Comprehensive Guide to Foreign Company Compliances in India

Comprehensive Guide to Foreign Company Compliances in India: Mandatory Foreign Subsidiary Company Compliances & Form FC-1 Submission

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Navigating the intricate web of regulatory compliances is a critical challenge for foreign companies operating through subsidiaries in India. With India emerging as a preferred investment destination, attracting over $83.57 billion in Foreign Direct Investment (FDI) in FY 2021-22, the regulatory landscape has become increasingly complex. Many foreign subsidiaries find themselves struggling with the multifaceted compliance framework, often facing penalties, operational disruptions, and reputational damage due to non-compliance.

This comprehensive guide addresses the pressing need for clarity on mandatory compliances applicable to foreign subsidiary companies in India. Whether you're a foreign investor establishing operations in India or an Indian business owner managing foreign subsidiaries understanding these compliance requirements is crucial for sustainable business operations.

Overview of Foreign Company Compliances in India

A foreign subsidiary company in India is defined as a company incorporated in India where the foreign parent company holds more than 50% of the shareholding, either directly or indirectly. According to the Companies Act, 2013, such entities are considered Indian companies for regulatory purposes but must comply with additional requirements due to their foreign ownership structure.

Key characteristics of foreign subsidiary companies include:

Incorporation under Indian laws (Companies Act, 2013)
Foreign parent company holding majority stake
Subject to both domestic and international regulatory frameworks
Required to maintain transparency in ownership structure and operations

Legal Framework Governing Foreign Subsidiary Companies in India

Foreign subsidiary companies operate within a comprehensive regulatory ecosystem governed by multiple statutes:

Companies Act, 2013 and Rules thereunder
Foreign Exchange Management Act (FEMA), 1999
Income Tax Act, 1961
Goods and Services Tax Act, 2017
Various Labour Laws including Industrial Disputes Act, Employees' Provident Funds Act

Mandatory Compliances Applicable to Foreign Subsidiary Companies in India

This comprehensive analysis presents the mandatory tax and legal compliance requirements for subsidiaries of foreign companies operating in India, updated as per the latest legal framework for 2025. The compliance landscape encompasses five major regulatory areas, each with specific timelines and documentation requirements.

Compliance under Companies Act, 2013 (and Allied Rules)

Compliance Forms & Deadlines

S.No.	Compliance Form	Due Date	Remarks
1	Board Meeting	Within 30 days of incorporation	Minimum 4 meetings per year with max gap of 120 days between meetings
2	Annual General Meeting (AGM)	Within 9 months of financial year end (by 30th September)	Mandatory for all companies; special provisions for OPC, small companies
3	Annual Return (Form MGT-7/7A)	Within 60 days from AGM date (generally by 29th November)	Contains company structure, shareholding, directorship details
4	Financial Statements (Form AOC-4)	Within 30 days from AGM date (generally by 29th October)	Balance sheet, P&L, cash flow statements with auditor's report
5	Auditor Appointment (Form ADT-1)	Within 15 days of AGM where auditor appointed	Mandatory statutory audit by qualified CA
6	Director Information (Form DIR-12)	Within 30 days from AGM	Annual disclosure of directorship and interest
7	Statutory Registers	Continuous maintenance	Maintain registers of members, directors, charges, meetings etc.
8	Form FC-1	Within 30 days of incorporation	For subsidiaries of foreign companies - one-time filing
9	Form FC-3	Within 30 days of establishing place of business	Details of business operations and financial records
10	Form FC-4	Within 6 months of financial year end	Financial statements and related party transactions
11	Compliance Certificate	Within 60 days of financial year end	Certificate from Company Secretary regarding statutory compliances

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Compliance under Foreign Exchange Management Act (FEMA) Regulations

Foreign Investment Compliance Forms

S.No.	Compliance Form	Due Date	Remarks
1	Foreign Investment Reporting (Form FC-GPR)	Within 30 days of share allotment	Report foreign equity investment to RBI through AD bank
2	Foreign Liabilities & Assets (FLA Return)	By 31st July each year (extended for FY 2024-25)	Annual return for companies with FDI/ODI - filed through FLAIR portal
3	Share Transfer (Form FC-TRS)	Within 60 days of transfer/receipt of funds	Transfer of shares between resident and non-resident
4	Single Master Form (SMF)	Within 30 days of any change	Entity master form in FIRMS portal - continuous update
5	FIRC Compliance	Within 30 days of receipt	Certificate from AD bank for foreign remittances
6	Downstream Investment (ODI)	As per ODI guidelines	If subsidiary makes investments in other Indian entities
7	KYC Documentation	Before share allotment	Due diligence and KYC of foreign investors through AD bank
8	Repatriation Compliance	As per FEMA guidelines	Compliance for repatriation of profits and capital to parent company
9	External Commercial Borrowing (ECB)	As per ECB guidelines	If subsidiary avails ECB - periodic reporting required
10	Compounding Application	As required for violations	For regularization of FEMA violations with penalties

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Compliance under Goods and Services Tax (GST) Act, 2017

GST Compliance Forms & Deadlines

S.No.	Compliance Form	Due Date	Remarks
1	GST Registration	Within 30 days of liability	Mandatory if turnover exceeds ₹20 lakh (₹40 lakh for goods)
2	Monthly Returns (GSTR-1, GSTR-3B)	11th and 20th of following month	Sales return (GSTR-1) and summary return (GSTR-3B)
3	Annual Return (GSTR-9)	31st December following financial year	Annual consolidation of monthly returns
4	Quarterly Returns (QRMP Scheme)	For eligible small taxpayers	Simplified return filing for small businesses
5	E-Way Bill	Before goods movement	For movement of goods above ₹50,000
6	E-Invoice	For turnover > ₹1 crore (from April 2025)	Electronic invoice for B2B transactions
7	Input Tax Credit (ITC)	Monthly reconciliation	Reconcile ITC claims with supplier returns
8	TDS Compliance	Monthly	If making payments to contractors/suppliers
9	Reverse Charge Mechanism (RCM)	As applicable	For specified services/goods under reverse charge
10	Multi-Factor Authentication (MFA)	From April 1, 2025	Mandatory two-factor authentication for GST portal access
11	GST Audit & Reconciliation	Annual	For companies with turnover > ₹2 crore

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Compliance under Income Tax Act, 1961

Income Tax Compliance Forms & Deadlines

S.No.	Compliance Form	Due Date	Remarks
1	PAN Registration	Before starting operations	Mandatory for all entities - one-time registration
2	TAN Registration	Before deducting TDS	For entities deducting tax at source
3	Income Tax Return (ITR)	31st October (31st July for audit cases)	Annual return based on company type and turnover
4	Tax Audit	30th September following financial year	Mandatory if turnover > ₹1 crore
5	Transfer Pricing (Form 3CEB)	31st October following financial year	For international transactions - certified by CA
6	Transfer Pricing Documentation	Annual maintenance	For international transactions > ₹1 crore
7	Advance Tax	15th June, Sept, Dec, 15th March	Pay advance tax in quarterly installments
8	TDS Returns	Monthly/Quarterly	24Q, 26Q, 27Q, 27EQ based on type of payments
9	TDS Certificates (Form 16/16A)	Within prescribed time	Issue TDS certificates to deductees
10	Master File/CbCR (Form 3CEAA/3CEAC)	31st March following financial year	For MNEs with revenue > ₹500 crore consolidated
11	Equalization Levy	Monthly	For digital advertising services to non-residents
12	Withholding Tax (Section 195)	Before payment to non-residents	TDS on payments to foreign entities

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Compliance under Labour Laws

Labour Law Compliance Forms & Deadlines

S.No.	Compliance Form	Due Date	Remarks
1	EPF Registration	Within 30 days of employment	Mandatory for establishments with 20+ employees
2	ESI Registration	Within 15 days of employment	Mandatory for establishments with 10+ employees
3	Professional Tax	State-specific deadlines	Monthly/quarterly returns as per state laws
4	Contract Labour License	Before engaging contract workers	For establishments using 20+ contract workers
5	Shops & Establishment License	Within 30 days of commencement	State-specific registration and renewals
6	Labour Welfare Fund (LWF)	Monthly contributions	Applicable in specific states
7	Gratuity Registration	Within 30 days if 10+ employees	Payment within 30 days of employee separation
8	Minimum Wages Compliance	Monthly verification	Ensure payment as per minimum wage notifications
9	Annual Returns	Various deadlines	Annual returns under EPF, ESI, and other labour laws
10	POSH Compliance	Annual reporting by 31st January	Prevention of Sexual Harassment compliance
11	Labour Codes Preparation	Implementation expected FY 2025-26	Preparation for unified labour law compliance
12	Workplace Safety	Annual renewals	Safety compliance and factory license renewals

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Best Practices for Ensuring Compliance

Robust Compliance Framework

Compliance Management System: Implement a comprehensive compliance management system that integrates all regulatory requirements into a unified framework. This should include Compliance Calender which can send automated reminder systems, document management capabilities, and real-time compliance tracking mechanisms.

Risk-Based Approach: Adopt a risk-based compliance approach that prioritizes high-risk areas and allocates resources accordingly. Focus on critical compliances like Form FC-1 filing, tax return submissions, and FEMA reporting that carry severe penalties for non-compliance.

Professional Expertise and Advisory Support

Qualified Compliance Officers: Appoint qualified company secretaries or compliance officers with specific expertise in foreign company tax and legal compliances. Ensure continuous training and updates on regulatory changes.

External Advisory Support: Engage with specialized legal and financial advisory firms that have deep expertise in foreign company compliances. Regular advisory support helps in staying updated with regulatory changes and best practices.

For foreign companies seeking to establish or optimize their subsidiary operations in India, partnering with experienced legal and financial advisors specializing in foreign company tax and legal compliances is essential. Professional guidance ensures not only current compliance but also strategic positioning for future regulatory changes and business expansion opportunities.

Akash Bagrecha

Co‑founder @ Jordensky | Chartered Accountant | Virtual CFO | Helped raise ₹400Cr+ for 30+ startups | Passionate about finance, tech & books.