How Foreign Company Start Business in India

Starting a business in India as a foreign company or a Non-Resident Individual (NRI) involves several legal, regulatory, and financial considerations. Here’s a step-by-step guide:

STEP-1 Choose the Type of Business Structure

Foreign companies or NRIs can establish a business in India through different structures:

1) As a Foreign Company

A) Open a Liaison Office (LO) / Representative Office in India

Used for market research and networking.

No revenue-generating activities allowed.

Prior approval from the RBI (Reserve Bank of India) is required.

B) Open a Branch Office (BO) in India

Can engage in business activities like export/import, consultancy, research, etc.

Cannot carry out manufacturing (but can subcontract).

Approval from RBI and compliance with FEMA (Foreign Exchange Management Act) required.

C) Open a Project Office (PO) in India

Temporary office set up for specific projects.

Approval from RBI needed if no general permission is available.

2) As an Indian Entity (Subsidiary / Joint Venture)

A) Open a Wholly Owned Subsidiary (WOS) in India

A foreign company can own 100% of an Indian private limited company in permitted sectors.

No RBI approval is needed if it falls under the automatic route.

B) Open a Joint Venture (JV) with an Indian Partner in India

A foreign company partners with an Indian company.

Required in sectors where 100% FDI (Foreign Direct Investment) is not allowed.

C) Open a Limited Liability Partnership (LLP) in India

Foreign Direct Investment (FDI) is allowed under the automatic route in most sectors.

At least one partner must be an Indian resident.

STEP 2 Check Foreign Direct Investment (FDI) Rules

India allows automatic route FDI (no approval required) in many sectors.

Some sectors require government approval, such as defense, telecom, and real estate.

Check the FDI Policy by DPIIT (Department for Promotion of Industry and Internal Trade).

STEP 3 Register the Business in India

For a Private Limited Company (Most Common Choice)

1) Obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN) Required for directors (including NRIs and foreigners).

2) Reserve Company Name with MCA (Ministry of Corporate Affairs) Apply through the RUN (Reserve Unique Name) portal.

3) Draft Memorandum of Association (MOA) & Articles of Association (AOA) Defines business objectives and governance.

4) File Incorporation Form (SPICe+ on MCA Portal) Requires details of directors, shareholders, capital structure, and registered office.

5) Obtain PAN & TAN (Tax Registration) Required for financial and tax compliance.

STEP -4 Open a Bank Account & Fund the Company

a) Open a bank account in an Indian bank.

b) Remit foreign investment as per FEMA regulations.

c) File an FC-GPR form with RBI for equity investment.

STEP-5 Register for Taxes & Licenses

a) GST (Goods & Services Tax) Registration – If turnover exceeds ₹20 lakh (₹10 lakh in some states).

b) Professional Tax & ESIC (if applicable).

c) Sector-Specific Licenses – e.g., FSSAI for food business, RBI license for NBFCs, etc.

STEP-6 Compliances & Ongoing Reporting

a) Annual Filings with MCA & Income Tax Department.

b) Transfer Pricing Compliance (if related party transactions exist).

c) FEMA & RBI Compliance – Reporting of foreign investment, transactions, etc.

Conclusion

The easiest way for a foreign company or NRI to do business in India is by registering a Private Limited Company under the automatic FDI route. However, legal and tax advisory is recommended to ensure compliance.