Legal and Tax Requirements for Setting Up a Subsidiary in Delhi (2026 Guide)

Delhi is one of India’s प्रमुख business hubs, attracting foreign investors, multinational corporations, and startups. If you are planning company formation in Delhi, setting up a subsidiary is one of the most effective ways to enter the Indian market.

However, understanding the legal and tax requirements for setting up a subsidiary in Delhi is essential to ensure smooth incorporation and long-term compliance.

This guide explains everything you need to know — from legal structure to taxation and regulatory compliance.

What is a Subsidiary Company?

A subsidiary company is an entity where a foreign parent company holds more than 50% ownership or controls the management.

Most foreign companies establish their presence in India through:

• Private Limited Company (most common)
• Wholly Owned Subsidiary (100% ownership)

Legal Requirements for Setting Up a Subsidiary in Delhi

1️. Choose the Right Business Structure

In India, subsidiaries are typically incorporated as Private Limited Companies under the Companies Act, 2013.

This structure provides:

• Limited liability protection
• Separate legal identity
• Ease of business operations
• Eligibility for foreign investment

2. Minimum Requirements for Incorporation

To register a subsidiary company in Delhi, you must meet the following criteria:

• Minimum 2 Directors
• At least one Indian resident director (182+ days residency)
• Minimum 2 shareholders (can include foreign entities)
• Registered office address in Delhi

Foreign companies can act as shareholders through board resolutions and authorized representatives.

3. Digital Signature Certificate (DSC) & DIN

Before incorporation:

• Directors must obtain a Digital Signature Certificate (DSC)
• Apply for Director Identification Number (DIN) through SPICe+

These are mandatory for filing incorporation documents online.

4️. Name Approval from MCA

Company name must be approved through:

• RUN (Reserve Unique Name) or
• SPICe+ Part A

The name should:

• Be unique
• Not conflict with existing trademarks
• Reflect the business activity

5. Drafting MOA & AOA

Two essential legal documents:

• Memorandum of Association (MOA) – defines business objectives
• Articles of Association (AOA) – defines internal rules and governance

These must be filed with the Registrar of Companies (ROC).

6️. Filing Incorporation Documents

The SPICe+ (Simplified Proforma for Incorporating Company Electronically) form is used to register the company.

It includes:

• Company details
• Director details
• Shareholding pattern
• Registered office

After approval, you receive:

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

7️. FEMA & FDI Compliance

For foreign-owned subsidiaries, compliance under FEMA (Foreign Exchange Management Act) is mandatory.

Key requirements:

• Check sectoral FDI limits
• File FC-GPR form with RBI after receiving foreign investment
• Report share allotment within prescribed timelines

Delhi-based subsidiaries must strictly follow RBI guidelines for foreign investments.

Tax Requirements for Subsidiary Company in Delhi

1. Corporate Income Tax

Subsidiary companies in India are taxed as domestic companies.

Applicable tax rates:

• 22% (new regime) or
• 25% (for certain companies)

Additional surcharge and cess may apply.

2. Goods and Services Tax (GST)

GST registration is required if:

• Annual turnover exceeds threshold limits
• Business involves interstate supply
• E-commerce operations

GST rates depend on the nature of goods/services.

3. Tax Deducted at Source (TDS)

Companies must deduct TDS on:

• Salaries
• Contractor payments
• Professional fees

TDS must be deposited and returns filed periodically.

4. Transfer Pricing Compliance

If the subsidiary deals with its foreign parent company:

• Transactions must follow arm’s length pricing
• Maintain transfer pricing documentation
• File transfer pricing reports

This is crucial for multinational companies.

5. Dividend & Profit Repatriation

Profits can be repatriated to the parent company as dividends.

Key points:

• Subject to applicable tax rules
• Must comply with RBI regulations
• No Dividend Distribution Tax (DDT), but shareholder-level taxation applies

Post-Incorporation Legal Compliance

After setting up a subsidiary in Delhi, companies must comply with:

• Appointment of statutory auditor
• Annual ROC filings
• Board meetings
• Maintenance of statutory registers
• Filing of income tax returns
• GST returns (if applicable)

Non-compliance can lead to penalties and legal consequences.

Timeline for Setting Up a Subsidiary in Delhi

⏳ Typical Timeline:

• 10–15 working days (subject to approvals and documentation)

Why Delhi is Ideal for Subsidiary Setup

• Strategic location (close to government bodies)
• Strong infrastructure
• Access to skilled workforce
• Presence of multinational companies
• Connectivity to Gurgaon & NCR business ecosystem

Delhi NCR is one of the most preferred regions for foreign companies entering India.

Conclusion

Setting up a subsidiary in Delhi involves a combination of legal registration, FDI compliance, and tax obligations. While the process is streamlined through digital platforms like MCA, understanding each requirement is essential for smooth incorporation and operations.

If you are planning company incorporation in Delhi or anywhere in India, professional guidance can help you navigate regulatory complexities and ensure full compliance from day one.