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Expanding your business internationally is a bold move — and if you’re exploring Asia, setting up a subsidiary in India could be one of your most rewarding decisions. India offers a thriving market, a skilled workforce, and a business environment that’s increasingly friendly to foreign investment.
But how does the process actually work? What are the advantages? And what should you watch out for? Let’s break it down step by step, using plain English and a practical lens.
Why Should You Set Up a Subsidiary in India?
There’s no shortage of reasons to expand into India — here are a few that stand out:
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Huge Consumer Base: Over 1.4 billion people, with a rapidly growing middle class and increasing purchasing power.
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Skilled and Cost-Effective Talent: India produces millions of qualified professionals every year, especially in tech, finance, and engineering.
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Improved Ease of Doing Business: Government reforms over the past few years have made business registration, taxation, and compliance much simpler.
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Favorable Costs: Operating a business in India often comes at a lower cost than in Europe or the US — without compromising on quality or output.
India’s economic growth, along with supportive policy reforms, makes it one of the top destinations for foreign companies.
What Is a Subsidiary and Why Is It Better Than a Branch Office?
A subsidiary is a legally independent company that is owned or controlled by a parent company — in this case, a foreign entity.
Here’s why a subsidiary is often preferred over a branch office:
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It allows for more flexibility in operations and hiring.
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The parent company’s liability is limited in case of local issues.
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You can conduct business as a full-fledged Indian company, which often builds more trust with Indian clients and regulators.
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It can open doors to local tenders, licenses, and tax advantages that might not be available to foreign branches.
How Do You Set Up a Subsidiary in India?
Here’s a simplified version of the process:
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Pick Your Company Structure
Usually, a Private Limited Company is the preferred structure for subsidiaries in India. -
Reserve a Company Name
You can do this online via the MCA (Ministry of Corporate Affairs) portal. -
Obtain Director Identification Numbers (DIN) and Digital Signatures
All proposed directors need to get these before incorporation. -
Submit Incorporation Documents
These include the Memorandum of Association (MoA), Articles of Association (AoA), and other statutory forms. -
Apply for PAN, TAN, and GST
These are necessary for tax compliance and billing in India. -
Open a Business Bank Account in India
You’ll need this to operate legally and manage finances. -
File with the Reserve Bank of India (RBI)
Required if there’s foreign direct investment involved, under FEMA regulations.
What Legal and Tax Aspects Should You Keep in Mind?
Here are a few compliance essentials:
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Corporate Tax: Indian subsidiaries are taxed on global income earned in India.
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GST: If you're providing goods or services, GST registration is typically mandatory.
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Annual Filings: You’ll need to file regular returns with MCA and the Income Tax Department.
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Transfer Pricing Regulations: Applicable if your Indian subsidiary has financial transactions with the parent company.
Final Thoughts
Setting up a subsidiary in India offers a powerful opportunity to grow your business in one of the most vibrant economies in the world. Yes, it involves careful planning and a bit of paperwork — but the rewards can be substantial. From tapping into a dynamic workforce to accessing a fast-growing customer base, India offers both scale and substance.
If you're ready to expand, working with local legal and financial experts can help you navigate the journey with confidence — and avoid surprises along the way.
