Compliance Checklist for Foreign Subsidiary Companies in India (2026)

A 2026 compliance calendar for Indian subsidiaries of foreign companies, covering incorporation, ROC filings, FEMA reporting, tax and transfer pricing, the Labour Codes and the DPDP Act

1. Who this checklist applies to

A foreign subsidiary company in India is an Indian company in which a foreign company holds more than half the share capital or controls the board. It is incorporated in India under the Companies Act, 2013, so it carries every obligation an Indian private company has. On top of those, it reports foreign investment to the Reserve Bank of India (RBI) under the Foreign Exchange Management Act, 1999 (FEMA) and documents its dealings with the parent under India’s transfer pricing rules.

Two consequences of being a subsidiary catch foreign groups out. A subsidiary can never be a “small company” under Section 2(85) of the Companies Act, however small it is, even after the limits were raised to ₹10 crore of paid-up capital and ₹100 crore of turnover in December 2025.^[5] It therefore does not get the lighter regime for small companies on board meetings, filings and the auditor’s report. And because of that, it must issue and hold its securities in dematerialised form under Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014.^[1]

2. How to incorporate a subsidiary in India

If the subsidiary does not exist yet, this is the sequence. Each step runs online on the Ministry of Corporate Affairs (MCA) V3 portal or the RBI’s FIRMS portal.

1. Confirm the FDI route. Check that 100% foreign ownership is allowed in your sector under the automatic route, and whether the investor or any beneficial owner is from a country that shares a land border with India. If so, Press Note 3 of 2020 requires government approval before anything else happens.
2. Fix the shareholders and directors. A private limited company needs at least two shareholders and two directors. One director must have stayed in India for at least 182 days in the financial year (Section 149(3)). That director can be a foreign national.
3. Get Digital Signature Certificates for the directors and the signatories of the subscriber company.
4. Reserve the name through SPICe+ Part A, typically the parent’s name followed by “India Private Limited”.
5. Legalise the parent’s documents. The parent’s certificate of incorporation, its board resolution authorising the investment and the foreign directors’ passports and address proofs must be apostilled (Hague Convention countries) or consularised at the Indian mission (non-Hague countries such as the UAE, and mainland China, whose accession India has objected to).
6. File SPICe+ Part B with the e-MoA, e-AoA and AGILE-PRO-S. This single filing covers incorporation, Director Identification Numbers, PAN, TAN, GST, EPFO and ESIC registration and the bank account application.
7. Receive the Certificate of Incorporation, then open the bank account and receive the share capital from the parent through banking channels.
8. Allot shares within 60 days of receiving the funds and file Form FC-GPR within 30 days of allotment.
9. File INC-20A within 180 days of incorporation to declare commencement of business.

With documents ready, incorporation usually takes two to four weeks, and the full cycle to an operating company with capital in the bank takes five to ten weeks. Our guide to foreign company registration in India compares the subsidiary route with liaison, branch and project offices.

3. First 180 days after incorporation

The first board meeting must be held within 30 days of incorporation.

4. Annual compliance calendar

The Indian financial year runs from 1 April to 31 March. A subsidiary with a 31 March year end typically works to this calendar.

Board meetings run alongside: at least four a year, with no more than 120 days between two consecutive meetings. A subsidiary recognised as a start-up by DPIIT can instead hold one meeting in each half of the calendar year. The CBDT extends tax deadlines often enough that each year’s dates should be checked against its latest circular.

5. Companies Act and ROC compliance

• Board meetings and minutes under Section 173, with minutes signed within 30 days.
• Statutory registers of members, directors and key managerial personnel, charges, and contracts with related parties, kept at the registered office.
• Related-party transactions with the parent (service fees, royalties, cost allocations, loans) need board approval under Section 188 and disclosure in the board’s report on Form AOC-2.
• Significant beneficial ownership. The company must identify any individual who ultimately holds 10% or more through the foreign chain and file Form BEN-2. Groups with trusts or funds at the top often get this wrong.
• Corporate social responsibility. Once net worth reaches ₹500 crore, turnover ₹1,000 crore or net profit ₹5 crore in a financial year, the subsidiary must spend 2% of average net profits on CSR. See our note on CSR compliance for private limited companies.
• Director changes on Form DIR-12 within 30 days, and a replacement resident director in place before the existing one stops qualifying.

Missed MCA filings attract an additional fee of ₹100 per day of delay, and the company and its officers face separate penalties. The Corporate Laws (Amendment) Bill, 2026, now before a Joint Parliamentary Committee, proposes more decriminalisation and changes to CSR and auditor rules.^[7] Until it is enacted, the current rules apply.

6. FEMA and RBI reporting

Every inflow and transfer of equity from the parent is reported on the RBI’s FIRMS portal:

• FC-GPR within 30 days of every fresh allotment to a foreign investor, including rights issues.
• FC-TRS within 60 days of any transfer of shares between a resident and a non-resident.
• FLA return by 15 July every year, even if no new investment came in.
• Pricing rules: shares issued to the parent cannot be priced below fair value under an internationally accepted valuation method, and shares transferred to a resident cannot be priced above it.
• External commercial borrowings from the parent need a Loan Registration Number before drawdown and ongoing reporting through the AD bank. The borrowing and lending regulations were overhauled in February 2026, so loan terms agreed before then should be rechecked.

Late reporting is settled by paying a late submission fee calculated under the RBI’s matrix, or through compounding where the delay exceeds three years. The RBI has also issued draft Foreign Exchange Management (Foreign Investment) Rules, 2026 to replace the current Non-Debt Instruments Rules; see our analysis of the draft rules. Our FDI practice handles these filings for clients.

7. Tax and transfer pricing

The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026.^[2] Section and form numbers have changed, so any internal compliance tracker built on the old numbering needs updating.

• Corporate tax. Most subsidiaries opt for the concessional regime: 22% base tax, 25.17% effective. New manufacturing companies no longer get the separate 15% rate, which closed to new entrants after 31 March 2024.
• Transfer pricing. Every transaction with the parent or another group company, whether service fees, software licences, reimbursements or guarantee fees, must be at arm’s length and supported by documentation kept for the year. An accountant’s report is filed with the return, and groups above the reporting thresholds also file a master file and country-by-country report notifications.
• Withholding. Payments to the parent for royalties, technical services and interest carry TDS at the domestic rate or the lower treaty rate, if the parent supplies a Tax Residency Certificate and Form 10F.
• Dividends to the parent are taxed in India at 20% plus surcharge and cess, or the lower treaty rate.
• GST. Register in each state where the subsidiary has an office. Services bought from the parent are usually taxed under reverse charge.

Our tax lawyers can review intra-group agreements before the first invoice goes out, which is far cheaper than defending them in a transfer pricing audit.

8. Employment and the Labour Codes

The four Labour Codes (the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020) came into force on 21 November 2025, replacing 29 earlier central laws, including the Minimum Wages Act, the EPF, ESI, Gratuity and Maternity Benefit Acts, and the Factories Act. The central rules under all four Codes followed in May 2026, though several states are still finalising theirs.^[3]

• Wages. The Code on Wages applies a uniform definition of wages: allowances above 50% of total remuneration are added back into wages, which raises PF and gratuity costs for salary structures built around allowances. State minimum wages continue to apply because the national floor wage has not yet been notified. See our note on the 50% wage rule.
• Social security. Provident fund registration applies from 20 employees and ESIC from 10, with gratuity payable after five years of service (one year for fixed-term employees).
• Appointment letters are mandatory for every employee under the OSH Code.
• Workplace harassment. Every office with 10 or more employees must constitute an Internal Committee under the POSH Act, 2013 and file an annual report with the district officer.
• Shops and establishments registration and holiday, working-hour and leave rules continue to be set by each state.

Our employment lawyers can audit employment contracts and policies against the Codes.

9. Data protection under the DPDP Act

The Digital Personal Data Protection Act, 2023 and the Digital Personal Data Protection Rules, 2025, notified on 13 November 2025, apply to any subsidiary that processes personal data of employees, customers or vendors. The rules take effect in phases: the Data Protection Board provisions applied at once, the consent manager framework applies from 13 November 2026, and the core obligations on notices, consent, security safeguards, breach reporting and retention apply from 13 May 2027.^[4]

Subsidiaries that share HR or customer data with the parent overseas should map those transfers now and put a data processing agreement in place. Our data privacy practice runs DPDP readiness reviews, and our note on the DPDP Removal of Difficulties Order 2026 explains the October 2026 clarifications, which corrected drafting but added no new duties.

10. Sector licences, IP and other registrations

• Sector licences. Depending on the business: import export code, FSSAI licence, drug or medical device licences, telecom or OSP registrations, pollution control consents for factories under the Water and Air Acts, and SEZ or GIFT City approvals.
• Intellectual property. Register trade marks in India in the subsidiary’s or the parent’s name and license them in writing. An unwritten licence from the parent weakens enforcement and makes the royalty harder to defend in transfer pricing.
• Contracts. Intra-group service, cost-sharing and secondment agreements should be signed before the first payment, stamped correctly in the relevant state, and match what the transfer pricing documentation says.

11. What non-compliance costs

The penalties are rarely the largest cost. A subsidiary that misses filings for two or three years usually finds that the parent’s next capital injection, dividend or exit is blocked until everything is regularised: FEMA compounding with the RBI, condonation of delay with the MCA, and revised tax filings. Directors of a company that fails to file financial statements or annual returns for three consecutive years are disqualified under Section 164(2) for five years from every Indian company, which hits foreign groups that use the same nominee directors across several entities.

12. How King Stubb & Kasiva can help

King Stubb & Kasiva runs the incorporation and the ongoing compliance calendar for Indian subsidiaries of foreign groups, so the parent has one firm answerable for company law, FEMA, tax, employment and data protection. Our company secretarial team keeps the ROC and RBI filings current, and our corporate lawyers handle board governance, intra-group agreements and regulatory approvals from offices across India. If you are still planning your entry, start with our business setup in India for foreign companies page and its free compliance-calendar tool.

FAQs

Sources

1. https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
2. https://incometaxindia.gov.in/documents/d/guest/7-formno48-pdf
3. https://labour.gov.in/labour-codes
4. https://www.meity.gov.in/data-protection-framework
5. https://www.foxmandal.in/news/mca-notifies-revised-small-company-thresholds/
6. https://www.icai.org/post/clcgc-director-kyc-compliance-02012026
7. https://prsindia.org/billtrack/the-corporate-laws-amendment-bill-2026

Last Updated on 26 October, 2026