Setting Up an Indian Subsidiary of a Foreign Company — Incorporation, FEMA Filings and the Press Note 2 (2026) Screen

Quick answer: A foreign company's Indian subsidiary is a private limited company incorporated through SPICe+ with at least two directors (one resident in India for 182 days or more) and two shareholders, which can be the foreign parent and a nominee. Foreign money comes in by banking channel; shares must be allotted within 60 days of the remittance and FC-GPR filed on RBI's FIRMS portal within 30 days of allotment, with an annual FLA return by 15 July. Since Press Note 2 of 2026, an investor from a land-border country is tested on beneficial ownership at the 10% line — at or below 10% with no control can use the automatic route, above it needs approval — so the parent's look-through ownership must be mapped before incorporation. The government registration fee is nil at both ₹1 lakh and ₹10 lakh of authorised capital.

Last verified 5 October 2026 — rules on this page checked against the current notifications. We update it the day a rule changes.

Subsidiary, branch or liaison office

	Subsidiary (private limited)	Branch office	Liaison office
Legal status	Separate Indian company	Extension of the foreign company	Extension, representation only
Can it invoice in India?	Yes — any permitted business	Yes — within RBI-permitted activities	No
Tax	Domestic company rates	Foreign company rates	No operating income
Foreign investment route	FDI — automatic in most sectors	RBI regulations of 2016 — see the draft-vs-law note	Same

Incorporation — what the Companies Act requires

Private limited company: minimum two directors and two shareholders; at least one director resident in India (stayed 182 days or more in the previous calendar year, s.149(3)); the foreign parent can be the main shareholder with an Indian nominee for the second share
SPICe+ with DSCs and DINs; the foreign directors' and parent's documents are notarised and apostilled (or consularised) in the home country; registered-office proof in India
Government registration fee: nil at ₹1 lakh and at ₹10 lakh of authorised capital — the exact ceiling above which a fee applies is read off the MCA fee calculator at filing. MOA and AOA stamp duty is computed by state (Delhi, Haryana, Uttar Pradesh, Bihar differ)
ROC: Delhi for Delhi and Haryana (Gurugram, Faridabad), Kanpur for Uttar Pradesh (Noida, Ghaziabad), Patna for Bihar
Then PAN/TAN, bank account, GST, INC-20A commencement within 180 days, auditor appointment — see ROC compliance

FEMA sequence — where subsidiaries slip

Step	Rule
Inward remittance	Through the banking channel from the investor's own account; the AD bank issues the FIRC and collects KYC of the remitter
Allotment of shares	Within 60 days of receipt of the funds, else the money is refunded; shares issued at not less than fair value certified by a CA or merchant banker
FC-GPR	On RBI's FIRMS portal within 30 days of allotment, with the FIRC, KYC, valuation certificate and the company secretary's certificate
Transfers of shares between resident and non-resident	FC-TRS within 60 days of the transfer or receipt of consideration
FLA return	Annually on RBI's FLAIR portal by 15 July for every company holding foreign investment — even with no activity
Delay	Regularised through RBI's Late Submission Fee framework (A.P. (DIR Series) Circular 16 of 30 September 2022), computed on the amount and the delay at the time of filing — cheaper than compounding if done early

Press Note 2 (2026) — the screen to run first. For investors from countries sharing a land border with India, the 2026 changes test beneficial ownership using the PMLA rule definition, with a 10% line: a land-border-country beneficial owner at or below 10% and without control can use the automatic route, subject to the new reporting requirement; above 10% or with control, government approval is still required. The FEMA NDI Rules were amended in early May 2026 to match. In practice this catches foreign parents whose funds or limited partners include Hong Kong or mainland investors — so we map the look-through chain before remitting. We describe the Press Note from DPIIT's release and published law-firm summaries; the operative paragraph numbers and reporting channel are confirmed on the text at filing, because summaries differ on the channel.

What we do

Structure choice (subsidiary vs branch/liaison vs LLP), beneficial-ownership mapping, SPICe+ with apostilled documents
Bank and FIRC coordination, valuation certificate, allotment, FC-GPR on FIRMS, FLA calendar; later FC-TRS and ODI-side questions
Registered office and filings in Gurugram, Noida, Delhi or Patna; later repatriation paperwork — Forms 145/146

Illustrative client engagement — details anonymised.
Client: A Singapore-parented software company opening its first India entity in Gurugram.
Situation: The parent had a Hong Kong fund among its limited partners and assumed any such link needed government approval.
Approach: Mapped the look-through ownership against the 10% beneficial-ownership test, documented that the fund stayed below it with no control rights, then incorporated the subsidiary and sequenced the remittance, allotment and FC-GPR.
Outcome: Proceeded on the automatic route with a file ready for the reporting requirement.
Client identity and certain details have been changed or withheld to protect confidentiality. Outcomes depend on individual facts and are not a guarantee of results.

Statutory periods are quoted from the Companies Act 2013 and the FEMA Non-Debt Instruments Rules; recent changes (Press Note 2 of 2026 and the May 2026 NDI amendments) are described from published law-firm and government summaries and the operative text is checked at filing. Fee thresholds are read off the MCA fee calculator, never estimated.

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Frequently asked questions

Can a foreign company own 100% of an Indian subsidiary?

Yes in sectors under the automatic route — which is most — subject to sectoral caps and, for land-border-country investors, the Press Note 2 (2026) beneficial-ownership screen.

Does the subsidiary need a director who lives in India?

Yes — at least one director must have stayed in India for 182 days or more in the previous calendar year (Companies Act s.149(3)).

How much does MCA charge to register the company?

Nothing for small authorised capital — the government registration fee is nil at ₹1 lakh and at ₹10 lakh; the exact ceiling and state stamp duty are computed at filing.

When must shares be allotted after the money arrives?

Within 60 days of receipt of the foreign remittance, otherwise the funds must be refunded.

What is the FC-GPR deadline?

Within 30 days of allotment of shares, filed on RBI's FIRMS portal.

When is the FLA return due?

Every year by 15 July on the FLAIR portal, for every company with foreign investment — including nil-activity companies.

Does Press Note 2 (2026) mean Chinese or Hong Kong investors are barred?

No — it sets a 10% beneficial-ownership line: at or below 10% without control can use the automatic route, above that or with control still needs approval.

Should we open a liaison office first?

Only if you will not invoice in India — a liaison office cannot earn revenue, and a subsidiary is the usual route for a revenue-earning presence.