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Subsidiary Office Benefits in India

A foreign company can start operations in India by incorporating the subsidiary company under the Company Act, 2013. Subsidiary Office is treated as a domestic company under laws of Indian taxation and is eligible for all exemptions, deduction advantages as applicable to any other Indian Company. The Indian subsidiary company is a company whose interests are held and controlled by another company. Compare to Branch office and Liaison office, Indian Subsidiary Company has a separate legal entity whereas the Branch Office or Liaison Office has no separate entity. It means that in case of registration of wholly owned subsidiary company in India, it is considered as an Indian entity according to the laws prevailing in India; whereas Branch office registration & Liaison office registration are considered as foreign entity in India.

A large no. of foreign companies want to do business in India, however, excessive corruption as well as delays in getting approvals are major issues which stops foreign companies from opening an Indian Subsidiary.

The government has realized these kinds of problems faced by foreign companies and so, taken variant steps to minimize the approval time for formation of wholly owned subsidiary in India.

These includes doing away with initial requirement of having DIN (Director identification Number ), introduction of new form for instant approval of proposed company name (RUN) & new spice form for applying for final approval for registration.

These positive steps will deliver results in long run and more and more foreign companies will encourage for opening an Indian Subsidiary.

There are some advantages of subsidiary company as mentioned below which must be bear in mind before going for registration of wholly owned subsidiary in India by foreign company:-

Benefits of Starting an Indian Subsidiary Company:

  1. An Indian Subsidiary company takes the benefit of Separate Legal Identity in the eyes of law.
  2. Indian subsidiary have a Management structure of its own, different from the parent company.
  3. Shareholders or the owners of a Company have a limited liability towards the company.
  4. In case of Indian Subsidiary, FDI is allowed 100% without any prior permission However it requires posts facto filing/intimation to the Reserve Bank of India.
  5. Parent Company (based in any part of the world) can retain a 100% effective ownership of its Indian Counter-part.
  6. The parent company can provide the monetary means & capability to jump start new companies & products.
  7. Parent company can provide continuous inflow of funds by subscribing to new shares of subsidiary company and hence save it from cost of debt.
  8. This arrangement provides benefit of offsetting losses from profits too, allows joint ventures(JV)with other companies.
  9. In terms of Taxation as well, the Indian subsidiary will have the same tax structure as a domestic company in India.
  10. An Indian subsidiary can perform all the works as permitted and mentioned in MoA (Memorandum of association).
  11. Time & money spent in registering an Indian Subsidiary is less than the Branch office registration
  12. One of the important benefits that subsidiary company gets financial support from parent company in terms of funding by share subscription money, training, employees and other consultancy free of cost or at very nominal price which is very arduous for any newly established company.
  13. Parent company can provide continuous flow of funds by subscribing to new shares of subsidiary company and thus save it from cost of debt.
  14. This arrangement allows joint ventures (JV) with other companies too.