When a US accounting firm or finance team cannot fill seats at home, a team in India usually comes up within a few meetings. The next question is structural: engage a provider, or form your own Indian company? This guide covers the second route: how a US parent sets up a wholly owned Indian subsidiary, the FEMA and Companies Act timelines, and the first twelve months of compliance, so the decision is made with the calendar in front of you.
- A US company can generally hold 100% of an Indian private company under the automatic route, unless the sector is capped or prohibited or a beneficial owner is from a land-border country (RBI Master Direction, paras 5.2.3 and 3.2).
- Four dates drive the first year: auditor appointment within 30 days of incorporation, Form FC-GPR within 30 days of share issue, INC-20A within 180 days, and Form FLA by 15 July.
- The US parent usually files Form 5471; the IRS penalty is $10,000 per foreign corporation per annual accounting period, plus continuation amounts up to $50,000.
- BLS expects about 115,300 US accountant and auditor openings a year. A subsidiary adds capacity but is a permanent compliance commitment, so many firms pilot with a provider first.
1. Why firms look at India, and the choice in front of you
The US staffing pressure is documented rather than speculative. The Bureau of Labor Statistics counted 1,595,200 accountants and auditors in 2025, projects 5% growth to 2035 and expects about 115,300 openings a year, many from people leaving the occupation. That describes national demand and churn, not any one firm. But for a partner with a senior seat open for two busy seasons, an India team doing production work under US review is a reasonable option to price.
There are two ways to get that team. You can engage a service provider, which needs contracts but no entity. Or you can incorporate your own Indian company, which gives you direct employment and control, and which also gives you an Indian statutory calendar for as long as the company exists. A subsidiary suits a permanent, larger team and real management attention. The rest of this guide sets out its cost in dates and forms.
2. Entry options compared
| Route | What it is | Points to weigh |
|---|---|---|
| Wholly owned subsidiary (private limited company) | Separate Indian legal entity, shares held by the US parent | Limited liability; full Companies Act, tax and FEMA compliance; can employ staff and contract in its own name |
| Branch, liaison or project office | Extension of the foreign company, set up with RBI authorised-dealer permission | Separate FEMA permissions and activity limits apply; not covered in this guide |
| Service provider | An Indian firm delivers the work under a services agreement | No entity to maintain; contract, data-protection and review controls carry the weight |
| Employer of record | A local entity employs the people on your behalf | Fast to start; you manage the work while another party holds the employment relationship |
This guide covers the first row. Whichever route you choose, take advice on whether the activity creates a taxable presence in India for the parent.
3. Incorporation: the working steps
| Step | What happens | Practical point |
|---|---|---|
| 1. Structure and name | Decide the shareholders, directors, registered office state and main objects | Name approval and incorporation are filed through the MCA's integrated SPICe+ process. Settle the registered office state first; it affects professional tax and labour registrations |
| 2. Directors | At least two directors; at least one who stays in India 182 days in the year | The resident-director rule applies proportionately at the end of the first financial year (Companies Act s.149(1) and (3)) |
| 3. Incorporation | Certificate of incorporation with CIN, PAN and TAN | The 30-day first-auditor clock starts from registration |
| 4. Bank account and capital | Open a company account; the parent remits the subscription money from abroad | Receipt through banking channels and a foreign inward remittance certificate (FIRC) with the remitter's KYC are the base documents for FC-GPR |
| 5. Operating registrations | GST where required, provident fund, ESI, professional tax and shops and establishment as applicable | Thresholds and applicability depend on headcount, state and activity; confirm before the first payroll |
4. FEMA and FDI reporting
Capital moving into an Indian company from abroad is regulated under FEMA, and the paperwork runs alongside the Companies Act filings, not inside them. Four rules matter at the start.
- Route. Up to 100% under the automatic route in sectors not capped, listed for approval or prohibited (Master Direction on Foreign Investment in India, para 5.2.3). If an entity or beneficial owner is from a land-border country, investment is only under the Government route (para 3.2).
- Pricing. Unlisted shares issued to a non-resident must not be priced below fair value determined by an internationally accepted method, supported by a certificate from a Chartered Accountant, a SEBI-registered merchant banker or a practising cost accountant, and the valuation must be no more than 90 days old at the date of investment (paras 8.1.1(2) and 8.11).
- Reporting. The Reporting Regulations, 2019 (as amended to 13 June 2026) set the timelines in the next table.
| Form | Trigger | Deadline | Source |
|---|---|---|---|
| FC-GPR | Issue of equity shares to a non-resident as FDI | Not later than 30 days from the date of issue | Reg. 4(1), FEMA 395/2019-RB |
| FC-TRS | Transfer of shares between a resident and non-resident | Within 60 days of transfer or of receipt or remittance of funds, whichever is earlier | Reg. 4(3) |
| FLA | Outstanding FDI as on end-March | On or before 15 July each year | Reg. 4(2); RBI FLA FAQ |
5. First-year compliance calendar
Dates run from incorporation, the share issue and the first year-end.
| When | Action | Authority and basis |
|---|---|---|
| Within 30 days of registration | Board appoints the first auditor (Form ADT-1 follows) | Companies Act s.139(6); if the Board misses it, members appoint at an EGM within 90 days |
| On receipt of funds and issue of shares | Allot shares, record the FIRC and KYC, obtain the valuation certificate | Master Direction paras 8.1.1 and 8.11 |
| Within 30 days of share issue | File FC-GPR through the AD bank on the RBI's FIRMS portal | Reg. 4(1), FEMA 395/2019-RB |
| Within 180 days of incorporation | File INC-20A before commencing business or borrowing | Companies Act s.10A |
| Within 9 months of first year-end | Hold the first AGM | Companies Act s.96(1) |
| Within 30 days of the AGM | File financial statements (AOC-4) | Companies Act s.137(1) |
| Within 60 days of the AGM | File the annual return (MGT-7) | Companies Act s.92(4) |
| By 15 July after the first 31 March with FDI outstanding | Submit the FLA return | Reg. 4(2) |
| Each year | Income-tax return, Form 3CEB for international transactions with the parent, TDS returns, GST returns if registered | Income-tax Act and GST law; confirm the notified dates each year on incometaxindia.gov.in |
6. Worked example: a January incorporation
Facts (illustrative). A US accounting firm incorporates a wholly owned Indian private company on Tuesday 5 January 2027. The parent remits the subscription money on 12 January, the board allots shares on Wednesday 27 January 2027, and the first financial year ends 31 March 2027. The first AGM is held on Monday 20 December 2027.
| Obligation | Computation | Date |
|---|---|---|
| First auditor appointed | 5 Jan 2027 + 30 days | Thursday 4 February 2027 |
| FC-GPR filed | 27 Jan 2027 + 30 days | Friday 26 February 2027 |
| INC-20A filed | 5 Jan 2027 + 180 days | Sunday 4 July 2027, so file by Friday 2 July |
| FLA return (FDI outstanding at 31 March 2027) | Fixed date | Thursday 15 July 2027 |
| First AGM latest | 31 Mar 2027 + 9 months | Friday 31 December 2027 |
| AOC-4 after AGM on 20 Dec 2027 | + 30 days | Wednesday 19 January 2028 |
| MGT-7 after AGM on 20 Dec 2027 | + 60 days | Friday 18 February 2028 |
Reading the result. Three deadlines fall inside the first 60 days, and they depend on papers that live abroad: the remittance advice, the parent's KYC and the valuation. A well-run set-up has them ready before incorporation. Recompute from your own dates.
7. Tax, transfer pricing and the US side
Indian tax. A domestic company may opt for the concessional regime in section 200 of the Income-tax Act, 2025, which prescribes a 22% rate on conditions, including giving up certain deductions and set-offs. The option is exercised by the return due date and, once exercised, continues. Surcharge and cess are separate. Model both regimes with your adviser before the first return.
Transfer pricing. If the subsidiary provides services to the US parent, that is an international transaction and must be priced at arm's length and reported in Form 3CEB. Agree the intercompany services agreement, the pricing method and the invoicing currency before the first invoice, and confirm each year's notified due date.
US reporting. The parent usually files Form 5471. Category 4 covers a US person who controls a foreign corporation (more than 50% of vote or value), and Category 5 covers a US shareholder of a controlled foreign corporation (10% or more). The IRS instructions state a $10,000 penalty for each annual accounting period of each foreign corporation, plus a further $10,000 for each 30-day period after a 90-day notice, limited to $50,000 for each failure. Coordinate dates with your US tax adviser.
Accounting firms. If client data will be handled by your own subsidiary, AICPA, section 7216 and information-security duties remain with you. See our offshore data security control map.
8. Pre-flight checklist
- You have chosen between a provider pilot and a subsidiary, and the headcount case is written down.
- The sector is on the automatic route, no beneficial owner is from a land-border country, and a resident director is identified.
- Attested parent documents, remitter KYC and the remittance route are ready before incorporation.
- A valuation certificate no more than 90 days old is arranged for the share issue.
- The FC-GPR, ADT-1, INC-20A and FLA dates are in a shared calendar with named owners.
- An intercompany services agreement and a transfer pricing approach are agreed before the first invoice.
- Your US adviser has the Form 5471 timetable, and payroll registrations are confirmed before day one of employment.
For the staffing context and the alternative of an offshore bench without an entity, read Build an Offshore Accounting Bench Instead of Chasing Local Hires and US CPA Shortage: Why Firms Offshore Bookkeeping to India.
9. Frequently asked questions
Can a US company own 100% of an Indian subsidiary?
Yes, in most sectors. Under the RBI Master Direction on Foreign Investment in India, para 5.2.3, investment of up to 100% is permitted under the automatic route in sectors that are not listed with a cap or approval requirement and are not prohibited. Check your sector's conditions first. If a beneficial owner is from a land-border country, the Government route applies (para 3.2).
How many directors does the Indian company need, and must any be resident in India?
A private company needs at least two directors (Companies Act 2013, s.149(1)). At least one director must have stayed in India for not less than 182 days in the financial year (s.149(3)); for a newly incorporated company this applies proportionately at the end of its first financial year.
What is Form FC-GPR and when is it due?
It is the report to the RBI, filed through your authorised dealer bank, when the Indian company issues equity shares to a non-resident under FDI. Regulation 4(1) of the FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 requires it not later than thirty days from the date of issue of equity instruments.
Do we have to file the FLA return every year?
Yes, where the company has outstanding foreign direct investment as on end-March. Regulation 4(2) requires Form FLA to be submitted on or before 15 July each year, and the RBI accepts it through its FLAIR portal.
What is Form INC-20A and what happens if we skip it?
Under section 10A of the Companies Act, a company with share capital cannot commence business or exercise borrowing powers until a director files the declaration within 180 days of incorporation that subscribers have paid for their shares, and the registered office is verified. The company faces a Rs 50,000 penalty, each officer in default Rs 1,000 a day up to Rs 1 lakh, and the Registrar may start strike-off proceedings.
Does the US parent have a filing in the United States?
Usually yes. A US person who controls a foreign corporation (more than 50% by vote or value) files Form 5471 under Category 4, and a US shareholder of a controlled foreign corporation (10% or more) under Category 5. The IRS instructions (12/2025) state a $10,000 penalty for each annual accounting period of each foreign corporation, with further $10,000 amounts for each 30 days after a 90-day notice, capped at $50,000 for each failure.
Should we pilot with a provider before forming a subsidiary?
Many firms do. A subsidiary brings fixed annual compliance, a resident director, payroll registrations and transfer pricing. A pilot with a provider tests scope, review load and turnaround before that commitment. The right answer depends on volume, permanence and management time.
Will setting up in India solve a US hiring shortage?
No one can promise that. BLS describes the US pressure: 1,595,200 accountant and auditor jobs in 2025, 5% projected growth to 2035 and about 115,300 openings a year. An India team can add capacity, but results depend on scope, review capacity and documentation. Treat it as one option.
10. Sources
- RBI, Master Direction - Foreign Investment in India (updated up to 15 Jun 2026), paras 3.2, 5.2.3, 8.1.1, 8.11, Annex 1: rbi.org.in
- RBI, Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, FEMA 395/2019-RB (amended to 13 Jun 2026), reg. 4: rbi.org.in
- RBI, FLA return FAQ: rbi.org.in; FLAIR FAQ (Mar 2026): rbi.org.in
- Companies Act 2013, s.10A (commencement of business): incometaxindia.gov.in
- Companies Act 2013, s.149 (directors; resident director): incometaxindia.gov.in
- Companies Act 2013, s.139 (first auditor): incometaxindia.gov.in
- Companies Act 2013, s.96 (AGM): incometaxindia.gov.in
- Companies Act 2013, s.137 (financial statements): incometaxindia.gov.in
- Companies Act 2013, s.92 (annual return): incometaxindia.gov.in
- Income-tax Act, 2025, s.200 (tax on income of certain domestic companies): incometaxindia.gov.in
- IRS, Instructions for Form 5471 (12/2025): irs.gov
- BLS, Occupational Outlook Handbook, Accountants and Auditors (updated 27 Aug 2026): bls.gov
Somesh Chandak & Associates, Chartered Accountants (FRN 158694W), Thane, supports foreign-owned Indian companies with monthly accounting, ROC and FEMA filings, and tax compliance. We can map the dates above to your incorporation plan and the documents your parent will need to prepare.
Foreign Subsidiary Accounting & FEMA Talk to usThis article is general information and is not legal, tax or investment advice. Dates in the worked example are illustrative. Statutory timelines, forms and thresholds change; confirm them on the official sites cited above before acting. The staffing figures describe national data and do not predict any individual firm's position.