How does a US company set up a subsidiary in India in 2026?

For an American parent, the differences lie in the paperwork: which US office apostilles each document, and an IRS Form 6166 for each calendar year to claim the treaty rate.

How does a US company set up a subsidiary in India?

A US parent invests on India's automatic route like any other foreign investor. Under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (the NDI Rules), a sector the rules do not list, such as IT and software services, takes 100% foreign direct investment (FDI) on that route. Listed sectors carry their own conditions, and financial services outside the activities the rules name need government approval first, so check the FDI route for your sector before the parent commits. Under India's land-border rule, often called Press Note 3, a US company can also need government approval if its beneficial owner, as India's anti-money-laundering rules define it, is a citizen of a country that shares a land border with India, such as China. Land-border ownership that does not need approval is reported to the RBI instead.

The subsidiary is a private limited company under the Companies Act 2013, usually called a wholly owned subsidiary although it needs a second shareholder beside the parent, often a group company or a nominee. It also needs at least two directors, including a resident director who stays in India for at least 182 days. Section 149(3) of the Act counts the resident director's 182 days within the financial year itself, applies that test proportionately at the end of a new company's first financial year, and sets no nationality condition, so a US citizen who stays the days can hold the seat. Advice that looks back to an earlier year, or asks for Indian citizenship, misreads the section.

If none of your people will spend that long in India, LegalJini provides a resident director in India from its own team at USD 500 a month, inside its ongoing compliance fee of USD 1,000 a month. 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 director signs basic operational documents with the Ministry of Corporate Affairs (MCA), the bank and the Registrar of Companies (RoC), and needs an indemnity from the parent company.

The set-up then runs in five steps:

1. The parent's board resolves to subscribe for the shares, stating the shares it will take and naming its authorised representative. The MCA lists a resolution that leaves out those details as a ground for rejecting the application.
2. The documents the MCA asks for from abroad, including the parent's certificate of incorporation and the memorandum and articles of association the parent signs, are notarised and apostilled in the US.
3. The company is incorporated through SPICe+ (form INC-32), the MCA's incorporation form, with the apostilled memorandum and articles attached.
4. The company opens its bank account.
5. The company issues its shares to the parent and reports the issue to the RBI in Form FC-GPR within 30 days from the date of issue.

With LegalJini, incorporation takes 45 days from the date LegalJini receives the documents, and the bank account a further 15 days. No one from the parent needs to visit India, because LegalJini's resident director is appointed in India and handles the work on the ground. LegalJini's subsidiary set-up service costs a one-time fee of USD 1,500, which includes the FDI filings and the filings under the Foreign Exchange Management Act (FEMA). For the reporting that follows the share issue, see LegalJini's guide to the FEMA filings after incorporation.

Which US office apostilles which document?

The US has no single apostille office: each document is apostilled by the office that can vouch for its signature. The Hague Conference on Private International Law lists the US Department of State's Office of Authentications for documents issued by federal agencies, and each state's designated authority, generally its Secretary of State, for that state's public documents. India's MCA adds, in its SPICe+ FAQ, that the place where a document is signed decides where it is notarised and apostilled.

Delaware's Division of Corporations apostilles only documents signed by a Delaware notary or a Delaware public official. It will not apostille documents notarised in another state, documents notarised remotely or electronically, federal documents or photocopies. Each document filed with the Delaware Secretary of State must be certified separately for an apostille, because Delaware does not accept a one-cover certification.

For example, a Delaware company whose officer signs the board resolution and the memorandum and articles before a notary in California uses two offices. The Delaware Division of Corporations apostilles the separately certified certificate of incorporation, and the California Secretary of State apostilles the papers notarised in California. California charges USD 20 per apostille and accepts only the original notarised document.

Before anyone signs, book an in-person Delaware notary for any document you want Delaware to apostille, and order a separately certified copy of each document filed with the Delaware Secretary of State.

What does the India-US tax treaty allow India to withhold from payments to the parent?

The India-US tax treaty caps the tax India may charge on what the subsidiary pays its US parent. The treaty was signed on 12 September 1989, has been in force since 18 December 1990 and has not been amended by any later protocol: the IRS lists only the 1989 treaty and its 1989 technical explanation.

India's own rate on dividends, royalties, fees for technical services and interest on money borrowed in foreign currency is 20% under section 207 of the Income-tax Act 2025, which governs payments from 1 April 2026, plus surcharge and cess. Where the treaty applies, section 159(4) of the Act applies Indian law only to the extent it is more beneficial, so the lower rate applies, and a dividend outside the 15% condition is taxed at India's own rate.

The treaty caps "fees for included services", a narrower class than the "fees for technical services" that Indian law taxes. Under Article 12(4), a fee for technical or consultancy services is an included service only if it is ancillary and subsidiary to a royalty, or if the services "make available" technical knowledge, experience, skill, know-how or processes, or develop and transfer a technical plan or design. The memorandum of understanding exchanged with the treaty says technology is made available when the person buying the service is enabled to apply it, and that consultancy which is not technical cannot be an included service under that test. Any other service fee is business profit under Article 7(7), which India can tax only if the parent has a permanent establishment (PE) in India (Article 7(1)). Before the parent charges the subsidiary for any service, ask a tax adviser to classify the charge.

How does the US parent claim the treaty rate?

The subsidiary applies a treaty rate only when the parent has given it a current IRS Form 6166 and has filed Form 41 (formerly Form 10F) online in India; without them, it deducts tax at India's own rate. Form 6166 is the IRS letter of US residency certification, the residence certificate that section 159(8) of the Income-tax Act 2025 requires before any treaty relief.

The parent requests Form 6166 on Form 8802. The IRS certifies residency by calendar year, fiscal-year filers included, while India's Form 41 guidance asks for a certificate valid for the Indian financial year, which runs from April to March. A parent paid in both halves of an Indian tax year therefore needs Form 6166 for both calendar years: in the Indian financial year 2026-27, a parent paid both before and after 31 December 2026 needs certification for 2026 and for 2027.

The IRS asks applicants to mail Form 8802 at least 45 days before they need Form 6166, and it will not accept a request for a year's certificate postmarked before 1 December of the year before, so certification for 2027 can be requested from 1 December 2026. For a year whose US return is not yet due, the IRS certifies only a parent that has filed its return for the most recent year that was due, which for a US corporation is Form 1120.

The IRS charges a company USD 230 per Form 8802, raised from USD 185 for applications postmarked on or after 1 October 2026. The Form 8802 instructions still show USD 185, and the IRS fee page, updated on 29 September 2026, sets the new amount. The fee is charged per application, and the IRS encourages one Form 8802 for every year and country a parent needs.

Which US entity subscribes for the shares decides who can obtain Form 6166. The IRS certifies a corporation incorporated in the US, and an LLC only if it is taxed as a corporation. An S corporation or a disregarded entity, such as an LLC with one owner that is not taxed as a corporation, is not a US resident for treaty purposes, so treaty benefits go to its US-resident owners. Settle the subscriber with the parent's US tax adviser before it is named in SPICe+.

Can the parent's own staff working in India create a tax presence?

Yes. Owning the subsidiary does not, by itself, give the parent a PE in India: under Article 5(6) of the treaty, control of one company by another does not of itself make either a PE of the other. The parent's own staff can create one. Under Article 5(2)(l), a US company that furnishes services in India through employees or other personnel, other than included services, has a PE once those activities continue for more than 90 days in any twelve-month period. When the services are performed for a related enterprise, such as the parent's own Indian subsidiary, the treaty sets no day count.

Before anyone from the parent works in India for the subsidiary, on a secondment or a visit, ask a tax adviser to review the arrangement against Article 5.

Does the 2026 trade position between the US and India affect a new subsidiary?

As of 13 October 2026, no trade agreement between the US and India is in force. In February 2026 the two governments announced a framework for an interim agreement, and on 28 September 2026 India's Commerce Ministry was still working to finalise it. Since 24 July 2026, products of India entering the US carry an additional 10% duty under Section 301, with exemptions for listed products. The duty applies to goods entered for consumption in the US, so a subsidiary that bills its US parent for services is outside it, and one that will ship goods to the US should plan for it.

From April 2000 to March 2026 the US was India's third-largest source of FDI equity: USD 81,821.12 million (about USD 81.8 billion), 10.39% of the total, according to the Department for Promotion of Industry and Internal Trade (DPIIT), with USD 11,171 million (about USD 11.2 billion) in 2025-26.

What should a US parent do first?

Gather four facts before anyone signs: the state where the parent is incorporated, the states where its officers will sign, the US entity that will hold the shares, and what the subsidiary will do, including whether any of the parent's staff will work in India for it. Send them to LegalJini by email or through the callback form on the website. LegalJini replies to every enquiry within 12 hours.

Frequently asked questions

Can Americans start a business in India?

Yes. An American, personally or through a US company, can own an Indian private limited company, in most sectors on the automatic route with no prior approval, and can sit on its board. The director who stays in India for the 182 days can be a US citizen, because the test sets no nationality condition.

Is there a minimum capital for an Indian subsidiary?

No. The Companies Act 2013 has set no minimum paid-up capital for a private company since 29 May 2015, when the Rs 1,00,000 minimum was removed, so the US parent decides how much share capital to subscribe.

Who handles the US parent's own filings for the subsidiary?

The parent's US tax adviser handles its US filings for the subsidiary, such as Form 5471, the information return of US persons with respect to certain foreign corporations.