How to Set Up a Wholly Owned Subsidiary in India: Step-by-Step Guide

A wholly owned subsidiary in India (Private Limited Company, or Pvt Ltd) is the standard structure for US companies establishing a permanent India presence. This guide walks through the setup process step by step — requirements, timeline, costs, and ongoing compliance obligations.

When to Set Up a Pvt Ltd vs Continue with EOR

• EOR is appropriate for 1–15 India employees — lower upfront cost, faster time to first hire, no ongoing entity compliance burden
• Pvt Ltd becomes economical at 15–25 employees — EOR fee savings (15–25% of gross salary) offset entity setup and maintenance costs within 12–18 months
• Pvt Ltd is required for: raising venture capital in India, holding Indian IP, operating a customer-facing India business, or when the EOR terms prohibit the scale of operations planned
• Break-even analysis example: 20 India employees at $30,000 average salary, 20% EOR fee = $120,000/year in EOR fees. Pvt Ltd annual maintenance cost: $15,000–$25,000. Net saving: $95,000–$105,000/year after Year 1

Requirements for a US Company to Set Up India Pvt Ltd

• Minimum two shareholders: the US parent company holds 99.99% of shares; the remaining 0.01% held by a nominee (typically a law firm partner or company secretary in India)
• Minimum two directors: at least one must be an Indian resident (has stayed in India for 182+ days in the prior calendar year). The US founder can be a director; the India HR lead or a nominee director fills the resident requirement
• Minimum authorized share capital: INR 100,000 (approximately $1,200)
• Registered office address in India: can be the EOR's address temporarily; should be updated when a dedicated office is established
• Digital Signature Certificate (DSC): required for all directors for online filing
• Director Identification Number (DIN): all directors must obtain DIN from the Ministry of Corporate Affairs

The Registration Process: Step by Step

Step 1: Engage an India corporate law firm (Week 1)

Engage a qualified India-based corporate law firm or company secretary (CS) firm. Expected cost: $3,000–$8,000 for the full registration process. Reputable options: Khaitan & Co, AZB & Partners, Trilegal for full-service firms; IndiaFilings, Vakilsearch, or Enterslice for tech-enabled corporate services at lower cost ($800–$2,000).

Step 2: Name reservation (Week 1–2)

Reserve the company name via the MCA21 portal (Ministry of Corporate Affairs). Name must end in 'Private Limited.' The MCA checks for: availability (no identical or similar existing company name), compliance with naming guidelines (no prohibited words). Typical approval: 2–5 business days.

Step 3: Digital Signature Certificates and DINs (Week 1–2)

All proposed directors obtain DSCs and DINs. US-based directors require apostilled identity documents (passport copy). Processing time: 3–5 business days.

Step 4: SPICe+ incorporation filing (Week 2–3)

The company secretary files the incorporation application (SPICe+ form) with the MCA, along with: Memorandum of Association (MoA), Articles of Association (AoA), declaration of compliance, and KYC documents for all directors. MCA issues the Certificate of Incorporation (CoI) within 3–7 business days of filing.

Step 5: Post-incorporation registrations (Week 3–6)

• PAN (Permanent Account Number): tax identification; apply online via NSDL; 5–7 business days
• TAN (Tax Deduction Account Number): required for TDS withholding on salaries; apply with PAN
• GSTIN (GST registration): required if annual turnover exceeds INR 20 lakh ($24,000) or for inter-state services; applies for most US company subsidiaries
• EPF registration: mandatory for establishments with 20+ employees; voluntary for smaller
• ESIC registration: mandatory for establishments with 10+ employees
• Shops and Establishments Act registration: state-level; required within 30 days of commencement of business
• RBI filings: FDI reporting (FC-GPR) within 30 days of share issuance to foreign parent

Ongoing Compliance Obligations

• Monthly: TDS (tax deducted at source) payment and filing; EPF and ESIC contributions; Professional Tax payment
• Quarterly: TDS returns (Form 24Q for salaries); advance tax payments
• Annual: income tax return; companies act annual return (AOC-4, MGT-7); statutory audit; board meetings (minimum one per quarter)
• FEMA compliance: remittances from US parent to India subsidiary must follow RBI guidelines; ODI/FDI reporting
• Annual cost of compliance (professional fees): $8,000–$18,000 depending on complexity and transaction volume