- Most foreign companies can own 100% of an Indian company under the automatic FDI route, with no prior government approval.
- An Indian subsidiary can elect a 22% corporate tax rate, roughly 25% once surcharge and cess apply. A foreign company's branch is taxed at 35% plus surcharge and cess.
- GST runs on four main rates after the September 2025 reform: 0%, 5%, 18%, and 40% for luxury and sin goods. The old 12% and 28% slabs are largely gone.
- Profits leave India mainly as dividends, taxed in the shareholder's hands with tax withheld at source and often reduced by a treaty.
- The hard part is rarely the law. It is the monthly filing cadence, and it does not pause because your head office is somewhere else.
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What is doing business in India actually like once the paperwork is done and you are running?
That is a different question from how to get in, and it is the one most guides skip. They stop at incorporation, which is roughly like explaining a country by describing its airport.
So this guide is about operating. How you get taxed, how GST works, how money leaves the country, what you have to file and when, and what genuinely trips people up. If you are still weighing which India operating model to run, start there instead.
If you are at an earlier stage, three companion guides cover it: whether and how to expand to India for the entry decision, business setup in India for choosing between a subsidiary, branch or liaison office, and company registration in India for the filing steps themselves. This page picks up after all three.
Can a foreign company or foreigner do business in India?
Yes, and in most sectors you can own the whole thing. Foreign companies routinely hold 100% of an Indian subsidiary under what India calls the automatic route, meaning no prior government approval is required. You invest, then you report it.
It helps that India is the world's fifth largest economy, runs on a common law legal system that will feel familiar to US and UK businesses, and has grown real GDP at roughly 6.5% a year.
Two qualifications matter, and both are about which route your investment falls under:
- The automatic route covers most of the economy: the large majority of India's cumulative foreign investment has come in this way, with reporting to the Reserve Bank of India after the fact rather than permission before it.
- The government route covers the exceptions: restricted sectors need prior approval, and investment from an entity in a country sharing a land border with India needs approval regardless of sector. Check your sector and your ownership chain early, because this one surprises people late.
A short list of activities is closed to foreign investment altogether, among them atomic energy, lottery and gambling, chit funds, and real estate as a trading business. Outside those, most of the economy allows up to 100% foreign ownership, and schemes such as Make in India, the production linked incentives across 14 sectors, and the special economic zones can add benefits on top.
Individuals can also do business in India, though a foreign national generally operates through an Indian company rather than as a sole trader, since sole proprietorships and partnerships are largely closed to non-residents.
| Vehicle | What it is for | Can it earn income in India? |
|---|---|---|
| Private limited company (subsidiary) | The default for a funded operation; needs at least one India resident director | Yes, with no activity ceiling beyond sector rules |
| Limited liability partnership | A lighter partnership vehicle, though foreign investment into it carries its own conditions | Yes, within its agreement |
| Branch office | A foreign company trading or providing services in India, set up with central bank permission through a bank | Yes, but it may not manufacture directly |
| Liaison office | Representation, market research and communication only | No, it is funded by inward remittance from the parent |
| Project office | Tied to a single awarded contract and closed when the project ends | Yes, for that project |
Once you are in and trading, the first thing your finance team will want to know is what India takes.
How is a foreign business taxed in India?
It depends entirely on whether you operate through an Indian company or as a foreign company, and the difference is large enough to drive the structure decision. An Indian subsidiary is taxed as a domestic company; a branch office is taxed as a foreign company.
| You operate as | Headline rate | On top of that |
|---|---|---|
| Indian subsidiary electing the concessional regime | 22% | 10% surcharge and 4% cess, around 25% effective |
| Indian subsidiary on the older regime | 25% or 30% by turnover | Surcharge and cess, but deductions retained |
| Branch or project office of a foreign company | 35% | 2% surcharge to about $1.2M income, 5% above, plus 4% cess |
| Liaison office | No tax on income | Because it may not earn income; filings still required |
Read that table twice if you are still choosing a structure, because it is the single strongest financial argument for incorporating a subsidiary rather than running a branch.
Two more things sit on top of the corporate rate. Transfer pricing applies to anything you transact with your parent, and India's Income Tax Act 2025 took effect on April 1, 2026, replacing the old assessment year concept with a single tax year and renumbering provisions inherited from the 1961 Act. Our India tax compliance guide tracks the wider picture, and you should ask your advisers for current section references rather than reusing old ones.
Corporate tax is the headline. The tax you will actually touch every month is GST.
How does GST work for a business operating in India?
GST is India's single indirect tax on goods and services, and it got considerably simpler in late 2025. The 56th GST Council meeting on September 3, 2025 approved the biggest overhaul since GST launched, effective September 22, 2025. Current GST rates in India now sit on four main slabs.
| Slab | What it covers |
|---|---|
| 0% and 5% | Essentials and a large share of everyday goods, with many items moved down from the old 12% slab |
| 18% | The standard rate, and where most business and professional services sit; many items previously at 28% moved down to it |
| 40% | A new top rate for luxury and sin goods such as tobacco and pan masala |
| 12% and 28% | Largely gone; if a supplier, contract or internal pricing sheet still quotes them, it is out of date |
If your India pricing model, vendor contracts or finance templates were built before September 2025, they encode GST slabs that no longer exist. That is a quiet source of mispriced invoices, and it is worth an afternoon to check.
Registration is threshold based and returns are monthly for most businesses, with an annual return on top. If you are a US company working with Indian contractors rather than selling in India, the position is different again, and we cover it in GST registration thresholds for US companies hiring in India.
Getting India tax and GST right from day one?
We handle registration, monthly returns and the filings so your India numbers stay clean.
So money comes in and tax goes out. The question founders ask next is how the profit gets home.
How do you get profits out of India?
Mainly as dividends, and the rules changed in 2020 in a way that helps most foreign parents. India abolished dividend distribution tax from April 1, 2020. Dividends are now taxable in the shareholder's hands, with the Indian company withholding tax at source when it pays out.
Three practical consequences:
- Treaty relief is now available: under domestic law withholding on dividends to a non-resident is 20% plus surcharge and cess, but a double taxation avoidance agreement commonly reduces it, often into the 5% to 15% range depending on the treaty. Under the old regime that relief was not reachable.
- You have to document the claim: a tax residency certificate, the prescribed declaration form and a PAN for the recipient are the usual conditions. No paperwork, no treaty rate.
- Dividends are not the only route: service fees, royalties and interest paid to the parent also move money, but each has its own withholding rate and each attracts transfer pricing scrutiny. Pricing them casually is how audits start.
Underneath all of it sits FEMA, India's foreign exchange law, which governs how funds enter and leave. Your authorised dealer bank handles the mechanics, but the reporting obligations are yours.
Which brings us to the part that actually consumes management attention.
What compliance does a business in India have to keep up with?
More filings, more often, than most Western finance teams expect. Nothing in India's HR and payroll compliance is conceptually hard. The difficulty is cadence: several obligations recur monthly, and missing them creates interest and penalties rather than a polite reminder.
The recurring set breaks into four streams:
- Payroll and statutory contributions: provident fund, employees' state insurance where applicable, professional tax and tax withheld from salaries, each with its own monthly due date. The India payroll compliance calendar lays them out.
- GST returns: monthly for most registered businesses, plus an annual return, and input credit depends on your suppliers filing correctly too.
- Corporate and ROC filings: annual accounts, annual return, board and shareholder meeting records, director filings, and an audit. These are calendar driven and unforgiving about dates.
- Labour law: India's four labour codes have been in force since November 21, 2025, and state-level rules are still being issued. Your state's rules govern a private employer, not just the central ones.
On top of those recurring filings, the Digital Personal Data Protection Act 2023 governs how you handle employee and customer personal data. Its rules were notified in November 2025 and the main obligations phase in through 2027, so build consent and data handling into your processes early rather than late.
Our guide to statutory compliance in India goes through the obligations in detail. The practical point is that this is an ongoing operations job, not a setup task you finish.
India compliance is a lot to carry alone
We run payroll, tax and statutory filings so your India operation stays compliant from month one.
With the filings mapped, the next operating question is the team itself, and how you bring people on and pay them without tripping a rule.
How do you hire and pay employees in India?
Either through your own registered entity, or through an Employer of Record that employs the team on your behalf. The second route means you can hire in India without an entity at all, which is why a lot of companies start there and incorporate later.
Three rules apply whichever route you take:
- Pay in rupees through a compliant channel: sending dollars directly to an employee's personal account is not a compliant payroll process. See how to pay employees in India.
- Classify people correctly: long-term, full-time, directed work is employment, whatever the contract calls it. Read contractor vs employee in India before defaulting to contractor agreements.
- Watch permanent establishment exposure: how people are engaged and who signs what can create a taxable presence. Understand permanent establishment risk in India before you scale headcount.
Those rules are manageable once someone owns them. The harder question is what actually creates friction once you are up and running.
What actually makes doing business in India hard?
Not the things people worry about beforehand. In our experience the friction is administrative and local rather than legal or cultural, and it mirrors the compliance concerns founders actually hit.
- State-level variation: professional tax, shops and establishments registration, leave rules and labour rules differ by state. A team split across three states is three compliance footprints.
- The filing cadence never pauses: monthly deadlines continue through your holidays, your fundraise and your reorganisation. Someone has to own them by name.
- Rules move: GST slabs changed in September 2025, the labour codes commenced in November 2025, and a new Income Tax Act took effect in April 2026. Anything you documented two years ago needs re-reading.
- Talent is competitive, not scarce: you are hiring against well-funded local and global employers in hubs like Bengaluru, Mumbai and Delhi NCR, so attrition and counter-offers are the real staffing risk, not availability.
None of that is a reason not to operate in India. It is a reason to decide early who carries the administrative load, which is where we come in.
How does Wisemonk help you do business in India?
Wisemonk is an India-specialist Employer of Record. For a company that wants people working in India this month, EOR is the fastest compliant way in: we become the legal employer, run payroll and carry the statutory filings, so you can operate before you incorporate, or alongside an entity, and move to your own structure or a capability centre when the headcount justifies it.
More than 300 global clients work with us, we manage over 2,000 employees, we process $20M+ in annual payroll, and we hold a 4.8 out of 5 rating on G2 across verified customer reviews. EOR pricing starts from $99 per employee per month.
Here's how we help:
- Employer of Record: we become the legal employer so you can hire and run a team in India without an entity, with payroll, statutory benefits and laptop procurement handled.
- PEO and HR services: if you already hold an Indian entity, we run payroll, provident fund, ESIC, professional tax and TDS filings under your own registrations.
- Managed payroll: the India pay run and its filings executed while you keep your own entity and HR team.
- Contractor of Record: we become the contracting party for Indian contractors, with compliant agreements, classification review and local payouts.
- Freelancer and vendor payments: pay Indian freelancers, consultants and agencies through compliant channels, with in-platform invoicing and FIRA documentation.
- Recruitment and Mira AI hiring: Mira AI screens applicants against a scorecard you write, with recruiter assisted sourcing across the major hubs.
- Background verification: identity, education, employment and criminal checks completed before a start date.
- Entity setup: incorporating your Indian company and obtaining the tax and employer registrations when you want your own vehicle.
- GCC and capability centre setup: standing up and staffing an India capability centre, from operating model to run state.
- Build, operate and transfer: we build and run the India team, then transfer it to your own entity when you are ready to own it.
We deliver EOR and the wider India employment stack in India today, and we are expanding into further markets including the US and the UK.
Red Hill Technology Solutions has run its India engineering team on Wisemonk for the past year and a half. They handle payroll and benefits end to end, so I can offer my employees good health insurance without having to master the idiosyncrasies of Indian benefits myself. Payroll cutoff reminders arrive every month before I need them, and off-cycle bonus runs have never been a problem. Even equipment purchasing, a real headache for a US company shipping to Indian addresses, is as simple as telling them what I need. Exchange rates are fair and the pricing is transparent. Deepika Elumalai, our point of contact, ties it all together. Whatever comes up, she pulls in the right people and sees it through. For any US company building a team in India, Wisemonk is an easy recommendation.
- Tak Yamamoto, President at Red Hill Technology Solutions, Inc.
Operating in India without a compliance team?
We carry the payroll, statutory filings and monthly deadlines so your team can focus on the business.
Frequently asked questions
Can a foreign company own 100% of an Indian business?
In most sectors yes, under the automatic FDI route, with no prior government approval and reporting to the Reserve Bank of India afterwards. Restricted sectors and investors from countries sharing a land border with India need prior approval instead.
What is the corporate tax rate for a foreign business in India?
It depends on the structure. An Indian subsidiary can elect a 22% rate, roughly 25% effective once surcharge and cess apply. A branch or project office is taxed as a foreign company at 35%, plus surcharge and 4% cess, as of July 2026.
What are the current GST rates in India?
Four main slabs since the reform effective September 22, 2025: 0%, 5%, 18% and a 40% rate for luxury and sin goods. The 12% and 28% slabs were largely removed, with items redistributed to 5% or 18%.
How do you repatriate profits from India?
Usually as dividends. Since April 2020 dividends are taxed in the shareholder's hands, with the Indian company withholding at source. Domestic law withholding is 20% plus surcharge and cess, commonly reduced by treaty if you hold a residency certificate and PAN.
Do you need an Indian entity to employ people in India?
No. An Employer of Record can be the legal employer, which lets you build a team without incorporating. Many companies operate this way first and set up their own entity once headcount and revenue justify the overhead.
What compliance is required to run a business in India?
Monthly payroll contributions and withheld tax, monthly GST returns plus an annual return, annual corporate and registrar filings with an audit, and labour law obligations under the four labour codes in force since November 2025, including state-level rules.
What is the hardest part of doing business in India?
The administrative cadence rather than the law itself. Several obligations recur monthly, many rules vary by state, and the framework changes: GST rates in 2025, the labour codes in 2025, and a new Income Tax Act in April 2026.
Ready to build your India team?
Tell us who you're looking to hire. We'll walk you through exactly how the setup works for your company, your timeline, and your budget.
