India Entry & Expansion in 2025-2026: A Practical Guide for Global Companies (Tax, Setup & Compliance)

Created By : Biyash Chakraborty | Senior Manager - Marketing

 

Imagine a country where a new unicorn is born every week, more than 20 million people come online every month, and global companies are setting up factories, technology centers, and innovation hubs at an unprecedented rate. A nation that stands as both the world’s largest democracy and the most populous on this planet — powered by a young and ambitious workforce.

Welcome to India.        

 

India will leap forward as one of the fastest-growing major economies in the world over the next two years. The data tells a story of confidence built one step at a time.

• Over US$ 695 billion in foreign exchange reserves
• Growth forecast: 6.3%–6.5%
• Export momentum crossed US$ 413 billion in just six months of FY26.

Global investors are seeing the opportunity. The country has received US$ 80.61 billion in FDI in FY25, while cumulative investments since 2000 have soared to US$ 1.09 trillion. The most symbolic sign of progress is India has climbed the ranks of the Global Innovation Index to 39, leaping from 81 not very long ago.

What's driving this shift?

A mix of ambition, resilience, and unstoppable market growth - a story the world wants to be part of.

The industries driving this growth wave encompass manufacturing, renewable energy, electric vehicles, technology, and GCCs.

Government initiatives like Make in India, Gati Shakti, reforms favouring FDI, and streamlined compliance with digital governance instil confidence in businesses to establish and grow more rapidly.

India has also evolved into a global hotspot for Global Capability Centers — with over 1,700 GCCs operating in the nation, providing jobs for nearly 2 million individuals, and projecting a market value of US$120 billion by 2030.

While the opportunity is big, India's business environment is still multilayered. For global companies to succeed, operations need the right structure, timely government approvals, and sound compliance planning from day one.

Understanding Your India Entry Options

When a global company makes the decision to enter India, the first big question is: Which route to choose?

• Some want full ownership and long-term presence.
• Some like to try before diving in
• Others like to collaborate with someone who already knows the market.

India offers several entry options – each with a story to tell.

Structure	Pros	Trade-offs	Example
Wholly Owned Subsidiary	Full control, easier tax planning	More compliance	A growing US SaaS company that wants a full-scale India tech hub
JV	Access local expertise & networks	Shared decision-making	A German automobile company entering India’s EV market
Branch Office	Revenue can be earned without fully incorporating	Higher taxes	UK EPC contractor executing projects
Liaison Office	Easy testing of market	Cannot earn revenue	Japanese electronics brand exploring consumer demand in India

In other words:

• Want control? Choose a Subsidiary.
• Want a partner? Go for a JV.
• Need to execute projects? A Branch Office works.
• Still testing the market? Liaison Office is the starting point.

Choosing the structure wisely can save millions later - in taxes, restructuring costs, and time.

Legal & Regulatory Framework: What You Must Know

 

Entering India resembles walking into a lively marketplace — brimming with energy, opportunities, and potential. However, similar to any marketplace, there are regulations that ensure everything operates efficiently. Grasping these principles early is essential for effectively operating a successful business in this area.

The legal and regulatory framework of India encompasses multiple crucial domains:

• Corporate & securities laws: Companies Act 2013, SEBI listing & disclosure requirements, which dictate how companies function and maintain transparency.
• Prioritizing Income Tax and GST - Tax regulations under these Acts outline the way in which profits or supplies will be taxed.
• FEMA and FDI policies guiding the inflow and outflow of money in and out of the country
• Labour laws that ensure fair employment and compliance across different states
• Sectoral laws ranging from banking to telecom and pharmaceuticals, etc.
• Data protection laws, such as the Digital Personal Data Protection Act, 2023, which help in keeping digital operations secure

Reforms such as IFSC, industrial zones, and digitized processes are making business operations smooth. Yet, the system can still be quite maze-like for a newcomer because of:

• Several authorities and splitting regulations
• Longer approval timelines in sensitive sectors
• Complex rules for cross-border payments and pricing
• Frequent legal changes that demand close monitoring
• Detailed exchange control reporting and stringent FEMA requirements

That may sound overwhelming, and many companies do get stuck here. But the ones that do succeed follow a clear, proactive roadmap.

Strategies to navigate this maze include:

• Proactively identify applicable laws and establish an integrated compliance management framework.
• Early initiation of approvals, with regular follow-up on clarifications from the concerned authorities for in-principal clarity.
• Agreements should be well documented and reviewed thoroughly, keeping in view the tax implications likely to arise, including benchmarking and optimizing benefits from tax treaties.
• Keep up with regulatory changes, consult professional counsel as needed, and maintain consistent and organized records.
• Plan transaction structures in advance, map FEMA requirements, and ensure all regulatory filings are completed on time.

In short, companies that win in India do not just follow compliance — they embrace it as a growth strategy.

Taxation for Foreign Companies Operating in India

Taxes can make or break the success of a global business entering a new market-and India knows this well. That's why the country has built a competitive tax framework designed to support investment and growth.

With the right structure in place, companies can often prevent 10-18% of unnecessary tax leakage, meaning they retain more profits within the business.

Some of the relevant competitive tax rates include:

Type	Tax Rate
New manufacturing units	15% (conditions apply)
Domestic companies (regular)	22–25%
Foreign companies operating directly	40%

 

So, the choice of appropriate structure doesn't just affect control; it directly impacts tax efficiency.

But, there’s more to that story.

Additional considerations for foreign companies

• Transfer Pricing for transactions within group entities
• Withholding Tax on royalty/services
• MAT if effective tax too low
• DTAA relief for 90+ treaty countries
• Form 10F & digital compliance updates in 2025-26

Setting Up Operations in India: A Step-by-Step Journey

Once the decision to enter India is made, the real story begins-turning strategy into reality. The good news? Setting up in India today is faster, more digital, and more seamless than ever.

Let's take the example of a European battery technology company entering India.

They started where every smart company should — understanding the market. They invested time in understanding demand, pricing, competitors, and the ideal location — metro cities for brand presence, Tier-2 cities for talent and scale. Their initial plan was to start as a Branch Office, since it seemed the quickest option. But once we analyzed the tax impact, the picture changed:

• They would be taxed at 40% as a branch
• They would also face increased withholding taxes on payments going back to the parent company.

The cost difference was too great to overlook. Our team helped them restructure as a Wholly Owned Subsidiary instead.

What changed?

• Their tax rate fell to 22%
• They can claim DTAA benefits with their home country
• Transfer pricing allowed clean intra-group billing
• They avoided double taxation and maximized cash available for India operations

From there, we guided their entire setup:

• Issuance of DSCs and DINs
• Register the company with MCA
• Opening business bank accounts and completing FDI filings
• Setting up payroll, GST, and all ongoing tax compliances

Result: They saved almost 15% in tax costs every year — money that went straight into expanding their India R&D centre.

A well-planned structure didn't just help them enter India; it helped them win in India from Day 1.

Overcoming Infrastructure Bottlenecks – Incentives & Opportunities for Foreign Investors

Expanding in India involves much more than just establishment; it's about seamless functioning on the ground. Simply put, it is about the right location, steady power, and reliable logistics that support growth.

Indeed, India is advancing these capabilities at an impressive pace, bolstered by significant infrastructure reforms and innovative policies:

• Gati Shakti National Master Plan: In order to reduce logistics timelines, it is working on integrating roads, ports, airports, and railways, thereby reducing bottlenecks across ministries.
• GIFT City is India's first International Financial Services Center, opening new channels for global financing and innovation.
• Plug-and-play industrial parks minimize setup times with pre-built facilities, utilities, and approvals.
• Public-Private Partnerships (PPP) and FDI-friendly financing reforms are opening up new avenues of investment in core infrastructure.
• Smart logistics systems, such as ULIP, provide real-time visibility across supply chains and help companies adapt much faster.
• Special Economic Zones or SEZs provide tax and duty concessions for export-oriented manufacturing and global supply chain operations.
• IFSC frameworks enable international banking, insurance, and capital markets activity — from within India.
• Captive and renewable energy solutions that will lower operation risk and improve sustainability outcomes.

With improving connectivity and scaling digital logistics fast, India is turning into a central hub where global companies can build, manufacture, and export to the world with much better efficiency.

Common Pitfalls to Avoid During India Entry

Every global company enters India with excitement-a huge market, strong talent, and endless opportunity. But some stumble along the way, not because the opportunity isn't real but because they missed a few important details that make all the difference.

Here are some of the most common pitfalls faced by foreign companies — and how to avoid them from the outset:

Pitfall	Fix / Recommended Approach
Rushing in Without Understanding Local Regulations	Align global policies with India’s compliance framework from Day 1.
Underestimating Tax & Transfer Pricing	Map taxes, pricing, and DTAA benefits upfront to prevent costly leakages.
Choosing the Wrong Business Structure	Select a structure that supports long-term strategy — not short-term convenience.
Ignoring Cultural Alignment	Invest in local leadership and relationship-building — culture drives progress here.
Delayed FEMA & RBI Filings	Maintain a clear compliance calendar with alerts and designated responsibility.
Underestimating Logistics, Power & Real Estate Gaps	Evaluate infrastructure readiness early — location and continuity planning are key.

How AKM Global Helps Global Companies Succeed in India

Every successful India entry needs more than a good product; it needs the right guidance, the right structure, and the right partner who understands global expectations and local realities.

For more than four decades, AKM Global has been assisting companies in over 35 countries to expand and enter India. We take care of all the needs for the same, from:

• India Entry Strategy
• Tax & Transfer Pricing
• Tax, Payroll & Accounting Compliance
• Cross-border & Transaction Advisory
• GCC setup and BOT models

We believe India is not just another market; it is one of the most powerful growth engines of the world for the next decade. Those moving early in 2025–2026 will be able to capture strategic talent, supply chain networks, and market share advantages that are difficult to replicate later.

Let's build your India success story: thoughtfully, compliantly, and confidently.

For any queries, please do not hesitate to contact us at info@akmglobal.in.

FAQ Section:

Q1. What is the best type of entity structure for a foreign business entering India?

Ans: It depends on your goals. Most global companies choose a Wholly Owned Subsidiary for the reasons of full control, better tax planning, and thereby allowing revenue generation in India.

However, a Liaison Office could be a simpler start if you just wanted to test the market first.

Q2. What are the tax responsibilities of foreign subsidiaries in India?

Ans: The foreign subsidiary has to file the tax returns on time and maintain appropriate records to remain compliant.

• Pay corporate tax on profits
• Deduct and deposit TDS on payments
• File GST returns if selling goods or services
• Follow the Transfer Pricing rules for transactions with group companies

Q3. How long does it take to set up a company in India?

Ans: Average 4–6 weeks if all documents are ready and filings are accurate.

Q4. What are the documents necessary for FDI approval?

Ans: Passport and ID details of directors/shareholders, Parent company documents (if applicable), Board resolutions approving investment, Bank and address proofs, Business activity details.

Q5. What should a CFO ensure before entering India?

Ans: Every CFO should ensure that a simple checklist is followed to set up their business properly and avoid all kinds of future risks:

• Right entity structure and tax planning
• FEMA compliance and reporting mapped
• Transfer Pricing and GST impact assessed
• Human resource and payroll policies that are compliant with Indian laws
• Strong documentation and governance in place
• Location, logistics, and power requirements reviewed