A foreign company can own 100% of an Indian private limited company under the automatic route in most sectors — no prior approval, only reporting — subject to the sectoral caps and conditions in the Consolidated FDI Policy and the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Investment from an entity in, or beneficially owned by a person in, a country sharing a land border with India (Press Note 3 of 2020) requires Government approval regardless of sector. The company needs at least two shareholders (the parent plus a nominee), two directors and one director resident in India for 182 days or more in the financial year (section 149(3), Companies Act, 2013). Capital received from the parent must be allotted within 60 days of receipt; the allotment is reported in Form FC-GPR on the FIRMS portal within 30 days; and every year the company files the Foreign Liabilities and Assets (FLA) return by 15 July.
Key facts
| Provision | Old reference (to 31 Mar 2026) | New reference (from 1 Apr 2026) | Rate / threshold | Timing | Form |
|---|---|---|---|---|---|
| FDI — routes and caps | Consolidated FDI Policy; FEM (Non-debt Instruments) Rules, 2019 | Unchanged | 100% automatic in most sectors; Government route for restricted sectors and Press Note 3 countries | Approval before investment where Government route applies | FIFP portal |
| Press Note 3 (2020) — land-border countries | Press Note 3 (2020 Series); Rule 6(a) NDI Rules | Unchanged | Government approval for investors from/beneficially owned in land-border countries | Before investment | FIFP |
| Minimum constitution — private company | ss. 3, 149 Companies Act, 2013 | Unchanged | 2 shareholders, 2 directors; 1 resident director (≥182 days in FY) | At incorporation and continuously | SPICe+ |
| Allotment after receipt of FDI | Rule 2(xxi)? / NDI Rules & Reporting Master Direction | Unchanged | Allot within 60 days of receipt; else refund within 15 days | 60 days | — |
| FC-GPR | FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 | Unchanged | Each allotment to a non-resident | Within 30 days of allotment | Form FC-GPR (SMF on FIRMS) |
| Valuation for issue price | Rule 21 NDI Rules — pricing guidelines | Unchanged | Not less than fair value by CA / merchant banker / cost accountant | At issue | Valuation certificate |
| FLA return | FEMA 20(R) / NDI Rules; A.P. (DIR Series) circulars | Unchanged | Every company with outstanding FDI or ODI | 15 July each year (RBI has extended in some years) | FLAIR portal |
| Downstream investment reporting | Form DI | Unchanged | Indian company owned/controlled by non-residents investing in another Indian company | Within 30 days of allotment | Form DI (SMF) |
| Late submission fee | RBI A.P. (DIR Series) Circular 16 dated 30 Sept 2022 | Unchanged | ₹7,500 + 0.025% × amount × years of delay (flow forms); ₹7,500 flat for FLA | Up to 3 years; compounding thereafter | — |
Step 1 — Can the parent invest, and on which route?
Check the sector against the Consolidated FDI Policy and Schedule I of the NDI Rules. Information technology, software, most manufacturing, professional services (other than those reserved), e-commerce marketplaces, and most B2B services are 100% automatic. Sectors with caps or conditions include defence, insurance, media, multi-brand retail, and certain financial services. Then check the investor: if the investing entity, or its beneficial owner, is situated in or is a citizen of a country sharing a land border with India (China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, Afghanistan), Press Note 3 of 2020 requires prior Government approval through the Foreign Investment Facilitation Portal, whatever the sector. Beneficial ownership is tested through the chain; a Singapore or US fund with significant Chinese ownership can be caught.
Step 2 — Incorporate
- Form: a private limited company is standard. An LLP is permitted for FDI only in sectors that are 100% automatic without FDI-linked performance conditions, and is less familiar to investors and banks.
- Shareholders: at least two. The parent holds all but one share; a nominee (often a parent-group company or an individual holding on declared trust for the parent, recorded in Form MGT-6) holds the other, so the company remains a wholly owned subsidiary in substance.
- Directors: at least two individuals. At least one must have stayed in India for a total of 182 days or more during the financial year (section 149(3)); for a newly incorporated company the requirement applies proportionately. Foreign nationals may be directors; each needs a DIN and a digital signature. Non-resident directors' documents are apostilled or notarised and consularised.
- Process: SPICe+ on the MCA portal — name reservation, incorporation, PAN, TAN, EPFO/ESIC, professional tax and bank account opening in one form; GST registration may be applied alongside. Registered office address proof and the subscribers' and directors' KYC are the usual sources of delay. Realistic timelines run from two to six weeks depending on document legalisation.
Step 3 — Bring in the capital and allot
- The parent remits the subscription money through banking channels to the Indian company's account; the bank obtains the remitter's KYC from the overseas bank and issues a FIRA.
- The issue price must be not less than the fair value determined under an internationally accepted pricing methodology, certified by a Chartered Accountant, SEBI-registered merchant banker or practising cost accountant (Rule 21, NDI Rules). At incorporation, par value subscription is accepted; later rounds need a valuation.
- Shares must be allotted within 60 days of receipt of the money; if not, the money must be refunded within 15 days thereafter. Board resolution, share certificates (stamped), register of members updated.
Step 4 — Report the allotment: FC-GPR
Within 30 days of allotment, file Form FC-GPR through the Single Master Form on the RBI's FIRMS portal (after registering the entity in the Entity Master and the user as business user through the bank). Attachments: FIRA and KYC of the remitter, the valuation certificate, a Company Secretary's certificate that the issue complies with the Act and the FEMA conditions, the board resolution, and a declaration by the authorised representative. The bank verifies and the RBI acknowledges; the acknowledged FC-GPR is the document every later diligence asks for. Late filing attracts the late submission fee — ₹7,500 plus 0.025% of the amount for each year of delay — for delays up to three years; beyond that, compounding.
Step 5 — Annual reporting: the FLA return
Every Indian company that has received FDI or made ODI and has an outstanding balance at 31 March must file the Foreign Liabilities and Assets return on the RBI's FLAIR portal by 15 July of each year, on the basis of audited or, if not available, provisional accounts (revised once audited accounts are available). The RBI has extended the date in some years; file by 15 July unless an extension is announced. A missed FLA return attracts a flat late submission fee and surfaces in every subsequent bank transaction and diligence.
Other first-year items
- Form DI within 30 days if the Indian subsidiary itself invests in another Indian company (downstream investment).
- Significant beneficial owner declarations (BEN-1/BEN-2) identifying the individuals who ultimately control the parent.
- Commencement of business declaration (INC-20A) within 180 days of incorporation, after the subscription money is received.
- GST, professional tax, shops and establishment registrations; LUT if exporting services; intercompany agreement before the first invoice.
- Transfer pricing from day one — see the arm's length page.
Worked example
A US software company sets up a Bengaluru subsidiary.
| Date | Event | Obligation |
|---|---|---|
| 5 May 2026 | Incorporated via SPICe+; parent 9,999 shares, nominee 1 share; two directors, one Bengaluru-resident | Section 149(3) satisfied; MGT-6 nominee declaration |
| 20 May 2026 | USD 500,000 received from parent (₹4.2 crore) | Allot by 19 July 2026 (60 days) |
| 10 June 2026 | Board allots 4,19,999 further shares at ₹100 (par; valuation certificate obtained) | FC-GPR by 10 July 2026 (30 days) |
| 8 July 2026 | FC-GPR filed on FIRMS with FIRA, KYC, CS certificate, valuation | Acknowledged 22 July |
| October 2026 | INC-20A filed; GST, LUT, intercompany agreement in place; first export invoice | — |
| 15 July 2027 | FLA return for 31 March 2027 on FLAIR | Annual, continuing |
Had the FC-GPR been filed on 10 September 2026 (two months late), the late submission fee would be ₹7,500 + 0.025% × ₹4.2 crore × (2/12 years, rounded as the RBI matrix prescribes) — a small sum, but the delay would appear in the RBI acknowledgement permanently.
Common mistakes we see
- Spending the subscription money on salaries before allotting shares, then missing the 60-day allotment window.
- Filing FC-GPR late because the Entity Master and business-user registration on FIRMS were never set up.
- Appointing two non-resident directors and discovering the resident-director requirement at the first annual filing.
- Overlooking Press Note 3 where the parent's cap table includes investors from a land-border country.
- Issuing shares to the parent at par in a later round without a valuation, in breach of the pricing guidelines.
- Never filing the FLA return because 'the auditor handles RBI'.
Frequently asked questions
Can a foreign company own 100% of an Indian company?
Yes, in most sectors under the automatic route of the FDI policy, with reporting to the RBI after the investment. Some sectors have caps or require Government approval, and investors from land-border countries always need approval under Press Note 3 of 2020.
Is a resident Indian director mandatory?
Yes. Section 149(3) of the Companies Act, 2013 requires at least one director who has stayed in India for 182 days or more in the financial year. The director need not be an Indian citizen or a shareholder.
What is the deadline for FC-GPR?
Within 30 days of the allotment of shares to the non-resident, filed through the Single Master Form on the RBI's FIRMS portal.
Within how many days must shares be allotted after receiving FDI?
Within 60 days of receipt of the money. If not allotted, the money must be refunded within 15 days after the 60 days expire.
When is the FLA return due?
By 15 July each year, for the position as at 31 March, on the RBI's FLAIR portal. The RBI has occasionally extended the date; do not rely on an extension.
What is the penalty for late FC-GPR or FLA?
A late submission fee — ₹7,500 plus 0.025% of the amount involved per year of delay for FC-GPR and other flow forms, and a flat ₹7,500 for the FLA return — for delays up to three years. Beyond that, the contravention must be compounded with the RBI.
Does the Indian subsidiary need a valuation at incorporation?
Subscription at par on incorporation is generally accepted. Any subsequent issue to the non-resident parent requires a fair valuation certificate under the pricing guidelines.
Sources
Primary sources only. Statutory text is read from the official publication; where a provision has been renumbered, the pre-2026 reference is given alongside so older material can be reconciled.
- FEMA notifications — Reserve Bank of India
- RBI Master Directions — Reporting under FEMA; External Commercial Borrowings; Overseas Investment; Export of Goods and Services; LRS
- FIRMS portal — Single Master Form (FC-GPR, FC-TRS, LLP, CN, ESOP, DI)
- FLAIR portal — Foreign Liabilities and Assets return
- Consolidated FDI Policy and Press Notes — DPIIT
- Companies Act, 2013 and rules — Ministry of Corporate Affairs
Last reviewed on 1 November 2026 by Suchit Jhunjhunwala, FCA, VMS Jhunjhunwala & Co. Law stated as at that date; the Income-tax Act, 2025 and Income-tax Rules, 2026 apply from 1 April 2026.
