Doing Business in India for Foreign Companies

Table of Contents:-

Doing Business in India for Foreign Companies – Entry, FDI, Tax & Compliance Guide

India offers significant opportunities for multinational corporations, overseas businesses and foreign investors seeking access to a large consumer market, skilled workforce, manufacturing capabilities, technology talent and expanding business ecosystem.

However, doing business in India as a foreign company requires more than registering an entity. Before entering India, an overseas company should evaluate the appropriate business structure, Foreign Direct Investment (FDI) regulations, FEMA requirements, taxation, transfer pricing, GST, employment laws, banking arrangements and ongoing regulatory compliances.

A foreign company can enter India through several routes, including a Wholly Owned Subsidiary, Joint Venture, Limited Liability Partnership, Branch Office, Liaison Office or Project Office. In some cases, a foreign company may initially enter the Indian market through a distributor or business partner without establishing its own entity.

The appropriate structure depends upon the proposed activities, ownership requirements, duration of operations, investment plans, tax considerations and long-term India strategy.

Foreign businesses planning their India expansion can also refer to our comprehensive India Market Entry Consulting Services and Business Setup in India guide.

Key Questions Before Doing Business in India

Before selecting an India entry structure, a foreign company should consider:

  • What activities will be carried out in India?
  • Will the Indian operation generate revenue?
  • Is 100% foreign ownership required?
  • Is foreign investment permitted under the Automatic Route?
  • Does the sector have an FDI cap or Government approval requirement?
  • Will employees be hired in India?
  • Will goods be manufactured, imported or distributed?
  • Will intellectual property or technology be licensed to India?
  • Will there be transactions between the Indian entity and overseas group companies?
  • How will profits ultimately be repatriated?
  • Is the India presence intended to be temporary or long term?
  • Does the foreign company require complete operational control?

These questions should preferably be considered before incorporation or investment is made, as changing the legal structure later may involve additional tax, FEMA and corporate-law implications.

Main Options for Foreign Companies Doing Business in India

Foreign companies can broadly choose between incorporated and unincorporated structures.

India Entry Structure Suitable For Revenue-Generating Activities Legal Status
Wholly Owned Subsidiary Long-term India operations with foreign control Yes Separate Indian company
Joint Venture Business with an Indian strategic partner Yes Separate Indian company/entity
LLP Certain service and professional businesses Yes Separate Indian LLP
Branch Office Extension of existing overseas business Permitted activities only Part of foreign company
Liaison Office Market research and representation No commercial activity Part of foreign company
Project Office Execution of specific Indian project Project-related activities Part of foreign company
Distributor / Agent Model Testing Indian market without own entity Generally undertaken by Indian distributor/agent No separate Indian entity of foreign company

Each option has different implications for control, taxation, repatriation, liability and regulatory compliance.

Wholly Owned Subsidiary in India

A Wholly Owned Subsidiary (WOS) is one of the most commonly considered structures for foreign companies intending to establish long-term commercial operations in India.

The Indian subsidiary is incorporated under the Companies Act, 2013 and is a separate legal entity from its overseas parent.

Where 100% foreign investment is permitted under the applicable sectoral rules, the foreign parent may hold the entire share capital of the Indian company.

A WOS may be suitable where the foreign company wants to:

  • Sell goods or services in India;
  • Employ a substantial Indian workforce;
  • Establish manufacturing operations;
  • Build a long-term Indian business;
  • Sign contracts directly with Indian customers;
  • Establish technology or service operations;
  • Create a Global Capability Centre;
  • Import or export products; or
  • Maintain greater control over Indian operations.

Foreign investment is governed by India’s FDI policy, FEMA and the Foreign Exchange Management (Non-Debt Instruments) Rules. In sectors not specifically restricted or subject to caps/conditions, foreign investment can generally be permitted up to the applicable limits under the Automatic Route.

For detailed information, see our Wholly Owned Subsidiary in India guide.

Joint Venture in India

A foreign company may establish a Joint Venture (JV) with an Indian business partner where local participation offers strategic or commercial advantages.

An Indian partner may contribute:

  • Local market knowledge;
  • Distribution channels;
  • Existing customers;
  • Manufacturing infrastructure;
  • Licences or regulatory experience;
  • Technology;
  • Land or facilities; or
  • Industry relationships.

A well-structured JV agreement should clearly address ownership, management control, funding, reserved matters, intellectual property, transfer of shares, non-compete provisions, deadlock resolution and exit rights.

For more information, refer to our Joint Venture Registration in India guide.

Limited Liability Partnership for Foreign Investors

A Limited Liability Partnership may also be considered for certain businesses.

An LLP combines limited liability with a relatively flexible management structure. However, foreign investment into an LLP is subject to applicable FEMA/FDI conditions.

The suitability of an LLP should therefore be considered after reviewing:

  • Sector;
  • Proposed business activity;
  • Foreign ownership;
  • Profit distribution;
  • Tax implications;
  • Future fund-raising plans; and
  • Exit strategy.

For businesses anticipating significant equity investment, employee stock options or future institutional funding, a company structure may often offer greater flexibility.

Branch Office in India

A Branch Office (BO) is an extension of the overseas parent company rather than a separately incorporated Indian entity.

A Branch Office may undertake only those activities permitted under the applicable FEMA/RBI framework.

Typical permitted activities may include specified activities such as:

  • Export or import of goods;
  • Rendering professional or consultancy services;
  • Carrying out research connected with the parent’s business;
  • Promoting technical or financial collaboration;
  • Representing the parent company in India;
  • Acting as buying or selling agent;
  • Providing IT/software-related services;
  • Providing technical support for products supplied by group companies; and
  • Representing foreign airlines or shipping companies, subject to applicable regulations.

The exact permitted activity should be checked against the prevailing RBI framework.

Applications for establishment of BO/LO are generally routed through the designated AD Category-I Bank, while specified cases may require referral to or prior approval from RBI.

Official reference: RBI Master Directions

For eligibility, permitted activities and the complete setup procedure, see our Branch Office in India guide.

Liaison Office in India

A Liaison Office (LO) is suitable where the foreign company wants to establish a limited representative presence in India without undertaking commercial operations.

An LO may generally undertake permitted liaison activities such as:

  • Representing the parent/group companies in India;
  • Promoting export or import between India and overseas group companies;
  • Promoting technical or financial collaboration; and
  • Acting as a communication channel between the overseas parent and Indian parties.

It cannot ordinarily undertake commercial, trading or revenue-generating business activities in India.

A Liaison Office is often considered where a foreign company wants to:

  • Understand the Indian market;
  • Develop business relationships;
  • Conduct permitted market-development activities;
  • Coordinate with Indian customers or suppliers; or
  • Establish an initial representative presence.

However, the tax position should not be described simply on the assumption that an LO is always non-taxable. Its actual activities need to remain within the permitted framework, and potential permanent-establishment or business-connection issues should be considered where relevant.

For complete guidance, see our Liaison Office in India page.

Project Office in India

A foreign company that has secured a specific contract or project in India may consider establishing a Project Office (PO).

A Project Office is generally established for the duration of the particular project and is expected to undertake activities related to that project.

This structure is commonly relevant in sectors such as:

  • Infrastructure;
  • Engineering;
  • Construction;
  • Power;
  • Industrial projects; and
  • Large equipment installation or turnkey contracts.

The regulatory route depends upon whether the proposed Project Office satisfies the conditions prescribed under the FEMA/RBI framework.

Read our detailed Project Office in India guide.

Distributor or Agent Model – Enter India Without Establishing an Entity

Not every foreign company needs to establish its own Indian entity immediately.

A foreign manufacturer or overseas supplier that wants to test the Indian market may initially appoint:

  • A Distributor;
  • Dealer;
  • Sales agent;
  • Commission agent; or
  • Independent Indian business partner.

This model may help the foreign company assess:

  • Customer demand;
  • Pricing;
  • Product-market fit;
  • Distribution challenges;
  • Competition; and
  • Long-term market potential

before making a larger investment in India.

However, distributor and agency agreements should be carefully structured to address pricing, exclusivity, territory, intellectual property, termination rights, regulatory responsibilities and potential tax/permanent-establishment exposure.

Foreign businesses evaluating this model may refer to our Distributor Appointment Services in India.

How to Select the Right India Entry Structure

There is no single business structure suitable for every foreign company.

A practical comparison is as follows:

Business Objective Structure Commonly Considered
Long-term full commercial operations Wholly Owned Subsidiary
100% ownership and operational control WOS where FDI permits
Need for Indian strategic partner Joint Venture
Market research / representation only Liaison Office
Extension of overseas business Branch Office
Execution of one specific Indian project Project Office
Initial market testing Distributor / Agent
Technology, finance or shared-service centre WOS / GCC structure
Manufacturing in India Usually Indian subsidiary/WOS

The final decision should be based on a combined review of commercial objectives, FDI regulations, taxation, FEMA, liability exposure and exit strategy.

Foreign Direct Investment Rules in India

Foreign investment in Indian businesses is governed by a combination of:

  • Foreign Exchange Management Act, 1999;
  • Foreign Exchange Management (Non-Debt Instruments) Rules, 2019;
  • India’s Foreign Direct Investment Policy;
  • RBI directions and reporting requirements; and
  • Sector-specific laws and regulations.

Foreign investment may generally fall under:

Automatic Route

Under the Automatic Route, prior Government approval is not required for foreign investment up to the permitted sectoral limit, subject to applicable conditions.

Government Route

Certain sectors, investment structures or investor circumstances require Government approval.

Foreign investors should therefore examine:

  • Sector/activity;
  • Permissible FDI percentage;
  • Entry route;
  • Pricing/valuation;
  • Investor jurisdiction and beneficial ownership;
  • Sector-specific conditions; and
  • Downstream-investment implications

before funds are remitted.

DPIIT states that in sectors/activities not specifically listed under sectoral restrictions, FDI is generally permitted up to 100% under the Automatic Route, subject to applicable laws and conditions.

Official FDI reference: DPIIT – Foreign Direct Investment Policy

Company Incorporation in India

Where a foreign investor chooses an Indian company structure, incorporation is undertaken through the Ministry of Corporate Affairs.

The SPICe+ system integrates company incorporation with several related services. MCA confirms that companies incorporated through the prescribed process use SPICe+ for name reservation and incorporation, along with integrated services such as DIN, PAN and TAN.

Foreign shareholders and directors may also need appropriately authenticated documents. The MCA guidance specifically addresses notarisation, apostille and consularisation of documents executed outside India.

Official reference: Ministry of Corporate Affairs

For the complete setup process, see our Foreign Company Registration in India guide.

FEMA and RBI Compliance After Foreign Investment

Incorporation is only the first step.

Once foreign investment is received, the Indian company must comply with applicable FEMA requirements relating to:

  • Receipt of investment;
  • Issue/allotment of securities;
  • Pricing and valuation;
  • Foreign investment reporting;
  • Transfer of securities;
  • Foreign liabilities and assets;
  • Downstream investment;
  • Overseas remittances; and
  • Other cross-border transactions.

RBI’s Foreign Investment Master Direction states that foreign investment is regulated under FEMA together with the Non-Debt Instruments Rules, 2019.

Failure to complete FEMA reporting correctly may result in regulatory consequences, late submission fees or the need for regularisation.

Taxation of Foreign Businesses in India

Tax consequences vary significantly depending upon the structure chosen.

An Indian incorporated subsidiary is generally taxed as a domestic company, whereas a Branch Office generally forms part of the foreign company and is taxed under the rules applicable to foreign companies.

For Assessment Year 2026-27, the Income Tax Department lists the general rate for “any other income” of a foreign company at 35%, before applicable surcharge and health and education cess, while certain categories of income may be governed by different provisions.

Indian subsidiaries may be eligible for different domestic corporate tax regimes depending upon their circumstances and conditions.

Foreign companies should also examine:

  • Permanent Establishment exposure;
  • Business connection;
  • Withholding tax;
  • Tax treaties;
  • Royalty and fees for technical services;
  • Capital gains;
  • Dividend taxation;
  • Transfer pricing; and
  • Repatriation strategy.

Tax modelling should ideally be undertaken before selecting the legal structure.

Transfer Pricing for International Transactions

Where an Indian subsidiary or establishment enters into transactions with overseas associated enterprises, India’s transfer-pricing regulations may apply.

Typical international transactions include:

  • Management services;
  • Software development services;
  • IT-enabled services;
  • Technical services;
  • Royalty;
  • Interest;
  • Purchase or sale of goods;
  • Cost allocations;
  • Loans and guarantees; and
  • Other intercompany arrangements.

The pricing should generally be supportable on an arm’s-length basis, and applicable documentation and reporting requirements should be reviewed.

This is particularly important for captive Indian subsidiaries and Global Capability Centres providing services to overseas group companies.

GST and Indirect Tax Considerations

A foreign business operating in India should also assess Goods and Services Tax implications.

GST considerations may arise in relation to:

  • Domestic supply of goods or services;
  • Import of goods;
  • Import of services;
  • Export of services;
  • Intercompany services;
  • Place-of-supply rules;
  • Input Tax Credit;
  • E-invoicing, where applicable; and
  • GST registration and periodic filings.

The exact GST position depends upon the business model and nature of supplies.

Official reference: GST Portal

Banking and Repatriation of Funds

Foreign investors should plan the banking and repatriation framework from the beginning.

Cross-border flows may include:

  • Foreign equity investment;
  • Loans or external commercial borrowings;
  • Service payments;
  • Royalty;
  • Dividends;
  • Interest;
  • Reimbursement of expenses;
  • Import payments;
  • Export proceeds; and
  • Capital/proceeds on exit.

Each transaction should be reviewed under applicable FEMA and tax regulations.

Depending upon the nature of the remittance, tax withholding and Form 15CA/15CB requirements may also need to be examined.

See our Form 15CA and Form 15CB guide.

Employment and Payroll Setup in India

Foreign companies establishing an Indian workforce should plan employment compliance at an early stage.

Key matters may include:

  • Employment agreements;
  • Payroll processing;
  • Tax deduction at source;
  • Provident Fund;
  • ESI, where applicable;
  • Gratuity;
  • Leave and employee benefits;
  • Professional Tax, where applicable;
  • State-specific registrations;
  • Labour-law records; and
  • Expatriate employee issues.

Employment regulations and registration requirements can vary based on employee strength, compensation, State and nature of establishment.

Manufacturing Operations in India

Foreign manufacturers establishing production facilities in India usually require additional planning beyond incorporation.

Depending upon the industry and location, the project may involve:

  • Land or factory premises;
  • Industrial approvals;
  • Environmental permissions;
  • Factory-related registrations;
  • Pollution-control approvals;
  • Labour registrations;
  • Electricity and utilities;
  • Import of machinery;
  • BIS requirements;
  • Customs;
  • GST;
  • Industrial licences, where applicable; and
  • State-specific incentives.

The National Single Window System facilitates access to information and applications for various Central and State approvals.

Official reference: National Single Window System

Foreign manufacturers can also review our Manufacturing Setup Services in India.

Import and Export Requirements

Foreign-owned Indian businesses involved in international trade may require an Importer Exporter Code and other registrations.

The Directorate General of Foreign Trade administers India’s foreign-trade framework and IEC-related processes.

Official reference: Directorate General of Foreign Trade

Businesses should also consider:

  • Customs classification;
  • Import restrictions;
  • Product standards;
  • BIS requirements;
  • Customs valuation;
  • Free Trade Agreements;
  • Country-of-origin rules; and
  • Export incentives or schemes, where applicable.

Global Capability Centres in India

Many multinational groups establish operations in India to provide technology, finance, engineering, analytics, research, customer support and other services to overseas group entities.

Such operations are commonly structured through an Indian subsidiary and require coordinated planning around:

  • Entity setup;
  • FDI;
  • Transfer pricing;
  • Intercompany agreements;
  • Employment;
  • Payroll;
  • Technology infrastructure;
  • Taxation;
  • GST; and
  • Ongoing regulatory compliance.

Companies evaluating this model may refer to our Global Capability Centre Setup in India service.

Choosing the Right State and City in India

India-entry planning should not stop at selecting the legal entity.

The proposed location can materially affect:

  • Talent availability;
  • Employee costs;
  • Office rentals;
  • Infrastructure;
  • Logistics;
  • Industrial land;
  • State incentives;
  • Local approvals;
  • Customer access; and
  • Supply-chain efficiency.

Technology and service businesses may prioritise talent and connectivity, while manufacturers may place greater emphasis on industrial infrastructure, logistics, ports, suppliers, power availability and State incentives.

Location selection should therefore form part of the initial India-entry feasibility analysis.

Ongoing Compliance After Setting Up Business in India

Once operations commence, foreign-owned businesses may need recurring compliance across several areas.

Typical obligations include:

  • Accounting and bookkeeping;
  • Financial statements;
  • Statutory audit;
  • Income-tax return;
  • Transfer-pricing compliance;
  • GST returns;
  • TDS returns;
  • ROC annual filings;
  • Board and shareholder meetings;
  • FEMA reporting;
  • Foreign Liabilities and Assets reporting, where applicable;
  • Payroll compliance;
  • Labour-law compliance; and
  • Sector-specific reporting.

Foreign companies should establish a compliance calendar immediately after commencing Indian operations.

For ongoing support, see our Managed Business Services in India.

India Entry Checklist for Foreign Companies

Stage Key Action
1 Define India business objectives
2 Analyse market and proposed activities
3 Select appropriate entry structure
4 Review FDI sector and entry route
5 Analyse tax and FEMA implications
6 Prepare foreign shareholder/director documents
7 Incorporate entity or obtain applicable office approval
8 Open Indian bank account
9 Bring foreign investment into India
10 Complete FEMA/RBI reporting
11 Obtain GST and other registrations
12 Establish accounting and payroll
13 Complete operational licences
14 Put intercompany agreements and transfer pricing in place
15 Establish recurring compliance calendar

Common Mistakes Foreign Companies Should Avoid

Foreign businesses entering India should avoid:

  • Selecting an entity only on the basis of incorporation cost;
  • Assuming 100% FDI is automatically permitted in every activity;
  • Sending foreign investment before confirming the correct structure;
  • Using incorrect valuation or investment documentation;
  • Missing FEMA reporting deadlines;
  • Treating a Liaison Office as a commercial business entity;
  • Establishing a Branch Office without reviewing permitted activities;
  • Ignoring Permanent Establishment risk;
  • Entering into intercompany transactions without transfer-pricing planning;
  • Ignoring State-level licences;
  • Starting manufacturing before obtaining required approvals;
  • Failing to create a compliance calendar; and
  • Planning profit repatriation only after the business has accumulated funds.

Good India-entry planning should consider the entire business lifecycle—from entry and operations to repatriation and eventual exit.

How EzyBiz India Assists Foreign Companies Doing Business in India

EzyBiz India Consulting LLP assists foreign companies, multinational corporations and overseas investors through the complete India business lifecycle.

Our India Entry services include:

  • India entry strategy;
  • Business structure advisory;
  • Foreign company registration;
  • Wholly Owned Subsidiary incorporation;
  • Joint Venture structuring;
  • Branch Office setup;
  • Liaison Office setup;
  • Project Office setup;
  • Distributor appointment strategy;
  • FDI advisory;
  • FEMA and RBI compliance;
  • Company incorporation;
  • GST and tax registrations;
  • International taxation;
  • Transfer pricing;
  • Accounting and bookkeeping;
  • Payroll;
  • ROC compliance;
  • Manufacturing setup;
  • Global Capability Centre setup;
  • Ongoing business compliance; and
  • Exit and restructuring support.

Foreign companies seeking end-to-end implementation assistance can explore our India Market Entry Consulting Services.

Frequently Asked Questions

Can a foreign company do business in India?

Yes. A foreign company can establish a business presence in India through structures such as an Indian subsidiary, Joint Venture, LLP, Branch Office, Liaison Office or Project Office, subject to applicable FDI, FEMA, corporate and sector-specific regulations.

Can a foreign company own 100% of an Indian company?

Yes, 100% foreign ownership is permitted in many sectors, subject to the applicable FDI policy, sectoral caps, entry route and conditions. The sector and proposed activity should be checked before incorporating or making the investment.

What is the best structure for a foreign company entering India?

For long-term commercial operations, a Wholly Owned Subsidiary is often considered because it provides a separate Indian legal entity and operational flexibility. However, the appropriate structure depends upon the proposed activities, ownership requirements, tax implications and long-term strategy.

What is the difference between a subsidiary and a Branch Office?

A subsidiary is a separate Indian company, whereas a Branch Office is an extension of the overseas foreign company. Their taxation, liability, permitted activities and regulatory requirements are different.

Can a Liaison Office earn revenue in India?

A Liaison Office cannot ordinarily undertake commercial or revenue-generating business activities. It is intended primarily for permitted representation, communication and liaison functions.

Does a foreign investor always need Government approval?

No. Many foreign investments are permitted under the Automatic Route, subject to sectoral limits and conditions. Certain sectors and investment circumstances require Government approval.

Does company incorporation complete all India entry requirements?

No. After incorporation, foreign-invested businesses may need to complete bank-account opening, foreign-investment reporting, GST and tax registrations, accounting, payroll, transfer-pricing arrangements and other regulatory requirements before and after commencement of operations.

What taxes apply to a foreign company doing business in India?

The answer depends upon the structure and income. An Indian subsidiary is generally taxed as a domestic company, whereas a Branch Office is generally taxed as a foreign company. GST, withholding tax, transfer pricing and other taxes may also apply depending upon the transactions.

Can profits earned in India be repatriated overseas?

Yes, subject to the applicable corporate, tax and FEMA requirements. Repatriation may take different forms including dividends, permitted service payments, royalties, interest or other legally permissible payments, depending upon the structure and underlying transaction.

Does a foreign company need an Indian director?

For an Indian company, the Companies Act requires compliance with the applicable director requirements, including the prescribed resident-director requirement. The detailed composition should be planned at incorporation stage.

Can a foreign company test the Indian market without setting up a subsidiary?

Yes. Depending upon the business model, it may consider a distributor/agent arrangement or a Liaison Office for permitted non-commercial activities. The tax and regulatory implications should be reviewed before adopting either model.

Is India entry only a company-registration exercise?

No. A successful India entry requires coordinated planning across business strategy, FDI, FEMA, taxation, transfer pricing, corporate law, GST, employment, banking and ongoing compliance.

Related India Entry Services

 

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Prepared By: EzyBiz India Consulting LLP
Reviewed By: CA Anil Agrawal
Last Updated: August 2026

Disclaimer

This article is intended for general informational purposes only and should not be construed as legal, tax, FEMA, investment or regulatory advice. The appropriate India entry structure and applicable requirements may vary depending upon the foreign investor’s country, beneficial ownership, proposed business activities, sector, investment amount, ownership structure and applicable regulations. FDI, FEMA, tax and other regulatory provisions may change from time to time. Professional advice should be obtained based on the specific facts and circumstances of each proposed investment or business operation.