Indian Subsidiary Company

Enter the Thriving Indian Market - Register Your Subsidiary with Kanakkupillai
Our online subsidiary registration service includes the following features.
Obtain 2 DSCs with 2 years validity.
Get 2 secure Director Identification Number (DIN).
Get unique name approval for your subsidiary company.
Acquire PAN and TAN for the company.
Open a current account with ICICI Bank.
Receive the official Company Incorporation Certificate.

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Indian Subsidiary Company Registration: Your Gateway to Business Expansion

Establishing an Indian subsidiary business is a good alternative for enterprises looking to grow their operations in the booming Indian market. As per data, till 2023, there are a total of 14,137 active foreign subsidiary companies operating in India. A subsidiary company is a recognized company under the Companies Act of 2013, in which the parent company holds more than 50% of the total capital of the subsidiary company. Parent companies and subsidiary companies have separate financial statements and audits that help them make well-informed decisions. A parent or holding company arranges its subsidiary companies into a tree-like hierarchy structure for better management. In India, the registration of a subsidiary company takes several steps. Each step plays an important role in its registration, therefore, by understanding and following each and every step carefully, you can ensure registration of your subsidiary company is smooth without any errors.

What is a Subsidiary Company?

As per Section 2(87) of the Companies Act, 2013, the subsidiary company is a company in which the holding or parent company eithers controls the composition of the Board of Directors or have control over more than 50% of the total share capital of the subsidiary company. Even though the subsidiary company has a separate legal identity in the eyes of law, it performs under the canopy of the parent or holding company.

Benefits of Registration of a Subsidiary Company in India

Registering a subsidiary company in India has a ton of benefits that include:

Separate Legal Entity: The subsidiary is legally separate from its parent company, which means it has its own legal status and responsibilities. The subsidiary can enter into contracts and manage assets independently.
Indian Shareholding Requirements: A foreign parent company can own at least 51% of the subsidiary company, which allows the parent company to maintain control over the subsidiary company's business.
Limited Liability: One of the most important benefits of registering a subsidiary company in India is that the liability of the parent company is limited to its investment in the subsidiary. The subsidiary itself is responsible for its debts.
Foreign Direct Investment (FDI) Rules: FDI rules of India allow foreign companies to own a majority stake in a subsidiary that opens a pathway for better invest in the Indian market.
Capital Structure: The subsidiary company can raise funds from both local and international sources, and it can be financed through a combination of equity and debt. Financial support of the parent company can strengthen the financial position of the subsidiary company.
Branch vs. Subsidiary: Unlike a branch, which is essentially an extension of the parent company, a subsidiary is a completely separate entity. This structure allows the subsidiary to operate independently while still taking benefits from the parent company.
Dividend Distribution: The subsidiary can distribute profits to the parent company in the form of dividends, which is a direct way for the parent to earn from the success of the subsidiary company.

Tax Benefits of the Subsidiary Company

Subsidiary Company	Parent Company (Foreign)	Parent Company (Indian)
Subsidiaries in India benefit from a competitive corporate tax rate of 25% (for companies with turnover up to INR 400 crore) or 30% for others.	Parent companies in foreign countries may face higher tax rates, depending on their country of residence.	Indian parent companies enjoy the same tax rates as Indian subsidiaries (25% or 30%), which creates consistency in tax treatment for businesses operating locally.
If an Indian subsidiary holds shares for over two years, it can qualify for exemptions on capital gains taxes when selling shares.	Foreign parent companies may face capital gains taxes in their home country when selling shares of the Indian subsidiary, but DTAAs can reduce these taxes.	Indian parent companies benefit from the same capital gains exemptions on long-term shareholdings in subsidiaries as Indian subsidiaries.
Indian subsidiaries can carry forward business losses for up to 8 years to offset future profits, offering tax relief in the future.	Foreign parent companies may not be able to offset the subsidiary’s losses against their global income, limiting tax relief options.	Indian parent companies can carry forward their losses for up to 8 years, just like subsidiary companies.
Subsidiaries involved in R&D activities can avail of tax deductions under Section 35(2AB) of the Income Tax Act, 1961, claiming 150% of eligible expenses, which reduces their taxable income.	Parent companies may not be eligible for India's R&D incentives unless their R&D activities are conducted in India.	Indian parent companies can also benefit from India's R&D incentives if they conduct R&D in India, reducing taxable income and encouraging innovation.
Indian subsidiaries can claim depreciation on assets like machinery, buildings, and vehicles according to Income Tax Act, 1961.	Parent companies follow depreciation rules in their home countries. If they own assets in India, those would be subject to Indian depreciation laws.	Indian parent companies can claim depreciation on assets in India same as the subsidiary companies.

Requirements for Subsidiary Company Registration in India

To register a subsidiary company in India, a foreign parent company must meet specific criteria, that includes:

Type of Company: The subsidiary must be registered as a Private Limited or Public Limited company.
Shareholding: The foreign parent company has to own at least 50% of the shares in the Indian subsidiary.
Directors: A minimum of two directors are required for the subsidiary company. Out of two directors, at least one director has to be an Indian resident, i.e., someone who has stayed in India for at least 182 days in the preceding calendar year.
Registered Office: The subsidiary company should have had a registered office address in India, which can be either commercial or residential property.

Eligibility for Subsidiary Company Registration

To be eligible for registering a subsidiary in India, the following conditions must be met:

Foreign Parent Company: The parent company must be incorporated in a foreign country and must have a substantial shareholding in the Indian subsidiary (minimum of 50%).
Indian Directors: At least one director of the subsidiary must be a resident of India. The other director(s) can be foreign nationals.
Business Purpose: The subsidiary must be set up for a lawful business purpose in India. It cannot engage in activities that are prohibited under Indian law.
Compliance with FEMA: Foreign investments in the subsidiary must comply with the Foreign Exchange Management Act (FEMA), a central legislation that governs foreign investments in India.

Documents Required for Subsidiary Company Registration

The following documents are essential for registering a subsidiary company in India:

For the Foreign Parent Company:

Certificate of Incorporation of the parent company.
The board resolution of the parent company authorizes the creation of a subsidiary company in India.
Proof of Address: Rent agreement or lease agreement of the registered office along with recent utility bill, bank statement, or any other document showing the address of the parent company.
Details of the directors: Identity proof (passport) and address proof of the foreign directors.
Memorandum and Articles of Association

For Indian Directors:

Proof of Identity: Passport, voter ID, or any other government-issued ID.
Proof of Address: Utility bill, bank statement, or lease agreement showing the residential address of the director.

For the Subsidiary Company:

Proposed Company Name: A suggested name of the subsidiary, which must be approved by the Ministry of Corporate Affairs (MCA).
Registered Office Address: Proof of the registered office address in India (utility bill or lease agreement).

Checklist for Indian Subsidiary Company Registration

Having all the required documentation and data ready is crucial before beginning the process of registering a subsidiary in India. Make use of these pointers to make sure the registration procedure is simple and effective:

1. Incorporation Documents:

Memorandum of Association (MOA) and Articles of Association (AOA) describing business goals and internal rules.
Certificate of establishment of the parent company.
Proposed MOA and AOA.
Affidavits and statements by officers and owners.

2. Identity Proof of Directors and Shareholders:

Valid proof of name and address of all members and owners.
Digital Signature Certificate (DSC) and Director Identification Number (DIN) for directors.
Photographs of the directors
Declaration of interest in other companies by first owners.

3. Address Proof of Registered Office:

Documented proof of the listed office address, such as a rent deal or ownership papers.
Copies of utility bills for the registered office address
Details of the listed office location for legal records and compliance reasons.

4. Name Approval and Reservation:

Reserve a unique business name in compliance with legal rules.
Consider including "India" in the subsidiary's name for clarity and difference.

5. Bank Account Opening and Tax Registration:

Open a company bank account post-registration.
Obtain appropriate tax forms like Permanent Account Number (PAN) and Tax Deduction Account Number (TAN).

Companies that ensure that all of these paperwork and actions are in place may simplify the subsidiary company registration process, satisfy legal requirements, and establish a solid foundation for their business in India.

Procedure for Subsidiary Company Registration in India

Follow the step-by-step procedure for registering a subsidiary company in India:

Step 1: Obtain a Digital Signature Certificate (DSC)

Digital Signature Certificate (DSC) required for signing documents electronically during the registration process is mandatory for all the directors.

Step 2: Obtain Director Identification Number (DIN)

Directors of the subsidiary company have to apply for a Director Identification Number (DIN) through the Ministry of Corporate Affairs (MCA) website.

Step 3: Name Approval from MCA

The proposed company name must be submitted for approval to the Ministry of Corporate Affairs (MCA). The name should not conflict with any existing companies or trademarks.

Step 4: Prepare Documents

Prepare the Memorandum of Association (MOA) and Articles of Association (AOA) for the subsidiary company. You will also need to submit the Board Resolution from the parent company that authorizes the incorporation of the subsidiary company.

Step 5: Submit Registration Forms to MCA

File the incorporation forms online through the MCA portal:

Form SPICe (INC-32): This form is used for company registration.
Form DIR-12: For the appointment of directors.
Form INC-22: For the registered office address.

All forms should be signed using the DSC and uploaded on the MCA portal.

Step 6: Payment of Registration Fees

The registration fee is determined by the authorized capital of the company. The fee has to be paid online during the filing process.

Step 7: Obtain a Certificate of Incorporation

Once the MCA reviews and approves the documents, the company will receive the Certificate of Incorporation.
This certificate is the official proof that the subsidiary company is legally registered in India.

Step 8: Apply for PAN, TAN, and GST Registration

After registration, the subsidiary needs to apply for:

Permanent Account Number (PAN).
Tax Deduction and Collection Account Number (TAN).
Goods and Services Tax (GST) registration (if applicable).

Step 9: Open a Bank Account

Once the company is incorporated, it can open a bank account in India. The authorized signatories (usually the directors) will be the ones to operate this account.

Compliance Requirements for Indian Subsidiary Companies

Indian subsidiary companies have to ensure various compliances post-registration. Key compliance factors include:

1. Annual Filings:

Submit yearly financial records, director's report, and auditor's report to the Ministry of Corporate Affairs.
Ensure mandatory checks are performed even for smaller businesses.

2. Board Meetings:

Board meetings should be conducted within 30 days of formation, and members' interests should be revealed using Form MBP-1.
File Form DIR-8 for director disqualifications before the first board meeting.

3. Registered Office Verification:

File e-Form INC-22 within 30 days of formation if registered office details were not given originally.

4. Statutory Auditors:

Appoint statutory accountants at the first board meeting within 30 days of incorporation of the company.
Activate the bank account within 2 months of registration

5. Share Allotment and Certificates:

Allot shares to members within 2 months of registration through a board vote.
Issue share certificates using Form SH-1 immediately after share allocation.

Compliance with these standards guarantees legal respect, financial openness, and operating efficiency for Indian partner businesses.

Why Choose Kanakkupillai for Indian Subsidiary Company Registration?

Kanakkupillai stands out as a top choice for Indian subsidiary company registration because of its commitment to delivering professional advice, personalized help, and smooth registration process. Kanakkupillai provides a variety of services that make the process of registering a subsidiary business in India simple and straightforward.

Expert Guidance: Our team of professionals brings years of expertise to set up your business. Our team is well versed with Indian laws and our clients up-to-date throughout the registration and filing process. Curiosity and striving for excellence is what that keeps our team moving.
Personalized Assistance: One of our key strengths is our personalized approach to client service. We work as per the unique needs and wants of the client and tailor our assistance to ensure that each client gets a solution to its problem effectively.
Streamlined Registration Experience: Kanakkupillai's online platform enables a simplified registration experience, allowing clients to complete all paperwork and registration work quickly. The services of Kanakkupillai are the best in the market for online subsidiary company registration.

Frequently Asked Questions

What is the minimum cash needed for starting a subsidiary company in India? +

There is no exact minimum capital requirement, but it is suggested to have at least USD 5000 as starting capital.

How many directors are needed for a subsidiary company in India? +

A minimum of two directors is required, with at least one director being a resident Indian

Can a foreign company be the sole partner of an Indian subsidiary? +

Yes, a foreign company can hold 100% shares of an Indian business or have two foreign people as owners.

What papers are needed for subsidiary business registration? +

Essential papers include Memorandum of Association (MOA), Articles of Association (AOA), proof of name and address for directors and owners, and address proof of the registered office in India.

Is it important to have a listed office in India for a secondary company? +

Yes, every business in India must have a listed office address within the country.

What are the legal needs after creating a subsidiary company? +

Compliance includes having yearly general meetings, completing statutory checks, filing annual financial accounts, and sticking to tax rules.

Can a foreign person be a member of an Indian subsidiary company? +

Yes, foreign people can be directors of an Indian subsidiary company.

Are there any limits on the business actions of a subsidiary company in India? +

Business operations must meet with Foreign Direct Investment (FDI) laws and sector-specific recommendations.

How long does it take to create a subsidiary company in India? +

The filing process usually takes around 15-20 days once all necessary papers are filed.

What are the tax effects for an Indian subsidiary company? +

Subsidiary businesses are subject to corporate income tax, Goods and Services Tax (GST), and other relevant taxes as per Indian tax rules.