Short answer: most US companies set up in India through a wholly owned private limited company (Pvt Ltd). Foreign ownership of up to 100% is allowed without prior approval in most sectors, including software, IT services and manufacturing. You need two shareholders, two directors (one of them resident in India) and apostilled documents from the US. Incorporation usually takes two to four weeks, and you must report the investment to the Reserve Bank of India (RBI) within 30 days of issuing shares.
1. Which entity should a US company use in India?
India gives foreign businesses four main ways in. The right one depends on whether you want to earn revenue locally, how much control you need, and how long you plan to stay.
| Entity | Closest US equivalent | Can it earn revenue? | Approval needed | Best for |
|---|---|---|---|---|
| Private limited company (wholly owned subsidiary) | Delaware C-corp subsidiary | Yes, any lawful business | None in automatic-route sectors; post-investment RBI reporting | Most operating businesses, hiring teams, GCCs |
| Limited liability partnership (LLP) | LLC taxed as a partnership | Yes | Automatic route only where the sector is 100% automatic with no performance conditions | Professional and advisory businesses wanting flexibility |
| Branch office | Foreign branch registration | Limited to permitted activities (such as export, import, consulting) | RBI approval via an authorized bank; parent needs a 5-year profit record and USD 100,000 net worth | Established companies testing the market under the parent's name |
| Liaison office | Representative office | No, only liaison and promotion | RBI approval; parent needs a 3-year profit record and USD 50,000 net worth | Market research and relationship building before a full entry |
For most of our US clients the subsidiary wins. It ring-fences liability in India, can hire employees and sign customer contracts, and is the structure Indian banks, landlords and customers understand best. A branch office exposes the US parent directly to Indian tax and liability, and a liaison office cannot invoice anyone.
Watch this space: in October 2025 the RBI published draft regulations that would remove the profit-record and net-worth tests for branch and liaison offices. As of September 2026 the final rules have not been notified, so the thresholds above still apply.
2. Do you need government approval to invest?
Usually not. India's Consolidated FDI Policy (2020, as amended by later Press Notes) sorts sectors into two routes:
- Automatic route: invest first, report to the RBI afterwards. This covers IT and software, SaaS, most manufacturing, medical devices, greenfield pharma and, since 2026, insurance companies.
- Government route: prior approval from the relevant ministry. This applies to sectors such as defense above set limits, print media, brownfield pharma above 74%, and any investor with a beneficial owner in a country that shares a land border with India, such as China.
The land-border rule matters for US funds with Chinese limited partners. Press Note 2 of 2026, in force from 1 May 2026, links "beneficial owner" to the thresholds under India's anti-money-laundering rules. Holdings below those thresholds now trigger a reporting step rather than an approval, which removes a long-standing bottleneck for many US investors.
3. How to incorporate: step by step
Indian companies are incorporated online with the Ministry of Corporate Affairs (MCA) through a single integrated form called SPICe+. All company filings moved to the MCA's V3 portal in July 2025. Here is the sequence for a US parent:
- Decide the structure. A private company needs at least two shareholders and two directors. The US parent usually holds almost all the shares, with one share held by a nominee or a second group company.
- Appoint a resident director. At least one director must have spent 182 days or more in India during the financial year. Many US companies use a senior India hire or a professional resident director.
- Prepare US documents. Board resolutions, the parent's certificate of incorporation, and directors' passports and address proofs must be notarized and apostilled in the US. This is usually the longest step.
- Get digital signatures. Each director and signatory obtains a Digital Signature Certificate (DSC).
- Reserve the name and file SPICe+. Part A reserves the name; Part B covers incorporation, director identification numbers, the company's PAN and TAN, and linked registrations for GST, employee provident fund, state insurance and a bank account.
- Receive the certificate of incorporation. Once approved, the company exists and can open its bank account and receive the investment.
Timeline: in our experience, two to four weeks from start to certificate, most of it spent on apostilles and signatures. MCA approval itself typically takes five to ten working days if nothing needs resubmitting.
4. FEMA filings after you invest
India's Foreign Exchange Management Act (FEMA) requires the Indian company to report foreign investment to the RBI through its FIRMS portal. The key deadlines:
| Filing | When | What it covers |
|---|---|---|
| FC-GPR | Within 30 days of issuing shares to the US parent | Reports the fresh issue of shares to a foreign investor |
| FC-TRS | Within 60 days of payment | Transfers of shares between Indian residents and foreign investors |
| Form DI | Within 30 days of the investment | Downstream investment by the Indian company into another Indian entity |
| FLA return | By 15 July each year | Annual return of foreign liabilities and assets (extended to 31 July for the 2025-26 return) |
Missed deadlines can be regularized with a late submission fee, but repeated delays invite scrutiny and slow down future investment. We set up a compliance calendar for every subsidiary we incorporate.
5. Tax and the India-US tax treaty
India replaced its 1961 income tax law with the Income-tax Act, 2025, in force from 1 April 2026. The rates did not change much, but the section numbers did, so older guides now cite the wrong provisions.
- Corporate tax: an Indian subsidiary can opt for a 22% base rate under section 200 of the new Act (formerly section 115BAA), which works out to about 25.17% with surcharge and cess.
- New manufacturers: the old 15% rate (now section 201) only applies to companies that began manufacturing before 31 March 2024, so it is not available to a plant starting up in 2026.
- Treaty benefits: to claim reduced withholding under the India-US tax treaty, the US recipient needs a Tax Residency Certificate from the IRS (Form 6166) and must file India's Form 41 (formerly Form 10F).
| Payment from India to the US | Treaty withholding rate |
|---|---|
| Dividends to a US company holding 10% or more | 15% |
| Other dividends | 25% |
| Interest to US banks and financial institutions | 10% |
| Other interest | 15% |
| Royalties and fees for included services | 15% (10% for equipment rental) |
Two points often surprise US companies. First, fees for services are only taxable in India under the treaty if the services "make available" technical knowledge or skills to the Indian payer. Second, if your US staff work from India for long periods, the US company may create a permanent establishment in India. For Indian subsidiaries providing IT services to their US parent, the safe harbor rules from tax year 2026-27 accept a 15.5% operating margin for companies with transactions up to INR 2,000 crore, which can remove most transfer-pricing disputes.
6. Running the company once it exists
After incorporation, an Indian subsidiary has a steady rhythm of obligations. Plan for these from day one:
- Statutory audit and annual filings with the MCA, including financial statements and an annual return
- At least four board meetings a year, with a gap of no more than 120 days between two meetings
- Monthly GST returns and quarterly tax deduction (TDS) returns
- Transfer-pricing documentation for transactions with the US parent
- Employment registrations and state-level labor filings once you hire
If you are setting up a captive technology or operations center, read our guide to setting up a Global Capability Centre in India, which covers state incentives and employment structuring.
This guide is general information current as of 30 September 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Rules on foreign investment change often; speak to us before you act.
