Overview
A Foreign Subsidiary Company in India is a company incorporated under the Companies Act, 2013, in which a foreign corporate entity holds more than 50% of the share capital. Such companies must adhere to both Indian corporate laws and the foreign exchange regulations, ensuring transparency and compliance with statutory obligations under MCA, RBI (FEMA), Income Tax and GST laws.
Why Compliance Is Important
Compliance ensures that the foreign subsidiary operates legally and maintains good standing with Indian authorities.
Key reasons include:
- Avoiding penalties and legal consequences.
- Building investor and regulatory trust.
- Enabling smooth business expansion and foreign remittances.
- Maintaining credibility with banks, clients and stakeholders.
Eligibility
A foreign company can set up a subsidiary in India if:
- At least two directors are appointed (one must be a resident Indian).
- The foreign parent holds more than 50% of equity capital.
- The company complies with FEMA and FDI guidelines.
- The business activity is permitted under the Automatic Route or with Government Approval.
Process to Ensure Compliance
- Maintain updated statutory registers and records.
- Conduct periodic board and general meetings.
- Prepare and audit financial statements.
- File annual and event-based returns with MCA and RBI.
- Ensure tax and FEMA reporting within timelines.
- Seek professional assistance for regulatory filings and audits.
Documents Required
- Certificate of Incorporation.
- MOA and AOA.
- PAN and TAN of the company.
- Board resolutions and minutes.
- Financial statements and audit report.
- Director KYC and declaration forms.
- FDI reporting documents (FIRC, share certificates, valuation report).
Post-Incorporation Compliances
Once incorporated, a foreign subsidiary must fulfil the following immediate statutory requirements:
- Hold the first Board Meeting within 30 days of incorporation (Section 173, Companies Act).
- Appoint the first statutory auditor within 30 days in Form ADT-1.
- Open a current bank account and receive capital from the foreign parent.
- File Form FC-GPR with the RBI within 30 days of share allotment.
- Issue share certificates within 60 days of allotment.
- Apply for PAN, TAN and GST registration, if applicable.
- Display mandatory company details (name, CIN, registered office, etc.) on all business materials as per Rule 26 of the Companies (Incorporation) Rules, 2014.
Post-Incorporation RBI & FEMA Compliance
1. Opening of Bank Account:
Open a current account in the name of the subsidiary for receipt of share capital and operational transactions.
2. FDI Reporting:
File Form FC-GPR on the RBI’s FIRMS portal within 30 days from the date of share allotment, as per FEMA (Non-Debt Instruments) Rules, 2019.
3. Downstream Investment (if applicable):
If the Indian subsidiary makes investments in another Indian company, it must comply with downstream investment norms applicable to Foreign-Owned or Controlled Companies (FOCC) under FEMA.
Annual Compliance Requirements
Every foreign subsidiary must file various returns, statements and reports annually under different regulations. Below is a consolidated list:
| Compliance | Form | Authority | Due Date |
| Board Meetings | – | MCA | Minimum 2 per year |
| Annual Financial Statements | AOC-4 | MCA | Within 30 days of AGM |
| Annual Return | MGT-7 | MCA | Within 60 days of AGM |
| Auditor Appointment | ADT-1 | MCA | Within 15 days of AGM |
| Director KYC | DIR-3 KYC | MCA | By 30th September each year |
| Income Tax Return | ITR-6 | Income Tax Dept. | 31st October (Non-Audit) / 30th November (Audit) |
| Tax Audit Report | Form 3CB/3CD | Income Tax Dept. | 30th September |
| Transfer Pricing Report | Form 3CEB | Income Tax Dept. | 30th November |
| FLA Return | FLA | RBI | By 15th July annually |
| FC-GPR / FC-TRS | FEMA | RBI | Within 30 days of issue/transfer |
| GST Return | GSTR-1, GSTR-3B | GST Portal | Monthly/Quarterly |
| EPF/ESI Returns | – | EPFO/ESIC | Monthly, if applicable |
Event-Based Compliances
Apart from regular annual filings, a foreign subsidiary must report certain corporate events to the Registrar of Companies or RBI within the prescribed timelines:
- Change in directors – Form DIR-12
- Change in registered office – Form INC-22
- Increase in authorised or paid-up share capital – Form SH-7 / PAS-3
- Allotment or transfer of shares to foreign shareholders – FC-GPR / FC-TRS
- Appointment or resignation of auditor – Form ADT-1 / ADT-3
- Alteration of MOA or AOA – Form MGT-14
- Reporting of foreign loans or ECB transactions – Form ECB-2
Regulatory and Tax Compliance
- Domestic Company: A foreign subsidiary is treated as a domestic company under the Income Tax Act, 1961 and is taxed at 22% or 25% (plus surcharge and cess) depending on its eligibility under Section 115BAA / 115BAB.
- Audit & Accounting: Books of accounts must be maintained and audited annually as per the Companies Act, 2013.
- Annual Filings: File Form AOC-4 and Form MGT-7A annually with the MCA.
- Repatriation of Profits: Dividends, royalties or technical fees can be repatriated abroad in compliance with FEMA regulations, the RBI Master Direction on Remittance of Assets and the Liberalised Remittance Scheme (LRS), after payment of applicable taxes.
Consequences of Non-Compliance
Failure to comply with statutory requirements can result in:
- Monetary penalties under the Companies Act and FEMA.
- Freezing of bank accounts or restrictions on remittances.
- Disqualification of directors.
- Legal prosecution or striking off by the Registrar of Companies.
Penalties for Non-Compliance
| Nature of Default | Governing Law | Penalty / Consequence |
| Delay in ROC filings | Companies Act, 2013 | ₹100 per day of delay (Sec 403) |
| Non-filing of AOC-4 / MGT-7 | Companies Act, 2013 | ₹1 lakh – ₹5 lakh on company + directors |
| Non-reporting of FDI (FC-GPR / FC-TRS) | FEMA, 1999 | Up to 3× amount involved or ₹2 lakh minimum |
| Non-submission of FLA Return | FEMA, 1999 | Monetary penalty + compounding under RBI |
| Non-filing of ITR | Income Tax Act, 1961 | ₹5,000 – ₹10,000 late fee + interest |
| Non-filing of Transfer Pricing report | Income Tax Act, 1961 | ₹1 lakh (Sec 271BA) |
Fee
The cost of compliance services depends on the company’s size, transaction volume and professional scope of work. Typically, fees vary among service providers and are charged annually or per filing basis.
Timeline
- Initial Post-Incorporation Filings: Within 30–60 days.
- Annual Compliances: Within 30–60 days of the financial year-end.
- Event-Based Filings: Within 15–30 days from the date of the event.
FAQs
Hold the first Board Meeting within 30 days, appoint the first statutory auditor (Form ADT-1) and open a bank account for capital infusion.
Yes. Every subsidiary incorporated in India must appoint an auditor and get its accounts audited annually under Section 139 & Section 143 of the Companies Act, 2013.
- AOC-4: Within 30 days of AGM.
- MGT-7: Within 60 days of AGM.
Yes. Every company registered in India must file Form ITR-6 annually, irrespective of profit or loss.
Filing of FLA Return, FC-GPR (for FDI) and FC-TRS (for transfer of shares) within prescribed timelines.
Yes. If there are international transactions with the parent or associated enterprises, Form 3CEB and Transfer Pricing documentation are mandatory.
Late filing attracts additional fees (₹100 per day of delay) and may lead to director disqualification or company strike-off.
Yes, if the annual turnover crosses the prescribed threshold or the company supplies taxable goods or services.
Yes, after paying applicable taxes and filing FEMA reports, profits can be remitted to the foreign parent company with RBI Master Directions.
Experts ensure timely filings, maintain statutory records, prepare RBI / FEMA returns and manage audits, ensuring the company remains fully compliant with Indian law.
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