What are the advantages and compliance requirements for a foreign company to set up a subsidiary in India?

I. Introduction

Because of India's fast-growing economy, there is always an inclination among foreign companies to start their businesses in India. Foreign nationals have the provision of forming a foreign subsidiary company in India through which they can conduct their business operations in the country. Over the years, there has been an increased craze among foreign nationals to open a foreign subsidiary in India. Establishing a subsidiary in India can offer the foreign company complete control over its business operations. So, here, we are going to talk about some of the major benefits of running a subsidiary in India and the compliances involved.

II. Advantages of Setting Up a Subsidiary in India

Here are some of the major benefits of setting up a subsidiary in India:

  • Market Access:
  • A foreign subsidiary will allow foreign nationals to tap into the Indian market. As you know, the Indian market is an extremely prosperous one, and by gaining entry to the market, foreign individuals will be able to give their businesses an excellent boost. It will also help them to generate outstanding revenue from their business. Their customer base will also expand.

  • Cost Efficiency:
  • The initial cost of setting up a foreign subsidiary company in India is quite low. This encourages foreign companies to open up subsidiaries in India. Our country is also famous for its low cost of labor, which once again helps the companies in substantially lowering their production cost. Establishing a subsidiary in India can also help companies take advantage of subsidies, tax incentives, and other perks offered by the Indian government.

  • Talent Pool:
  • India is home to a fast pool of talent. So, by establishing a subsidiary in India, the foreign company can get access to a highly skilled and educated workforce with a strong emphasis on education in engineering, science, technology, and mathematics. Establishing a subsidiary in India will also give foreign companies access to diverse skill sets at lower prices. This can again be used to fuel growth and innovation.

  • Regulatory Environment:
  • India has made excellent progress in improving its business regulatory environment over the past few years. This has encouraged individuals from different corners of the world to start their businesses in India. The Indian government has been eliminating bureaucratic bottlenecks and simplifying rules for quite a while now. This offers an attractive business environment for foreign companies. The companies can also start operating with full force within a shorter period.

  • Brand Building and Reputation:
  • Building a brand in India isn't a mammoth task. India boasts of being home to diverse customers. So, irrespective of the kind of products and services the foreign companies are willing to offer, it is definitely going to find the right customer base in India. This will allow the companies to build an enhanced customer base for themselves easily. With proper marketing and branding, the companies will also be able to build extraordinary reputations among their customers.

IIT. Compliance Requirements for Subsidiaries

Company Registration: For a foreign company to operate in India, it will have to opt for online company registration in India. Without proper registration, the company will no longer be able to perform its business operations with full force.

Taxation: Multiple taxation laws are associated with operating a foreign subsidiary in India. Some of the major tax implications to be considered include Corporate Tax, Goods and Service Tax, Withholding Tax, Transfer Pricing, and much more.

Labour Laws: Foreign companies must also make them aware of the different labour laws while starting their business operations in India. This will save them from becoming victims of any kind of compliance issues.

Foreign Exchange Regulations: The foreign exchange regulations in India are mostly handled by the Reserve Bank of India (RBI). These regulations are mainly aimed at balancing the promotion of foreign investment with managing forex reserves.

Other Compliances: Other than the ones mentioned above, there are various other compliances that the foreign subsidiary must fulfil, including obtaining the necessary permits and licenses for carrying out business operations, complying with Intellectual Property Rights laws, etc.


So, if you are willing to open a foreign subsidiary in India, it is high time that you reach out to BC Shetty & Co. The BC Shetty & Co team will guide you through the startup registration process. They will also make you familiar with all the regulations associated with starting a foreign subsidiary in India.


1. What are the different types of licenses and permits required for a foreign subsidiary to operate in specific sectors in India?

There are multiple licenses and permits required both at the central level as well as state level for a foreign subsidiary to operate in India. Companies also require certain sector-specific licenses to conduct business operations.

2. What are the long-term growth prospects for foreign subsidiaries in the Indian economy?

The foreign subsidiaries in India have extraordinary long-term growth prospects owing to the large and growing Indian market and the availability of a highly skilled workforce. The Indian government is also implementing various reforms in the business environment to attract the attention of foreign investors.

3. Are there any government grants or incentives available specifically for foreign subsidiaries in certain industries or regions of India?

Multiple government grants and incentives are available for foreign subsidiaries. The companies can make use of these incentives to run their businesses in India.

4. What are the compliance requirements for a subsidiary of a foreign company in India?

There are multiple compliance requirements that the foreign subsidiaries must comply with. This includes tax laws, labour laws, company laws, and various industry-specific laws.


“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received, or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”

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