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For Non Resident Indians or Foreign Owners

For a Non-Resident Indian (NRI) or a foreign entity looking to establish a presence in India, a Subsidiary Company (typically a Private Limited Company) is the most preferred structure. It allows for full operational control while offering the benefits of an Indian domestic entity.

Key Features for NRIs

  • Foreign Direct Investment (FDI): NRIs can invest in an Indian subsidiary under the "Automatic Route" for most sectors (e.g., IT, Manufacturing, Consulting), meaning no prior government or RBI approval is needed.
  • Wholly Owned Subsidiary (WOS): An NRI or their foreign company can own 100% of the shares, making it a wholly owned subsidiary.
  • Director Requirements: At least two directors are required. While both can be NRIs/foreigners, at least one must be a resident of India (stayed in India for 182+ days in the previous calendar year).

Advantages

  • Separate Legal Identity: The Indian subsidiary is a distinct legal entity. The parent company or the NRI owner is not personally liable for the subsidiary's debts or legal issues.
  • Repatriation of Profits: Profits (dividends) can be sent back to the NRI's home country after paying the applicable taxes in India.
  • Local Market Credibility: Being an Indian-registered entity makes it easier to sign contracts, participate in government tenders, and hire local talent.
  • Tax Efficiency: Indian subsidiaries are taxed as domestic companies (approx. 22%-25%). This is significantly lower than the 40% tax rate often applied to "Branch Offices" of foreign companies.
  • Fundraising: It is much easier to raise equity or debt from Indian banks and VCs compared to a Branch or Liaison office.

Disadvantages

  • FEMA Compliance: Every time money is brought into India (as equity), the company must file a Form FC-GPR with the RBI within 30 days. Failure to do so leads to heavy penalties.
  • Strict Reporting: Annual filing of FLA (Foreign Liabilities and Assets) returns to the RBI is mandatory, in addition to regular MCA (Ministry of Corporate Affairs) filings.
  • Initial Setup Complexity: Documents from the NRI's country of residence (like Passports and Address Proofs) must be Apostilled or notarized by the Indian Embassy in that country, which can be time-consuming.
  • Recurring Costs: High maintenance costs due to mandatory audits, GST filings, and Board Meeting requirements
 
     
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