An Indian company entering the US market has to answer three questions in order: how will the investment leave India, what US structure will hold it, and how will profit come back. Each answer brings its own filings on both sides. This guide for an Indian company entering the US market explains the main structures, the US forms that follow them, the India-US treaty rates on money sent home, and the visa routes for the people who will run the business. It reflects October 2026 rules and is general information for planning, not legal or immigration advice.
How can an Indian company entering the US market choose a structure?
| Option | US filing | Liability | Typical fit |
|---|---|---|---|
| US subsidiary (corporation) | Form 1120; Form 5472 | Ring-fenced in the subsidiary | Operating business, hiring staff, investors later |
| US LLC owned by the Indian company | Disregarded: pro forma Form 1120 with Form 5472; or elected as a corporation | Limited, but home-country tax treatment must be checked | Simple wholly owned set-up, pass-through planning |
| Branch of the Indian company | Form 1120-F | The Indian company is directly exposed | Short-term projects, pilot sales |
| No US presence (sales from India) | Often none, but a permanent establishment risk exists | The Indian company | Testing demand, remote services |
A foreign corporation engaged in a US trade or business files Form 1120-F, due the 15th day of the 4th month after year-end if it has a US office, and the 15th day of the 6th month if it has no office or place of business in the US. A registered foreign entity may also face beneficial ownership reporting; since FinCEN's August 2026 final rule, US-formed companies are exempt, so a subsidiary formed in a US state is generally not required to report, while a foreign-formed entity registered in a state is. See our beneficial ownership status update.
How to enter the US market, step by step
- Settle the India side first. Overseas investment by a resident Indian entity is regulated under the Foreign Exchange Management (Overseas Investment) Rules, 2022. The RBI's master direction, updated as of April 1, 2026, says the person making a financial commitment fills Form FC with supporting documents and approaches its designated authorised dealer bank. Cases outside the automatic route go to the RBI through the bank.
- Choose the US structure. Use the table above and our India-US business structures guide.
- Form the entity. Register it with a state; if you form in Delaware but operate in Illinois, also register here (foreign qualification).
- Get the EIN. Foreign applicants without an SSN or ITIN apply by phone, fax or mail; details are in EIN and bank account for foreign founders.
- Open the bank account and fund the company. Decide how much goes in as equity and how much as a loan. Both are reported on Form 5472 and Form FC.
- Register for taxes. State income and franchise taxes, sales tax and payroll, depending on activity; see the employer checklist and sales tax guide.
- Document transfer pricing. Charges between the Indian parent and the US subsidiary should be arm's length on both sides; see India transfer pricing basics.
- Calendar the annual filings. US returns, Form 5472, Forms 1042 and 1042-S on payments to India, and the Indian reports.
How is money sent back to India taxed?
| Payment from the US company | US statutory rate | India treaty rate (IRS Table 1, revised May 2023) |
|---|---|---|
| Dividend to an Indian company owning at least 10% of voting stock | 30% | 15% |
| Other dividends | 30% | 25% |
| Interest | 30% | 15% |
| Royalties and fees for included services (patents, know-how, copyrights) | 30% | 15% |
| Royalties for equipment rental | 30% | 10% |
The treaty text, not the table, controls, and the payer needs a valid Form W-8BEN-E from the Indian parent before applying a treaty rate; see withholding on payments to foreign persons. The US tax paid is generally claimed as a foreign tax credit in India; ask your Chartered Accountant about Form 67 and the treatment of the dividend in India under the Income-tax Act that applies to the year.
Documents and information you need
- Board resolution approving the investment, and the Indian company's latest audited financials
- Overseas investment documents for Form FC, including the structure chart and valuation where required
- US formation documents, EIN notice and operating agreement or bylaws
- Passports and address proof for directors and officers
- Intercompany agreements for loans, services, licences and cost sharing
- A list of expected US employees and their visa status
Visas and people
- E-2 treaty investor: not available to Indian nationals, because India does not appear on the State Department's list of treaty countries for E visas (9 FAM 402.9-10, updated February 2026). Canada does; see our Canadian company guide.
- L-1A: lets a company with a foreign office transfer an executive or manager, including to start a new US office. The employee generally must have worked for the foreign company for one continuous year in the previous three; a new office starts with a maximum one-year stay, and extensions are in two-year steps up to seven years.
- H-1B: for specialty occupations, subject to annual limits, and an additional $100,000 payment requirement for certain petitions has been in litigation in 2026; an immigration lawyer must confirm the current position.
- O-1: for people of extraordinary ability.
Visa work belongs to an immigration professional. Our hiring guide shows the tax side.
A worked example
Sabarmati Components of Ahmedabad forms a Delaware corporation, qualifies it in Illinois, and leases a 10,000 square foot warehouse near Bolingbrook to serve Midwest customers. It invests US$500,000 as equity through its authorised dealer bank. In year one the subsidiary earns US$200,000 of taxable income, so federal tax at 21% is US$42,000, leaving US$158,000. If US$100,000 is paid as a dividend, the treaty rate for a parent with at least 10% of the voting stock is 15%, or US$15,000 withheld. The US subsidiary files Form 1120 and Form 5472 for the equity, the dividend and parent-company charges. These numbers are hypothetical and exclude Illinois tax.
Mistakes to avoid
- Wiring money to the US before the Indian reporting is in place.
- Treating a branch as a simple office when it creates a direct US filing for the Indian company.
- Skipping Form 5472 because the subsidiary has a loss.
- Paying the parent for services or royalties without an agreement and a W-8BEN-E.
- Assuming the E-2 route is open to Indian nationals.
How we can help
We handle the US side: choosing and forming the structure with your attorney, getting the EIN, setting up books and payroll, and preparing Forms 1120, 5472, 1042 and 1042-S. We coordinate with your Indian Chartered Accountant so Form FC, the Indian return and the US filings agree. Our firm is based in the Aurora, Illinois area and supports companies planning a Midwest base. See cross-border tax, business formation and registrations and startup and equity tax planning.
Frequently asked questions
Should an Indian company use a subsidiary or a branch?
A subsidiary usually limits liability and keeps the Indian company out of the US tax system, but it creates its own filings. A branch means the Indian company files Form 1120-F directly.
Do I need RBI approval to invest in the US?
Often not for the automatic route, but the investment must be reported on Form FC through the authorised dealer bank, and limits and conditions apply. Your Chartered Accountant confirms.
What US forms does the subsidiary file?
Form 1120, Form 5472 for related-party transactions, payroll returns if it has staff, and Forms 1042 and 1042-S for payments to the parent.
Can I use an E-2 visa?
Not as an Indian national, per the State Department treaty-country list. L-1A, H-1B and O-1 are the usual routes.
How are dividends to India taxed in the US?
By withholding at 15% for an Indian company holding at least 10% of the voting stock, and 25% otherwise, if the treaty paperwork is correct. Otherwise the statutory 30% applies.
Official sources
- RBI: Master Direction - Overseas Investment (updated April 1, 2026)
- IRS: Convention between the United States and India
- IRS: Tax Treaty Table 1 (Rev. May 2023)
- IRS: Instructions for Form 5472
- IRS: Instructions for Form 1120-F
- USCIS: L-1A Intracompany Transferee Executive or Manager
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.
General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.