Advantages of Indian subsidiary company
Market access: Provides access to the Indian market, one of the fastest-growing economies.
Limited liability: Limits the parent company’s liability to the extent of its investment in the subsidiary.
Operational independence: Allows the subsidiary to operate independently while benefiting from the parent company’s support.
Tax benefits: Potential tax advantages and incentives provided by the Indian government for foreign investment.
Brand recognition: Enhances brand presence and credibility in the local market, leveraging the parent company’s reputation.
Regulatory authorities for Indian subsidiary company registration
Ministry of Corporate Affairs (MCA):
Registrar of Companies (RoC):
Reserve Bank of India (RBI):
Securities and Exchange Board of India (SEBI):
Income Tax Department:
Requirements and key facts about company registration in India
Minimum Directors and Shareholders:
Digital Signature Certificate (DSC):
Director Identification Number (DIN):
Registered Office Address:
Memorandum and Articles of Association:
PAN and TAN:
GST Registration:
Taxation
Corporate Tax: Corporate tax is a mandatory levy imposed on a company's profits, essential upon the company registration. It serves as a significant source of national revenue, calculated based on the company's taxable income after deducting allowable expenses and deductions. This tax ensures that businesses contribute a portion of their earnings to governmental coffers, thereby playing a crucial role in funding public services and infrastructure.
GST (Goods and Services Tax): GST is a consumption tax that is mandatory for businesses engaged in the supply of goods and services. It is applied at each stage of the production and distribution chain, ultimately borne by the end consumers who purchase the goods or services. The registration threshold for GST varies by country, and once registered, businesses must comply with the obligation to collect GST from customers and remit it to tax authorities. This tax system ensures fair distribution of tax burden across the consumption spectrum and facilitates seamless revenue collection for governments.
GST Return: GST-registered businesses are required to file regular GST returns to maintain compliance with tax regulations. These returns provide a detailed account of the GST collected from customers against the GST paid on purchases. Filing is typically done periodically—monthly, quarterly, or annually—depending on the jurisdiction's requirements. This process not only ensures transparency and accountability in financial transactions but also facilitates efficient tax administration by enabling authorities to monitor revenue flows and enforce compliance measures effectively.
Annual compliance
Annual compliance for a subsidiary company in India includes filing financial statements, and annual returns with the Registrar of Companies (RoC), conducting annual general meetings, maintaining statutory registers, and filing GST returns and income tax returns to ensure adherence to regulatory requirements and avoid penalties.
How to register a subsidiary company in India?
To register a subsidiary company in India, follow these steps:
Name selection: Choose a unique name that complies with Indian corporate naming regulations.
Document preparation: Gather essential documents such as proof of identity, address proofs, and details of directors.
Digital signatures and DIN: Obtain Digital Signature Certificates (DSC) for electronic filings and Director Identification Numbers (DIN) for all directors involved.
Memorandum and Articles: Draft the Memorandum of Association (MoA) and Articles of Association (AoA) to outline the company's objectives and internal governance structure.
Next, submit these documents electronically to the Registrar of Companies (RoC) along with the incorporation application. The RoC will scrutinise the application and, upon approval, issue a Certificate of Incorporation for the subsidiary. Ensure to register for Goods and Services Tax (GST) if applicable, and obtain any necessary licenses or permits depending on the business activities. Throughout this process, consider engaging professional consultants or legal advisors to navigate the complexities of Indian corporate law and ensure compliance at every step. This approach ensures a smooth and legally sound registration process for your subsidiary in India.
Determine the type of company
Choosing the type of company depends on factors such as the number of shareholders, liability preferences, funding requirements, and long-term business goals. Common types include private limited company, public limited company, and limited liability partnership (LLP).
Obtain Digital Signature Certificate (DSC)
A Digital Signature Certificate (DSC) is required for all directors to electronically sign documents submitted to the Ministry of Corporate Affairs (MCA). It ensures secure and authentic digital transactions. To obtain a DSC, apply through a certified agency by providing identity proof, address proof, and passport-sized photographs.
Apply for a Director Identification Number (DIN)
A Director Identification Number (DIN) is mandatory for anyone intending to become a director in an Indian company. To apply, submit Form DIR-3 on the MCA portal, along with identity and address proofs, and the applicant's photograph. Once approved, the DIN is issued, enabling the individual to serve as a director.
Name Approval
Name approval is a crucial step in registering a subsidiary company in India. You must propose a unique company name through the Ministry of Corporate Affairs (MCA) portal. The name should comply with MCA guidelines and avoid any existing trademarks to gain approval.
Draft Memorandum of Association (MoA) and Articles of Association (AoA)
The Memorandum of Association (MoA) and Articles of Association (AoA) are essential documents for company registration. The MoA outlines the company’s objectives and scope of activities, while the AoA details the internal management and operational rules. These documents must be carefully drafted and submitted for incorporation.
File incorporation documents
File the incorporation documents, including the SPICe+ form, MoA, AoA, and other necessary forms, with the Registrar of Companies (RoC) through the MCA portal. Ensure all documents are correctly completed and signed, as this step is crucial for obtaining the Certificate of Incorporation.
Payment of registration fees
Pay the required registration fees through the MCA portal during the company incorporation process. The fees vary based on the authorized share capital of the company. Prompt payment ensures that the application is processed without delays, leading to the issuance of the Certificate of Incorporation.
Obtain a Certificate of Incorporation (COI)
The Certificate of Incorporation (COI) is issued by the Registrar of Companies (RoC) upon approval of your incorporation documents. It officially certifies the existence of your company, provides it with a unique corporate identity number (CIN), and allows you to commence business operations legally.
Apply for Permanent Account Number (PAN) and Tax Registration
Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) through the Income Tax Department's online portal. These are essential for tax-related activities and compliance, enabling your company to fulfil its tax obligations and conduct financial transactions.
Open Bank Account
Open a corporate bank account in your company's name to manage financial transactions and maintain proper financial records. Present the Certificate of Incorporation (COI), PAN, and other required documents to the bank to facilitate the account opening process and begin operational banking activities.
Obtain a GST Number
Register for a Goods and Services Tax (GST) number with the GST Network (GSTN) portal if your company's turnover exceeds the threshold limit. A GST number is mandatory for tax compliance, enabling you to charge GST on goods and services and file regular GST returns.
Initiating business operations
Once all legal formalities are completed, initiate business operations by executing your business plan, hiring necessary staff, and starting marketing activities. Ensure that your product or service is ready for launch, and begin engaging with potential customers to generate initial sales and establish a market presence.
Compliance requirements for Indian subsidiary registration
Ensure ongoing compliance by maintaining accurate financial records, filing annual returns, conducting regular board meetings, and adhering to tax regulations. Stay updated with changes in corporate laws and regulations to avoid penalties. Regularly file GST returns and other mandatory filings to maintain good standing with regulatory authorities.
Conclusion
Starting a subsidiary in India involves several crucial steps, from securing funding to meeting compliance requirements. Proper planning and adherence to legal guidelines ensure smooth business operations. Considering a business loan can provide the necessary financial support to kickstart your entrepreneurial journey and achieve long-term success.
