Doing Business in India: Guide for Foreign Companies (2025)

What makes India such an attractive place for global businesses?[toc=Why India is Ideal Place]

India has become one of the most attractive destinations for global businesses because of its fast-growing economy, vast English-speaking talent pool, and pro-business reforms. With GDP growth projected at 6.5 to 7% in 2025 (IMF), India is already the world’s fifth-largest economy and is expected to enter the top three by 2030. That makes it an ideal place for doing business in India today.

From our experience helping global companies build and hire in India, here’s why the country stands out:

1. India’s economic growth story

India’s digital economy is booming, with over 850 million internet users and the world’s third-largest startup ecosystem (Startup India, 2024). The government’s initiatives like “Make in India” and “Digital India” have simplified trade regulations, promoted foreign investment, and supported private limited company registration for new entrants. With policies under the Companies Act and the Income Tax Act, setting up a private limited company or limited liability partnership in India is now faster, more transparent, and globally competitive.

2. Global shifts and India’s advantage

The pandemic reshaped global supply chains, pushing companies to diversify beyond China. India stands out as a strategic hub for manufacturing and services, offering competitive paid-up capital, lower registration fees, and smoother company registration processes that allow foreign nationals to submit documents online. Add to that India’s strong digital infrastructure and the rise of remote work, and it’s clear why global firms are turning to India for tech and back-office talent.

3. India vs. other emerging markets

Compared to markets like Vietnam, the Philippines, or Indonesia, India offers unmatched scale and sophistication. Labor and compliance costs remain low, while investors benefit from robust systems like intellectual property protection, corporate identification numbers, and a streamlined company incorporation process managed by the Ministry of Corporate Affairs (MCA). The Companies Act ensures that every private limited company is a separate legal entity, protecting personal assets from company debts, a key factor for foreign investors.

4. Why global companies are betting big on India in 2025 and beyond

With a 1.4 billion-strong consumer market, thousands of thriving private limited companies, and consistent reforms that make the registration process easier, India has become a true Build and Hire destination. Whether through a branch office, partnership firm, or private limited company, global firms now view India not just as an outsourcing base but as a long-term hub for innovation, R&D, and market expansion.

What are the biggest advantages of doing business in India?[toc=Biggest Advantages]

The biggest advantages of doing business in India stem from cost efficiency, world-class talent, and a massive consumer market, all supported by pro-business government reforms that facilitate smoother global expansion.

From our experience helping global companies build and hire in India, here’s what sets India apart:

1. Cost advantage: Operating in India is far more affordable than in Western markets. Businesses save on labor, infrastructure, and compliance costs, with setup expenses often 50 to 60% lower than in the US (World Bank). Even the company registration process, stamp duty, and filing fees are relatively low. Under the Companies Act and Income Tax Act, investors also enjoy tax benefits and incentives through Startup India.
2. Talent advantage: India offers one of the largest pools of English-speaking, technically skilled professionals. About 65% of Indians are under 35, providing access to digital-first talent across engineering, finance, and CX. Many companies either set up a private limited company or hire through an Employer of Record (EOR) to quickly tap into this workforce.
3. Market advantage: With over 1.4 billion people and high digital adoption, India is one of the fastest-growing consumer markets globally. The rise of UPI payments, e-commerce, and digital-first consumers gives foreign companies endless growth potential.
4. Policy tailwinds: The central government’s initiatives such as Make in India, Digital India, and Startup India have liberalized foreign investment and made it easier to register businesses online. With 100% FDI allowed in most sectors, global firms can own fully separate legal entities in India with minimal restrictions.

Can foreigners or U.S. citizens do business in India?[toc=Can US company Do Business]

Yes, foreigners and U.S. citizens can legally do business in India, and the process is now simpler than ever. India allows 100% foreign ownership in most sectors, making it easy for international investors to establish operations or invest directly without needing an Indian partner.

From our experience helping global companies expand here, here’s what you should know before starting:

1. Foreign Direct Investment (FDI) routes

There are two main routes for foreign investment:

• Automatic Route: No prior approval from the central government is required. Most industries, including IT, manufacturing, and services, fall under this route.
• Government Route: Required for sensitive sectors like defense, telecom, or insurance. Proposals go through the Department for Promotion of Industry and Internal Trade (DPIIT) and relevant ministries.

2. Legal pathways for non-residents

Foreign nationals can register a business in India under the Companies Act by incorporating a private limited company, limited liability partnership (LLP) or even setting up a branch office or liaison office. These structures are recognized by the Ministry of Corporate Affairs (MCA) and provide separate legal entity status, protecting personal assets from company debts.

3. Typical business models

Most foreign entrepreneurs choose one of these options:

• Wholly Owned Subsidiary (Private Limited Company): Full control, ideal for long-term presence.
• Joint Venture (JV): Shared ownership with an Indian partner for market entry.
• Employer of Record (EOR): A fast, low-risk way to hire local talent without setting up a legal entity.

4. Tax implications and profit repatriation

All companies are subject to income tax under the Income Tax Act, but India has Double Taxation Avoidance Agreements (DTAA) with the U.S. and several countries. This allows foreign investors to repatriate profits after paying local taxes. Businesses must also comply with GST registration, Employees’ Provident Fund contributions, and annual income tax returns.

5. Compliance made easier

Setting up involves obtaining a Digital Signature Certificate (DSC), Director Identification Number (DIN), and registering online through the MCA portal. Most steps, including name approval, filing incorporation documents, and getting your Corporate Identification Number (CIN), can now be completed digitally.

U.S. citizens and foreign nationals can easily do business in India, thanks to relaxed foreign investment rules, digital registration systems, and flexible entry options that fit any business goal, from hiring remote teams to building a full-fledged subsidiary.

What business structures are available in India for foreign companies?[toc=Business Structures in India]

Foreign companies have several options when it comes to setting up operations in India. The most popular way to register a business in India is by forming a private limited company, though there are other flexible structures depending on your goals and investment plans.

From our experience working with global clients, here’s a breakdown of each structure and when it makes the most sense:

1. Private Limited Company (Most common)

A Private Limited Company is the preferred choice for foreign investors because it offers limited liability, a separate legal entity, and full control under the Companies Act. You’ll need at least two directors (one must be an Indian resident) and two shareholders. There is no minimum paid-up capital requirement, and 100% foreign ownership is allowed in most sectors.
Key features:

• Regulated by the Ministry of Corporate Affairs (MCA)
• Requires a Digital Signature Certificate (DSC) and Director Identification Number (DIN)
• Must file annual forms and income tax returns with the Income Tax Department
• Ideal for long-term business operations, R&D centers, and hiring local teams

2. Limited Liability Partnership (LLP)

A Limited Liability Partnership combines the benefits of a partnership firm and a private limited company. It has designated partners instead of directors and allows flexibility in capital contribution and management.

Key features:

• Low registration fee and simplified compliance costs
• Protection from company’s debts and personal asset exposure
• Suitable for consulting, service, or small-scale operations

3. Branch Office, Liaison Office, or Project Office

If your goal is to represent your existing company or manage short-term contracts, you can open a Branch Office, Liaison Office, or Project Office in India.

• Branch Office: Can conduct commercial activities, but profits are taxed in India.
• Liaison Office: Non-commercial, used for communication or research.
• Project Office: For executing specific projects in India.
  These require prior approval from the Reserve Bank of India (RBI) and compliance with foreign exchange regulations.

4. Sole Proprietorship and One Person Company (OPC)

A Sole Proprietorship is not suitable for most foreign nationals because it requires Indian residency. However, India offers an One Person Company (OPC) structure, allowing a single individual to operate as a separate legal entity under the Companies Act, though foreign citizens cannot directly form one.

When each structure makes sense:

• Testing the market: LLP or EOR model
• Hiring local talent fast: EOR or Private Limited Company
• Establishing full presence: Private Limited Company
• Short-term projects: Branch or Project Office

The Private Limited Company remains the best structure for most foreign businesses to register in India, offering control, flexibility, and recognition as a separate legal entity while keeping compliance manageable and risk low.

How can you register a business in India (step by step)?[toc=Steps to Register a Business]

Registering a business in India as a foreign company is now easier than ever, thanks to a fully digital process managed by the Ministry of Corporate Affairs (MCA). The most common structure for foreign investors is a Private Limited Company, which provides a separate legal entity, limited liability, and 100% foreign ownership in most sectors.

From our experience guiding global businesses through incorporation, here’s a step-by-step breakdown of the company registration process in India:

Step 1: Choose your business structure

Decide whether to register as a Private Limited Company, Limited Liability Partnership (LLP), or open a Branch Office. A Private Limited Company is usually preferred for long-term presence due to its credibility and flexibility under the Companies Act.

Step 2: Get Digital Signature Certificate (DSC) and Director Identification Number (DIN)

All proposed directors must obtain a Digital Signature Certificate (DSC) from authorized certification agencies and apply for a Director Identification Number (DIN) through the MCA portal. These are essential for signing and submitting incorporation documents electronically.

Step 3: Reserve your company name

Apply for company name approval via the MCA’s SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form online. The proposed name must follow MCA naming rules and should reflect your business activity.

Step 4: File incorporation documents

Submit incorporation documents such as the Memorandum of Association (MoA), Articles of Association (AoA), address proof, identity proof of directors, and declaration forms through the MCA portal. You’ll also need to pay the prescribed fees and stamp duty based on the paid-up share capital.

Step 5: Obtain PAN, TAN, and open a bank account

Once the Corporate Identification Number (CIN) is issued, apply for your Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) through the Income Tax Department. You’ll then need to open an Indian bank account in the company’s name for all financial transactions.

Step 6: Register for GST and other licenses

Register for GST, Professional Tax, and other local or sector-specific registrations required by local authorities. For employees, register with Employees’ Provident Fund and state labor authorities.

Step 7: Hire your team

You can hire employees directly or through an Employer of Record (EOR), which helps manage payroll, compliance, and onboarding without needing a legal entity.

Timeline and Cost

• Timeline: Usually 2 to 4 weeks for most incorporations
• Average Cost: Around USD 500 to 1500 for basic setup depending on professional and government fees

Compliance after registration

After your new company is incorporated, you must maintain compliance with:

• Annual filings of income tax returns and financial statements
• Board meetings and maintenance of annual accounts
• Renewal of licenses and tax registrations every financial year

The process to register a business in India is transparent, efficient, and fully online. With clear regulations under the Companies Act, well-defined incorporation rules, and digital submission options, setting up your private limited company in India is one of the easiest ways to establish a global footprint.

How tough is it to do business in India?[toc=Ease of Doing Business]

Doing business in India has become much easier in recent years, but it still requires patience and local know-how. The World Bank’s Ease of Doing Business report consistently highlights India’s progress, the country jumped from rank 142 in 2014 to 63 in 2020, driven by reforms in company registration, tax filing, and property registration.

From our experience supporting global firms, here’s a realistic view of what to expect:

1. On paper vs. on ground

On paper, setting up a private limited company or limited liability partnership is straightforward, with most forms submitted online through the Ministry of Corporate Affairs (MCA). But in practice, delays can occur due to document verification, local authority approvals, or small compliance gaps. These challenges are more about navigating systems than complex laws.

2. Bureaucracy and state-level variations

India has 28 states and 8 union territories, each with its own trade regulations and local compliance norms. For example, labor registrations and Professional Tax rules vary across states. While the central government continues to simplify policies, businesses often need guidance from company affairs consultants or local partners to stay compliant.

3. Compliance and documentation

Once your new company is registered, maintaining compliance involves filing annual forms, income tax returns, and GST registration renewals. Missing deadlines can lead to penalties. Many companies reduce this risk by working with an Employer of Record (EOR) or chartered accountant who manages filings and payroll under the Income Tax Act.

4. Why many global firms choose an EOR

Instead of setting up a full entity immediately, global companies often start by hiring through an EOR partner. It’s the fastest way to test the Indian market, manage employees’ provident fund compliance, and handle payroll without getting caught up in lengthy company incorporation or stamp duty formalities.

5. Long-term outlook

India rewards businesses that take a long-term view. Once established, the country offers access to affordable talent, a growing consumer market, and a network of private limited companies driving innovation. With ongoing reforms in corporate affairs and digital governance, the path is getting smoother every year.

Doing business in India is not “tough”, it’s about understanding the process and partnering with the right experts. The groundwork may take effort, but the growth potential easily makes it worth it.

What are the key challenges of doing business in India?[toc=Key Challenges]

While India offers huge opportunities, doing business here also comes with a few real challenges. Most are not deal breakers, but they require careful planning and reliable local support to navigate smoothly.

From our experience helping global companies set up and hire in India, here are the main areas where foreign businesses often face friction:

• Regulatory complexity: India has multiple layers of regulation including central, state, and municipal authorities. Each state may have its own trade regulations, tax rules, or registration processes. Even though the Companies Act and Income Tax Act have improved transparency, staying compliant still needs local expertise.
• Bureaucracy and paperwork: Despite strong digital progress, approvals from the Ministry of Corporate Affairs (MCA), Income Tax Department, or local authorities can take time. Delays in obtaining GST registration, professional tax licenses, or intellectual property filings are common. Many foreign companies rely on chartered accountants or EOR partners to manage compliance efficiently.
• Payment cycles and contract enforcement: Indian businesses often operate on longer payment timelines. Legal proceedings and arbitration can move slowly, so it’s essential to create strong contracts with clear payment terms and dispute resolution clauses before starting work.
• Talent retention and competition: India has an enormous skilled workforce, but retaining top performers in markets like Bangalore, Hyderabad, and Gurgaon can be difficult. Offering competitive pay, flexible work policies, and strong onboarding support through local HR teams helps reduce turnover.
• Evolving compliance and tax laws
  New rules under the labour codes, data privacy laws, and miscellaneous provisions act are changing how businesses operate. Companies must regularly update income tax returns, annual accounts, and financial year filings. Missing deadlines can lead to penalties or compliance issues with corporate affairs authorities.
• The right partner reduces friction: Most global firms overcome these hurdles by working with an Employer of Record (EOR) or local compliance expert. An EOR manages payroll, benefits, and employees’ provident fund filings while ensuring complete compliance, eliminating nearly 80 percent of operational challenges.

In short, doing business in India requires patience and the right guidance, but once the foundation is set, the growth potential and long-term rewards make the effort completely worthwhile.

What should foreign businesses consider before entering India?[toc=Key Considerations]

Before entering India, foreign businesses should take time to define their goals, choose the right entry model, and understand local compliance. India is a high-potential market, but success comes from preparation and a clear strategy.

From our experience helping global companies expand into India, here are the most important things to consider:

1. Define your purpose: Identify why you are entering India. Is it to cut operational costs, access skilled talent, test the Indian market, or build a long-term R&D and delivery hub? Your objective will determine whether you should register an entity or start with an Employer of Record (EOR) model.
2. Choose the right entry model: You can establish a Private Limited Company, set up a Limited Liability Partnership, form a joint venture, or hire through an EOR. For companies looking to test the waters, an EOR is the fastest and most flexible option, while a Private Limited Company is ideal for those planning a long-term presence.
3. Validate your assumptions: Study the Indian market carefully. Understand local pricing, customer behavior, and talent availability. For example, salary benchmarks and hiring costs vary widely between cities like Bangalore and Pune. This helps prevent overspending and ensures a realistic market fit.
4. Understand taxation and repatriation: Learn about income tax, GST registration, and profit repatriation rules under the Income Tax Act and Companies Act. India has Double Taxation Avoidance Agreements (DTAA) with several countries, including the U.S., which makes transferring profits easier and legally compliant.
5. Evaluate long-term scalability: India rewards consistency. Whether you start through an EOR, branch office, or private limited company, plan for growth. Build relationships with local authorities, invest in compliance systems, and maintain strong corporate affairs oversight to scale smoothly.
6. Partner with trusted experts: Working with an experienced Employer of Record (EOR) or incorporation partner like Wisemonk allows global businesses to hire quickly, manage payroll and compliance, and operate confidently without setting up an entity right away.

What’s the smartest way to start small and scale fast in India?[toc=Start Small & Scale Fast]

The smartest way for global companies to start small and scale fast in India is to begin with an Employer of Record (EOR) model. It lets you hire employees quickly, test operations, and understand the market without going through the lengthy process of company incorporation or private limited company registration.

From our experience helping global businesses establish their India presence, here’s the most effective way to build a strong foundation before expanding:

1. Start with an EOR partner: Using an Employer of Record allows you to hire local talent legally while the EOR handles payroll, taxes, and compliance under the Companies Act and Income Tax Act. You retain full control of day-to-day operations, and the EOR takes care of everything else, from employees’ provident fund registration to income tax returns.
2. Validate operations first: Before investing heavily, use this phase to assess your team’s performance, test product-market fit, and understand regional salary benchmarks. This approach helps you make data-driven decisions and minimizes compliance risk.
3. Register a company when ready: Once your operations are stable and you have a long-term plan, you can move from the EOR model to a Private Limited Company or Limited Liability Partnership. The transition is simple, especially if you already have local processes in place. Most businesses complete company registration within 2 to 4 weeks by submitting required documents through the Ministry of Corporate Affairs (MCA) portal.
4. Use market insights to scale: Use insights on talent availability, paid-up capital, and operational costs to plan expansion. India’s separate legal entity protection and transparent company registration process make scaling safe and sustainable.

Examples of smart expansion

• A U.S. SaaS company started by hiring 10 engineers in India through an EOR to validate operations, then registered a Private Limited Company to build a larger development center.
• A European retail brand used the EOR route to test customer support operations in India before establishing its Limited Liability Partnership to expand service delivery.

The best way to start small and scale fast in India is to hire through an EOR, validate early, and register your business when ready. It’s the most cost-efficient, compliant, and strategic route for global companies entering India for the first time.

How Wisemonk helps global companies do business in India?[toc=How Wisemonk Helps]

Wisemonk is a leading Employer of Record (EOR) in India that helps global companies hire, onboard, and manage employees without setting up a legal entity. We take care of everything from payroll and compliance to IT and admin support, so you can focus entirely on growing your business.

Here’s how Wisemonk make expanding into India simple and seamless:

• End-to-End Employment Compliance: We handle all statutory requirements under the Companies Act, Income Tax Act, and labour laws, including payroll taxes, provident fund registration, and local filings.
• Recruiting and Onboarding Support: Access top Indian talent across engineering, finance, customer success, and operations with help from our in-house recruiting team and verified talent network.
• Equipment Procurement and Setup: We ensure your remote teams in India have all the hardware, software, and office essentials they need from day one.
• Background Verification: Comprehensive checks including criminal, address, and employment history to ensure reliable and compliant hires.
• HRBP and Employee Support: Dedicated HR business partners manage employee onboarding, engagement, and retention to help you build long-term, productive teams.

Beyond these, Wisemonk also supports global companies with contractor management, company registration, visa & work permit assistance, Offshore Team Setup and GCC setup in India. Whether you’re hiring one employee or building a full-scale India operation, Wisemonk helps you set up, scale, and stay compliant, all under one platform.

By choosing us as your trusted partner, you can focus on your core operations while we handle the complexities of your business in India. Reach out to us now!