How to Register a Wholly Owned Subsidiary in India from the USA
A Wholly Owned Subsidiary (WOS) is the preferred structure for large and mid-sized US corporations entering the Indian market. Unlike a Private Limited Company with multiple shareholders, a WOS is 100% owned by the US parent company, giving the parent complete control over the Indian entity's operations, finances, and strategic direction.
The United States is India's third-largest source of FDI, with cumulative inflows exceeding USD 70.65 billion since April 2000. Major US corporations including Google, Amazon, Microsoft, Apple, and hundreds of mid-market companies operate in India through wholly owned subsidiaries. The structure is ideal when the US parent wants to retain full equity ownership, protect proprietary technology through controlled IP licensing, and maintain direct oversight of the Indian operation.
A WOS in India is legally structured as a Private Limited Company under the Companies Act 2013, where 100% of the shareholding is held by the US parent company (technically 99.99% by the parent and 0.01% by an authorized nominee on behalf of the parent, as a Pvt Ltd requires at least two shareholders). This gives the subsidiary a separate legal identity from the parent, limiting liability exposure while enabling full commercial operations in India.
FDI Route and Regulatory Requirements
Setting up a WOS from the USA falls under the automatic FDI route for most sectors. No prior approval from the RBI or the government is required. The US parent simply incorporates the subsidiary, remits capital to India, allots shares, and reports the investment to the RBI through prescribed forms.
100% FDI under the automatic route is permitted in sectors including IT and software services, manufacturing, e-commerce (marketplace model), consulting, education (EdTech), healthcare, renewable energy, food processing, and infrastructure. Sectoral caps apply to insurance (100% with conditions), defense (74% automatic, 100% government route), telecom (100% with conditions), and single-brand retail (100% with conditions). Multi-brand retail allows only 51% FDI via the government route.
Since the US does not share a land border with India, Press Note 3 (2020) restrictions do not apply to American investors. This is a significant advantage compared to investors from China, Pakistan, Bangladesh, Nepal, Myanmar, Bhutan, or Afghanistan, who require prior government approval regardless of sector.
The FDI advisory process for a WOS involves verifying the sector, confirming the FDI cap, ensuring compliance with any sector-specific conditions (such as local sourcing norms for single-brand retail), and structuring the investment in a way that optimizes both Indian and US tax obligations.
DTAA Benefits for US Investors
The India-USA DTAA is one of the most comprehensive double taxation treaties India has signed. For a WOS structure, the treaty benefits are particularly valuable because all profit repatriation flows from the Indian subsidiary to the US parent:
- Dividends: 15% withholding tax if the US parent owns at least 10% of voting stock (which it does in a WOS). This is lower than the default 20% rate under the Income Tax Act.
- Interest: 10% for bank loans; 15% for other interest payments from the Indian subsidiary to the US parent or affiliated entities.
- Royalties: 10% for industrial/commercial equipment royalties; 15% for IP-related royalties (patents, copyrights, trademarks). This is significantly lower than the 20% domestic rate.
- Fees for Technical Services: Capped at 15% under the treaty.
- Capital gains: Taxation depends on the type of asset and holding period. The DTAA provides relief mechanisms to avoid double taxation on gains from share transfers.
US parent companies can also claim Foreign Tax Credits (FTC) on their US tax returns for Indian taxes paid, preventing double taxation on the same income. Proper structuring of intercompany pricing is critical, and transfer pricing documentation must comply with both IRS Section 482 and Indian Section 92 requirements.
Document Requirements and Authentication
A WOS requires more extensive documentation than a standalone Pvt Ltd because the US parent company's corporate identity must be verified. Both the USA and India are Hague Convention members, so all documents follow the apostille process.
Documents required from the US parent company:
- Board resolution: Authorizing the incorporation of a subsidiary in India, specifying the authorized capital, names of proposed directors, and the authorized signatory. Must be certified by the Company Secretary or equivalent officer and apostilled.
- Certificate of Incorporation of the US parent (certified copy, apostilled)
- Charter documents: Articles of Incorporation, Operating Agreement (for LLCs), or Bylaws of the US parent (certified and apostilled)
- Good Standing Certificate from the relevant US state (apostilled)
- Passport copies of all proposed directors (notarized and apostilled)
- Address proof of US-based directors (recent utility bill or bank statement, notarized and apostilled)
- Power of Attorney in favor of the Indian authorized representative (notarized and apostilled)
Apostille services are provided by the Secretary of State in each US state for state-issued documents. Federal documents require apostille from the US Department of State. Processing times range from same-day service (in-person at some state offices) to 4-6 weeks for federal documents by mail. Each director also needs a Digital Signature Certificate (DSC) from an Indian Certifying Authority.
Step-by-Step Registration Process
The WOS registration process mirrors the Pvt Ltd incorporation process but includes additional steps for RBI compliance:
- US parent board resolution: The US parent's board passes a formal resolution to establish an Indian subsidiary, specifying investment amount, directors, and authorized representative. This resolution is notarized and apostilled.
- Obtain DSCs: All proposed directors (including US-based directors) apply for Digital Signature Certificates from an Indian Certifying Authority via remote video verification. Timeline: 1-2 days.
- Name reservation (SPICe+ Part A): Apply for company name approval through the MCA portal. Two name options can be proposed. Timeline: 1-2 days.
- File SPICe+ Part B: Complete the incorporation application including director details, registered office address, capital structure, and upload the MoA and AoA. The form also integrates PAN, TAN, GST, EPFO, and ESIC registrations.
- Certificate of Incorporation: The ROC reviews and issues the Certificate of Incorporation. Timeline: 5-7 days.
- Open Indian bank account: Open a current account in the subsidiary's name. This is where the US parent will remit FDI funds. Timeline: 1-3 weeks.
- Capital remittance: The US parent remits investment capital via wire transfer to the Indian subsidiary's bank account. The Authorized Dealer (AD) bank processes the inward remittance under FEMA.
- Share allotment: The Indian subsidiary allots shares to the US parent company against the received capital.
- File FC-GPR: File Form FC-GPR through the RBI's FIRMS/SMF portal within 30 days of share allotment. This is a mandatory RBI compliance that reports the foreign investment.
- File FC-TRS (if applicable): If shares are transferred between a resident and non-resident, Form FC-TRS must be filed within 60 days.
Timeline and Costs
The WOS setup process typically takes 6-8 weeks from the US parent's board resolution to completion of RBI reporting:
| Step | Timeline |
|---|---|
| US parent board resolution and document preparation | 3-5 days |
| Document apostille in the US | 5-15 days |
| DSC for all directors | 1-2 days |
| SPICe+ name approval + incorporation | 7-10 days |
| Bank account opening | 7-21 days |
| Capital remittance and share allotment | 3-7 days |
| FC-GPR filing with RBI | Within 30 days of allotment |
Cost breakdown:
- Government fees (MCA): INR 2,000-15,000 depending on authorized capital
- Stamp duty: Varies by state (0.15%-0.3% of authorized capital in most states)
- DSC: INR 1,500-2,500 per director
- Professional fees (CA/CS firm): INR 50,000-2,00,000 depending on complexity and capital structure
- Apostille fees in the US: USD 10-25 per document
- Valuation report (if required): INR 25,000-75,000
For a comparison of entity options, see our guide on WOS vs LLP for Foreign Investors.
Post-Registration Compliance
A WOS has the same annual compliance obligations as any Indian Pvt Ltd, plus additional requirements related to foreign ownership:
- Board meetings: Minimum 4 per year (at least one every 120 days)
- Annual General Meeting: Within 6 months of financial year-end
- ROC filings: AOC-4 (within 30 days of AGM), MGT-7 (within 60 days of AGM)
- Statutory audit: Mandatory annual audit by a Chartered Accountant
- Income tax return: Due by October 31 (if transfer pricing audit is applicable)
- Transfer pricing documentation: Mandatory if intercompany transactions with the US parent or affiliates exceed INR 1 crore. Must include benchmarking analysis, master file, and local file.
- FLA return: Annual Foreign Liabilities and Assets return to RBI by July 15
- FC-GPR for subsequent investments: Any additional capital infusion requires a fresh FC-GPR filing within 30 days
- Significant Beneficial Owner (SBO) filing: BEN-2 form to be filed with the ROC identifying the ultimate beneficial owner
- FATCA reporting: Indian entity must report to the US under FATCA; US parent must file IRS Form 5471
Our Annual Compliance service covers all these obligations for foreign subsidiaries.
Common Challenges for US Companies
Setting up a WOS involves additional complexities compared to a simple Pvt Ltd:
- Intercompany pricing scrutiny: Indian tax authorities closely examine transactions between the WOS and the US parent. Transfer pricing must follow the arm's length principle, with comprehensive documentation. The IRS also reviews these transactions under Section 482, creating dual compliance requirements.
- Thin capitalization rules: India's thin capitalization rules under Section 94B limit the deduction of interest paid to associated enterprises to 30% of EBITDA. US parents providing intercompany loans to the Indian WOS must structure debt carefully.
- Permanent Establishment risk: If the US parent's employees exercise decision-making authority in India or the WOS is deemed a dependent agent, it could create a Permanent Establishment for the US parent, triggering Indian tax obligations on the parent's global income attributable to India.
- Repatriation planning: While dividend repatriation is straightforward, it requires compliance with FEMA regulations and proper TDS deduction at treaty rates. The US parent must plan for currency conversion timing and hedge exchange rate risk.
- Regulatory changes: India's FDI policy undergoes periodic updates through DPIIT press notes. US companies should monitor changes to sectoral caps, conditions, and reporting requirements to maintain compliance.
Frequently Asked Questions
Can a US LLC be the parent company of an Indian WOS?
Yes. A US LLC can serve as the holding company for an Indian WOS. The LLC's investment in India must comply with FEMA regulations, and the LLC's operating agreement should authorize international investments. The Indian subsidiary will be structured as a Pvt Ltd under the Companies Act 2013.
Does the US parent need to appoint an Indian resident as director?
Yes. The Companies Act 2013 requires at least one director who has resided in India for 182 days or more during the financial year (per Section 149(3) of the Companies Act 2013). The US parent can use a nominee resident director service if it does not have an employee in India.
What is the minimum capital required for a US-owned WOS in India?
There is no statutory minimum capital requirement for a WOS in India (the minimum was removed by the Companies Amendment Act 2015). However, the capital should be sufficient to cover the subsidiary's initial operating expenses and demonstrate commercial substance. RBI and tax authorities may scrutinize entities with very low capitalization relative to their operations.
How is a WOS different from a branch office for a US company?
A WOS is an independent Indian legal entity with limited liability, while a branch office is an extension of the US parent with no separate legal identity. A WOS can engage in any lawful business activity, whereas a branch office is restricted to specific permitted activities and cannot manufacture goods. See our detailed Branch Office vs Subsidiary comparison.
Can a US company hold 100% equity in an Indian subsidiary in all sectors?
No. While 100% FDI is allowed in most sectors under the automatic route, certain sectors have caps (insurance at 100% (with conditions), multi-brand retail at 51%) or require government approval beyond certain thresholds (defense above 74%). Some sectors like gambling and atomic energy are completely prohibited for FDI. Check our 100% FDI vs Restricted Sectors comparison.
What are the transfer pricing documentation requirements for a US-India WOS?
If the aggregate value of international transactions with the US parent and associated enterprises exceeds INR 1 crore (approximately USD 120,000), the WOS must maintain transfer pricing documentation including a local file and master file. A transfer pricing audit report in Form 3CEB must be filed by October 31. The US parent must also comply with IRS transfer pricing requirements.
Can the Indian WOS remit dividends back to the US parent?
Yes. After declaring a dividend through a board or shareholder resolution, the WOS deducts withholding tax at the DTAA rate of 15% (for 10%+ ownership) and remits the net amount through the Authorized Dealer bank. The dividend repatriation process is straightforward but requires proper documentation and TDS compliance.