India Entry & Business Setup

The structures, and what each permits

• Wholly owned subsidiary — a private limited company incorporated in India, able to trade freely subject to sector rules
• Joint venture — an Indian company with a local partner, used where the sector caps foreign ownership
• Liaison office — representation only; cannot trade, earn income or invoice
• Branch office — may carry on specified activities including export and import, but not manufacturing
• Project office — established for a specific contract, for its duration only

The foreign investment rules

Most sectors permit foreign investment up to one hundred per cent through the automatic route, with no prior approval needed. Others are capped, and some require government approval before any investment.

A separate rule applies to investment from countries sharing a land border with India, which requires government approval regardless of sector. This catches structures where the ultimate beneficial owner sits in such a country even where the immediate investor does not.

Reporting is where new entrants slip

• Advance reporting of the inward remittance to the authorised dealer bank
• Form FC-GPR filed with the Reserve Bank within thirty days of allotting shares
• Annual return on foreign liabilities and assets, by 15 July each year
• Form FC-TRS on any transfer of shares between residents and non-residents
• Valuation certificate supporting the issue price, from a registered valuer or merchant banker

Repatriation

A subsidiary repatriates through dividends, which are subject to withholding, or through payment for services and royalties, which must be at arm’s length and attract transfer pricing scrutiny.

A branch may remit profits after tax with the authorised dealer’s approval. A liaison office earns nothing and remits nothing — it is funded from abroad and its expenses are met from those inward remittances.

How we handle it

1. 1 Structure selection We establish which vehicle suits your intended activity, since a liaison office cannot trade and a branch cannot manufacture.
2. 2 Checking the sector rules Foreign investment caps, approval requirements and the land-border rule are checked against your ownership chain.
3. 3 Document attestation Parent company documents are apostilled or consularised, which is usually the longest lead item.
4. 4 Incorporation or approval The company is incorporated, or the Reserve Bank application filed for a branch, liaison or project office.
5. 5 Banking and reporting The bank account is opened, funds received and the advance reporting and FC-GPR filings completed on time.
6. 6 Compliance calendar We set up the ongoing ROC, tax, transfer pricing and FLA reporting obligations.

Frequently asked questions