In short: Setting up a wholly owned subsidiary India allows a foreign company to own 100% of an Indian private limited company, operate as a separate legal entity, and invest through the RBI’s automatic or approval route — with no mandatory minimum paid-up capital and a single unified filing on the MCA portal.
Key points
- A wholly owned subsidiary is a separate legal entity; the foreign parent’s liability is limited to its investment in the subsidiary, not the subsidiary’s wider obligations.
- The Private Limited Company form is the most commonly used structure for a foreign company setting up a wholly owned subsidiary in India.
- At least two directors are required, and at least one must be a resident Indian director — defined as someone who has stayed in India for at least 182 days in the preceding calendar year.
- There is no mandatory minimum paid-up capital since the Companies (Amendment) Act, 2015 removed that requirement.
- Most sectors permit 100% FDI under the automatic route, meaning no prior RBI approval is needed; more than 90% of FDI inflow into India arrives through this route.
- Investors from countries sharing a land border with India — including China, Pakistan, Nepal, and Bangladesh — require prior government approval regardless of the sector.
What exactly is a wholly owned subsidiary under Indian law?
The Companies Act, 2013 does not define “wholly owned subsidiary” in those exact words. It does define a subsidiary as a company in which the holding company controls the composition of the Board of Directors or exercises control over more than one-half of the total share capital.
In practice, a wholly owned subsidiary India foreign company structure means the foreign parent holds 100% of the shares. Because the subsidiary is incorporated in India and is a separate legal person, it can own property, sign contracts, and sue or be sued in its own name — independent of the parent.
Which corporate form should you choose?
A foreign investor can incorporate a wholly owned subsidiary either as a Private Limited Company or a Public Limited Company. The Private Limited Company is the overwhelmingly preferred choice for foreign entrants — it involves lower compliance overhead and restricts the transfer of shares, keeping ownership tightly held.
What are the basic eligibility requirements?
Directors and shareholders
You need a minimum of two directors. At least one must be a resident Indian director — someone physically present in India for at least 182 days in the preceding calendar year. Indian citizenship is not required to satisfy this condition.
On the shareholder side, two shareholders are technically required for a private limited company. The foreign parent company can hold 99.99% of the equity shares; the remaining fraction is held by a nominee shareholder who does not hold any beneficial rights in those shares.
Capital and registered office
There is no mandatory minimum paid-up capital. You can start with whatever amount suits your business plan. The subsidiary must, however, have a registered office in India — a physical address that serves as its official correspondence address with the government.
Step-by-step: the incorporation process via SPICe+
India’s Ministry of Corporate Affairs (MCA) handles incorporation through an integrated online portal. The key vehicle is the SPICe+ form — a single unified filing that covers multiple steps simultaneously.
| Step | What happens | Output / Registration |
|---|---|---|
| 1. Obtain DSC | All proposed directors apply for a Digital Signature Certificate from a government-approved certifying authority | DSC (required to sign MCA filings electronically) |
| 2. Obtain DIN | Each director applies for a Director Identification Number from the MCA | Unique DIN number per director |
| 3. File SPICe+ | Single form covers name approval, incorporation application, and simultaneous registrations | PAN, TAN, EPF, and ESIC registrations issued alongside incorporation |
| 4. Certificate of Incorporation | Registrar of Companies (ROC) verifies documents and issues the CoI | CoI confirming separate legal entity status; Corporate Identification Number (CIN) assigned |
| 5. Post-incorporation ROC filings | Annual compliance under the Companies Act, 2013 | Annual return (Form MGT-7) and financial statements (Form AOC-4) filed each year |
For a broader overview of company law concepts in plain language, see the Law for You guides on The Courtroom — they cover everything from director duties to shareholder agreements in accessible, jargon-free terms.
How does FDI compliance work for a wholly owned subsidiary India foreign company?
Automatic route vs. approval route
India’s foreign direct investment policy offers two routes for bringing in capital. Under the automatic route, the foreign parent does not need prior approval from the RBI or any ministry — it can invest directly, then report the transaction through the prescribed RBI process.
Under the approval route, the investor must seek prior approval from the relevant ministry or department through the Foreign Investment Facilitation Portal (FIFP) before remitting funds.
Most sectors are open to 100% FDI under the automatic route. According to official government data, more than 90% of all FDI inflow into India comes through the automatic route.
Prohibited sectors and border-country rule
Some sectors are entirely closed to FDI — lottery businesses and the manufacture of tobacco products are examples explicitly noted in India’s FDI policy. Investment into these sectors is not permitted regardless of how the corporate structure is arranged.
A separate and important rule applies to investors incorporated in countries that share a land border with India — China, Afghanistan, Nepal, Myanmar, Bhutan, Pakistan, and Bangladesh. Any entity from these countries must obtain prior government approval before investing, irrespective of the sector.
What are the tax implications?
Because the wholly owned subsidiary is a separate legal entity incorporated in India, it is taxed in India as a domestic company under the Income Tax Act. Dividends paid to the foreign parent, interest payments, and royalties may attract withholding tax obligations; the precise rates depend on whether an applicable Double Taxation Avoidance Agreement (DTAA) between India and the parent company’s home country applies. These figures were not part of the verified data used for this article — consult a qualified chartered accountant or tax advocate for current rates and treaty analysis before finalising your structure.
Frequently asked questions
Can a foreign company be the sole shareholder of an Indian subsidiary?
Not technically on its own — Indian company law requires at least two shareholders for a private limited company. In practice, the foreign parent holds 99.99% of shares and a nominee holds the remaining fraction without any beneficial rights, making the parent the effective sole economic owner and giving it a wholly owned subsidiary structure.
Is RBI approval needed to set up a wholly owned subsidiary India?
For most sectors, no prior RBI approval is needed — the investment comes in through the automatic route and is reported to the RBI after the fact through the prescribed process. Prior approval through the Foreign Investment Facilitation Portal is required only for sectors on the approval route or if the investor is from a country sharing a land border with India.
What is the minimum capital required to incorporate a wholly owned subsidiary in India?
There is no mandatory minimum paid-up capital. The Companies (Amendment) Act, 2015 removed the earlier minimum capital requirement. You can determine the initial capital based on your business needs rather than any statutory floor.
This article is for general information only and is not legal advice. Laws change; verify against the primary sources cited and consult a qualified advocate for your situation.
