Entity structures for an India capability centre

This guide describes the structures companies use to hold an India capability centre and what each commits you to. It does not recommend one, estimate costs or replace Indian legal and tax counsel. Statements are marked as required by law, usual practice or a judgement call.

Private limited company (wholly owned subsidiary)

Required by law. A private company restricts share transfers, limits members to two hundred and may not invite the public to subscribe (Companies Act 2013, s.2(68)). It is formed by two or more persons (s.3). It needs at least two directors, one of whom has stayed in India for not less than 182 days in the previous financial year (s.149).

Foreign investment is permitted up to 100% under the automatic route in sectors not listed in Schedule I of the Non-debt Instruments Rules and not prohibited (RBI Master Direction on Foreign Investment, para 5.2.3); information technology services are not a listed sector. An investor from a country sharing a land border with India, or whose beneficial owner is a citizen of one, invests only under the Government route (para 3.2). Each issue of equity to the parent is reported in Form FC-GPR within 30 days of issue (FEMA 395/2019-RB).

What it commits you to: a separate legal person that signs leases and employment contracts, a board with a resident director, and the Companies Act filing calendar.

Limited liability partnership

Required by law. An LLP must have at least two designated partners who are individuals, at least one resident in India, meaning not less than 120 days in the financial year (LLP Act 2008, s.7). Foreign investment is permitted where 100% is allowed under the automatic route with no FDI-linked performance conditions (Master Direction, para 9.3.3).

What it commits you to: partners rather than shareholders. Whether it suits a captive centre is a judgement call for tax counsel.

Branch office and liaison office

Required by law. Both are places of business of the foreign company itself, established under FEMA through an AD Category-I bank, with RBI prior approval in specified cases (RBI FAQ). Taxguru reports from the RBI Master Direction that a branch office needs a profit-making track record in the preceding five financial years and net worth of at least USD 100,000, and a liaison office three years and USD 50,000; that a liaison office is a channel of communication that undertakes no commercial, trading or industrial activity and lives on inward remittances; that liaison permission is generally for three years; and that a branch may carry on the parent's activities other than manufacturing. The Master Direction, as reproduced by TaxTMI, lets a branch remit profit net of Indian taxes on production of certified documents.

What they commit you to: the foreign parent is the legal person in India. A branch is a fixed place of business of the parent, which is what the Income-tax Act's definition of permanent establishment includes, so the parent is itself taxable here. A liaison office cannot deliver work.

IFSC Global In-House Centre

Required by law for this route. The IFSCA (Global In-House Centres) Regulations, 2025 were issued on 24 December 2025, replacing the 2020 regulations (IFSCA). SCC Online reports that they came into force on 29 December 2025, that only entities of a Financial Institution Group may apply, that services relate to financial products and services and go to non-resident group entities, and that an applicant has 180 days after in-principle approval to meet conditions. Taxguru reports a cap of 10% of annual revenue on services to Indian group entities and a 90-day transition for units under the 2020 regulations.

What it commits you to: a unit in an IFSC such as GIFT City, IFSCA registration and reporting, and a scope confined to a financial services group.

Build-operate-transfer with a third party

A judgement call. A partner recruits and employs the team, provides premises and systems, and runs the centre under its own Indian entity; on agreed triggers the team, assets and contracts move to an entity you own. No statute defines the arrangement; the contract does. The clauses that matter are who owns intellectual property from day one, how the transfer price is set, what triggers transfer, how employees consent to move, and what happens to data and access at exit. You still need one of the structures above by the transfer date.

Transfer pricing and the arm's length markup

Required by law. Income from an international transaction is computed having regard to the arm's length price (Income-tax Act, s.92), and an accountant's report must be furnished (s.92E). International Tax Review reports that Budget 2026-27 merged software development, IT-enabled services, KPO and contract R&D into one Information Technology Services category with a uniform 15.5% safe harbour margin, raised the threshold from INR 3 billion to INR 20 billion, and processes a five-year election automatically. Safe harbour is a margin the tax authority accepts without benchmarking; electing it, or defending a lower benchmarked margin, is a judgement call.

Permanent establishment risk

A judgement call informed by law. Permanent establishment includes a fixed place of business through which the enterprise's business is wholly or partly carried on (s.92F(iiia)). A subsidiary is a separate taxpayer, but counsel will ask whether the parent itself carries on business through the centre, for example through seconded parent employees or staff who negotiate on the parent's behalf. Keep the centre's mandate, reporting lines and contracts consistent with a service provider to the group.

Repatriation basics

Required by law. An authorised dealer bank may remit the sale proceeds of a security, net of applicable taxes, to a non-resident seller who held it on repatriation basis and sold within pricing guidelines or with RBI approval (Master Direction, para 10.2.2). Banks allow remittances to non-residents only on an undertaking by the remitter and a chartered accountant's certificate that applicable taxes have been paid or provided for (RBI Master Circular on Remittance Facilities). Dividends and intercompany fees follow the same pattern: Indian tax first, then certification, then remittance.

Check before you rely on this

• The IFSCA 2025 regulations and FAQ: the regime is new, and one report suggests third-party service providers may also be eligible, which this guide has not confirmed from the regulator.
• The safe harbour rule text after Budget 2026-27; the figures here are reported, not read from the notified rules.
• Branch and liaison office eligibility figures, which come from a 2020 reproduction of the RBI Master Direction; confirm them with your AD Category-I bank.