India’s expanding economy and large consumer base make it a prime destination for foreign businesses. To operate legally, foreign companies must register under the Companies Act, 2013 and comply with rules issued by the Ministry of Corporate Affairs (MCA), Reserve Bank of India (RBI), and Foreign Exchange Management Act (FEMA). Registration ensures transparency, accountability, and lawful operations.

Legal Framework

• Companies Act, 2013 (Sections 379–393) governs foreign company registration.
• Companies (Registration of Foreign Companies) Rules, 2014 outline procedures.
• RBI Guidelines under FEMA, 1999 regulate foreign exchange and entry routes.
• Sectoral Regulations (SEBI, FDI policies) apply depending on industry.A “foreign company” is defined as any company incorporated outside India that establishes a place of business in India, either physically or electronically.

Modes of Entry

Foreign companies can enter India through:

1. Liaison Office
   • Acts as a communication channel.
   • Cannot undertake commercial activities.
   • Requires RBI approval.
2. Branch Office
   • Permitted for export/import, consultancy, research, and professional services.
   • Cannot engage in manufacturing directly.
3. Project Office
   • Set up for executing specific projects, common in infrastructure sectors.
4. Wholly Owned Subsidiary (WOS)
   • Foreign company holds 100% shares.
   • Operates as a private limited company under Indian law.
5. Joint Venture (JV) Partnership with Indian companies, sharing resources and risks.

Registration Procedure

Step 1: RBI Approval

Foreign companies must obtain prior approval from RBI for liaison, branch, or project offices. Applications are submitted through an Authorized Dealer (AD) bank.

Step 2: Filing with MCA

After RBI approval, companies must file Form FC‑1 with the RoC within 30 days of establishing a place of business.

Step 3: Submission of Documents

• Certified copy of charter, statutes, or memorandum and articles of association.
• Full address of registered/principal office.
• List of directors and secretary.
• Details of authorized representatives in India.
• RBI approval letter.
• Proof of registered office in India.

Step 4: Certificate of Registration

RoC issues a certificate of registration, granting legal status to operate in India.

Post‑Registration Compliance

Foreign companies must adhere to ongoing compliance requirements:

• Annual Filings:
  • Form FC‑3 (annual accounts and list of places of business).
  • Form FC‑4 (annual return).
• Financial Statements:
  • Balance sheet and profit & loss account prepared under Indian accounting standards.
  • Audited by a practicing Chartered Accountant in India.
• Corporate Governance:
  • Maintain registers of directors, members, and charges.
  • Display company name and country of incorporation at offices.
• Tax Compliance:

• Obtain PAN and TAN.
• Deduct and deposit TDS where applicable.
• File income tax returns annually.
• Register under GST if turnover exceeds threshold.

Taxation of Foreign Companies

• Corporate Tax Rate: 40% (plus surcharge and cess).
• Permanent Establishment (PE): Income attributable to Indian operations is taxable.
• Double Taxation Avoidance Agreements (DTAA): Relief available under treaties.
• Transfer Pricing Regulations: Apply to transactions with associated enterprises.

Advantages of Registering in India

• Access to a large market of 1.4 billion people.
• Skilled workforce in IT, finance, and engineering.
• Government support through FDI liberalization and ease of doing business reforms.
• Global integration via trade agreements.

Challenges for Foreign Companies

• Regulatory complexity due to overlapping laws.
• Compliance burden with annual filings and tax returns.
• Cultural differences in business practices.
• Tax litigation risks around PE and transfer pricing.

Role of Chartered Accountants (CA Firms)

CA firms assist foreign companies by:

• Advising on entry routes (liaison office, subsidiary, JV).
• Handling RBI and MCA approvals.
• Drafting and filing incorporation documents.
• Ensuring tax compliance and planning.
• Conducting audits and preparing financial statements.
• Advising on transfer pricing and DTAA benefits.

Conclusion

Registering a foreign company in India is a structured process requiring compliance with the Companies Act, RBI guidelines, and tax laws. While the framework may seem complex, India’s vast market and supportive policies make it a lucrative destination for global businesses. With professional guidance from CA firms, foreign companies can navigate legal requirements smoothly, ensure compliance, and focus on growth.