India entry primer: the decisions in the order they constrain each other

This primer lists the decisions a company must make before it can open a capability centre in India, in the order in which each constrains the next. It is a map, not advice: it does not rank cities, estimate costs or recommend a structure, and it does not replace Indian legal and tax counsel. Each step is marked as required by law, usual practice or a judgement call.

1. Mandate and business case

A judgement call. Write down what the centre will do, who in the parent owns it and how its output will be measured. Every later choice depends on whether the centre is a cost centre serving the group or a unit that will sell to third parties.

2. Legal route

A judgement call bounded by law. The routes are:

• Wholly owned subsidiary (private limited company). 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). An investor from a country sharing a land border with India, or whose beneficial owner is a citizen of one, may invest only under the Government route (para 3.2).
• Limited liability partnership. Foreign investment is permitted where 100% is allowed under the automatic route with no FDI-linked performance conditions (para 9.3.3).
• Branch or liaison office of the foreign company. Approved under FEMA through an AD Category-I bank, with RBI prior approval in specified cases (RBI FAQ). Taxguru reports from the Master Direction that a liaison office may not undertake commercial, trading or industrial activity.
• IFSC Global In-House Centre in GIFT City. The IFSCA (Global In-House Centres) Regulations, 2025 were issued on 24 December 2025 and replace the 2020 regulations (IFSCA). SCC Online reports that only entities of a Financial Institution Group may apply. This route is for financial services groups.
• Build-operate-transfer with a partner. A third party hires and hosts the team under its own entity, then transfers team and assets to yours on agreed triggers. No statute defines it; the contract does, and you still need your own entity by the transfer date.

The rest of this primer assumes a wholly owned subsidiary.

3. Location

A judgement call. State law sets shops and establishments registration, professional tax and state incentives, so the city decision precedes the registration list. Weigh talent for your functions, the parent's time-zone tolerance and whether an SEZ or STPI unit fits.

4. Entity and registrations

Required by law, in roughly this order:

1. Incorporation. A private company is formed by two or more persons (Companies Act 2013, s.3) and 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). Beacon Filing reports that the MCA SPICe+ form returns the certificate of incorporation, PAN, TAN and DIN, and the linked AGILE-PRO-S form applies for EPFO, ESIC, professional tax and a bank account.
2. PAN and TAN. A person carrying on business must apply for a permanent account number (Income-tax Act, s.139A); a person deducting tax at source must apply for a tax deduction and collection account number (s.203A).
3. FDI reporting. File Form FC-GPR not later than 30 days from the date of issue of equity instruments to the parent (FEMA 395/2019-RB), through the RBI FIRMS portal.
4. GST. Registration is required once aggregate turnover exceeds Rs 20 lakh (Rs 10 lakh in special category states), and irrespective of turnover for inter-State supplies. Exports are zero-rated and may be made under a bond or letter of undertaking without payment of tax (CBIC FAQ).
5. Shops and establishments. State law. In Karnataka the employer sends the registration statement within thirty days of commencing work (Karnataka Shops and Commercial Establishments Act 1961, s.4).
6. Professional tax. State law. CS Pratik K Shah reports that AGILE-PRO-S auto-applies it in Karnataka, Maharashtra and West Bengal.
7. Provident fund and ESI. The EPF Act applies to establishments employing twenty or more persons (EPF and MP Act 1952, s.1(3)). The ESI Act applies to non-seasonal factories employing 10 or more persons, extended to shops and other establishments, with a wage limit of Rs 21,000 per month since 1 January 2017 (ESIC).

5. Transfer pricing with the parent

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 filed (s.92E). International Tax Review reports that Budget 2026-27 set a single safe harbour margin of 15.5% for IT services and raised the eligibility threshold to INR 20 billion. Electing safe harbour or defending a benchmarked margin is a judgement call.

6. STPI or SEZ unit

A judgement call. SEZ units must achieve positive net foreign exchange cumulatively over five years (SEZ India FAQ). The section 10AA exemption for SEZ units carries a sunset clause effective from 1 April 2020, while duty-free procurement and single window clearance remain listed (SEZ India).

7. Talent, leadership and real estate

Judgement calls. Name the leader and the resident director before signing a lease, because the Indian entity signs the lease and the employment contracts.

8. Data and security

Required by law. PRS Legislative Research reports that the Digital Personal Data Protection Act 2023 requires consent after notice, reasonable security safeguards and breach notification to the Data Protection Board and affected persons, permits transfer abroad except to countries the central government restricts, and carries penalties up to Rs 250 crore. Shardul Amarchand Mangaldas reports that the DPDP Rules 2025 were published on 14 November 2025 and that the substantive obligations apply from 14 May 2027.

A realistic sequence

1. Mandate, then legal route, then city.
2. Name the resident director and the leader.
3. Incorporate, obtain PAN and TAN, open the bank account.
4. Capitalise and file FC-GPR within 30 days.
5. Register for GST, shops and establishments, professional tax, EPF and ESI as each threshold is crossed.
6. Sign the intercompany services agreement with a transfer pricing policy.
7. Sign the lease, hire, and run the DPDP programme before personal data arrives.

Check before you rely on this

• The DPDP Rules commencement dates and any amendment since November 2025.
• Safe harbour margins and thresholds after Budget 2026-27, and the notified rule text.
• EPF and ESI thresholds and wage ceilings, and any change to your state's shops and establishments law.