India Entry Guide 2026

The first and most important decision for a foreign company is determining the form of presence it intends to establish in India.

The chosen legal structure should align with the company’s objectives, proposed business activities, funding strategy, and long-term operational plans.

Depending on its requirements, a foreign company may establish:

• a Private Limited Company
• a Limited Liability Partnership (LLP)
• a Branch Office
• a Liaison Office

A high-level comparison of these structures is provided below to illustrate their key differences and typical suitability.

Foreign investment into India is governed primarily by the Foreign Exchange Management Act (FEMA) and related regulations.

In many sectors, 100 percent foreign investment is permitted under the automatic route, meaning no prior government approval is required. However, certain sectors are subject to investment caps or require government approval.

Foreign companies must ensure that their proposed business activities fall within the permitted sector and route. They must also comply with FEMA guidelines when issuing shares and complete the required reporting of foreign investment through the Reserve Bank of India (RBI) reporting system within prescribed timelines.

Failure to comply with FDI reporting requirements can lead to penalties and compounding proceedings, making regulatory compliance an essential consideration during the entry planning stage.

The incorporation of a Private Limited Company or LLP in India typically takes around three to four weeks, depending on documentation readiness.

Documents from the foreign parent company often require notarisation and apostille, which can add additional processing time.

If a Branch Office or Liaison Office is proposed, approval from the Reserve Bank of India through an authorised bank is required, and this process may take several weeks.

Companies should also account for the time required to:

• open bank accounts
• obtain tax registrations
• complete other mandatory formalities

before business operations can commence.

Tax rates in India vary depending on the legal structure adopted.

A domestic company may opt for a concessional corporate tax rate of 22 percent under Section 115BAA of the Income Tax Act. After surcharge and cess, the effective rate is approximately 25 percent.

Certain newly incorporated manufacturing companies may qualify for a 15 percent base tax rate, subject to specific conditions.

A Limited Liability Partnership (LLP) is taxed at 30 percent plus surcharge and cess, resulting in a higher effective rate compared to companies opting for the concessional regime.

A Branch Office of a foreign company is taxed at 40 percent plus surcharge and cess, making it the most tax-expensive structure.

A Liaison Office is not permitted to generate income. If it strictly performs permitted activities, it does not have taxable income.

Understanding the tax implications early helps companies select the most appropriate entry structure.

If the Indian entity provides services to its foreign parent or other group companies, transfer pricing rules will apply.

Indian law requires that transactions between related parties be conducted at arm’s length, meaning the pricing should reflect what independent parties would agree under comparable circumstances.

This requires:

• properly drafted intercompany agreements
• benchmarking studies
• annual transfer pricing documentation

Failure to comply may result in tax adjustments, penalties, and potential litigation.

For Global Capability Centres (GCCs) operating as service centres, transfer pricing planning is one of the most critical elements of structuring operations.

Indian company law requires disclosure of individuals who ultimately hold or control at least 10 percent beneficial interest in a company, whether directly or indirectly.

Even when shares are held through multiple layers of holding companies, the ultimate individual owners must be identified and disclosed.

Companies must maintain a register of significant beneficial owners and file relevant forms with the Registrar of Companies. Non-compliance can result in financial penalties.

Foreign groups with complex ownership structures should carefully map their ownership chains before incorporation.

A Private Limited Company or LLP must have at least two directors or designated partners respectively.

At least one director must be resident in India.

Companies are also required to:

• conduct regular board meetings
• maintain statutory registers
• file annual returns
• prepare audited financial statements

Strong corporate governance practices are an important component of operating in India.

Once employees are hired in India, several labour law obligations arise.

Depending on the number of employees and salary levels, companies may need to register under:

• Provident Fund regulations
• Employee State Insurance (ESI) laws

Payroll must comply with income tax withholding rules, and Shops and Establishment registration is required in most states.

Employment agreements should clearly define:

• roles and responsibilities
• compensation structures
• notice periods
• confidentiality obligations

Labour compliance is an ongoing responsibility and should be managed carefully.

After incorporation, a bank account must be opened in India.

Foreign capital must be remitted through normal banking channels, and shares must be issued in accordance with applicable pricing guidelines.

The reporting of share allotment to the RBI system must be completed within prescribed timelines.

Profit repatriation is generally permitted after the payment of applicable taxes and completion of required compliance procedures. Proper planning ensures the smooth movement of funds between the Indian entity and its parent company.

After incorporation, companies must obtain a Permanent Account Number (PAN) and Tax Deduction Account Number (TAN).

If the entity crosses the prescribed threshold or supplies taxable goods or services, Goods and Services Tax (GST) registration is required.

Other registrations may include:

• Professional Tax
• Shops and Establishment registration
• Import-Export Code

depending on the nature of the business.

The Ministry of Corporate Affairs allows certain key registrations to be obtained at the time of incorporation, which helps simplify the initial setup process and reduce the need for separate applications later.

Without these registrations, business operations and payroll processing cannot commence smoothly.

Companies operating in India must comply with ongoing statutory obligations.

These include:

• filing annual financial statements and annual returns with the Registrar of Companies
• filing income tax returns annually
• submitting GST returns monthly or quarterly, where applicable

Transfer pricing documentation must be maintained, and relevant audit reports must be filed where required.

Compliance in India is calendar-driven and time-bound, making a structured compliance framework essential to avoid penalties and regulatory issues.

Concluding Comments

India presents significant opportunities for foreign companies seeking growth and access to a highly skilled talent base. At the same time, expanding into India involves far more than simply registering an entity.

Successful market entry requires thoughtful planning around the appropriate legal structure, tax considerations, regulatory approvals, and ongoing compliance responsibilities.

When these factors are addressed carefully from the outset, companies can minimise operational challenges and enter the market with greater confidence.

A well-planned entry strategy ultimately lays the foundation for sustainable and long-term growth in India.

How Vistra can help

Expanding into India requires careful planning across legal structuring, regulatory approvals, tax considerations and ongoing compliance.

Vistra supports global businesses at every stage of their India entry journey — from market entry strategy and entity formation to corporate governance, tax compliance, payroll and ongoing corporate administration. Our teams combine local expertise in India with Vistra’s global network, helping companies establish and operate with confidence in one of the world’s most dynamic markets.

If you are considering setting up a Global Capability Centre (GCC), subsidiary or operational presence in India, our specialists would be pleased to discuss how we can support your expansion.

Contact Vistra to explore your India market entry strategy.