Doing business in India: a legal guide for foreign companies (2026)

Background 

Doing business in India as a foreign company means working through four sets of rules at once: the Companies Act 2013 for the entity you set up, the foreign-exchange (FEMA) and FDI rules for the money you put in and take out, the Income-tax Act 2025 and GST for tax, and the four Labour Codes for your workforce. This guide compares the vehicles open to a foreign company (private and public companies, LLPs, branch, liaison and project offices) and sets out formation steps, timelines, ongoing compliance, repatriation and the main legal risks. It reflects the law as at October 2026, including the Income-tax Act 2025 (in force from 1 April 2026), the Labour Codes (in force from 21 November 2025) and Press Note 2 (2026) on investors with land-border owners [1][2][3]. For the approval rules in detail, see FDI in India: rules, routes and approvals for foreign investors (2026).

Corporate Structures in India

India offers several business vehicles. A Private Limited Company (Pvt Ltd) and Public Limited Company are governed by the Companies Act 2013. Both now have no minimum capital requirement (amended in 2015). Private companies require at least 2 shareholders and 2 directors (one director must be resident in India), and cannot invite public investment (max 200 members). Public companies need at least 3 directors and 7 shareholders, and may issue shares to the public. An One-Person Company (OPC) is a private company with a single shareholder (individual) and director. It cannot invite outside investment and must convert to a private company if more members are added. 

A Limited Liability Partnership (LLP) (LLP Act 2008) blends partnership flexibility with limited liability. An LLP requires at least 2 partners; there is no statutory upper limit on partners (unlike traditional firms capped at 50 by Companies Rules). Partners manage the LLP per an agreement, and enjoy limited liability. A Partnership Firm (Indian Partnership Act 1932) requires at least 2 partners and is limited to 50 (by Companies Act rules); partners have unlimited joint liability. 

A Branch Office/Project Office/Liaison Office allows a foreign company to operate in India without separate incorporation. These must register with RBI and a designated bank under FEMA. A Liaison Office (LO) can only represent its parent or promote exports in India. A Branch Office (BO) may undertake limited commercial activities (e.g. export/import, consultancy, IT services). A Project Office (PO) is for executing a specific contract or project; upon completion it must wind down or extend with RBI approval. 

Foreign Direct Investment (FDI) Regime

India’s FDI policy (set by DPIIT/Commerce and backed by FEMA) classifies investment as Automatic or Government Route depending on sector. Under the automatic route, no prior approval is needed from the Indian government; key sectors like manufacturing, agriculture, mining, IT, telecom, retail (wholesale cash and carry and e-commerce), and infrastructure generally allow 100% FDI. The table below illustrates examples of automatic-route sectors and FDI caps: 

Note: The above is illustrative. Please consult the current Consolidated FDI Policy for full details. Sectors not listed above or marked “Government route” require prior approval from the relevant ministry, applied for on the National Single Window System (NSWS) with DPIIT coordinating (the FIPB no longer exists). Lottery, gambling, atomic energy and the other prohibited sectors cannot take FDI at all.” [5][11] FDI in an existing Indian company (by subscription or share purchase) must also comply with pricing and reporting rules under FEMA (e.g. FCGPR filings to RBI for equity infusion, under the FEMA (NDI) Rules 2019). All investments by non-residents require reporting to RBI (Form FC-GPR within 30 days of share issue, and an annual FLA return). 

FEMA/RBI Procedures (FDI & ODI) 

All foreign investments must flow through an AD Category-I bank. Under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules), an Indian company can issue shares to a non-resident only at or above fair value: for unlisted shares, a value certified by a chartered accountant, SEBI-registered merchant banker or practising cost accountant; for listed shares, SEBI pricing” [6] Reporting: Indian companies receiving FDI must file Form FC-GPR (Foreign Currency-Gross Provisional Return) with an AD bank within 30 days of allotting shares[22], and an annual foreign liabilities/assets (FLA) return by July 15 each year. 

Compliance Checklists

Indian businesses face extensive ongoing compliance. Important checklists include: 

Corporate Governance & Secretarial Compliance: Under the Companies Act, companies must hold board meetings (minimum four per year, or as per threshold) and Annual General Meetings. All companies must file annual financial statements (Form AOC-4) and annual returns (Form MGT-7) within 30/60 days of the AGM. Unlisted public companies must also file half-yearly share capital reconciliation (Form PAS-6). Any special/board resolutions (e.g. approval of related-party transactions, appointment of auditor) are filed via MGT-14 or ADT-1 as required. Accounting & audit: Financial statements must comply with Ind AS/IGAAP and be audited. Large companies must constitute an Audit Committee and CSR obligations under section 135 (net worth of INR 500 crore or more, turnover of INR 1,000 crore or more, or net profit of INR 5 crore or more). 

Tax Compliance: Companies must obtain a PAN and TAN and comply with the Income-tax Act 2025, which replaced the 1961 Act from 1 April 2026 (first tax year 2026-27) and renumbered its sections and forms. Advance tax must be paid quarterly if liability is large. The Goods and Services Tax (GST) require registration if turnover exceeds ₹40L (goods) or ₹20L (services); GST returns (GSTR-1, 3B) are filed monthly/quarterly based on turnover. Transfer pricing rules apply if there are cross-border-related party transactions. Companies must maintain documentation and file the transfer-pricing accountant’s report (Form 48, formerly Form 3CEB, from tax year 2026-27)” [1] if transaction value exceeds thresholds. File the annual return and pay advance tax quarterly.” Delete the presumptive-tax sentence (those schemes are not open to companies). [1] to eligible entities. 

Secretarial Filings: Besides annual ROC filings, there are event-based filings: e.g. Form PAS-3 for capital changes, DIR-12 for director changes, Form INC-20A, the declaration of commencement of business under section 10A, due within 180 days of incorporation for a company with share capital, and others. Listing companies must file periodic shareholding pattern, corporate governance reports, and disclosures to SEBI (via LODR Regulations). 

Labor & Social Security: Four Labour Codes (the Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020 and the Occupational Safety, Health and Working Conditions Code 2020) have been in force since 21 November 2025 and consolidate 29 central labour laws. Provident fund, state insurance and gratuity continue under the Code on Social Security; fixed-term employees now earn gratuity after one year. The contract-labour licensing threshold rises from 20 to 50 workers. Central rules were notified on 8 May 2026; state rules are still being notified, so check the state where you employ staff. Shops and establishments registration under state law still applies.” [2][13]

Environmental & Safety: Industrial or infrastructure projects often require environmental clearance from the Ministry of Environment or State PCB (under the EIA Notification) before construction. Factories need No Objection Certificates (NOCs) for pollution, and workplace safety rules under the Occupational Safety, Health and Working Conditions Code 2020, which subsumed the Factories Act 1948. 

Sector Licenses: Industry-specific regulations must be followed – e.g. FSSAI license for food businesses, Drug Controller approvals for pharma manufacturing, RBI/IRDAI licences for NBFC/insurance companies, DOT license for telecom services, ISI/BIS certifications for certain products, etc. 

General Compliance Calendar: Companies must file annual returns with ROC (Form AOC-4/AOC-4 CFS, MGT-7) and LLPs file Form 8 (financial statements) and Form 11 (annual return) by prescribed deadlines. Income-tax audit reports (if turnover > ₹1 crore for companies) are due by September 30. Statutory registers (share transfer register, register of directors’ interests, minutes books) must be maintained at the registered office. 

In summary, non-compliance can trigger penalties and prosecution. Maintaining a detailed compliance calendar (board meetings, filings, tax deadlines) is essential.

Practical steps for foreign investors

Entity Selection: Foreign investors first decide how to enter. If pursuing a specific Indian project without local incorporation (e.g. a construction contract), a Project Office may suffice (with RBI approval). For marketing or liaison only, a Liaison Office is the simplest. To actually sell products or operate locally, the investor must form an Indian entity or acquire one. The main options are: (a) Wholly-Owned Subsidiary (private company with 100% foreign holding where allowed and a nominee shareholder); (b) Joint Venture Company (newly incorporated company with a local partner sharing equity); (c) Branch Office (an extension of the foreign parent, taxed at 35% plus surcharge and cess, 36.4%–38.22% effective, in tax year 2026-27; no manufacturing, processing or retail outside an SEZ); or (d) LLP or other structure. Often a private limited company (Pvt Ltd) is preferred for ease of ownership and limited liability. 

Registration Timeline: In practice, private-company incorporation can be quite fast via the SPICe+ e-form system: name approval (≈1–2 days), DIN/DSC procurement (immediate online), and registration with MOA/AOA can take 1–2 weeks if documents are in order. Opening a bank account and obtaining a Tax ID (PAN/TAN) happens in parallel once incorporation is approved. For 100% FDI (subject to sector), after share allotment the company must file Form FC-GPR (to RBI) within 30 days of allotment of shares. A branch, liaison or project office applies through an Authorised Dealer Category-I bank on Form FNC; applications are referred to the RBI or the government only in specified cases (for example, land-border applicants and certain sectors) (depending on completeness of application and review). 

Documentation: Common documents include (for company incorporation) identity/address proofs of directors, consent/declarations (Form DIR-2, INC-9), registered office proof, and MOA/AOA draft. For FDI, KYC of investor (FIRC, passport, board resolution, certificate of incorporation) is needed. FDI reporting is made on the RBI’s FIRMS portal (Foreign Investment Reporting and Management System) through your bank: FC-GPR within 30 days of allotment. If any owner from a country sharing a land border with India holds an interest below the threshold and has no control, the company files the land-border (LBC) form on NSWS before the money is remitted.. The RBI also issues a Unique Identification Number (UIN) for each BO/LO/PO. 

Transaction Structures

1. Wholly-Owned Subsidiary (WOS): The simplest is for the foreign investor to subscribe to 100% of shares in a new or existing Indian Pvt Ltd. If foreign equity is 100% (in an automatic-route sector), only ROC and RBI filings are needed, no govt nod. 
2. Joint Venture (JV): The foreign investor partners with an Indian company/person to form a new company. Sectoral caps and government approvals apply as usual. JV agreements must address management, funding, and exit. 
3. Acquisition: Buying an existing Indian company’s shares or assets. This requires compliance with takeover regulations if acquiring >25% of a listed firm (SEBI Takeover Code) and possible CCI merger filing (if turnover criteria met). Stamp duty on share transfers can be high. 

Profit Repatriation: Profits can be sent back via dividends or branch remittance. Dividends paid to a foreign parent bear withholding tax at the 20% rate set by section 207 of the Income-tax Act 2025, plus surcharge and cess (20.8%–21.84%), or the lower treaty rate where the parent provides a tax residency certificate and Form 41 (formerly Form 10F). Branch profits can be remitted net of Indian tax on audited accounts and a chartered accountant’s certificate through the bank, without separate RBI permission and without any Indian tax on the remittance. Outward remittances from 1 April 2026 use Forms 145 and 146 (formerly 15CA and 15CB). Capital repatriation on sale of shares is normally allowed repatriable foreign exchange (with payment of any capital gains taxes). Transfer pricing and GAAR provisions apply on related-party cross-border payments. 

Key Risk Areas and Mitigation

1. Regulatory Risk: Policy changes (e.g. sudden sector cap revision) can affect investment plans. Mitigation: Keep abreast of DPIIT press notes (e.g. changes in defense or insurance FDI caps) and structure deals with flexibility (e.g. conditional commitments). 
2. Tax Risk: Transfer pricing audits or disallowances on expenses can increase costs. Aggressive characterization (FDI vs loan) can trigger penalties. Mitigation: Maintain robust transfer pricing documentation, adhere to RBI pricing rules for share issues, and use professional tax advice. 
3. Employment/Labor Risk: Indian labor laws (e.g. gratuity, PF) are The four Labour Codes have applied since 21 November 2025 and state rules are still being notified; check the rules of each state where you employ staff. Violations can lead to fines or stoppages. Mitigation: Register with PF/ESIC, enforce proper contracts and labour compliances from day one; consider seeking dispensations (e.g. thresholds under labour codes). 
4. Intellectual Property: Foreign technology and trademarks may be unprotected in India. Mitigation: File for patents, trademarks, and copyright in India early, and monitor infringement. 
5. Competition Law: Combinations need prior CCI approval where the parties’ combined India assets exceed INR 2,500 crore or turnover INR 7,500 crore (group: INR 10,000 / 30,000 crore, with worldwide alternatives), or where the deal value exceeds INR 2,000 crore and the target has substantial Indian operations. The small-target exemption notified on 7 March 2024 (India assets up to INR 450 crore or turnover up to INR 1,250 crore) was granted for two years and does not apply to the deal-value test; confirm it has been renewed before relying on it. Mitigation: run the tests before signing and build CCI approval into the conditions.
6. Currency and Repatriation Controls: FEMA rules restrict certain capital movements. Mitigation: Structure transactions via permitted routes, repatriate earnings only after due compliance (e.g. RBI reporting forms, tax compliance), and maintain forex accounts. 

Due Diligence & Costs (CHECKLIST AND TIMELINE) 

A comprehensive due diligence for an acquisition or JV should cover: 

1. Corporate: Verify incorporation documents, board/shareholder resolutions, ROC filings (annual returns, charges). 
2. Financial: Audited accounts for 3–5 years, tax returns, debt/loan covenants. 
3. Legal: Material contracts (leases, sales, supply), litigation history, regulatory licenses. 
4. Compliance: Check adherence to labor laws (employee records, benefits), environment (consents, inspections), and sector rules. 
5. Intellectual Property: Ownership of patents/trademarks, any licensing or disputes. 
6. Tax: Review transfer pricing policy, past audits, potential liabilities. 

A sample timeline (approx.) might be as follows: name reservation 1–2 days; incorporation paperwork 2–4 weeks; opening bank account and tax registrations 1–2 weeks; Automatic-route FDI: no approval, post-investment reporting only. Government-route FDI: DPIIT’s target is 12 weeks, but plan for six months or more for land-border cases. BO/LO/PO: bank processing via Form FNC; sectoral licenses (e.g. drug/trade license) 2–8 weeks depending on agency. Government fees and professional fees vary by state and firm. For example, a nominal government fee (≈nominal; varies by state and authorised capital) applies for private company registration at ₹100,000 authorized capital; annual ROC filing (AOC-4/MGT-7) is fee-free up to ₹1 lakh capital, then rising with capital. RBI application (Form FNC/FCBP) has minimal fee but may require chartered accountant certification. 

Indicative Timeline And Fees

All activities above require certified copies and/or notarized docs (with apostille if overseas documents are submitted).  

Sources

1. Income Tax Department, press release: Income-tax Act 2025 in force from 1 April 2026 — https://www.incometaxindia.gov.in/documents/d/guest/press-release-income-tax-act-2025-comes-into-force-from-01-april-2026-pdf ; FAQs on forms under the Income-tax Rules 2026 (10F→41, 15CA→145, 15CB→146, 3CEB→48) — https://www.incometaxindia.gov.in/w/faqs-on-forms-as-per-income-tax-rules-2026-1
2. PIB, Prime Minister’s Office, “Prime Minister welcomes the implementation of the Four Labour Codes” (21 November 2025) — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2192540 ; PIB, “India’s Labour Reforms: Simplification, Security, and Sustainable Growth” (backgrounder, 21 November 2025: 29 laws consolidated; fixed-term gratuity after one year; contract-labour threshold 20 → 50; Factories Act among the Acts merged into the OSH Code) — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2192524&reg=3&lang=2
3. DPIIT, Press Note 2 (2026 Series) — https://www.dpiit.gov.in/static/uploads/2026/03/b9da5830b052c2f2d788593e97d07c63.pdf
4. DPIIT, Press Note 1 (2026 Series), insurance — https://www.dpiit.gov.in/static/uploads/2026/02/4eddf849f19d658e3a74dc32d344b5f9.pdf
5. DPIIT, Consolidated FDI Policy Circular 2020 — https://www.dpiit.gov.in/static/uploads/2025/07/6457fc2703ee6082366c4a958b6473a8.pdf
6. Reserve Bank of India, FEMA (Non-Debt Instruments) Rules 2019, consolidated to 2 September 2026 — https://rbi.org.in/Scripts/bs_viewcontent.aspx?Id=5083
7. Income Tax Department, First Schedule (Finance Act 2026) — https://www.incometaxindia.gov.in/w/first-schedule-104 ; s.200 Income-tax Act 2025 — https://www.incometaxindia.gov.in/w/section-200-77
8. Income Tax Department, section 207, Income-tax Act 2025 (tax on dividends, royalty and fees for technical services of non-residents and foreign companies: dividends at 20%) — https://www.incometaxindia.gov.in/w/section-207-76 ; Income Tax Department, Rule 220, Income-tax Rules 2026 (Forms 145/146) — https://www.incometaxindia.gov.in/w/rule-220-1
9. RBI, FEMA 22(R)/2016-RB (branch, liaison and project offices) — https://rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=10327 ; RBI Master Direction 10/2015-16 — https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10404
10. Competition Commission of India, Filing of combination notice: introduction (current section 5 asset and turnover thresholds; de minimis target exemption, S.O. 1131(E), 7 March 2024, for two years from gazette publication: India assets up to INR 450 crore or turnover up to INR 1,250 crore) — https://www.cci.gov.in/combination/combination/filing-of-combination-notice/introduction ; Competition (Minimum Value of Assets or Turnover) Rules 2024, G.S.R. 547(E) — https://egazette.gov.in/WriteReadData/2024/257007.pdf ; CCI, Fair Play (Nov 2024), deal-value threshold — https://www.cci.gov.in/images/publications_fairplay/en/fp-50-61124315pm-final-online-compressed1730891120.pdf
11. DPIIT, Standard Operating Procedure for FDI proposals, 4 May 2026 — https://fifp.gov.in/Forms/SOP.pdf
12. LiveLaw, “Unlocking FDI for ‘Made in India’ exports: analyzing new framework for inventory-based e-commerce” (31 August 2026; DPIIT Press Note 3 (2026 Series), 23 July 2026) — https://www.livelaw.in/articles/unlocking-fdi-made-in-india-exports-analyzing-framework-inventory-based-ecommerce-547807 ; Ministry of Finance, Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules 2026, S.O. 4870(E), 2 September 2026, Gazette of India (Extraordinary) No. 4683, 3 September 2026 (new entry 15.2.5: inventory-based e-commerce permitted for export of goods made or produced in India; in force on publication)
13. PRS Legislative Research, Code on Wages (Central) Rules 2026 (central rules under the four Codes notified 8 May 2026) — https://prsindia.org/billtrack/code-on-wages-central-rules-2026
14. RBI, Master Direction — Reporting under FEMA (updated 1 October 2026; FIRMS portal, FC-GPR, FC-TRS, Form DI) — https://www.rbi.org.in/scripts/bs_viewmasdirections.aspx?id=10202
15. DPIIT, Press Note 4 (2021 Series), telecom services 100% automatic (6 October 2021) — https://www.dpiit.gov.in/static/uploads/2025/07/ac023f4ea2330b3a29be1b999dabf826.pdf

Part of ATB Legal’s Corporate & Commercial practice.