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NRI · FEMAForeign subsidiary in India: accounting, audit and ROC compliance
A foreign company setting up a subsidiary in India must comply with company law, FEMA reporting, income tax with transfer pricing, GST and TDS on payments abroad. Here is a complete annual compliance map with timelines.
A wholly owned subsidiary (WOS) is the most common entry route for foreign companies. Once incorporated, it is an Indian company subject to the Companies Act, Income-tax Act, GST and FEMA.
Setting up – FEMA steps
| Step | Requirement | Time |
|---|---|---|
| FDI under automatic or approval route | Check sectoral caps and conditions | Before investment |
| Receipt of share subscription | Through banking channels; KYC of remitter | — |
| Allotment of shares | Board resolution | Within 60 days of receipt (else refund) |
| FC-GPR on FIRMS portal | With valuation certificate, CS certificate | Within 30 days of allotment |
| Transfer of shares (resident ↔ non-resident) | FC-TRS | Within 60 days of transfer/receipt |
Delays in FEMA reporting attract late submission fees or compounding.
Annual compliance calendar (FY 2025-26 example)
| Due date | Compliance |
|---|---|
| Monthly 7th | TDS/TCS deposit (including on payments to parent) |
| Monthly 11th/20th | GSTR-1, GSTR-3B |
| Quarterly | TDS statements (24Q, 26Q, 27Q) |
| 30 June | DPT-3 |
| 15 July | FLA return to RBI |
| By 30 September | Board meetings (4 a year), AGM |
| 30 September (extended for AY 2026-27 as notified) | Tax audit report |
| 31 October | Form 3CEB transfer pricing report (accountant's report) |
| Within 30 days of AGM | AOC-4 (financial statements) |
| Within 60 days of AGM | MGT-7 (annual return) |
| 30 November | Income-tax return (TP cases), master file (if applicable) |
| 31 December | GSTR-9/9C |
Transfer pricing
Payments for services, royalties, reimbursements, loans and purchases from the parent are international transactions. They must be at arm's length, documented (TP study, benchmarking) and reported in Form 3CEB. Penalties for failure to document or report are significant. See our transfer pricing deadline guide.
Cross-border payments
- Management fees, royalty, IT charges to the parent: TDS under Section 195 (Section 393(2)) at domestic or DTAA rates; Form 15CA/15CB; GST under reverse charge (import of services) at 18%, with ITC.
- Reimbursement of expenses: examine whether they are pure reimbursements or services.
- Dividend to the parent: TDS at 20% plus surcharge and cess or DTAA rate.
Accounting and audit
- Books under Indian law (Ind AS if thresholds met; else Indian GAAP), with group reporting packs prepared separately.
- Statutory audit by an Indian CA; CARO applies unless exempt.
- Tax audit if turnover exceeds limits (most subsidiaries do).
Worked example
Example: A Singapore company sets up "SG Tech India Pvt Ltd" in Gurugram with capital of ₹2 crore received in May 2026; shares allotted on 10 June 2026. In FY 2026-27 the subsidiary provides software services to the parent (₹6 crore) and pays it a management fee of ₹50 lakh.
| Compliance | Action |
|---|---|
| FC-GPR | By 10 July 2026 |
| TP: services to parent and management fee | Benchmark margins; Form 3CEB by 31 October 2027 |
| Management fee | TDS as per India–Singapore DTAA (if FTS/"make available" test applies) + 15CA/15CB; RCM GST 18% |
| Export of services to parent | Zero-rated with LUT; refund of ITC |
| FLA return | By 15 July 2027 |
| ITR | By 30 November 2027 |
Common mistakes
- Late FC-GPR, leading to compounding.
- No TP study for intra-group charges.
- Missing RCM GST on import of services.
- No resident director after the local director resigns.
- Treating the subsidiary as a branch for accounting.
Key takeaway
A foreign subsidiary must run four compliance tracks together: FEMA, company law, income tax with transfer pricing, and GST/TDS. Use a calendar and a single point of coordination. Our doing business in India team supports foreign companies from incorporation to annual compliance.
Official references
Provisions discussed (summaries in our Law Library):
- FEMA, 1999 & rules – Section 6: Capital account transactions
- FEMA, 1999 & rules – Section NDI Rules 2019: Non-debt instruments
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
When must FC-GPR be filed?
Within 30 days of allotment of shares to the foreign investor, on the RBI's FIRMS portal, after reporting receipt of funds as required.
What is the FLA return?
The annual return on Foreign Liabilities and Assets filed with RBI by 15 July by every Indian company that has received FDI or made overseas investment.
Does a foreign subsidiary need transfer pricing documentation?
Yes, if it has international transactions with associated enterprises (e.g. parent). A Form 3CEB report from a CA is required and the return is due by 30 November.
Does the subsidiary need an Indian resident director?
Yes. Every company must have at least one director who stayed in India for 182 days or more in the previous calendar year.
Is a company secretary mandatory for a subsidiary?
A whole-time company secretary is required only above the paid-up capital threshold (₹10 crore). Smaller companies use practising CS services for compliance.
Can the parent provide a loan to the subsidiary?
Yes, as an external commercial borrowing under ECB guidelines, with reporting to RBI, or by way of equity/compulsorily convertible instruments.
Is GST applicable on services exported to the parent?
Exports of services are zero-rated if conditions are met (payment in foreign exchange, place of supply outside India, not merely establishments of a distinct person).
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
Have a tax, GST or business question?
Call, WhatsApp or email CA Dilbagh Singh and team, from Delhi, anywhere in India or abroad.