Do you want to start a company in Bangalore, India?
One can set up a business in the form of Proprietary concern, Partnership firm, Limited Liability Partnership or Private Limited Company. The form of business to choose depends on the requirement of the entrepreneur. Indian entrepreneurs have a reasonable understanding of the advantages and disadvantages of each of the forms and it is the foreign companies who have to get a clarity on this aspect.
A foreign company wanting to start their activity in India can choose either (a) a subsidiary company (Private Limited Company) or (b) a branch or liaison office.
The important aspects to be considered are –
- (a) Taxation
- (b) Repatriation of profits
- (c) Ease of doing business
Here are the important difference between subsidiary and branch office
| Branch Office | Subsidiary company |
|---|---|
| Companies incorporated outside India and engaged in manufacturing or trading activities (including rendering professional / software services) are allowed to set up Branch Offices in India with specific approval of the Reserve Bank | A Subsidiary (to be incorporated as Private Limited company) can be set up without the approval of Reserve Bank and no restriction on activities to be carried out |
| Track Record For Branch Office — a profit making track record during the immediately preceding five financial years in the home country. |
Track Record A private company is required to be incorporated with a minimum Authorized & paid up capital of Rupees 100,000 and minimum two subscribers. No requirement of track record of parent company as shareholder |
| Net Worth Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name]. For Branch Office — not less than USD 100,000 or its equivalent |
Net Worth No such condition |
| Local authorized Representative A branch office should nominate a local Resident Indian as a authorized Representative to sign all the documents. Usually, the companies nominate one of the senior employees |
Local Director A private limited company should appoint a local director. Usually one of the senior employees is appointed as the director. |
| Tax on income Since a branch office of a foreign company is taxed as a foreign company in India, it is taxed @ 41.2% or 42.23% if the taxable income exceeds INR 10,000,000 during any financial year (FY) |
Tax on Income The tax rate is 26% on the profits. The profits are arrived based on Transfer Pricing Provisions, adding a markup amount on the cost (cost + markup) |
| Dividend Tax Dividend paid to Parent is tax free. |
Dividend Tax Dividend can be paid after payment of Dividend Distribution Tax @ 20.35% |
| Liability The liability of the Branch is unlimited and liability of the Branch office extends to the parent company, i.e. when the branch is unable to discharge liabilities, it has to be paid by Head Office. |
Liability the liabilities of a subsidiary company do not extend to the holding company |
Other points which may be of help are -
Local Director / Partner – One of the challenges all foreign companies face while setting up a company in India is to identify a local director / partner. As per the Companies Act, 2013, it is mandatory to have a local resident Director in every private company. So, many foreign companies will appoint a senior employee of the company as the Director of the company.
Physical Presence – There is no requirement for the shareholders to be physically present in Bangalore for setting up a company. The documents can be sent through courier after apostalization or attestation by Indian embassy.
Foreign Direct Investment (FDI) – Another important aspect to be checked before making an investment is the FDI policy. Today, in India, FDI policy is liberalized and most of the sectors / industries can get foreign equity participation without the specific approval of Reserve Bank of India/ Government. However, there is still a list of activities which are restricted for foreign investments. For example, Real Estate investments are not completely liberalized. It is advisable to seek pre-investment consultation.
FAQ:
How can a foreign company set up a business in India?
A foreign company can set up business in India through five main routes: (1) Wholly Owned Subsidiary (Private Limited Company) — most popular for operational presence; (2) Limited Liability Partnership (LLP); (3) Branch Office — for trading and professional services; (4) Liaison Office — for market representation only, no commercial activity; (5) Project Office — for specific projects. Most sectors allow 100% FDI under the automatic route without prior government approval. Balakrishna & Co. provides complete Entry India advisory and incorporation services in Bangalore.
What is the process to register a foreign subsidiary company in Bangalore?
The process to register a foreign subsidiary (wholly owned subsidiary) in Bangalore involves: (1) Obtaining DIN and DSC for proposed directors including foreign nationals; (2) Name reservation via RUN on MCA portal; (3) Drafting MOA and AOA; (4) SPICe+ filing on MCA portal for incorporation; (5) PAN and TAN application; (6) GST registration; (7) Bank account opening with FIRC for FDI; (8) FC-GPR filing with RBI within 30 days of share allotment. The process typically takes 15-20 working days. One director must be an Indian resident.
What are the accounting and compliance requirements for a foreign company in India?"
Foreign companies operating in India through a subsidiary must comply with: Income Tax Act (ITR filing, advance tax, TDS), GST Act (registration, monthly/quarterly returns), Companies Act (annual ROC filings, statutory audit, board meetings), FEMA (FC-GPR, FC-TRS, FLA annual return), Transfer Pricing (Form 3CEB if intercompany transactions exceed ₹1 crore), and Payroll compliance (EPF, ESI, Professional Tax, payroll TDS). Balakrishna & Co. provides complete accounting outsourcing and virtual CFO services tailored for foreign-promoted companies in Bangalore.
What is a Global Capability Center (GCC) and how is it set up in Bangalore?
A Global Capability Center (GCC), also known as a Global In-house Center (GIC) or captive center, is a wholly owned offshore unit established by a multinational company to manage operations, technology, finance, or analytics functions from India. Bangalore is India's top GCC destination with 500+ GCCs. Setting up a GCC involves: choosing the legal structure (typically a wholly owned subsidiary), FDI compliance, company incorporation, office setup, hiring, payroll and accounting compliance setup, and transfer pricing documentation for intercompany service fees. Balakrishna & Co. provides CA services for GCC setup and ongoing compliance in Bangalore.
What is FDI compliance for a foreign company in India?
FDI compliance for foreign companies in India includes: FC-GPR filing with RBI within 30 days of allotment of shares to foreign investors; FC-TRS filing for transfer of shares between resident and non-resident; Annual FLA return filed by July 15 each year reporting foreign liabilities and assets; Valuation certificate from SEBI-registered merchant banker or CA for share transfers; and compliance with sector-specific FDI caps under the Consolidated FDI Policy. Balakrishna & Co. handles complete FDI and FEMA compliance for foreign companies in Bangalore.
What are the transfer pricing requirements for foreign subsidiaries in India?
Indian subsidiaries of foreign companies must comply with transfer pricing regulations if their international transactions with the parent or associated enterprises exceed ₹1 crore in a financial year. Requirements include: maintaining contemporaneous transfer pricing documentation; obtaining a transfer pricing study report benchmarking intercompany transactions (management fees, royalties, IT services, loans); filing Form 3CEB (Accountant's Report) signed by a Chartered Accountant along with the income tax return. Penalties for non-compliance range from 2% to 100% of the transaction value. Balakrishna & Co. provides transfer pricing documentation and Form 3CEB certification in Bangalore.
We at Balakrishna and Co., Chartered Accountants, Bangalore, have been providing consultation, incorporation services to entrepreneurs (both Indian and foreign) over the last 30 years.
Those who are interested to set up a company / business in Bangalore, may write to us on Prasad@balakrishnaandco.com or call us on 9845721255.