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India Business Setup

India Business Setup involves the legal and procedural steps required to establish and register a business entity, ensuring compliance with the regulatory framework and facilitating smooth operations in the Indian business environment
₨41899
₨ 28999 All Inclusive
  • Company Registration
  • Share Certificates
  • GST Registration
  • 2 Digital Signatures
  • 1 RUN Name Approval
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India Business Setup - Setting up a Subsidiary

Setting up a subsidiary in India is a strategic move for international businesses looking to establish a distinct presence in the country. This process involves creating a separate legal entity that operates independently but is fully owned and controlled by a foreign parent company. Navigating through the regulatory landscape set by the Ministry of Corporate Affairs is crucial for a seamless and legally compliant establishment.

Understanding Subsidiary Structure

A subsidiary, in the context of business, refers to a company that is controlled by another company, known as the parent company. In the case of international expansion, a foreign company can establish a subsidiary in India to engage in business activities without directly operating as a branch or representative office.

Key Steps in Setting Up a Subsidiary

1. Obtaining Director Identification Numbers (DIN) and Digital Signatures

The initial step involves obtaining Director Identification Numbers (DIN) for individuals who will serve as directors of the subsidiary. Simultaneously, Digital Signatures must be secured, as many legal documents in India are filed electronically, requiring a valid digital signature.

2. Registering the Company Name

Selecting and registering a unique company name is a critical step. The name should comply with the guidelines set by the Ministry of Corporate Affairs to avoid any conflicts or rejections during the approval process.

3. Preparing and Filing Incorporation Documents

Once the name is approved, the next step is preparing the incorporation documents, including the Memorandum of Association (MOA) and Articles of Association (AOA). These documents outline the company’s objectives, structure, and internal regulations. The subsidiary’s registered office address must also be provided. After preparing the documents, they are filed with the Registrar of Companies (RoC) for approval.

4. Approval and Certificate of Incorporation

Upon successful scrutiny of the documents, the RoC issues a Certificate of Incorporation, officially recognizing the subsidiary as a legal entity. This certificate includes the Corporate Identity Number (CIN), which is unique to each company.

5. Compliance with Tax Regulations

Registering for the Goods and Services Tax (GST) is mandatory for businesses in India. Additionally, obtaining a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) is essential for tax compliance.

6. Appointment of Statutory Auditor

Within a month of incorporation, the subsidiary must appoint a statutory auditor who will audit the company’s financial statements and ensure compliance with accounting standards.

7. Ongoing Compliance

Maintaining compliance with Indian corporate laws is an ongoing process. Annual filings, board meetings, and adherence to statutory regulations are crucial for the smooth functioning of the subsidiary.

Advantages of Setting Up a Subsidiary in India

  1. Limited Liability: The subsidiary operates as a separate legal entity, providing limited liability to the foreign parent company.

  2. Operational Independence: The subsidiary has autonomy in its day-to-day operations, allowing for quicker decision-making and adaptability to the local market.

  3. Market Presence: Establishing a subsidiary enhances the parent company’s market presence, fostering stronger relationships with local clients and partners.

  4. Tax Planning: A subsidiary structure allows for efficient tax planning and management, taking advantage of India’s tax regulations.

  5. Strategic Expansion: Setting up a subsidiary is a strategic move for companies looking to expand their global footprint and tap into the vast Indian market.

Challenges and Considerations

While the subsidiary structure offers numerous advantages, businesses must be aware of challenges such as cultural differences, regulatory complexities, and the need for local expertise. Engaging local legal and financial advisors can significantly ease the process and ensure a successful establishment.

In conclusion, setting up a subsidiary in India is a multifaceted process that requires careful planning and adherence to legal formalities. The benefits of establishing a distinct presence in one of the world’s fastest-growing economies make it a worthwhile endeavor for international businesses seeking strategic expansion opportunities.

Regulatory Authorities for Indian Subsidiary Company Registration

Ministry of Corporate Affairs (MCA is responsible for setting and enforcing the rules and regulations governing company registration and compliance. Registrar of Companies (ROC) offices handle the procedures related to company incorporation, ensuring companies follows legal requirements. Reserve Bank of India (RBI) regulates foreign currency exchange aspects for Indian subsidiary companies, ensuring adherence to financial regulations. ullamcorper mattis, pulvinar dapibus leo.

Requirements and Key Facts about Company Registration in India

The process of registering a company in India is governed by the Companies Act, 2013, which outlines various pre-incorporation and post-incorporation requirements. Here are the essential elements to consider when registering a company in India:

  • Company Name: Your new business requires a unique name that is distinct from existing businesses’ names or trademarks
  • Shareholders: The parent company can hold 100% of the shares, or any combination of two foreign nationals can be shareholders. It is not mandatory to have an Indian resident as a shareholder.
  • Share Capital: India does not impose a minimum capital requirement for company registration.
  • Directors: A minimum of two directors is mandatory, with at least one director being an Indian resident. Nominee directorship services can be provided if required.
  • Registered Address: Every company in India must have a registered address that is officially recorded in government records. Virtual office address services are available to meet this requirement.
  • Annual General Meeting (AGM): According to the Companies Act, every Indian company must conduct at least one general meeting annually, in addition to two board meetings.
  • Company Secretary: It is mandatory to file three secretarial returns each year, which are handled by a company secretary. IndiaFilings can assist with this requirement. A statutory auditor must also be appointed.

Taxation

  • Professional fees, including government fees for company registration
  • Following incorporation, companies are subject to a profit tax rate of approximately 25.36%.
  • GST (Goods and Services Tax) is applicable to domestic sales, with monthly GST returns and one annual tax return required.

Annual Compliance

India has unique compliance requirements, including mandatory statutory audits even for smaller companies.

  • Companies must appoint a statutory auditor and submit annual filings.
  • Navigating these requirements is crucial for establishing and operating a company in India under the Companies Act, 2013.

Compliance Requirements for Indian Subsidiary Registration

To establish a legal and valid Indian subsidiary company, compliance with specific regulations is mandatory:

  • Foreign Exchange Management Act (FEMA): Foreign companies based in India must adhere to foreign exchange laws and regulations outlined in the Foreign Exchange Management Act, 1999.
  • Companies Act, 2013: All Indian subsidiary companies must comply with the Companies Act, 2013 provisions.
  • Reserve Bank of India (RBI) Compliances: RBI imposes several foreign exchange management compliances on Indian subsidiary companies.
  • Income Tax Act, 1961: Indian subsidiaries must file income tax returns every year. The corporate tax rate in India is currently 25%.
  • Annual Returns: Companies are required to file annual returns with the MCA and the Registrar of Companies.
  • SEBI (Listing Obligations and Disclosure Regulations): If the subsidiary lists its securities on a stock exchange, it must comply with SEBI regulations.

Taxation of Indian Subsidiary Companies

Indian subsidiary companies are subject to specific taxation policies:

  • Taxes are levied on all income earned within or outside India, including dividends from foreign subsidiaries.
  • Tax rates for foreign subsidiaries in India include 50% for royalty received for technical services from the government or any Indian entity and 40% for other income.
  • A surcharge of 2% is applied if the company’s income falls between Rs. 1 Crore and Rs. 10 Crores; for payments above Rs. 10 Crores, a 5% surcharge is levied.
  • A 4% health and education cess is added to the total tax amount.

Concessional tax rates apply to Indian subsidiaries in specific sectors, such as oil exploration, air transportation, and shipping businesses.

How Alltaxindia Can Assist with Indian Subsidiary Company Registration

Alltaxindia simplifies establishing an Indian subsidiary company by offering comprehensive support at every crucial step. From selecting a unique name and obtaining essential Director Identification Numbers (DIN) and Digital Signature Certificates (DSC) to assisting with PAN and TAN applications and setting up a dedicated company bank account, we streamline the entire registration process.

Our expert team ensures compliance with regulatory requirements, including the Foreign Exchange Management Act (FEMA), Companies Act, 2013, Reserve Bank of India (RBI) compliances, and the Income Tax Act, 1961.

We facilitate filing annual returns, guide you through SEBI (Listing Obligations and Disclosure Regulations) compliance, and provide tax services to navigate India’s taxation policies. With Alltaxindia as your partner, you can initiate and grow your Indian subsidiary business confidently and efficiently.

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