India Entry Strategy Advisory: Who Needs It and Who Does Not
Whether India Entry Strategy Advisory applies to a given business is the first thing worth settling, and it is where most of the early questions land. The questions below are the ones raised most often in practice; the full scope of the service is on the India Entry Strategy Advisory page.
Does India require government approval for all foreign investments?
No. The majority of sectors in India permit FDI under the Automatic Route — meaning no prior government approval is needed; the foreign investor simply invests and reports to the RBI within the prescribed timelines. However, a number of sectors require Government Route approval (prior approval from DPIIT or the relevant sectoral ministry), such as defence above 74% and multi-brand retail trading, and investments from countries that share a land border with India need Government approval under Press Note 3 (2020). Sector lists and thresholds change periodically. A few activities are entirely prohibited for FDI: lottery, gambling, chit fund business, Nidhi company, real estate trading (buying and selling), manufacturing of tobacco/cigarettes, and activities in the negative list. PNPC maps your specific activities against the current Consolidated FDI Policy before any capital is committed.
In practice: The FDI policy is updated periodically. Sectors that required government approval have in many cases been moved to the automatic route over time — and occasionally the reverse. We always verify against the current policy and the applicable FEMA Non-Debt Instruments Rules, not from memory.
What is Permanent Establishment (PE) risk — and why is it critical for foreign companies entering India?
A Permanent Establishment (PE) is a fixed place of business or a dependent agent through which a foreign company conducts its business in India. If a PE exists, India has the right to tax the profits attributable to that PE at Indian corporate tax rates — even though the foreign company has not set up a formal Indian entity. PE risk arises when: a foreign company's employees regularly conclude contracts in India on the company's behalf (agency PE); a foreign company's employees are stationed at a fixed location in India for extended periods (fixed place PE); construction or installation projects in India exceed a threshold duration (project PE, typically 6–9 months depending on the treaty); or software development or R&D activity is conducted in India under a 'body shopping' arrangement that exceeds a time threshold. The solution is either to formalise the India presence as a subsidiary (which then bears the Indian tax itself) or to structure activities to stay below PE thresholds.
In practice: PE risk is one of the most complex and consequential issues in international tax. It can arise, for example, in two scenarios: a foreign tech company whose Indian employees are executing client-facing work (concluding contracts, making decisions), and a foreign parent whose Indian subsidiary acts as its operational arm with no independent risk or decision-making. PE risk assessment is a core part of India entry advisory and should be reassessed annually as headcount and activity levels change.
What is Transfer Pricing — and when does it apply to an India-headquartered or India-subsidiary business?
Transfer pricing refers to the pricing of goods, services, loans, licences, and intangibles transacted between two entities that are related parties (defined as Associated Enterprises under Section 92A of the Income-tax Act 1961; the corresponding provisions of the Income-tax Act 2025 apply from tax year 2026-27). Under the arm's-length principle, related-party transactions must be priced as they would be between unrelated parties in a free market. India's transfer pricing regulations (Sections 92 to 92F and rules thereto) require: documentation of all international transactions above prescribed thresholds, a transfer pricing study annually by the entity's own CA or TP specialist, and disclosure in Form 3CEB (a CA's certification), which is furnished separately from, and earlier than, the ITR (one month before the ITR due date under the Income-tax Act 1961). Penalties for TP adjustments include 2% of the transaction value for failure to maintain documentation (Section 271AA) or to furnish it when called for (Section 271G), plus the primary tax adjustment on the income addition (sections of the Income-tax Act 1961).
In practice: Transfer pricing is not a Year 3 concern — it starts from the first intercompany transaction. Fixing this after the fact requires retroactive documentation and is a red flag in any IT scrutiny or M&A due diligence.
What is the Annual Performance Report (APR) — and who must file it?
The Annual Performance Report (APR) is an annual RBI filing requirement for Indian companies and residents that have made Overseas Direct Investment (ODI); it is due by 31 December for the preceding financial year and does not apply to inbound FDI. An Indian entity that has received FDI instead files the Foreign Liabilities and Assets (FLA) Return on the RBI's FLAIR portal by 15 July each year. Non-filing invites RBI scrutiny and compounding proceedings. PNPC files FLA Returns and APRs as part of the annual compliance programme.
In practice: The FLA Return and the APR are annual FEMA filings that sit outside the main income-tax and MCA deadline cycle, so they belong in the annual compliance calendar from the first year.
What is Ind AS — and does it apply to our India subsidiary?
Ind AS (Indian Accounting Standards) are a set of accounting standards substantially converged with IFRS, introduced by the Ministry of Corporate Affairs. An Indian subsidiary must apply Ind AS only if it is listed or in the process of listing, has net worth at or above the prescribed threshold, or is a holding, subsidiary, joint venture or associate company of an Indian company that meets those tests; the size of the foreign parent does not by itself trigger Ind AS. Companies below the thresholds prepare financial statements under the Companies (Accounting Standards) Rules 2021 (the older GAAP framework).
In practice: PNPC prepares Ind AS-compliant financial statements for subsidiaries of foreign companies where applicable. The first year of Ind AS transition requires an opening balance sheet as of the comparative period under Ind AS, reconciliation from previous GAAP, and disclosure of transition adjustments — a complex first-year exercise that should not be attempted without specialist CA involvement.
What is GIFT City (Gujarat International Finance Tec-City) — and should we consider it?
GIFT City is India's first International Financial Services Centre (IFSC), located in Gandhinagar, Gujarat, regulated by the International Financial Services Centres Authority (IFSCA). It operates under a special regulatory and tax framework designed to compete with global financial centres. Key advantages: a 100% deduction of profits for any 10 consecutive years out of 15 for IFSC units under Section 80LA of the Income-tax Act 1961 (and the corresponding provision of the Income-tax Act 2025 from tax year 2026-27); zero GST on services provided by IFSC units to non-residents; securities transactions exempt from Securities Transaction Tax (STT) and Commodities Transaction Tax (CTT); access to multi-currency accounts and international settlement. GIFT IFSC is relevant for: fund management companies (AIF, FPIs), aircraft leasing, insurance and reinsurance, global treasury operations, capital market intermediaries, fintech. It is not a general-purpose India entry vehicle — it is specifically designed for financial services and capital market activities.
In practice: GIFT IFSC is genuinely world-class for the right use case. For a UAE financial services firm or fund manager seeking an India base with international operating standards, it merits serious consideration. We work with the IFSCA framework and can advise on IFSC unit registration alongside the conventional India entry options.
Do we need a local Indian director — and what are the obligations?
Yes. Under Section 149(3) of the Companies Act 2013, every company, including a Private Limited Company, must have at least one director who has stayed in India for at least 182 days in the previous calendar year. This is the 'resident director' requirement. The resident director does not need to be an owner or have any economic stake — they simply need to meet the 182-day residency test. They are responsible for signing statutory documents, board resolutions, and annual filings. For foreign companies with no existing India connections, PNPC helps identify and structure the resident director arrangement with a qualified, trusted individual — we do not ourselves serve as nominee directors.
In practice: The resident director's liability exposure under Indian law is real: directors who sign false returns, omit mandatory filings, or allow prohibited transactions face personal penalties and in some cases criminal liability. We brief every resident director we help appoint on their obligations, and ensure they are insulated from signing decisions they cannot verify by structuring the appropriate authority and indemnity framework.
What is Form 15CA / 15CB — and when is it needed for outward remittances?
Form 15CA is an online declaration filed by the remitter (the Indian entity making a payment to a foreign party) confirming that applicable Indian taxes have been deducted or that the payment is not chargeable to tax in India. Form 15CB is a certificate from a Chartered Accountant confirming the nature of the payment, applicable tax treaty provisions, and that the correct withholding tax has been deducted. Form 15CB must be obtained before filing Form 15CA for remittances of payments that are chargeable to tax in India (Rule 37BB of the Income-tax Rules 1962; the Income-tax Act 2025 and its rules apply from 1 April 2026, so current form numbers and thresholds should be confirmed). Both are filed on the income-tax portal before the remittance is made through the bank. The AD (Authorised Dealer) bank will not release an outward remittance above the prescribed threshold without 15CA/15CB. Exceptions apply for a number of routine payment categories listed in Rule 37BB.
In practice: Filing must be completed before the remittance, not retrospectively. Form 15CA is required for most outward remittances, with Form 15CB where the payment is chargeable to tax and above the prescribed threshold; certain routine payments are exempt under Rule 37BB.
What is the role of a CA in India entry — specifically, what can a CA do that a legal firm or advisory firm cannot?
A CA's unique role in India entry encompasses: (1) Tax structure design — DTAAs, transfer pricing, advance tax, MAT, withholding tax optimisation; (2) FEMA compliance — FC-GPR, APR, Form 15CA/15CB, ECB reporting — these are statutory CA functions; (3) Statutory audit — mandatory under Companies Act; (4) ITR-6 and Form 3CEB (transfer pricing certificate) — CA-only certifications; (5) Incorporation via SPICe+ — CA practitioners can certify the INC-8 declaration; (6) Rule 11UA valuation reports to support share issue pricing under Companies Act and FEMA pricing-guideline requirements; (7) Advance tax estimation and optimisation. Legal firms handle SHA drafting, employment law, IP assignments, and dispute resolution — but they do not do tax filings, FEMA reporting, or statutory audit. An advisory firm can frame strategic options but lacks the statutory certifying authority. PNPC combines the CA function with the strategic advisory — everything from entry strategy through annual compliance under one engagement.
In practice: A common failure mode in India entry is having four advisers who each handle their piece — a legal firm for the SHA, a CA for tax, a company secretary for MCA filings, and an advisory consultant for market strategy — with no single party who sees the full picture and spots when one adviser's advice is inconsistent with another's. We are the single integrated adviser who resolves these conflicts before they arise.
Where this sits in the wider engagement
India Entry Strategy Advisory rarely arrives on its own. The statutory basis and the current requirements are set out on the India Entry Strategy Advisory service page, and the related services are grouped under Business Setup.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On India Entry Strategy Advisory we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.