Introduction
The Indian subsidiary Company means those companies whose interests are held and controlled by another company. It can either be owned or owned in part by another company. A Company that owns the subsidiary is called a parent company or a holding company. A holding company does faintly differ from a parent company. A Wholly owned subsidiary company means a company owned 100% by another company and the company that had made a 100% investment in it.
Features of Indian Subsidiary Companies
Some features of the Indian Subsidiary Company given the following:
For repatriation, the dividend does not require any prior approval.
Debt, Equity, and Internal accruals are available for funding mechanisms.
The Indian subsidiary Company is regulated by an application of the Indian Transfer Pricing.
Indian subsidiary company is treated as an Indian company for all other applicable laws and the purpose of income tax.
Indian subsidiary company is taxable at30% in comparison to a foreign company whereas a foreign company is taxable at 40%.
The dividend distribution tax is subjected to 16.995%.
Advantages of Indian Subsidiary Registration
1. Limited Liability: The liability of Directors and members of the private limited company is limited to their shares which means the company suffers from any loss and faces financial distress because of primary business activity, the personal assets of shareholders or Members or Directors will not be at risk of being seized by banks, creditors, and government.
2. Continuity of Existence: The life of the business doesn’t affect by the status of shareholders. The private limited company continues to exist even after the death of any shareholder.
3. Brand Value: The brand value of a company will get enlarged because employees feel secure in joining the private limited company, the vendor feels secure in offering credit, the investor feels secure in investing, and the customer feels trust and confidence in a brand for buying the product of company or services because of the sound corporate structure. Many startup companies start with zero revenue and rapidly reach a multibillion-dollar company in just a few years because of the high brand value of the company.
4. Scope of expansion: The scope of expansion is higher because it is easy to raise capital from a venture capitalist, financial institutions, and angel investor, and the advantages of limited liability, the Private limited offer more liquidity in the company.
5. Foreign Direct Investment in India: Foreign Direct Investment is 100% allowed in several business activities or industries without any prior approval. But it is not allowed in Proprietorship or Partnership or LLP and requires prior Government approval.
Minimum Requirements for Indian Subsidiary Registration
Minimum 2 Shareholders
Minimum Capital of Rs. 1lac
DIN for all Directors
A Parent company must hold 50% of the total equity capital
Documents required for Indian Subsidiary Company
Some documents are required for an Indian Subsidiary Company which are given below:
From All Directors and Shareholders
Utility bills (any)
A copy of a rent agreement with a No Objection Certificate from an owner
For Proposed Registered Office (Residential or commercial)
Passport of foreign directors
Incorporation certificate which is issued by the foreign government
In India for opening a subsidiary company a resolution from LLC or INC
A copy of the Voter’s ID or Driving license or Passport & PAN Card of the Indian director.
Passport-sized Photograph of all directors and shareholders
Annual Compliances of Indian Subsidiary Company
All Indian Subsidiary companies are required to comply with the Companies Act, the Income Tax Act, and transfer pricing guidelines. They are liable to file an income tax return from time to time with the income tax department, an annual return with the registrar of companies, and other necessary filings with the RBI or securities and exchange board of India, etc. However, the requirement is based on the type of industry, turnover, and the number of employees.
Registration Process for Indian Subsidiary Company
The owners can begin the incorporation procedure after fulfillment of minimum requirements.
To start with the incorporation of a subsidiary company, two directors apply for Digital Signature Certificate, and all the directors must apply for Director’s Identification No.
The applicant is required to apply Form INC-1 for the name of the company.
After obtaining name approval from the Registrar of Companies, an applicant is necessary to file –
1. Form INC-7 which is an application for Incorporation of a Company Other than One Person Company.
2. Form DIR-12 is for Particulars of the appointment of directors and key managerial staff.
3. Form INC-22 is for notice of the situation along with the Memorandum and Articles of Association of the Company.
After filing of the incorporation documents, fees for the payment of online Registrar of Companies, and Stamp duty is done by the applicant
After that ROC verifies the filed documents. Form INC-22 and DIR-12 are approved by the Straight-Through-Process and the ROC verifies Form INC-7 in detail. The Registrar of Companies may suggest some changes in the form or attachment.
Once the changes have been affected and the ROC is pleased, a Certificate of Incorporation is sent to the applicant through email.
Conclusion
It concluded that the Indian subsidiary Company means those companies whose interests are held and controlled by another company. It can either be owned or owned in part by another company. A Company that owns the subsidiary is called a parent company or a holding company. A Parent company must hold 50% of the total equity capital. All Indian Subsidiary companies are required to comply with the Companies Act, the Income Tax Act, and transfer pricing guidelines. They are liable to file an income tax return from time to time with the income tax department, an annual return with the registrar of companies, and other necessary filings with the RBI or securities and exchange board of India, etc.
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