Expanding to India? Here’s How Foreign Companies Can Set Up Legally

India is no longer just a promising emerging market — it’s a powerhouse of innovation, talent, and consumer demand. With a population exceeding 1.4 billion, a rapidly growing middle class, and a thriving digital economy, India has become one of the most attractive destinations for global business expansion.

However, while the opportunities are vast, entering the Indian market requires navigating a unique regulatory and legal landscape. For foreign companies looking to set up operations in India, understanding the legal framework is crucial to ensure compliance, avoid delays, and lay the foundation for long-term success.

In this blog, we provide a comprehensive overview of how foreign companies can legally set up in India, outlining the types of entry strategies, legal structures, registration processes, compliance requirements, and key considerations for a smooth expansion.

Why India?

Before diving into the legal setup, it’s important to understand why India is so appealing to foreign investors:

• Market Size: India has one of the world’s largest consumer markets with a growing appetite for global products and services.
• Skilled Workforce: The country boasts a large, English-speaking, and tech-savvy workforce.
• Startup Ecosystem: India has become a hub for innovation and entrepreneurship, ranking among the top startup ecosystems globally.
• Favorable Government Policies: The Indian government has introduced reforms like “Make in India,” “Digital India,” and simplified FDI norms to attract foreign investments.

With that context, let’s explore how to legally establish your business in India.

1. Choose the Right Entry Strategy

Foreign companies can enter the Indian market through two primary routes:

a) Incorporating a Company in India

This involves setting up a legal entity under Indian laws. It can take the form of:

• Wholly Owned Subsidiary (WOS): A foreign company holds 100% of the shares. This is allowed in sectors with 100% FDI under the automatic route.
• Joint Venture (JV): A partnership with an Indian company, useful in sectors where 100% FDI is not permitted or for local expertise.

b) Establishing a Liaison, Branch, or Project Office

If you don’t want to incorporate a company, you can set up a representative office instead:

• Liaison Office: Acts as a communication channel with the parent company. Cannot undertake commercial or revenue-generating activities.
• Branch Office: Can undertake commercial activities like export/import, consulting, and research. Subject to sectoral restrictions.
• Project Office: Set up to execute specific projects in India, especially in infrastructure and engineering.

These offices require approval from the Reserve Bank of India (RBI) and are governed by FEMA (Foreign Exchange Management Act).

2. Select the Appropriate Legal Structure

If you choose to incorporate a company in India, you’ll need to register under the Companies Act, 2013. The two most common structures are:

a) Private Limited Company

• Requires at least two shareholders and two directors (one must be an Indian resident).
• Suitable for most small-to-medium foreign subsidiaries.
• Limited liability for shareholders.

b) Public Limited Company

• Requires at least seven shareholders and three directors.
• Typically used for large-scale operations or future IPOs.

3. Understand Foreign Direct Investment (FDI) Regulations

Foreign Direct Investment (FDI) in India is governed by the FDI Policy and FEMA regulations. FDI can be made under two routes:

• Automatic Route: No prior approval needed from the government or the RBI. Most sectors like IT, manufacturing, and e-commerce fall under this route.
• Government Route: Prior approval is required from the relevant ministry. Sectors like defense, telecom, and media are partially or fully under this route.

It’s critical to consult the latest FDI policy or a legal advisor to determine the applicable route for your sector.

4. Register Your Company

Once your entry mode and structure are finalized, the next step is company registration. The registration process is governed by the Ministry of Corporate Affairs (MCA) and involves:

Step-by-Step Process:

1. Obtain Digital Signature Certificates (DSC) for directors.
2. Apply for Director Identification Number (DIN).
3. Name Approval through the MCA portal.
4. File Incorporation Documents (e.g., MOA, AOA, address proof).
5. Obtain PAN and TAN (Tax Identification Numbers).
6. Register for GST, Shops & Establishment License (state-level), and other industry-specific licenses.

The entire process can take 2 to 6 weeks, depending on the complexity and sector.

5. Comply with Tax and Regulatory Requirements

After incorporation, foreign companies must adhere to several compliance obligations:

a) Taxation

• Corporate Income Tax: Ranges from 15% to 30% based on turnover and business type.
• GST (Goods and Services Tax): Mandatory for businesses with a turnover above the threshold or engaged in interstate commerce.
• Transfer Pricing: Applicable to transactions between the Indian entity and its foreign parent or affiliates.

b) Annual Filings

• Companies must file annual returns and financial statements with the Registrar of Companies (RoC).
• Statutory audits and board meetings are mandatory, even for wholly owned subsidiaries.

c) FEMA and RBI Compliance

• Foreign investments and share allotments must be reported to the RBI via Form FC-GPR and Form FC-TRS.
• Outbound remittances, loan structures, and profit repatriation are also regulated under FEMA.

6. Employment and HR Considerations

Foreign companies must follow Indian labor laws, which govern wages, working hours, social security, and employee termination. Key laws include:

• The Shops and Establishments Act (varies by state)
• The Payment of Gratuity Act
• The Employees’ Provident Fund (EPF) and ESI
• The Code on Wages and Industrial Relations

Additionally, hiring senior management from India is encouraged to meet director residency requirements and navigate cultural and regulatory nuances.

7. Protect Your Intellectual Property (IP)

India recognizes and enforces IP rights, but registration is essential for enforcement. Consider registering:

• Trademarks: For brand names and logos.
• Patents: For inventions and innovations.
• Copyrights: For software, written material, or creative content.

The Controller General of Patents, Designs and Trademarks (CGPDTM) manages the IP registration process.

8. Sector-Specific Licenses and Compliance

Some sectors require special permissions or regulatory clearances. For example:

• Finance and Insurance: Regulated by SEBI and IRDAI.
• Telecommunications: Regulated by DoT and TRAI.
• E-commerce and Retail: Subject to FDI caps and conditions under DPIIT.

Always consult sector-specific legal experts before entering regulated industries.

Final Thoughts: Partner with Local Experts

India offers a dynamic and rewarding environment for foreign businesses, but setting up operations requires strategic planning and legal diligence. To ensure a seamless setup:

• Work with local legal and tax advisors.
• Use professional services for compliance and accounting.
• Leverage government platforms like Invest India, which provides guidance and facilitation for foreign investors.
• Explore emerging hubs like GIFT City (Gujarat International Finance Tec-City), India’s first International Financial Services Centre, which offers world-class infrastructure, a liberal regulatory framework, and tax incentives for financial services, fintech, and international operations.

GIFT City is particularly attractive for foreign companies in finance, asset management, insurance, and global trading looking to establish a strategic base with ease of doing business comparable to global financial centers — with trusted partners like RNM Capital Trust offering specialized advisory and setup support within the IFSC framework.

By understanding and adhering to India’s legal and regulatory framework—and leveraging progressive ecosystems like GIFT City—foreign companies can not only establish themselves successfully but also unlock immense growth potential in one of the world’s most dynamic markets.

How RNM India Helps Foreign Companies Enter India

Expanding into a new country is not just about paperwork—it’s about understanding the culture, aligning with regulatory norms, and ensuring long-term operational efficiency. That’s where a trusted advisor like RNM India comes in.

About RNM India?

RNM India is a leading financial advisory firm in India, with decades of experience in helping international companies establish and grow their Indian presence. With a multidisciplinary team of chartered accountants, company secretaries, legal experts, and tax advisors, RNM provides end-to-end services, including:

• Entity setup (WOS, JV, LO, BO, etc.)
• FDI compliance and RBI filings
• Tax advisory and transfer pricing
• Corporate governance and secretarial services
• Due diligence and cross-border structuring
• Audit, assurance, and accounting

Why Choose RNM?

• Local Expertise, Global Mindset: Deep understanding of Indian law with international client experience.
• One-stop Solution: From incorporation to tax to payroll—everything under one roof.
• Regulatory Compliance: Ensures 100% compliance, reducing legal risks and penalties.
• Trusted by Global Clients: Proven track record across sectors including IT, pharma, manufacturing, and consulting.

For any foreign company planning to expand into India, partnering with RNM ensures a smooth, compliant, and efficient market entry.