By Manu Rao | Updated March 2026
What Is a Wholly Owned Subsidiary?
A Wholly Owned Subsidiary (WOS) is an Indian company where the entire shareholding — 100% — belongs to a single foreign parent company. It is incorporated as a Private Limited Company or Public Limited Company under the Companies Act 2013 and operates as a separate legal entity from its parent. The parent company's liability is limited to the value of its shareholding.
For foreign companies planning long-term operations in India, a WOS is the preferred entry structure. Unlike a Branch Office, it provides complete operational independence, access to lower tax rates, and freedom to engage in any permitted business activity.
Legal Framework
- Companies Act 2013, Section 2(87) — Defines subsidiary company (a company where the holding company controls the composition of the board or holds more than 50% of total voting power)
- Section 2(46) — Defines holding company
- FEMA (Non-debt Instruments) Rules 2019 — Governs foreign investment in Indian companies
- DPIIT Consolidated FDI Policy — Sector-specific caps and conditions
A WOS is, by definition, a 100% subsidiary — the foreign parent holds all issued shares. The Companies Act requires a minimum of 2 members for a private limited company. Foreign companies typically meet this by having the parent company as one member and a nominee (individual or group entity) as the second.
Minimum Requirements
| Requirement | Private Ltd WOS | Public Ltd WOS |
|---|---|---|
| Minimum members | 2 | 7 |
| Minimum directors | 2 | 3 |
| Resident director | At least 1 (Section 149(3)) | At least 1 |
| Authorized capital | No statutory minimum | No statutory minimum |
FDI Rules
100% FDI is permitted under the automatic route in most sectors. Sectors where 100% foreign ownership is not allowed (e.g., multi-brand retail at 51%, insurance at 74%, defense at 74% automatic/100% government route) cannot have a WOS through the automatic route alone.
Key FEMA compliance for a WOS:
- Form FC-GPR — File within 30 days of share allotment on the FIRMS portal
- FLA Return — File with RBI by July 15 annually if the company has foreign liabilities or assets
- Form FC-TRS — Required for any transfer of shares between residents and non-residents
- Downstream investment rules — If the WOS invests in another Indian company, FEMA downstream investment norms under Regulation 14 of NDI Rules apply
Incorporation Process
Setting up a WOS follows the same incorporation process as any private limited company:
- The foreign parent company's board passes a resolution to incorporate a subsidiary in India
- Obtain DSC for proposed directors
- Reserve name through RUN or SPICe+ Part A
- File SPICe+ Part B with MOA and AOA
- Receive Certificate of Incorporation
- Report foreign investment via Form FC-GPR within 30 days
- Open an Indian bank account and receive share subscription money from the parent
Documents from the Foreign Parent
- Certificate of incorporation of the parent company (apostilled)
- Board resolution authorizing the incorporation and naming authorized signatories
- Memorandum and Articles of the parent company
- Passport copies of proposed foreign directors (notarized and apostilled)
- Address proof of foreign directors (not older than 2 months)
- Proof of registered office address in India
Tax Advantages Over Branch Offices
A WOS incorporated in India is treated as a domestic company for tax purposes. This gives it access to:
- 22% corporate tax under Section 115BAA (effective ~25.17%) vs. 40% for branch offices
- 15% tax for new manufacturing companies incorporated after October 1, 2019 (Section 115BAB)
- No profit repatriation restrictions — Dividends can be paid to the parent company (subject to withholding tax under Section 195, reduced by DTAA)
- Transfer pricing applies to transactions between parent and subsidiary under Section 92
The tax differential alone — 25% vs. 44% — makes a WOS far more tax-efficient than a branch office for profitable operations.
Annual Compliance
- AOC-4 — Financial statements within 30 days of AGM
- MGT-7/MGT-7A — Annual return within 60 days of AGM
- ADT-1 — Auditor appointment
- DIR-3 KYC — Director KYC by September 30
- Income Tax Return (ITR-6) — By October 31
- Transfer Pricing Report (Form 3CEB) — If international transactions with the parent exceed Rs. 1 crore
- FLA Return — By July 15 to RBI
Common Mistakes
- Not appointing a resident director — Section 149(3) requires at least one director who stayed in India for 182+ days in the previous calendar year. Many parent companies try to run the subsidiary entirely with foreign directors. This violates the Act.
- Ignoring downstream investment rules — If your WOS invests in another Indian entity, it counts as downstream investment under FEMA. The invested entity is treated as foreign-owned, and sectoral caps apply to it as well.
- Late FC-GPR filing — Foreign investment must be reported within 30 days of allotment. The parent company often delays funding or the company delays allotment, pushing the reporting past the deadline. RBI compounding fees apply for late filings.
- Transfer pricing non-compliance — Parent companies regularly charge management fees, royalties, or IT service charges to the subsidiary. All such transactions need transfer pricing documentation. Not maintaining it invites penalties under Section 271G (up to 2% of transaction value).
- Confusing authorized and paid-up capital — The authorized capital determines the maximum shares the company can issue. The paid-up capital is what shareholders actually pay. Setting authorized capital too low means you cannot allot additional shares without passing a special resolution and filing Form SH-7.
Practical Example
A British fintech company wants to build a technology development center in Bangalore. The fintech sector (other financial services) allows 100% FDI under the automatic route.
The parent company (UK Ltd) incorporates a private limited WOS in India. The UK company holds 99.99% shares and a UK director holds 0.01% as the second member. They appoint 3 directors — 2 from the UK and 1 Indian resident (a hired India CEO) who satisfies the 182-day residency rule.
The parent invests Rs. 5 crore as share capital, remitted through banking channels. Form FC-GPR is filed within 30 days. The subsidiary hires 50 Indian software engineers. Management fees of Rs. 80 lakh per year are charged by the parent — documented with a transfer pricing study benchmarked against comparable transactions.
The subsidiary pays corporate tax at 22% under Section 115BAA. When it distributes dividends to the UK parent, withholding tax of 10% applies under the India-UK DTAA (Article 10). The effective tax outflow is far lower than the 40% rate that a branch office would pay.
WOS vs. Joint Venture
A WOS gives the foreign company full control. A Joint Venture involves sharing ownership with an Indian partner. Choose a WOS when you want operational independence and do not need a local partner's network, licenses, or sector expertise. Choose a JV when the sector requires Indian ownership (sectoral caps), or you need local market knowledge that only a partner can provide.
For help incorporating a subsidiary in India, visit our company registration services.