wholly Owned Subsidiary is a company in which 100% of the shares are owned by a foreign parent company. This structure allows the foreign company to have complete ownership, management control, and decision-making authority over the Indian entity.

Foreign companies can establish their wholly owned subsidiaries in India as:

  • Private Limited Company
  • Public Limited Company

However, most investors prefer the Private Limited Company structure due to easier compliance and flexibility.

Benefits of Setting Up a Wholly Owned Subsidiary in India

  • Complete Ownership and Control – 100% shareholding allows the parent company full control over operations.
  • Limited Liability – The parent company’s liability is limited to the investment in the subsidiary.
  • Access to Indian Market – Direct entry into one of the fastest-growing economies in the world.
  • Separate Legal Entity – The subsidiary is an independent legal entity under Indian law.
  • Repatriation of Profits – Profits can be repatriated after payment of taxes and compliance with FEMA regulations.
  • Tax Benefits and Incentives – Access to various government incentives, depending on the industry and location.

    • Legal Framework for a Wholly Owned Subsidiary

    Foreign investment in India is governed by:

    • Companies Act, 2013
    • Foreign Exchange Management Act (FEMA), 1999
    • RBI Regulations and FDI Policy

    The route for investment depends on the sector:

    • Automatic Route – No prior government approval required.
    • Government Route – Prior approval from relevant authorities (like DPIIT or RBI) is required.

    Step-by-Step Procedure to Set Up a Wholly Owned Subsidiary in India

    Step 1: Obtain Digital Signature Certificate (DSC)

    Each director of the proposed company must obtain a Digital Signature Certificate to file forms electronically with the Ministry of Corporate Affairs (MCA).

    Step 2: Obtain Director Identification Number (DIN)

    A DIN is required for all directors. It can be obtained by filing e-Form SPICe+ (INC-32) during incorporation.

    Step 3: Name Reservation

    Apply for name approval through the RUN (Reserve Unique Name) service on the MCA portal. The name should reflect the foreign parent’s brand, if applicable, and must end with Private Limited.

    Step 4: Drafting of Incorporation Documents

    Prepare the following documents:

    • Memorandum of Association (MOA)
    • Articles of Association (AOA)
    • Declaration and affidavits by directors
    • Proof of registered office address
    • Identity and address proof of directors

    Step 5: Filing for Incorporation (SPICe+ Form)

    Submit the SPICe+ form on the MCA portal, along with MOA, AOA, and supporting documents. Once approved, the company receives:

    • Certificate of Incorporation
    • Corporate Identification Number (CIN)
    • PAN and TAN

    Step 6: Post-Incorporation Compliance

    After incorporation, the following steps are mandatory:

    • Open a bank account in the company’s name.
    • Issue shares to the foreign parent company within 60 days.
    • File Form FC-GPR with the RBI through the FIRMS portal to report foreign investment.
    • Obtain other registrations like GST, Professional Tax, Shops & Establishment, etc., as applicable.

    Documents Required

    From Parent Company

    • Certificate of Incorporation
    • Board Resolution authorizing investment
    • Memorandum & Articles of Association
    • Proof of registered office
    • Authorized signatory ID proof

    From Directors and Shareholders

    • Passport (mandatory for foreign nationals)
    • Address proof (utility bill, bank statement)
    • Passport-size photographs

    Taxation for Wholly Owned Subsidiaries in India

    A WOS is treated as an Indian company for tax purposes.

    • Corporate Tax Rate: 25% (for turnover up to ₹400 crore) or 30% otherwise.
    • Dividend Distribution Tax (DDT): Abolished; dividends are taxable in the hands of shareholders.
    • Transfer Pricing: Applicable to transactions with the foreign parent company.

    Compliance Requirements

    A wholly owned subsidiary must comply with:

    • Annual filing of Financial Statements (Form AOC-4) and Annual Return (Form MGT-7).
    • Statutory Audit by a Chartered Accountant.
    • Filing of FC-GPR and Annual Return on Foreign Liabilities and Assets (FLA) to RBI.
    • Regular tax filings (TDS, GST, Income Tax, etc.).

    Conclusion

    Setting up a Wholly Owned Subsidiary in India offers foreign investors full control, flexibility, and direct access to the Indian market. However, compliance with Companies Act, FEMA, and RBI regulations is crucial to avoid legal complications.

    Partnering with a professional Chartered Accountant or legal firm ensures smooth registration, regulatory compliance, and effective tax planning.