India is one of the world’s fastest-growing economies and a hub for foreign investment. With its large consumer base, skilled workforce, and strong technology sector, the country offers many opportunities for foreign entrepreneurs. Starting a business in India as a foreigner can be profitable, but it requires a clear understanding of the rules, documents, and costs involved.
In this blog, we will explain in detail the requirements, documents, and costs for foreigners who want to start a business in India.
Why Start a Business in India?
Foreign investors are increasingly choosing India for business expansion. Here are a few reasons why:
- Large Market – Over 1.4 billion people make India one of the biggest consumer markets in the world.
- Skilled Workforce – India has a young, educated, and talented workforce across industries.
- Government Support – Programs like “Make in India” and “Startup India” encourage foreign investment.
- Growing Economy – India is among the top economies with steady growth in technology, manufacturing, and services.
- Strategic Location – Easy access to Asian, Middle Eastern, and global markets.
Requirements for Foreigners to Start a Business in India
Foreign entrepreneurs must follow specific guidelines set by the Indian government. Some key requirements include:
- Choose the Right Business Structure
- Private Limited Company (PLC) – The most popular option for foreign investors.
- Limited Liability Partnership (LLP) – Suitable for service-based businesses.
- Branch Office / Liaison Office – For foreign companies that want to operate in India without a full setup.
- Wholly Owned Subsidiary – A company fully owned by a foreign parent company.
- Minimum Directors and Shareholders
- A Private Limited Company must have at least 2 directors and 2 shareholders.
- At least one director must be a resident of India.
- Approval from Authorities
- Most sectors are open to foreign investment under the Automatic Route (no prior approval needed).
- Some restricted industries require government approval through the Approval Route.
- Compliance with Indian Laws
- Registration under the Companies Act, 2013.
- Tax compliance, GST registration, and RBI/FEMA guidelines for foreign ownership.
Documents Required for Foreign Entrepreneurs
Foreign nationals must provide certain documents to register a business in India. These include:
- For Directors and Shareholders
- Passport (notarized and apostilled).
- Address proof (utility bill or bank statement).
- Passport-size photographs.
- Digital Signature Certificate (DSC).
- For the Company
- Proposed name of the company.
- Memorandum of Association (MOA) and Articles of Association (AOA).
- Registered office address in India.
- Rental agreement or property ownership proof of the office.
- Additional Approvals (if required)
- RBI approval for certain sectors.
- Industry-specific licenses (for banking, telecom, insurance, etc.).
Step-by-Step Process of Starting a Business in India for Foreigners
- Decide on Business Structure – Choose between Private Limited Company, LLP, or a branch office.
- Get Director Identification Number (DIN) and DSC – Mandatory for foreign directors.
- Name Approval – Apply for a company name through the Ministry of Corporate Affairs (MCA) portal.
- Draft and File Incorporation Documents – Submit MOA, AOA, and other documents.
- Obtain Certificate of Incorporation – Official registration certificate from the Registrar of Companies (ROC).
- Open Bank Account – Open a company bank account in India.
- Apply for PAN and TAN – Tax registration numbers required for business operations.
- Register for GST (if applicable) – For businesses crossing the annual turnover limit.
- Other Licenses and Registrations – Industry-specific approvals depending on business activity.
Costs of Starting a Business in India for Foreigners
The cost depends on the type of business entity and professional charges. Here’s a breakdown:
- Company Registration Fees – ₹15,000 to ₹30,000 (approx.) depending on structure.
- Digital Signature Certificate (DSC) – ₹1,500 to ₹2,000 per director.
- DIN Application – Around ₹500 per director.
- Name Approval Fee – ₹1,000.
- MOA & AOA Drafting – ₹5,000 to ₹10,000.
- Professional/Consultant Fees – ₹15,000 to ₹40,000 depending on the service provider.
- Government Approval (if required) – Costs vary by sector.
Overall, starting a company in India as a foreigner may cost between ₹50,000 to ₹1,00,000, depending on the setup.
Compliance After Starting a Business
Once the company is registered, foreign entrepreneurs must follow compliance rules such as:
- Filing annual returns with the MCA.
- Maintaining proper accounting records.
- Filing Income Tax Returns.
- GST filings (if registered).
- Foreign investment reporting to the RBI.
Regular compliance is important to avoid penalties and ensure smooth operations.
Common Challenges for Foreign Entrepreneurs in India
Starting a business in a new country comes with challenges. Some common issues are:
- Understanding the Indian tax and legal system.
- Language and cultural differences.
- Finding a reliable local partner or director.
- Handling compliance and regulatory changes.
With proper guidance from professional consultants, these challenges can be managed easily.
Final Overview
India is one of the most promising destinations for foreign investors. With its huge consumer base, growing economy, and supportive government policies, it offers excellent opportunities for international entrepreneurs.
Foreigners who want to start a business in India must follow the legal requirements, prepare the right documents, and understand the costs involved. With the right planning and professional guidance, setting up a company in India can be smooth and successful.
If you are planning to start your business journey in India, expert support can make the process faster and easier. For professional assistance, reliable guidance, and Foreign Subsidiary Company Registration in India, you can trust Groom Tax.
