Due to its growing economy, geographic location, and large consumer base, India stands as a prime destination for Foreign investors. It offers a structured plan and a dynamic environment for foreign companies. However, the Indian market is not just about identifying opportunities, it’s also about complying with the legal requirements laid down by Indian authorities.
Before incorporating a company in India, understanding the legal framework is crucial before any operations. From selecting the right business structure to obtaining government approvals, foreign companies must follow a systematic process under Indian laws such as the Companies Act, FEMA, and RBI Regulations. This article breaks down the 5 Important legal steps to help foreign entities Incorporate a company in India .
Decide the Type of Business Structure:
India being the fastest-growing economy in the world provides many opportunities for foreign companies to establish their presence in India. In India, foreign companies are governed by the rules and regulations of FDI, FEMA, RBI, and Companies Act, 2013. Common structures include:
- Joint Venture with Indian Partner.
- Wholly Owned Subsidiary.
- Liaison Office.
- Branch Office.
- Project Office.
Regulatory Approvals Under FEMA and RBI:
In India, foreign investment is regulated by the Foreign Exchange Management Act (FEMA) and monitored by the Reserve Bank of India (RBI). Foreign businesses must determine if their investment comes under the automatic route or requires government approval.
For setting up a Liaison office, Branch office, or Project office, companies must apply through an Authorized Dealer Bank, which forwards the proposal to the RBI for approval. For Wholly Owned Subsidiaries and Joint Ventures, RBI reporting is done after receiving capital.
Incorporation with the Ministry of Corporate Affairs (MCA):
Foreign companies must incorporate a company under the Companies Act, of 2013, This involves:
- Getting a Digital Signature Certificate (DSC) for directors.
- Application for Director Identification Number (DIN).
- Filing incorporation forms including MOA and AOA.
- Receiving Certificate of Incorporation and Corporate Identification Number.
This process usually takes 7 to 10 working days.
Tax Registrations and Bank Setup:
After incorporation, the company must complete essential registrations including obtaining a Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) from the IT department. Additionally, opening a bank account is necessary to receive capital from the foreign parent company.
Labour Laws and Other Licenses:
Companies must comply with labor law compliances in India such as:
- Shop and establishment license
- Professional tax
- EPF and ESIC (if employee count exceeds limits)
- Import Export Code for cross-border trade.
If these requirements are not followed properly, it can lead to compliance issues and financial penalties.
Conclusion:
India offers excellent opportunities for foreign businesses, but the success of a business lies in incorporating a company in India in the right way. From incorporation to regulatory approvals, each step must be handled professionally.
At KDP Accountants, we specialize in guiding foreign companies through the end-to-end company setup process in India. For expert guidance reach out to us at enquire@kdpaccountants.com , Our experienced team is here to make your business entry in India smooth, compliant, and successful.
