A Foreign Company in India is defined under Section 2(42) of the Companies Act, 2013, as any company or body corporate incorporated outside India which has a place of business in India either by itself or through an agent, physically or electronically and conducts any business activity in India.
Foreign companies looking to tap into India's expanding economy can set up their operations in several forms, such as:
- Wholly Owned Subsidiaries
- Branch Offices
- Liaison Offices
- Project Offices
India's vast consumer base, growing digital ecosystem, skilled workforce, and liberal Foreign Direct Investment (FDI) policies make it an attractive destination for global companies.
Table of Contents
Eligibility Criteria for Foreign Company Registration in India
To register a foreign company in India, the following eligibility conditions must be fulfilled:
- FDI Policy Compliance: The foreign investor must follow FDI norms, either under the Automatic Route (no prior approval required) or the Government Route (approval from concerned ministries needed).
- Indian Resident Director: A subsidiary company must have at least one director who is a resident in India.
- Registered Office in India: The company must maintain a registered office in India, and proof of valid address must be submitted during incorporation.
- Business Activity Restrictions: Foreign companies are not permitted to engage in retail trading or real estate activities.
- Regulatory Compliance: Business activities must align with the Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA) regulations.
Types of Business Entities for Foreign Companies in India
Foreign companies can enter India through multiple legal structures based on their business goals and compliance appetite:
- Wholly Owned Subsidiary (WOS)
- A private limited company incorporated in India with 100% foreign shareholding.
- Can engage in commercial and revenue-generating activities under FDI-compliant sectors.
- A private limited company incorporated in India with 100% foreign shareholding.
- Liaison Office
- A non-commercial presence used for market research, networking, and representing the parent company.
- Requires RBI approval and cannot earn income in India.
- A non-commercial presence used for market research, networking, and representing the parent company.
- Branch Office
- Set up to conduct business and earn revenue in India.
- Can export/import goods, offer consultancy services, or carry out R&D.
- RBI approval required.
- Set up to conduct business and earn revenue in India.
- Project Office
- Temporary setup for executing specific projects awarded by Indian entities or government bodies.
- Generally permitted if the project is funded by an inward remittance or a bilateral/multilateral agency.
- Temporary setup for executing specific projects awarded by Indian entities or government bodies.
- Joint Venture (JV)
- A foreign company can form a joint venture with an Indian entity to share equity, control, and profits.
- A foreign company can form a joint venture with an Indian entity to share equity, control, and profits.
Step-by-Step Registration Process for a Foreign Company in India
Setting up a foreign company in India involves regulatory approvals, documentation, and legal filings. Here's a detailed breakdown of the process:
Step 1: Choose the Right Business Structure
Foreign entities must select the most suitable mode of entry based on their intended operations:
- Wholly Owned Subsidiary (WOS)
- Branch Office
- Liaison Office
- Project Office
- Joint Venture (JV)
Each structure has different regulatory requirements under RBI, FEMA, and MCA.
Step 2: Obtain a Digital Signature Certificate (DSC)
A Digital Signature Certificate (DSC) is needed for all directors/authorized representatives to sign e-forms on the MCA portal. Apply for a DSC from a certified authority in India.
Step 3: Name Reservation & Company Incorporation via SPICe+ (For Subsidiary/JV)
File the SPICe+ Part A form for name reservation on the MCA portal. After name approval, complete SPICe+ Part B, including:
- eMOA (Memorandum of Association)
- eAOA (Articles of Association)
- AGILE-Pro (for GST, EPFO, ESIC, and bank account setup)
- INC-9 (declaration by subscribers/directors)
Upload all documents with digitally signed forms.
Step 4: RBI Approval for Liaison, Branch, and Project Offices
Foreign companies opting for Liaison, Branch, or Project Offices must apply via Form FNC on the RBI FIRMS portal. Approval is granted under RBI’s Authorized Dealer Category-I Banks (designated AD Bank).
Step 5: Open a Bank Account
Open a current account in an Indian bank in the name of the newly incorporated entity. It is required for:
- Receiving foreign capital infusion
- Making statutory payments
- Conducting business transactions
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FDI Policy & Compliance for Foreign Companies
Foreign Direct Investment (FDI) in India is governed by the FEMA Act, RBI circulars, and sectoral guidelines. Here’s what foreign companies must know:
- FDI Routes:
- Automatic Route: No prior government approval needed.
- Government Route: Approval required from specific ministries, based on the sector.
- Automatic Route: No prior government approval needed.
- Sectoral Caps: Certain sectors have FDI limits (e.g., defense, insurance, telecom) and special conditions.
- Compliance & Reporting:
- File FC-GPR (Foreign Currency-Gross Provisional Return) after equity shares are allotted.
- Annual Return on Foreign Liabilities and Assets (FLA) must be filed with RBI.
- Form FC-TRS for transfer of shares between resident and non-resident.
- File FC-GPR (Foreign Currency-Gross Provisional Return) after equity shares are allotted.
Documents Required for Foreign Company Registration
To complete the registration process, the following documents are typically required:
For Directors:
- Valid Passport (mandatory for foreign nationals)
- Government-issued ID proof (Aadhar, Voter ID)
- Address proof (utility bill, bank statement)
For Registered Indian Office:
- Rental Agreement or Lease Deed
- NOC from owner
- Recent utility bill
For RBI/FEMA Compliance:
- FDI declaration
- FC-GPR or Form FNC for RBI registration
Post-Registration Compliance for Foreign Companies in India
Once registered, a foreign company must ensure continuous legal and financial compliance. Key post-incorporation obligations include:
- Annual Filings with MCA:
- File Form FC-3 with business activity details and financials.
- Submit AOC-4 for financial statements.
- File Form FC-3 with business activity details and financials.
- Tax Compliance:
- File ITR, pay TDS, and maintain GST records if applicable.
- File ITR, pay TDS, and maintain GST records if applicable.
- FEMA/RBI Reporting:
- Submit Annual Activity Certificate through an authorized dealer bank.
- Continue timely reporting of share allotments and inward remittances.
- Submit Annual Activity Certificate through an authorized dealer bank.
Frequently Asked Questions
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
Limited Liability Partnership
(LLP)
- Professional services
- Firms seeking any capital contribution from Partners
- Firms sharing resources with limited liability
One Person Company
(OPC)
- Freelancers, Small-scale businesses
- Businesses looking for minimal compliance
- Businesses looking for single-ownership
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
One Person Company
(OPC)
- Freelancers, Small-scale businesses
- Businesses looking for minimal compliance
- Businesses looking for single-ownership
Private Limited Company
(Pvt. Ltd.)
- Service-based businesses
- Businesses looking to issue shares
- Businesses seeking investment through equity-based funding
Limited Liability Partnership
(LLP)
- Professional services
- Firms seeking any capital contribution from Partners
- Firms sharing resources with limited liability
Frequently Asked Questions
What is the difference between a subsidiary and a branch office in India?
To register a construction company in India, follow these steps:
- Subsidiary: A separate legal entity incorporated in India under the Companies Act, 2013. It can be wholly or partly owned by the foreign parent. It enjoys full operational autonomy and is taxed like any Indian company.
- Branch Office: Not a separate legal entity. It's an extension of the foreign parent company and is restricted to specific activities approved by the RBI (like export/import, consultancy, R&D). It cannot carry out manufacturing or retail trading.
Can a foreign company operate in India without registration?
No, foreign companies cannot legally conduct business in India without registration. They must register with the Ministry of Corporate Affairs (MCA) and obtain approvals (such as RBI clearance for certain types of offices). Unregistered operations may attract penalties and legal consequences.
How long does it take to register a foreign company in India?
The timeline varies based on the business structure and regulatory approvals:
- Subsidiary or Joint Venture: Around 15–25 working days, assuming all documents are in order.
- Branch/Liaison/Project Office: May take 4–6 weeks, as RBI/AD Bank approval is required before MCA registration.
What are the tax implications for foreign companies in India?
- Subsidiaries: Taxed as Indian domestic companies at standard corporate tax rates (15% to 30% depending on turnover and type).
- Branch/Project/Liaison Offices: Taxed at 35% (plus surcharge and cess) for AY 2025-26 on profits attributable to Indian operations. Liaison offices are non-income generating, so they are typically not taxed.
Is RBI approval mandatory for all foreign company registrations?
No. RBI approval is only mandatory for:
- Branch Offices
- Liaison Offices
- Project Offices
For subsidiaries and joint ventures, RBI approval is not required if the investment is under the automatic route of the FDI policy.
Can foreign nationals be directors in an Indian subsidiary?
Yes, foreign nationals can be directors in an Indian subsidiary. However, at least one director must be a resident of India (i.e., lived in India for a total of 182 days or more in the previous calendar year) as per Section 149(3) of the Companies Act, 2013.
What are the compliance requirements for foreign companies under FEMA?
Foreign companies must adhere to FEMA (Foreign Exchange Management Act) regulations, including:
- Filing of FC-GPR (for share allotment) and FC-TRS (for transfer of shares).
- Annual Return on Foreign Liabilities and Assets (FLA) to RBI.
- Annual Activity Certificate (AAC) for Branch/Liaison/Project offices.
- Reporting inward remittances and maintaining proper documentation for foreign investments.
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Akash Goel is an experienced Company Secretary specializing in startup compliance and advisory across India. He has worked with numerous early and growth-stage startups, supporting them through critical funding rounds involving top VCs like Matrix Partners, India Quotient, Shunwei, KStart, VH Capital, SAIF Partners, and Pravega Ventures.
His expertise spans Secretarial compliance, IPR, FEMA, valuation, and due diligence, helping founders understand how startups operate and the complexities of legal regulations.
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