Setting up a business in India as a foreign company: the 2026 guide

The route decides who approves your entry. A subsidiary on the automatic route needs no prior approval; a branch or liaison office needs approval from an Indian bank you choose, under Reserve Bank of India (RBI) rules.

How can a US company set up a business in India?

Each route has its own approver, scope and conditions. A subsidiary, a joint venture and an LLP are Indian entities your company invests in; the three offices belong to your US company itself.

Which routes need approval, and from whom?

Does a subsidiary need RBI or government approval?

A subsidiary needs prior approval only on the government route. Under the RBI's Master Direction on foreign investment, investment from outside India on the automatic route needs no prior approval from the Central Government, while investment on the government route needs prior Government approval. On both routes, the company reports the investment to the RBI.

Any sector not listed in Schedule I of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (the NDI Rules), and not prohibited, takes up to 100% foreign investment on the automatic route, subject to applicable laws; financial services activities sit outside this default. IT and software services are not among the listed sectors, so they take up to 100% on the automatic route. Telecom services are listed, and they also take 100% on the automatic route.

The listed sectors carry their own caps and routes. Multi-brand retail trading is capped at 51% and needs Government approval. Defence industry under an industrial licence takes foreign investment on the automatic route up to 74%, and on the government route beyond 74% wherever it is likely to result in access to modern technology or for other reasons to be recorded.

One rule overrides the sector. An investor from a country that shares a land border with India, or whose beneficial owner is a citizen of such a country, may invest only on the government route, and the rule reaches a US company with such a beneficial owner. If your sector is on the government route, or the land-border rule reaches your company, Government approval comes before the investment.

Who approves a branch, liaison or project office?

Your company applies in Form FNC to the AD Category-I bank it chooses, and the bank decides under the RBI's Master Direction on branch, liaison and project offices. Before it issues the approval letter for a branch or liaison office, the bank obtains a Unique Identification Number (UIN) from the RBI. The approval covers the Foreign Exchange Management Act (FEMA) only, so any other licence or clearance the office needs is obtained separately before it starts work. An approval lapses if the office does not open within six months of the approval letter; where the delay is beyond your control, the bank may extend the time by a further six months.

The RBI's own prior approval, which it processes with the Government, is needed in four cases:

• the applicant's principal business is defence, telecom, private security or information and broadcasting, unless a Government approval or licence is already held;
• the applicant is from Pakistan;
• an applicant from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau wants an office in Jammu and Kashmir, the North East region or the Andaman and Nicobar Islands;
• the applicant is a non-government or non-profit organisation, or a body, agency or department of a foreign government.

Beyond four branch or liaison offices, one for each of the East, West, North and South zones, a company must justify the extra offices and needs the RBI's prior approval for them.

A company that falls short of the profit and net worth test for a branch or liaison office can still apply if it is itself a subsidiary: its parent or another group company that meets the test gives a Letter of Comfort.

A project office needs no approval when your company holds a contract from an Indian company to execute a project in India, the project has its regulatory clearances, and the project is funded by remittance from abroad, by a bilateral or multilateral international financing agency, or by a term loan from a public financial institution or a bank in India to the company that awarded the contract. It suits a US company with one such contract. A project office still reports to its designated AD bank, through a Chartered Accountant's certificate on the project's status and its audited accounts.

Can a branch office or a liaison office earn money in India?

A branch office can earn in India and send its profit home; a liaison office does not earn there. The RBI's direction settles both through what each office may do and what its Indian bank account may receive.

A liaison office may represent the parent and group companies in India, promote exports to and imports from India, promote technical and financial collaborations between the group and Indian companies, and act as a communication channel between the parent and Indian companies. Its bank account may receive only funds from head office for the office's expenses, refunds of security deposits and of taxes, and the proceeds of selling the office's own assets, and it may be debited only for the office's local expenses. With those four activities and no account entry for business income, a liaison office does not earn in India. It suits a US company that wants only to represent itself, promote trade or collaborations and keep a channel open to Indian companies.

A liaison office's approval is generally valid for three years, or two years for Non-Banking Finance Companies (NBFCs) and businesses in construction and development. The bank may extend it by three years at a time, except for those two kinds of business, whose liaison offices must close at expiry or convert into a joint venture or wholly owned subsidiary. If a liaison office is later permitted to upgrade to a branch, it keeps its Permanent Account Number (PAN) and its bank accounts.

A branch office's account may also receive "any legitimate receivables arising in the process of its business operations", and the branch may remit its profit abroad, net of applicable Indian taxes, against an audited balance sheet and a Chartered Accountant's certificate. Its work is confined to eight activities: exporting and importing goods; professional or consultancy services, other than the practice of law; research work in the parent company's field; promoting technical or financial collaborations between Indian companies and the group; representing the parent and acting as its buying or selling agent in India; IT services and software development in India; technical support for products the group supplies; and representing a foreign airline or shipping company. The RBI's direction says a branch should normally carry on the activity its parent is engaged in. Manufacturing is not on the list, although a branch in a Special Economic Zone (SEZ) has a general permission to manufacture and provide services, on conditions that include a sector open to 100% FDI.

A branch is taxed as part of your US company. The Income Tax Department's rate table for assessment year 2026-27 (income earned in 2025-26) lists 35% for a foreign company, plus surcharge and cess. An Indian subsidiary is a domestic company and may opt under section 200 of the Income-tax Act 2025 to pay income-tax at 22%, before surcharge and cess, on income computed without the deductions the section lists; once chosen, the option cannot be withdrawn for that or any later tax year. A branch suits a US company that wants revenue in India from one of the eight activities without incorporating there, and that accepts the foreign company rate.

Registering a branch or liaison office with the Registrar of Companies (RoC) follows the bank's approval: under section 380 of the Companies Act 2013, every foreign company that establishes a place of business in India delivers its documents to the Registrar within 30 days. A branch or liaison office then files an Annual Activity Certificate, with audited financial statements, to its AD bank, with a copy to the Director General of Income Tax (International Taxation), by 30 September every year, under the RBI's reporting direction.

What does a wholly owned subsidiary need?

A wholly owned subsidiary is a private company under the Companies Act 2013. It needs at least two directors, and it may have up to 15 without a special resolution. A private company is formed by two or more persons, so your US company needs at least one other shareholder alongside it, and the company's articles limit its members to 200. The minimum paid-up capital of Rs 1,00,000 was removed from the definition of a private company with effect from 29 May 2015.

The company is incorporated through SPICe+, the integrated web form of the Ministry of Corporate Affairs (MCA). Part A reserves the name, which the MCA's SPICe+ FAQ says is held for 20 days from approval. Part B is a single application for the incorporation itself, a Director Identification Number (DIN) for each new director, the company's PAN and its Tax Deduction and Collection Account Number (TAN), its Employees' State Insurance Corporation (ESIC) and Employees' Provident Fund Organisation (EPFO) numbers, and a Goods and Services Tax Identification Number (GSTIN) if you apply for one. The memorandum and articles of association are filed in the linked e-MOA (INC-33) and e-AOA (INC-34), and every new company applies for its bank account through the linked AGILE-PRO-S form.

Where a subscriber is a company outside India, or a foreign national without a valid Indian business visa, the signed memorandum and articles are attached, with the subscriber's signature and address notarised, apostilled or consularised as applicable. The same FAQ says a company incorporated through SPICe+ with authorised capital up to Rs 15 lakh pays no MCA filing fee, while state stamp duty still applies. For the order of the steps, see the step-by-step incorporation of a wholly owned subsidiary.

Does the company need a director who lives in India?

Section 149(3) of the Companies Act 2013 requires every company, a foreign-owned subsidiary included, to have at least one director who stays in India for a total period of at least 182 days during the financial year. For a newly incorporated company, the requirement applies proportionately at the end of the financial year in which it is incorporated.

The section has read this way since 7 May 2018. It counts the days a director stays in India during the current financial year and sets no condition of nationality, so a US citizen who meets the stay qualifies. If you have read that the director must have spent 182 days in India in an earlier year, or must hold Indian citizenship, the Act says neither.

If none of your people will be in India for that long, LegalJini provides a resident director for your Indian company from its own team. The role is purely operational and non-managerial: the director signs only on board approval, the bank account has two signatories, and the director takes no part in your business and can be replaced on notice. The resident director costs USD 500 a month, inside LegalJini's ongoing compliance fee of USD 1,000 a month. LegalJini suggests appointing your own director from your India team 9 to 18 months after set-up and relieving LegalJini's director.

What has to be filed in the first year?

Incorporation starts a clock kept by two regulators, the RBI for the foreign investment and the Registrar for the company. These are the first-year dates for a subsidiary with a US parent, each with the rule that sets it:

Until the commencement declaration is filed, and the company has filed the verification of its registered office, it may not commence any business or exercise any borrowing powers. Missing the 60-day window for the shares means refunding the money and remitting it again. The FLA return is due from every Indian company or LLP that has received foreign investment in any earlier year or the current year, with each year counted from April to March. For the reporting in more detail, see the FEMA filings after incorporation.

What changed for foreign companies in 2026?

Five changes between November 2025 and October 2026 apply to a company entering India now:

How does LegalJini set up the subsidiary?

No one from your company needs to visit India: LegalJini's resident director is appointed in India and handles the work on the ground. Setting up an Indian subsidiary with LegalJini costs a one-time fee of USD 1,500, which includes the FDI and FEMA filings. GST registration and the LUT are part of the same service.

Before you write, check your sector against Schedule I of the NDI Rules, find out whether any beneficial owner of your company is a citizen of a country sharing a land border with India, and decide who will hold the shares and sit on the board. Then write to LegalJini by email or use the callback form on the website. LegalJini replies to every enquiry within 12 hours.

Frequently asked questions

Can a US citizen open a business in India?

A US citizen can own a business in India through an Indian company or an LLP. Living outside India, a US citizen invests on the same entry routes as a US company, so in a sector on the automatic route they can hold shares in an Indian private company, or put capital into an LLP where the sector allows it, without prior approval. A partnership firm or a sole proprietorship is open to foreign money only from a non-resident Indian (NRI) or an Overseas Citizen of India (OCI), and only on a non-repatriation basis.

How long does it take to set up a company in India?

The Ministry of Corporate Affairs' Citizen's Charter (2022-23 edition) sets a service standard of one working day from receiving an incorporation application for the Registrar of Companies to approve it and issue the certificate of incorporation, or to point out its deficiencies. No authority publishes a time for the parent signing and notarising its documents abroad, or for a bank's approval of a branch or liaison office. When LegalJini sets up a subsidiary, incorporation takes 45 days from the date LegalJini receives the documents, and opening the bank account takes a further 15 days.