India has emerged as a global hotspot for foreign businesses looking to scale operations, tap into a large consumer market, and build cost-efficient teams. One of the most preferred entry routes for foreign companies is setting up a Wholly Owned Subsidiary in India.

This guide explains the process, FDI rules, taxation, and compliance requirements for a wholly owned subsidiary in India — in simple, founder-friendly language.

What Is a Wholly Owned Subsidiary in India?

A Wholly Owned Subsidiary is a Private Limited Company incorporated in India, where 100% of the shareholding is held by a foreign parent company.

It is treated as a separate legal entity under Indian law and can conduct full commercial activities.

Why Foreign Companies Prefer a Wholly Owned Subsidiary

A WOS offers maximum control and operational flexibility.

Key Advantages

• 100% foreign ownership (subject to FDI rules)
• Limited liability protection
• Full operational freedom in India
• Easier fundraising & contracts
• Eligible for government registrations (GST, Startup India, MSME)

Internal link:
Subsidiary Company Registration in India for Foreign Companies
https://thestartuplab.in/subsidiary-company-registration-in-india-for-foreign-companies/

FDI Rules for Wholly Owned Subsidiaries in India

Foreign Direct Investment (FDI) in India is regulated under FEMA and RBI guidelines.

FDI Routes

1. Automatic Route

• No prior government approval required
• Applicable to most sectors like IT, SaaS, consulting, manufacturing, e-commerce services

2. Government Approval Route

• Requires approval from DPIIT
• Applies to restricted sectors (defence, media, telecom, etc.)

🔗 Outbound authority link:
FDI Policy – DPIIT
https://dpiit.gov.in/foreign-direct-investment

Legal Structure of a Wholly Owned Subsidiary

Step-by-Step Process to Set Up a Wholly Owned Subsidiary

Step 1: Check FDI Eligibility

Confirm whether your business sector allows 100% FDI.

Step 2: Appoint Directors

• Minimum 2 directors
• At least 1 resident Indian director

Step 3: Obtain DSC & DIN

Digital Signature Certificates and Director Identification Numbers for directors.

Step 4: Company Name Approval

Apply through MCA using SPICe+.

Step 5: Incorporation Filing

File:

• MOA & AOA
• Shareholding structure
• Registered office proof

Step 6: Open Bank Account

Open an Indian company bank account.

Step 7: Bring in Foreign Capital

• Receive FDI
• File FC-GPR with RBI within 30 days

RBI & FEMA Compliance After Incorporation

Foreign-owned subsidiaries must comply with RBI regulations.

Mandatory Filings

• FC-GPR (for capital infusion)
• FLA Return (annual)

Internal link:
FLA Filings in India – Foreign Liabilities & Assets Return
https://thestartuplab.in/sft-filings-in-india/

Taxation of Wholly Owned Subsidiaries in India

Corporate Tax

• 22% (new tax regime, without exemptions)
• 30% (old regime)

Other Applicable Taxes

• GST (if applicable)
• Withholding tax on foreign payments
• Transfer pricing compliance
• Dividend distribution taxed in shareholder’s country

Ongoing Compliance Requirements

A wholly owned subsidiary must follow Indian corporate compliance rules.

Annual Compliances

• ROC filings (AOC-4, MGT-7)
• Income tax return
• Statutory audit
• Board & shareholder meetings

Internal link:
Annual ROC Filing Services
https://thestartuplab.in/esi-epf-filing-services-for-startups/

Common Challenges for Foreign Companies

• Understanding FDI sector rules
• RBI compliance delays
• Transfer pricing documentation
• Managing Indian tax laws
• Appointing reliable local directors

How The Startup Lab Supports Wholly Owned Subsidiaries

At The Startup Lab, we offer complete support for foreign companies:

• Wholly owned subsidiary registration
• FDI & RBI compliance
• Bank account & capital infusion
• Accounting, ROC & tax compliance
• Ongoing legal support

We ensure your India expansion is smooth, compliant, and scalable.

Final Thoughts

A Wholly Owned Subsidiary in India is the most powerful and flexible structure for foreign businesses planning long-term growth. With the right legal setup and compliance partner, entering the Indian market becomes straightforward and risk-free.