US Company Entering India: FDI Routes, Entity Choice and US Reporting for 2026

India offers US companies a large domestic market and a deep technical workforce, and the rules for foreign investors are more open than many expect. They also involve two regulators, the RBI for foreign exchange and the Ministry of Corporate Affairs for company law, plus a tax system that is changing. This guide for a US company entering India explains the investment routes, how to choose between a subsidiary and an office, how profits come back to the US, and what the US parent must report. Indian rules are summarized at overview level; your Chartered Accountant confirms the current provisions.

What are the FDI routes?

The RBI's Master Direction on Foreign Investment in India, updated up to June 15, 2026, states that foreign investment in equity can be made through two routes. Under the automatic route no prior approval of the Central Government is needed. Under the government route prior approval is required, and applications are made on DPIIT's Foreign Investment Facilitation Portal. Foreign investment up to 100% is permitted under the automatic route in sectors not listed in Schedule I of the Non-Debt Instruments Rules and not prohibited, subject to applicable laws and conditions. Some sectors have caps, and indirect foreign investment counts toward the cap. Check the sector early; it also decides whether a subsidiary is possible at all.

How can a US company entering India choose a structure?

For an office, the RBI direction says the applicant files Form FNC with a designated authorised dealer bank. A branch office applicant needs a profit-making track record in the preceding five financial years in its home country and a net worth of at least USD 100,000; a liaison office needs three years and USD 50,000. A parent that is not financially sound may offer a letter of comfort from a group company. Our India entity options guide and private limited company guide compare the choices in depth.

How to enter India, step by step

1. Confirm the sector and route under the Master Direction on Foreign Investment in India.
2. Reserve the name and incorporate. The Ministry of Corporate Affairs' integrated SPICe+ web form has Part A for name reservation and Part B for incorporation and linked services; company law also sets director and residency conditions, which your Chartered Accountant or company secretary confirms.
3. Wire the money through banking channels to the Indian company's account in exchange for shares priced at no less than fair value under the NDI rules.
4. Issue the shares within sixty days of receiving the consideration, or refund it within fifteen days after the sixty days end.
5. File Form FC-GPR within thirty days of issue in the Single Master Form on the RBI's FIRMS portal through the authorised dealer bank. See FC-GPR and annual FEMA reporting.
6. Register for taxes and labour laws: PAN and TAN, GST where required, and employee and professional-tax registrations; see PAN, TAN, Aadhaar and registrations and labour and professional tax.
7. Document transfer pricing for charges between the parent and the Indian company; see India transfer pricing basics.
8. Plan the US reporting described below.

How is money sent back to the US taxed?

The Income Tax Department's TDS chart, current as of October 2026, shows 20% TDS on dividends to non-residents. A tax residency certificate and Form 10F support the treaty rate; see treaties, Form 10F and TRC. The Income-tax Act, 2025 applies from tax year 2026-27 and the 1961 Act for earlier years, so the section numbers on your documents depend on the year. Branch profits remitted abroad are net of Indian taxes. Our full repatriation guide covers dividends, branch profits and fees together.

What must the US parent report?

• Form 5471 for the Indian company if the US company controls it or owns 10% or more as a US shareholder; filed with the US return. The penalty is $10,000 per foreign corporation per year, with extra $10,000 amounts each 30 days after 90 days from an IRS notice, up to $50,000.
• Form 8858 for an Indian branch or a foreign disregarded entity.
• Foreign tax credit (Form 1118 for corporations) for Indian taxes paid.
• FBAR and Form 8938 where the thresholds are met.

Classification matters: under the US foreign-entity default rule, an Indian entity whose members all have limited liability is generally an association taxable as a corporation unless it elects otherwise, and an Indian public limited company is always a corporation for US purposes. See forms 5471, 8858 and 8865.

Documents and information you need

• US parent's incorporation documents, board resolution and audited financial statements
• Passports and addresses for proposed directors, with Indian director identification
• Registered office proof in India and the proposed memorandum and articles
• Valuation report for share pricing, where required
• Bank details of the Indian company and the authorised dealer bank contact

A worked example

Midwest Dental Devices Inc., a Naperville manufacturer, forms a wholly owned private limited company in Hyderabad and invests US$500,000 for shares. The Indian company issues shares within sixty days and files FC-GPR within thirty days after. In year two it pays a US$100,000 dividend. Indian TDS at the domestic rate is 20% plus surcharge and cess, but with a tax residency certificate and Form 10F the 15% treaty rate applies, so US$15,000 is withheld in India. The US parent files Form 5471 with its Form 1120 and claims the Indian tax as a foreign tax credit, subject to US rules. All figures are hypothetical.

Mistakes to avoid

• Starting operations before the RBI route and sector rules are checked.
• Missing the thirty-day FC-GPR filing or the sixty-day share-issue window.
• Forgetting that an Indian branch creates a US filing (Form 8858) and an Indian tax return for the foreign company.
• Claiming the 15% treaty rate without a tax residency certificate and Form 10F.
• Ignoring Form 5471 on the US side.

How we can help

We prepare the US parent's Forms 5471, 8858 and 1118, FBAR and the US treatment of dividends and charges from India. For the Indian filings, we work with your Chartered Accountant, who handles Indian law and tax; we do not prepare Indian returns or represent clients before Indian authorities. Our firm is based in the Aurora, Illinois area and serves Chicago-area companies expanding to India. See cross-border tax, foreign account and asset reporting and business tax returns and planning.

Frequently asked questions

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.