A booming concept is India at present is that many foreign investors are invited to establish their concern in India. The best part is it encourages entrepreneurs from all over the world to participate in Indian market for the mutual growth. Those entrepreneurs from across the world looking for setting up companies in India has various options as recommended by Indian Govt as per FDI policy.

A foreign company can have a business place in India by following formalities. A foreign company may either form a company

  • As an Indian company by way of joint venture with an Indian company or can form a wholly owned subsidiaries company;
  • As a foreign company by way of representative office or project office or branch office.




Govt approval for foreign companies setting up in India is not required for FDI under the Automatic Route. Automatic Route is directly without approval can set up companies. But FDI under automatic route is now allowed in all sectors. In such cases of non approval the only information is to be sent to RBI within 30 days OD inward remittance or issue of shared to Non-residents is required.

In case of industries not falling under automatic route has to get approval from Govt for setting up business in India. These are the recommendations proposed by Foreign Investment Promotion Board (FIPB).

  • Foreign Investors - Application for such cases are to be submitted in FC/IL form or on plain paper to Foreign Investment Promotion Board (FIPB) in Department of Economic Affairs, Ministry of Finance, Government of India North Block, New Delhi 110 001.
  • Non Resident Indians - Non Resident Indians are required to submit their proposals to the Secretariat for Industrial Assistance (SIA) Department of Industrial Policy and Promotion, Government of India for consideration of FIPB.


India is progressing towards reforming its tax policies and systems so as to assist globalization of economic behavior. The corporate tax rate for foreign companies is 40%. The net tax rate is far lower than this on account of various deductions and exemptions available under the tax laws. Tax holidays are available in Special Economic Zones set up to make industry globally competitive. Infrastructure Sector Projects enjoy special tax treatment/holidays. A user friendly tax administration is being introduced with round the clock electronic filing of customs documents.


A foreign company planning to set up business operations in India has the following options

flow chart

A foreign company can commence operations in India by incorporating a company under the Companies Act,1956 through

  • Joint Ventures or
  • Wholly Owned Subsidiaries
  • Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy. Details of the FDI policy, sectoral equity caps & procedures can be obtained from Department of Industrial Policy & Promotion, Government of India
Joint Venture With An Indian Partner

Foreign Companies can set up their operations in India by forging strategic alliances with Indian partners.

Joint Venture may entail the following advantages for a foreign investor:

  • Established distribution/ marketing set up of the Indian partner
  • Available financial resource of the Indian partners
  • Established contacts of the Indian partners which help smoothen the process of setting up of operations
Wholly Owned Subsidiary Company

Foreign companies can also to set up wholly-owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy.

Incorporation of Company

For registration and incorporation, an application has to be filed with Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies. For details please visit the website of Department of Company Affairs under Ministry of Finance at

Foreign Companies can set up their operations in India through

  • Liaison Office/Representative Office
  • Project Office
  • Branch Office

Such offices can undertake any permitted activities. Companies have to register themselves with Registrar of Companies (ROC) within 30 days of setting up a place of business in India.

Liaison Office/Representative Office

Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office can not undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.

Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI).

Project Office

Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices can not undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.

Branch Office

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

  • Export/Import of goods
  • Rendering professional or consultancy services
  • Carrying out research work, in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  • Representing the parent company in India and acting as buying/selling agents in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by the parent/ group companies.
  • Foreign airline/shipping Company.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

Branch Office on “Stand Alone Basis”

Such Branch Offices would be isolated and restricted to the Special Economic zone (SEZ) alone and no business activity/transaction will be allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.

No approval shall be necessary from RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities subject to specified conditions.