Subsidiary vs. branch office vs. liaison office – what's the difference?
A subsidiary company in India is a separate Indian legal entity – typically a Private Limited Company – where the foreign parent holds 100% (or majority) of the shares. It is the most common structure for foreign companies entering India for full commercial operations.
Unlike a branch office, a subsidiary is a distinct legal person. It can enter contracts, hire employees, open bank accounts, raise funding, and hold assets in its own name. The parent's liability is limited to its investment in the subsidiary.
A wholly owned subsidiary (WOS) is a subsidiary where the foreign parent holds 100% of shares – the standard for most foreign companies entering India.
Why most foreign companies choose a subsidiary over other structures
Can earn revenue, sign contracts, hire employees across all functions.
25.17% corporate tax vs 40% for a branch office. Significant savings at scale.
In most sectors – no prior Government approval needed to incorporate.
Parent is not liable for the subsidiary's debts beyond its share subscription.
Can issue equity to investors, employees (ESOPs), and strategic partners.
Dividends can be repatriated to the parent subject to withholding tax and DTAA.
How to set up a wholly owned subsidiary in India
Confirm your sector permits 100% FDI under the Automatic Route. Restricted sectors (insurance, telecom, media, defence) require Government approval and have investment caps.
Determine authorised and paid-up share capital. For most subsidiaries, Rs.1 - 10 lakh is sufficient to start. Capital structure affects stamp duty and future fundraising.
At least one director must be an Indian resident. This can be a nominee director if your team is entirely overseas. We help arrange nominees where needed.
Draft MOA and AOA, obtain Digital Signature Certificates for all directors, prepare apostilled parent company documents.
The consolidated MCA filing – covers company name, directors, registered office, PAN, TAN, and GSTIN. Certificate of Incorporation typically issues within 7 - 12 working days.
File FC-GPR (Form Foreign Currency – Gross Provisional Return) with RBI through the FIRMS portal. Mandatory for all foreign investment. Missing this 30-day window requires a penalty compounding application.
Bank account, GST registration, TDS registration, payroll setup, compliance calendar. Full operational readiness.
Subsidiary setup in practice
London fintech set up a regulated India subsidiary in 24 days
FCA-regulated company needed India presence with zero risk of PE exposure or RBI non-compliance flagging their UK auditors. Any misstep would trigger a reporting obligation to the FCA.
Wholly owned subsidiary incorporated, RBI FCGPR filed within 30 days, GST registration complete, compliance calendar aligned to their UK reporting cycle.
Zero RBI or FEMA notices in 2 years of operation. Clean records for the FCA-regulated parent.
What goes wrong with subsidiary setups
Every intercompany transaction between the subsidiary and parent – management fees, royalties, service charges – requires transfer pricing documentation under Indian law. Most companies set this up a year later, after transactions have already occurred, creating back-audit exposure.
Some sectors look unrestricted but have hidden caps or approval requirements. Fintech, pharma, e-commerce, and multi-brand retail all have sector-specific conditions. We check this before any filing.
Forgetting the Indian resident director requirement stalls incorporation. Many foreign companies discover this late and have to find a nominee urgently, delaying the entire process.
A subsidiary is a separate Indian company. It needs its own bank account, its own contracts, its own compliance filings. Sharing infrastructure with the parent without proper intercompany agreements creates PE risk.
Cost of setting up a subsidiary in India
Timeline: 19 - 25 working days for a standard case. Sectors needing Government approval take 8 - 12 weeks longer.
Frequently asked questions about subsidiary setup
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