India is one of the world's largest markets for foreign direct investment (FDI). Setting up there means working within two main legal frameworks: the Foreign Exchange Management Act (FEMA), with its Non-Debt Instruments Rules and the government's FDI Policy, and the Companies Act, 2013.
Step 1: Choose your entity
| Option | Best for | Key points |
|---|---|---|
| Wholly owned subsidiary (private limited company) | Full operations and revenue in India | Most common choice. Needs at least two directors, at least one of them resident in India. |
| Joint venture | Partnering with an Indian company | A shareholders' agreement is critical: control, exit and dispute terms. |
| Limited liability partnership (LLP) | Professional or service businesses | FDI allowed under the automatic route in sectors that permit 100% automatic-route FDI without conditions. |
| Liaison office | Market research and representation only | Cannot earn revenue in India. Needs approval through an authorized bank under RBI rules. |
| Branch or project office | Specific activities or a defined project | Permitted activities are limited. Approval and reporting rules apply. |
Step 2: Check the FDI route
- Automatic route. In most sectors, foreign investment up to the permitted limit needs no prior government approval. You invest and then report.
- Government route. Some sectors, and investments above certain limits, need prior approval from the relevant ministry.
- Prohibited sectors. A short list of sectors is closed to FDI.
- Land-border countries. Under Press Note 3 (2020), investment from entities in countries that share a land border with India, or whose beneficial owner is from such a country, needs government approval. India amended its FEMA Non-Debt Instruments Rules several times in 2026, including changes to investment screening, so check the current position for your investor structure.
Step 3: Incorporate
- Get Director Identification Numbers and digital signature certificates for directors.
- Reserve the company name and file incorporation documents with the Ministry of Corporate Affairs.
- Obtain tax registrations (PAN, TAN and GST, where applicable) and open a bank account.
- Bring in the share capital through banking channels.
Step 4: Report the investment
After shares are issued to a foreign investor, the company must report the issue to the Reserve Bank of India through its authorized bank, generally on Form FC-GPR within 30 days of allotment. Annual filings follow, including the foreign liabilities and assets return. Pricing guidelines apply to share issues and transfers, so valuations need care.
Step 5: Ongoing compliance
- Board and shareholder meetings, statutory registers and annual filings with the Registrar of Companies
- Transfer pricing rules for transactions with the foreign parent
- Employment, payroll and visa compliance for staff, including employment visas and FRRO registration for foreign employees
Contracts matter as much as structure
Intercompany service agreements, licensing of intellectual property, distribution agreements and joint venture terms set how money and control flow between the parent and the Indian entity. Choose governing law and dispute resolution, such as arbitration seated in India or abroad, at the outset.
This article is general information as of November 2026, not legal advice. Immigration rules, fees and processing change often, and the right strategy depends on your facts. For advice on your situation, book a consultation.