Setting up subsidiary in Bangalore by US company — step-by-step 2026

Introduction

Bangalore (Bengaluru) is one of India’s leading locations for US companies establishing technology, software, SaaS, consulting, engineering, R&D, fintech, healthcare, and shared-service operations. A US company that wants to build a long-term commercial presence in India can generally establish an Indian Private Limited Company as a wholly owned subsidiary, subject to the applicable Foreign Direct Investment (FDI) rules.

Most sectors are open to foreign investment, with many allowing 100% FDI under the Automatic Route, although sector-specific caps, conditions, licensing requirements, and Government approval requirements must be checked before incorporation.

The Indian subsidiary becomes a separate legal entity from the US parent. It can enter contracts, employ staff, lease office premises, open Indian bank accounts, invoice customers, obtain GST registration, and conduct business in India subject to applicable laws.

This guide provides a practical 2026 roadmap for a US company planning to establish a subsidiary in Bangalore.

🇮🇳 Why Should a US Company Set Up an Indian Subsidiary?

A Bangalore subsidiary can provide a US company with:

Access to India’s technology and professional talent

A local operating and contracting entity

Ability to hire Indian employees directly

Local banking facilities

Indian invoicing and revenue collection

Access to Indian customers

R&D and software development capabilities

A platform for expansion into the Indian market

Better operational control than a representative or liaison structure

For a company intending to conduct revenue-generating business in India, a subsidiary is often more flexible than a Liaison Office.

Recommended Structure

For many US companies, the preferred structure is:

US Parent Company → 100% Indian Wholly Owned Subsidiary → Bangalore Operations

The Indian entity is generally incorporated as a Private Limited Company under the Companies Act, 2013.

The US parent becomes the shareholder of the Indian company, subject to the applicable FDI rules.

Main Laws & Regulatory Authorities

A US company establishing a Bangalore subsidiary may need to consider:

Companies Act, 2013

Governs:

Incorporation

Directors

Share capital

Board meetings

Annual filings

Financial statements

Corporate governance

The Companies Act requires a private company to have at least two directors, and the Board structure must comply with the resident-director requirement.

FEMA, 1999

Foreign investment is governed by FEMA and the applicable foreign-investment rules and RBI framework.

FDI Policy

DPIIT formulates India’s FDI policy, and most sectors are open to foreign investment, although certain sectors remain subject to restrictions or specific conditions.

Income-tax Act

The Indian subsidiary is separately taxable in India.

GST Laws

GST registration and ongoing GST compliance apply where the subsidiary makes taxable supplies or otherwise becomes liable for registration.

Karnataka State Laws

Because the subsidiary will operate in Bangalore, Karnataka-specific requirements such as Professional Tax and applicable employment or establishment registrations should also be evaluated. Karnataka’s Professional Tax system provides registration and payment facilities for businesses and employers.

Step 1 — Determine the Business Activity

Before incorporation, the US parent should clearly identify what the Indian company will actually do.

For example:

Software development

SaaS services

IT consulting

Business process outsourcing

Engineering services

R&D

Digital marketing

E-commerce

Manufacturing

Trading

Financial services

Healthcare services

The activity is important because the applicable FDI route and sectoral conditions depend on the business.

Step 2 — Check FDI Eligibility

This is one of the most important steps before sending capital to India.

Check:

Is the sector open to FDI?

What is the applicable FDI cap?

Is the investment under the Automatic Route?

Is Government approval required?

Are there sector-specific licences or conditions?

For example, many technology and service activities permit substantial or 100% foreign investment under the Automatic Route, but this should be verified against the activity actually proposed. DPIIT confirms that most sectors, apart from certain strategically important sectors, are open to 100% FDI under the Automatic Route.

Step 3 — Collect Documents from the US Parent

The US parent company will generally need to provide corporate documents for incorporation and foreign investment compliance.

Common documents include:

Certificate of Incorporation

Articles of Incorporation

Bylaws or equivalent constitutional documents

Registered office details

Board resolution approving Indian investment

Details of directors

Authorised signatory details

Passport of foreign directors/subscribers

Beneficial ownership information

Authorisation for establishing the Indian subsidiary

Because the parent is incorporated outside India, documents may need appropriate notarisation, apostille/legalisation, and certification, depending on the document and applicable MCA requirements.

‍💼 Step 4 — Appoint Indian Directors

A private limited company normally requires at least:

2 Directors

At least one director must satisfy the statutory resident director requirement under the Companies Act.

A US national can also be appointed as a director, subject to obtaining the necessary DIN and completing MCA requirements.

Foreign directors generally need:

Passport

Overseas address proof

Digital Signature Certificate

DIN

KYC compliance

The Companies Act contains specific provisions dealing with Board composition and Director Identification Numbers.

🆔 Step 5 — Obtain DIN and DSC

DIN

The Director Identification Number (DIN) is the unique identification number assigned to a director.

DSC

A Digital Signature Certificate (DSC) is required for electronic MCA filings.

For a foreign director, the documentation and verification process can require additional steps compared with an Indian resident director.

Step 6 — Choose & Reserve the Company Name

The proposed name should:

Be distinctive

Not conflict with an existing company

Not conflict with an existing trademark

Comply with MCA naming requirements

It is advisable to conduct both:

MCA Name Search

and

Trademark Search

before finalising the name.

Step 7 — Incorporate the Indian Company

The company is incorporated through the MCA’s prescribed incorporation process.

The incorporation documentation generally covers:

Proposed company name

Registered office

Directors

Subscribers/shareholders

Share capital

Main objects/business activities

Memorandum of Association

Articles of Association

Upon successful incorporation, the company receives its:

Certificate of Incorporation

CIN

PAN

TAN

Step 8 — Establish Bangalore Registered Office

The Indian subsidiary must have a registered office in India.

For Bangalore, the company can use:

Leased commercial premises

Owned premises

Eligible serviced office arrangement, subject to applicable requirements

Common documents include:

Rent/lease agreement

Utility bill

NOC from property owner, where applicable

Address proof

The registered office is the company’s official communication address.

Step 9 — Open the Indian Bank Account

After incorporation, the subsidiary should open a current account with an Indian bank.

The bank will generally conduct:

Corporate KYC

Beneficial ownership verification

Director verification

Foreign shareholder verification

The account will be used for:

Capital infusion

Business receipts

Vendor payments

Payroll

Taxes

Operating expenses

Step 10 — Infuse Share Capital from the US Parent

The US parent remits the subscription money to the Indian subsidiary through permitted banking channels.

The transaction should be properly documented.

The company should maintain evidence such as:

Bank advice

Inward remittance documentation

Foreign investor KYC

Share subscription documentation

⏱️ Step 11 — Issue Shares Within the FEMA Timeline

Under the RBI framework, equity instruments should generally be issued to the non-resident investor within 60 days from receipt of consideration. If the instruments are not issued within that period, the amount is generally required to be refunded within the prescribed additional period, subject to the applicable rules.

This is a critical compliance point for a US parent funding its newly incorporated Indian subsidiary.

Step 12 — File FC-GPR

Once shares are issued to the US parent, the Indian company must report the foreign investment through Form FC-GPR under the RBI reporting framework.

The current RBI framework requires FC-GPR reporting within 30 days from the date of issue of equity instruments.

The filing is made through the RBI’s foreign investment reporting framework with the involvement of the company’s Authorised Dealer bank.

Typical supporting information can include:

Share issue details

Investor details

Remittance evidence

Valuation information, where applicable

Shareholding pattern

Company declarations

Other documents required by the AD Bank

Step 13 — File FLA Return Annually

An Indian company that has received FDI is generally required to submit the Annual Return on Foreign Liabilities and Assets (FLA) to RBI.

The RBI framework specifies an annual filing deadline of:

15 July

for the preceding financial year, subject to the applicable reporting rules.

This should be added to the subsidiary’s annual compliance calendar.

Step 14 — Obtain GST Registration

GST registration should be evaluated based on the Indian subsidiary’s activities and applicable registration thresholds/compulsory-registration provisions.

For a technology or services subsidiary, GST registration is commonly relevant because the company may:

Provide services to Indian customers

Export services to the US parent

Receive payments from overseas customers

Import services

Enter into inter-company arrangements

Where the Indian company provides services to its US parent, the transaction may also need to be evaluated under the export of services and GST zero-rating framework.

Step 15 — Obtain TAN & Set Up TDS Compliance

If the subsidiary is required to deduct tax at source, it must obtain and use a TAN and comply with applicable TDS requirements.

This may cover:

Employee salaries

Professional fees

Rent

Contractor payments

Interest

Payments to the US parent

Other specified payments

Step 16 — Set Up Payroll

If the Bangalore subsidiary hires employees, it should establish a proper payroll system.

Depending on employee numbers and circumstances, consider:

Provident Fund (EPF)

ESI

Professional Tax

Labour-law registrations

Salary TDS

Employment contracts

Leave and attendance policies

Gratuity requirements

State-specific employment compliance

Karnataka’s Professional Tax authorities specifically provide employer registration and compliance facilities.

Step 17 — Karnataka Professional Tax

Professional Tax should be evaluated for both:

Employer obligations

and

Employee deductions

The Karnataka Professional Tax system provides online registration and payment mechanisms, and its rules have undergone changes in 2025–2026. Therefore, the applicable rates and filing requirements should be verified for the relevant period.

Step 18 — Set Up Accounting System

The subsidiary should establish accounting from day one.

The accounting system should track:

Revenue

Expenses

Payroll

Fixed assets

Receivables

Payables

Inter-company transactions

Foreign currency transactions

Taxes

Capital expenditure

Particular attention should be given to transactions with the US parent.

Step 19 — Transfer Pricing for US Parent Transactions

If the Bangalore subsidiary and US parent are Associated Enterprises, transactions between them may fall within India’s transfer pricing provisions.

Examples include:

Software development services

Management fees

Technical support

Royalty

Software/IP licensing

Cost reimbursements

Inter-company loans

Corporate guarantees

The transactions generally need to satisfy the Arm’s Length Principle and applicable documentation/reporting requirements.

This becomes particularly important for a US-owned captive or service subsidiary where most of the Indian company’s revenue comes from the US parent.

Step 20 — Taxation of the Indian Subsidiary

The Indian subsidiary is a separate taxable entity.

Depending on the circumstances, it may be liable for:

Corporate income tax

GST

TDS

Professional Tax

Customs duties

Other applicable taxes

The tax treatment should be planned together with the US parent because cross-border payments can create both Indian withholding tax and US tax considerations.

Step 21 — Payments from Indian Subsidiary to US Parent

Once operations begin, the Indian subsidiary may make legitimate payments to the US parent for:

Software licences

Technology

Management services

Technical services

Brand usage

Cost allocations

Reimbursements

Interest, where legally permitted

These transactions should be supported by appropriate agreements and reviewed for:

Transfer pricing

Withholding tax

GST

FEMA

DTAA

A payment should not simply be labelled as a “management fee” without establishing the actual services received and appropriate commercial support.

Step 22 — Annual ROC Compliance

The Indian subsidiary will have continuing Companies Act compliance obligations.

Important annual activities include:

Board Meetings

Annual General Meeting

Financial Statements

Board’s Report

Auditor appointment/compliance

AOC-4

MGT-7 or MGT-7A, depending on eligibility

Statutory registers

Director disclosures

Foreign ownership does not exempt the Indian subsidiary from normal Indian corporate compliance.

Key Compliance Calendar

Compliance	Indicative Requirement
Incorporation	Before commencing operations
Capital Infusion	After incorporation as planned
Share Issue	Generally within 60 days of receipt of consideration
FC-GPR	Generally within 30 days of share issue
GST Returns	Monthly/quarterly, as applicable
TDS Returns	Quarterly, where applicable
Payroll Compliance	Monthly/periodic
Board Meetings	As prescribed under Companies Act
AGM	Annually
AOC-4	Within prescribed ROC timeline
MGT-7/MGT-7A	Within prescribed ROC timeline
FLA Return	Generally by 15 July annually
Income Tax Return	As applicable
Transfer Pricing	Where applicable

The FC-GPR and FLA timelines above reflect the RBI framework; companies should verify the applicable rules and portal requirements at the time of filing.

Estimated Timeline for Setting Up a Bangalore Subsidiary

A straightforward incorporation can often be completed within a few weeks once documents are ready, but a foreign-owned company may take longer because of:

Apostille/legalisation

Foreign parent documentation

DIN/DSC requirements

Bank KYC

FEMA documentation

Capital remittance

FC-GPR filing

Indicative Roadmap

Stage	Approximate Period
Structure & FDI Review	1–3 days
Document Preparation	3–7 days
Name & Incorporation	Several working days
Bank Account	1–2 weeks, depending on bank
Capital Remittance	Depends on US bank/Indian bank
Share Issue	Within FEMA timeline
FC-GPR	Within 30 days of issue
GST/Other Registrations	Depends on applicability

A realistic end-to-end implementation period is often 3–6 weeks, although complex cases can take longer.

Common Mistakes US Companies Should Avoid

Sending Capital Before Checking FDI Rules

Always verify the sector and applicable route before remitting funds.

Missing the 60-Day Share Issue Timeline

The share issue timeline under FEMA is different from the FC-GPR filing deadline.

Treating FC-GPR as Optional

Foreign investment reporting is a regulatory requirement, not merely an administrative formality.

Using an Incorrect Valuation

Where valuation requirements apply, the appropriate valuation methodology and professional certification should be followed.

Ignoring Transfer Pricing

Transactions between the US parent and Indian subsidiary should be reviewed before invoices start flowing.

Mixing Parent and Subsidiary Expenses

The Indian subsidiary should maintain clear books and separate bank records.

Ignoring Karnataka Compliance

Federal incorporation does not automatically complete state-level requirements such as applicable Professional Tax and employment compliances.

Why Bangalore is Attractive for US Companies

Bangalore offers several strategic advantages:

Large technology talent pool

Strong startup ecosystem

Established multinational presence

Software and engineering expertise

Strong R&D capabilities

International airport connectivity

Extensive professional-services ecosystem

Established technology infrastructure

For US technology businesses, Bangalore can function as a development centre, R&D hub, sales office, shared-services centre, or Indian market headquarters.

Conclusion

Setting up a subsidiary in Bangalore by a US company involves much more than registering a company with the MCA. The process should be planned as an integrated corporate, FDI, FEMA, tax, GST, payroll, accounting and transfer-pricing project.

The typical structure involves incorporating an Indian Private Limited Company, making the US parent the shareholder, appointing the required directors, opening an Indian bank account, receiving foreign capital, issuing shares within the prescribed FEMA timeline, and reporting the investment through FC-GPR. The subsidiary must then establish its ongoing Indian compliance framework, including GST, TDS, payroll, Professional Tax, accounting, ROC filings, income tax and, where applicable, transfer pricing.

For a US company establishing operations in Bangalore in 2026, early review of the FDI route and cross-border transaction structure can prevent delays later. In particular, the 60-day share-issuance requirement and 30-day FC-GPR reporting requirement should be built into the implementation checklist from the beginning.

A properly structured Indian subsidiary can provide the US parent with a scalable platform for hiring, technology development, customer servicing, R&D, exports and expansion into the Indian market while maintaining a clear separation between the Indian company’s legal and financial affairs and those of its US parent.