India Entry Strategy Advisory: The Process, Start to Finish
The mechanics of India Entry Strategy Advisory are what clients ask about once they have decided to proceed. 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.
What is India Entry Strategy Advisory — and how is it different from just registering a company in India?
Company registration is a single transaction: fill in SPICe+, get a COI. India Entry Strategy is the foundational analysis that determines what type of entity to register, how to structure the FDI, which jurisdiction to route investment through for optimal DTAA benefits, what sector approvals are needed before the entity can operate, and how to structure governance and shareholding to support the business plan over 5–10 years. Registration without strategy leads to the wrong entity type, missed FDI approvals, unfavourable tax structure, and documents that need expensive amendment at the first investor or exit event. Strategy before registration prevents all of this.
In practice: Costly India-entry mistakes often stem from executing before strategising — registering as a branch when it should be a subsidiary, routing FDI directly from a high-tax jurisdiction when a DTAA-friendly intermediate was available (subject to the MLI principal purpose test, GAAR and substance requirements), or incorporating with a template MoA that misses the company's core activities.
What is the Double Taxation Avoidance Agreement (DTAA) — and how does it affect the India entry decision?
A DTAA (also called a tax treaty) is a bilateral agreement between India and another country that determines how income earned by residents of one country in the other country will be taxed — preventing the same income from being fully taxed twice. For India entry, the applicable DTAA determines: the withholding tax rate on dividends paid by the India entity to its foreign parent (lower DTAA rates vs the domestic 20% rate); the withholding tax rate on interest, royalties, and technical services fees; and the country where capital gains on sale of Indian shares are taxable. The routing jurisdiction of the investment — whether through the UAE, Singapore, Netherlands, Mauritius, UK, or directly — determines which DTAA applies. This is one of the most financially significant decisions in the India entry strategy.
In practice: Since India's implementation of BEPS Action 6 via the Multilateral Instrument (MLI) and the introduction of the Principal Purpose Test (PPT), treaty benefits can be denied if the primary purpose of using an intermediate jurisdiction is to access a lower DTAA rate. Substance in the intermediate jurisdiction — real employees, real office, local management decisions — is increasingly required to defend DTAA positions. We advise on both the DTAA choice and the substance requirements.
What is a Liaison Office — and can it generate any revenue?
A Liaison Office (LO) is a representative presence in India that can only promote the parent company's goods and services, gather information, and facilitate communication between the parent and Indian customers or suppliers. It absolutely cannot generate any revenue, sign contracts on behalf of the parent, or undertake any commercial activity. It is funded entirely by remittances from the foreign parent. It requires prior approval, generally routed through an Authorised Dealer bank (with the RBI handling cases outside that route), initially for 3 years and extendable. Annual compliance: filing of Annual Activity Certificate (AAC) certified by a CA with the RBI. It is appropriate only for market exploration, sourcing support, and customer communication — not for operations.
In practice: A liaison office that starts generating revenue — however informally — is in violation of its RBI approval conditions and FEMA, creating compounding risk for the parent. The boundary between 'facilitating communication' and 'concluding contracts' is thin. We advise clients to convert to a WOS subsidiary as soon as the relationship with Indian customers moves toward contracting.
What is an FC-GPR and what happens if it is not filed in time?
FC-GPR (Foreign Currency — Gross Provisional Return) is an RBI reporting form that records the details of FDI received by an Indian company — the amount, the allottee (foreign investor), the securities issued, and the price per share. It is filed on the RBI's FIRMS (Foreign Investment Reporting and Management System) portal within 30 days of the date of share allotment. If not filed within 30 days, the company and its officers are in violation of FEMA. Late reporting is ordinarily regularised by paying the RBI late submission fee; other contraventions may require a compounding application under the FEMA compounding rules. RBI compounding is public record.
In practice: FC-GPR has a strict 30-day clock that starts from allotment — not from when the money is received. The shares must actually be allotted first (Board resolution, register of members updated), and then the FC-GPR filed. The allotment date should be diarised at the outset so that the FC-GPR is filed within the window.
Does an Indian subsidiary need to conduct a statutory audit even in its first year?
Yes. Every Private Limited Company in India must undergo a statutory audit under Section 139 of the Companies Act 2013, conducted by an independent Chartered Accountant, regardless of revenue, size, or whether the company has been fully operational for the entire financial year. The auditor must be appointed by the Board within 30 days of incorporation (Form ADT-1 filed within 15 days of appointment) and confirmed by shareholders at the first AGM. For a new subsidiary that is incorporated partway through a financial year, the first audit covers the short financial year from the date of incorporation to 31 March. The audit must be completed before the AOC-4 filing, which is due within 30 days of the AGM (by 30 October where the AGM is held on 30 September).
In practice: For subsidiaries of listed foreign companies or large groups, the statutory audit may also need to align with the group's IFRS or US GAAP consolidation audit process. We coordinate with the global audit firm where required — providing the India GAAP statutory audit that feeds into the group's consolidation without conflicts.
What is DPIIT Startup Recognition — and how does it benefit a foreign-invested startup?
DPIIT Startup Recognition is a certification from the Department for Promotion of Industry and Internal Trade that gives eligible young, innovation-driven entities access to Startup India benefits. Key benefits: (1) Section 80IAC income tax holiday — deduction of 100% of profits for any 3 consecutive financial years out of the first 10 years from incorporation, for eligible startups (private limited companies and LLPs incorporated within the statutory cut-off date) certified by the Inter-Ministerial Board; (2) Self-certification of compliance under 6 labour laws and 3 environmental laws (the central labour laws are now consolidated into four Labour Codes in force from 21 November 2025, so the scheme's current scope should be confirmed); (3) Fast-track patent examination with 80% rebate on patent fees; (4) easier public procurement and faster winding-up eligibility. Recognition was historically also the route to angel tax exemption under Section 56(2)(viib), but that provision has been abolished for all investor classes with effect from 1 April 2025 (assessment year 2025-26 onwards), so recognition's ongoing value now centres on the 80IAC tax holiday and the other listed benefits. Foreign-invested Indian companies that meet the eligibility criteria can apply for recognition.
In practice: DPIIT recognition is frequently underutilised — especially by foreign-backed startups that do not realise they are eligible. The 80IAC tax holiday for a profitable startup can represent significant savings, and recognition also streamlines several compliance and procurement processes. We assess eligibility at the India entry strategy stage and apply for recognition as part of the initial engagement where appropriate.
How long does the entire India entry process take — from decision to operational company?
For a straightforward Wholly Owned Subsidiary Private Limited Company under the FDI automatic route (no sector-specific approvals), the main steps are strategy advisory, incorporation (Certificate of Incorporation from MCA), bank account opening, GST registration, and IEC (import/export) registration. Timelines depend on the authority and the case; confirm the current processing time. The total time from the first PNPC engagement session to a fully operational entity with bank account, GST, and accounting live depends on how quickly documents are assembled and on the authorities' processing times. Where RBI approval is needed (Branch/LO/PO), add time for that approval; confirm the current processing time. Where DPIIT government approval is needed, add time for that approval; confirm the current processing time. Sector-specific licences (NBFC, payment, insurance) add several months.
In practice: Timeline depends significantly on how quickly promoters provide the required documents — especially foreign documents, which must be apostilled (in Hague Convention countries) or legalised through the Indian Embassy in the home country (elsewhere); processing time depends on the authority concerned, so confirm it early. We provide a document checklist at the first engagement session so this process starts in parallel with the strategy work.
What ongoing annual compliances does an India subsidiary need to maintain?
Annual statutory obligations for an Indian Pvt Ltd subsidiary: (1) Statutory audit — completed before AGM; (2) AGM — within 6 months of FY end; (3) AOC-4 (financial statements) — filed with MCA within 30 days of AGM; (4) MGT-7 (annual return) — within 60 days of AGM; (5) ITR-6 (income tax return) — typically 31 October (30 November where a transfer pricing report is required); (6) Quarterly TDS returns — July, October, January and May filing cycles; (7) Monthly / quarterly GST returns (GSTR-1 + GSTR-3B); (8) Form 3CEB (transfer pricing accountant's report) for any international transaction, and a transfer pricing study where international transactions exceed the prescribed aggregate threshold (confirm the current figure with PNPC or the official source); (9) FEMA Foreign Liabilities and Assets (FLA) Return on the RBI's FLAIR portal — by 15 July (an Annual Performance Report by 31 December applies only where the company has made overseas direct investment); (10) DIR-3 KYC for all directors — once every third consecutive financial year, by 30 June; (11) Four Board meetings per year; (12) Any sector regulator annual filings (RBI, SEBI, IRDAI). PNPC offers annual retainer services covering the core compliance items listed above.
In practice: The compliance profile of an India subsidiary with a foreign parent is materially more complex than a domestic company's — because of the FEMA reporting layer (the FLA Return, FC-GPR on each investment event), transfer pricing obligations, and the interface with group audit requirements. We manage all three dimensions in one integrated engagement.
Can the India subsidiary pay management fees or royalties to its foreign parent — and how are these taxed?
Yes. An Indian subsidiary can pay management service fees and royalties to its foreign parent, subject to: (1) a written arm's-length agreement with specific scope and pricing, documented before the payments begin; (2) Transfer pricing compliance — the price must be at arm's length and supported by an annual transfer pricing study; (3) Withholding tax — royalties and fees for technical services are subject to Indian withholding tax at 20% (plus applicable surcharge and cess) under Section 115A of the Income-tax Act 1961 (renumbered under the Income-tax Act 2025 from tax year 2026-27), following the Finance Act 2023 increase from the earlier 10% rate (or the applicable DTAA rate if lower, with Tax Residency Certificate from the parent — for example, the India-UAE DTAA rate of 10%); (4) FEMA compliance — remittance of royalties and management fees constitutes an outward remittance and requires a CA certificate and Form 15CA / 15CB confirming tax compliance; (5) Disallowance risk — if tax is not deducted at source on the payment it can be disallowed under Section 40(a)(i) (Income-tax Act 1961; the Income-tax Act 2025 applies from tax year 2026-27), and a payment that is not at arm's length is adjusted under Section 92C, increasing the subsidiary's taxable income.
In practice: Two failure modes are worth avoiding: companies that pay management fees without a written agreement (relying on a group understanding) — disallowed in full; and companies that pay at a rate that has never been benchmarked — adjusted on transfer pricing grounds. Neither is an audit-proof position. Both are avoidable with proper documentation at the start of the arrangement.
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.