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Indian Subsidiary
Setup And Opetare A Business In India
India Business Setup - Setting up a Subsidiary
- Filing Champs assists businesses in establishing subsidiary companies in India.
- Setting up a subsidiary in India offers advantages such as access to a large market, a growing middle class, diverse talent, and government incentives.
- The process of navigating Indian business regulations can be challenging.
- Filing Champs simplifies this process with their expertise.
- Their team of legal and business professionals focuses on making subsidiary formation straightforward, allowing businesses to concentrate on growth.
Subsidiary Company
- A subsidiary company, often termed as a sister company, is controlled by another firm known as the parent or holding company.
- The parent company has the power to oversee the operations of the subsidiary, whether partially or entirely.
- According to the Companies Act of 2013 in India, a subsidiary is defined as a company where a foreign corporate body or parent entity holds at least 50% of the total share capital.
- Essentially, the parent company wields significant influence and authority over the subsidiary.
Types of Subsidiaries in India
- In India, there are two main types of subsidiaries: Wholly-Owned Subsidiaries and Subsidiary Companies.
- Wholly-Owned Subsidiary: The parent company owns all the shares (100%) of the subsidiary. However, this type of subsidiary can only be established in industries that permit 100% foreign direct investment (FDI).
- Subsidiary Company: Here, the parent company holds 50% of the shares.
- Before starting a subsidiary in India, approval from the Reserve Bank of India is necessary. This regulatory process ensures compliance with the country’s foreign investment laws and safeguards the interests of all involved stakeholders.
Advantages of Establishing a Subsidiary Company in India
- Market Entry: Forming a subsidiary in India offers access to a competitive market with abundant investment opportunities, attracting foreign entrepreneurs.
- Foreign Direct Investment (FDI): Indian subsidiary registration becomes a preferred choice due to regulations requiring clearance for investments from neighboring countries, fostering foreign firms’ involvement in Indian companies.
- Perpetual Succession: Ensures the continued existence of the company despite changes in management, ownership, or financial circumstances, ensuring stability.
- Limited Liability: Shields shareholders and directors from personal liability, safeguarding their assets while holding the company responsible for its debts.
- Diversification Scope: Enables foreign enterprises to expand their operations strategically, contributing to the diversity and growth of the Indian economy.
- Separate Legal Identity: Establishes the company as a distinct legal entity, empowering it to engage in agreements, legal actions, and property transactions independently.
- Property Ownership and Rental: Grants the subsidiary company the authority to own or lease properties in India for business purposes, enhancing operational stability and continuity.
Regulatory Authorities for Registering an Indian Subsidiary Company
- Ministry of Corporate Affairs (MCA): Responsible for formulating and enforcing regulations concerning business registration and adherence to legal standards.
- Registrar of Corporations (ROC) offices: Conduct procedures related to company incorporation, ensuring compliance with legal requirements.
- Reserve Bank of India (RBI): Oversees foreign currency exchange aspects for Indian subsidiary companies, ensuring adherence to financial regulations.
Requirements and Key Facts about Registering a Company in India
- Company Name: Choose a unique name for your company, different from existing ones or trademarks.
- Shareholders: The parent company can hold 100% shares, or any two foreign nationals can be shareholders, without needing an Indian resident.
- Share Capital: No minimum capital requirement for company registration in India.
- Directors: At least two directors needed, with one being an Indian resident. Nominee directorship services are available if required.
- Registered Address: Every company must have a formal registered address listed with the government, which can be facilitated through virtual office address services.
- Annual General Meeting (AGM): Mandatory to hold at least one AGM per year, alongside two board meetings, as per the Companies Act.
- Company Secretary: Required for filing three secretarial returns annually, with assistance available from services like Filing Champs. A statutory auditor must also be appointed.
Taxation
- Profit tax rate approximately 25.36% post-incorporation.
- GST (Goods and Services Tax) applies to domestic sales, necessitating monthly and annual tax returns.
Annual Compliance
- Statutory audits mandatory, even for smaller businesses.
- Employ a statutory auditor and provide yearly reports to ensure compliance with regulations.
- Navigating Criteria: Vital for successfully establishing and managing a company in India under the guidelines of the Companies Act of 2013.
Procedure for Registering an Indian Subsidiary Company
- Determine Company Type: Decide on the type of subsidiary company you wish to establish.
- Obtain Digital Signature Certificate (DSC): Each proposed director needs a DSC for electronically signing documents during the registration process.
- Apply for Director Identification Number (DIN): Directors must obtain a DIN from the Ministry of Corporate Affairs (MCA) by completing an online application.
- Name Approval: Choose a unique name for the subsidiary and seek approval through the MCA’s online portal, ensuring it meets naming criteria.
- Draft Memorandum of Association (MoA) and Articles of Association (AoA): Prepare legal documents outlining the company’s objectives, rules, and regulations in compliance with the Companies Act of 2013.
- File Incorporation Documents: Submit incorporation documents, including MoA, AoA, and relevant forms, to the Registrar of Companies (ROC) through the MCA’s online platform, commonly using the SPICe+ form.
- Payment of Registration Fees: Pay registration fees to the ROC based on the company’s authorized capital.
- Obtain Certificate of Incorporation (COI): If all documentation is correct, the ROC will issue a COI, confirming the company’s registration.
- Apply for Permanent Account Number (PAN) and Tax Registration: Contact the Income Tax Department to obtain a PAN and Tax Deduction and Collection Account Number for the subsidiary.
- Open Bank Account: Open a bank account in the subsidiary company’s name in India.
- Compliance with Other Regulations: Ensure compliance with other relevant regulations alongside the registration process.
- Obtain GST Number: Apply for Goods and Services Tax (GST) registration if the company engages in various business activities, as required for tax purposes.
- Initiating Business Operations: Complete all registration stages before commencing company operations.
Compliance Requirements for Registering an Indian Subsidiary Company
- Foreign Exchange Management Act (FEMA): Foreign enterprises operating in India must adhere to the regulations outlined in the Foreign Exchange Management Act, 1999, concerning foreign exchange laws.
- Companies Act, 2013: All Indian subsidiary companies must comply with the regulations stipulated in the Companies Act of 2013.
- Reserve Bank of India (RBI) Compliances: Indian subsidiary enterprises are subject to various foreign exchange management compliances mandated by the Reserve Bank of India (RBI).
- Income Tax Act, 1961: Indian subsidiaries are obligated to file annual income tax returns, with the current corporation tax rate set at 25%.
- Annual Returns: Companies must submit annual returns to both the Ministry of Corporate Affairs (MCA) and the Registrar of Companies.
- SEBI (Listing Obligations and Disclosure Regulations): If the subsidiary decides to list its securities on the stock exchange, it must adhere to the laws outlined by the Securities and Exchange Board of India (SEBI).
Taxation of Indian Subsidiary Companies
- Income Tax: Indian subsidiary companies are taxed on all income earned within or outside India, including dividends from foreign subsidiaries.
- Royalties and Technical Services: Royalties received for technical services from the government or any Indian firm are taxed at 50%, while other income is taxed at 40% for foreign subsidiaries in India.
- Surcharge: A surcharge of 2% applies if the company’s income falls between Rs. 1 Crore and Rs. 10 Crores, and a 5% surcharge is applied for income above Rs. 10 Crores.
- Health and Education Surcharge: A 4% surcharge is added to the total tax amount for health and education purposes.
- Concessional Tax Rates: Certain Indian subsidiary companies may benefit from concessional tax rates in specific sectors like oil exploration, air transportation, and shipping.
Foreign Direct Investment (FDI) in Private Limited Companies
- Industry Restrictions: While most industries allow 100% foreign direct investment, certain sectors like private security, civil aviation, mining, print media and broadcasting, satellite establishment and operation, medicines, and food commerce require prior approval from the Central Government.
- Wholly-Owned Subsidiaries: Foreign firms can establish wholly-owned Indian subsidiaries with 100% ownership, provided they fulfill specific conditions.
Requirements for Private Limited Companies
- No Minimum Capital Requirement.
- At least 2 Directors, with one being a resident of India.
- Minimum of 2 Shareholders.
Requirements for Public Companies
- Minimum of 3 Directors.
- At least 7 Shareholders.
How Filing Champs Can Assist with Indian Subsidiary Company Registration
- Comprehensive Support: Filing Champs provides comprehensive assistance throughout the registration process, ensuring simplicity at every step.
- Name Selection and Essential Documentation: We help in selecting a unique company name and obtaining crucial Director Identification Numbers (DIN) and Digital Signature Certificates (DSC).
- PAN and TAN Applications: Our services extend to assisting with PAN and TAN applications, essential for tax compliance.
- Bank Account Setup: We facilitate the setup of a dedicated company bank account, streamlining financial operations.
- Regulatory Compliance: Our expert team ensures compliance with regulatory requirements such as the Foreign Exchange Management Act (FEMA), Companies Act, 2013, and Reserve Bank of India (RBI) compliances.
- Annual Returns and SEBI Compliance: Filing Champs aids in filing annual returns and guides through SEBI (Listing Obligations and Disclosure Regulations) compliance.
- Tax Services: We provide comprehensive tax services to navigate India’s taxation policies effectively.
- Confidence and Efficiency: With Filing Champs as your partner, you can initiate and expand your Indian subsidiary business with confidence and efficiency.
Proprietorship vs Partnership vs Limited Liability Partnership (LLP) vs Company
| Features | Proprietorship | Partnership | LLP | Company |
|---|---|---|---|---|
| Definition | Business managed by one person | Agreement between multiple parties | Combination of partnership and company | Registered entity with limited liability |
| Ownership | Sole Ownership | Min 2 Partners, Max 50 Partners | Designated Partners | Min 2 Directors, Min 2 Shareholders, Max 15 Directors, Max 200 Shareholders. For One Person Company: 1 Director, 1 Nominee Director |
| Registration Time | 7-9 working days | – | – | – |
| Promoter Liability | Unlimited Liability | Limited Liability | Limited Liability | Limited Liability |
| Documentation | MSME, GST Registration | Partnership Deed | LLP Deed, Incorporation Certificate | MOA, AOA, Incorporation Certificate |
| Governance | – | Under Partnership Act | Under LLP Act, 2008 | Under Companies Act, 2013 |
| Transferability | Non Transferable | Transferable if registered under ROF | Transferable | Transferable |
| Compliance Requirements | Income tax filing if turnover is more than Rs.2.5 lakhs, ITR 5, Form 11, Form 8 | ITR 5 | ITR 5, ITR 6, MCA filing, Auditor’s appointment | ITR 6, MCA filing, Auditor’s appointment |
Indian Subsidiary FAQ's
A subsidiary company in India is controlled by a foreign parent company, regulated by the Companies Act of 2013.
There are two types: wholly-owned subsidiaries (100% ownership by parent company) and subsidiary companies (parent company owns at least 50%).
Advantages include entry into the Indian market, foreign direct investment opportunities, perpetual succession, limited liability, scope for diversification, and separate legal identity.
The Ministry of Corporate Affairs (MCA), Registrar of Companies (ROC), and Reserve Bank of India (RBI) regulate the registration process.
Yes, company names must be unique and distinct from existing businesses or trademarks.
At least two shareholders are required, with the option for the parent company to hold 100% shares.
No, India does not impose a minimum capital requirement for company registration.
A minimum of two directors are required, with at least one being an Indian resident.
A registered address is required officially recorded in government records, with virtual office address services available to fulfill this requirement.
An AGM must be conducted annually, as per the Companies Act, along with two board meetings.
A Company Secretary handles secretarial returns and ensures statutory compliance, including annual filings.
Taxes are levied on income earned within or outside India, with GST applicable to domestic sales.
FEMA outlines foreign exchange laws and regulations for foreign companies operating in India.
IndiaFilings offers comprehensive support, including name selection, obtaining DIN and DSC, PAN and TAN applications, and compliance with regulatory requirements.
Yes, foreign entities can establish wholly-owned Indian subsidiaries with 100% ownership, subject to certain qualifications.
Sectors like private security agencies, civil aviation, mining, print media, pharmaceuticals, and food product trading require prior approval for foreign investments.
A 2% surcharge applies for incomes between Rs. 1 Crore and Rs. 10 Crores, and a 5% surcharge for incomes above Rs. 10 Crores.
Yes, sectors like oil exploration, air transportation, and shipping enjoy concessional tax rates.
Perpetual succession ensures company continuity despite management changes or insolvency, providing stability.
Yes, Indian subsidiary companies, as legal entities, can purchase or rent properties for business activities.
