How do UK companies enter the Indian market in 2026?
Subsidiary, EOR, or branch — with real numbers.
UK companies have three legal ways to operate in India: an Employer of Record (EOR), a Wholly Owned Subsidiary (WOS), or a Branch Office.
EOR is fastest — operational in 5 days, no entity needed, costs £40–65 per employee per month. Best for testing the market or hiring up to ~10 people.
Subsidiary is the right long-term structure for most companies — 25–30 days to incorporate, costs £650–950 to set up, £240–480/month ongoing.
Branch Office is almost never the right answer — 90–120 days for RBI approval, restricted activities, and Permanent Establishment tax risk on your global UK revenue.
What are the three ways a UK company can operate in India?
When a UK founder wants to hire engineers in Bengaluru, open an office in Mumbai, or serve Indian customers at scale, they face a choice that most UK advisers don't know well: which legal structure to use.
The three options carry different timelines, costs, risks, and operational constraints. Getting the structure wrong in year one is expensive to unwind — so this guide covers all three in full.
The short answer: most UK companies should use EOR to move fast, then transition to a Wholly Owned Subsidiary once they're past 10 employees or 12 months. Branch offices are a trap most people don't know to avoid.
How do the three options compare?
The table below covers the dimensions that matter most for a UK founder making this decision. All costs in GBP.
| Criteria | EOR (Employer of Record) | Wholly Owned Subsidiary | Branch Office |
|---|---|---|---|
| Time to operational | 5 working days | 25–30 days | 90–120 days |
| Setup cost | £0 (no entity) | £650 – £950 | £1,800 – £3,500 |
| Monthly running cost | £40–65 / employee | £240–480 / month | £300–600 / month |
| Legal entity in India? | No — EOR is employer | Yes — separate Pvt Ltd | No — extension of UK Co |
| Can hold IP / assets? | No | Yes | Limited |
| Can sign India contracts? | No | Yes | Only parent's activities |
| FDI / RBI approval needed? | No | FCGPR filing only | Full RBI approval required |
| PE (Permanent Establishment) risk? | Low–medium | None (ring-fenced) | High — global UK revenue at risk |
| Minimum headcount | 1 | None required | None required |
| Resident Director required? | No | Yes (182 days/year) | Yes (authorised rep) |
| Exit / wind-down | 30 days notice | 4–12 months | 6–18 months |
| Right for you if... | Testing market, <10 hires, moving fast | Building a real India presence | Almost never |
Option 1 — What is an Employer of Record in India, and when should you use it?
An EOR (Employer of Record) is a third-party company that employs Indian workers on your behalf. They are the legal employer on paper. You manage the work. The EOR handles payroll, PF (Provident Fund), ESI (Employees' State Insurance), TDS (Tax Deducted at Source), and all labour law compliance.
You pay a monthly per-employee fee — typically £40–65 per employee per month — instead of setting up your own entity. There is no minimum headcount, no setup cost, and you can have your first Indian employee onboarded within 5 working days.
When EOR is the right answer
EOR works well when you want to hire 1–10 people in India and aren't yet certain this will be a long-term commitment. It's also the fastest way to test whether your India hiring strategy works before committing to an entity.
Many UK companies use EOR as a bridge: hire 2–3 people via EOR, validate the team and the market, then transition to a subsidiary once they're confident. The transition from EOR to subsidiary typically takes 4–6 weeks.
What are the limitations of EOR?
The EOR provider is the legal employer, not you. Your Indian team members' employment contracts are with the EOR company — which creates complications if you want to offer equity, assign IP ownership, or build a strong employment brand in India.
EOR also carries a grey area on Permanent Establishment risk. If your EOR employees are doing core revenue-generating work for your UK entity — not just support functions — the Indian tax authority can argue your UK company has a PE in India.
EOR cost scales linearly with headcount. At 10 employees paying £50/month each, that's £500/month — more than the cost of running your own subsidiary (£240–480/month). Beyond 8–10 employees, a subsidiary is almost always cheaper.
Option 2 — What is a Wholly Owned Subsidiary in India, and how does it work?
A Wholly Owned Subsidiary (WOS) is a Private Limited Company (Pvt Ltd) incorporated in India where your UK entity holds 100% of the shares. It is a completely separate legal entity with its own company registration number, PAN (Permanent Account Number — India's equivalent of a UTR), GST registration, and bank accounts.
It can hire employees directly, sign contracts in its own name, hold IP, own assets, receive FDI from your UK parent, and repatriate profits back to the UK under the UK–India DTAA.
How long does it take to set up a subsidiary from the UK?
End-to-end: 25–30 days from first document submission to a fully operational entity with a bank account.
| Stage | What happens | Time |
|---|---|---|
| Document preparation | Companies House CoI + Board Resolution apostilled via FCDO | 7–15 working days |
| Name reservation | MCA RUN (Reserve Unique Name) application | 1–3 working days |
| SPICe+ filing | Incorporation form filed with Ministry of Corporate Affairs | 1 day |
| Certificate of Incorporation | MCA issues CoI, CIN, PAN, TAN | 7–15 working days |
| GST registration | GST number applied for and issued | 3–7 working days |
| Bank account opening | Account opened at HDFC, ICICI, or Axis | 7–10 working days |
| RBI FCGPR filing | FDI reporting after first capital transfer from UK | Within 30 days of transfer |
The FCDO apostille step and the MCA incorporation step can run in parallel. Start your document apostille on day one while the incorporation forms are being prepared — this is how the 25–30 day timeline is achieved.
What does a subsidiary require on an ongoing basis?
Your Indian subsidiary must file 25+ regulatory returns per year: monthly GST-3B returns, quarterly TDS returns, annual Income Tax Return, ROC (Registrar of Companies) Annual Return, statutory audit by an Indian CA, board meetings (minimum two per year), and — if you have any intercompany transactions with your UK parent — an annual Transfer Pricing Study.
A subsidiary ring-fences your UK entity from Indian tax liability. The Indian subsidiary is taxed on its own profits only. Your UK revenue is never at risk — unlike a branch office.
Option 3 — Why is a branch office almost always the wrong choice for UK companies?
A Branch Office sounds like the simplest option — an extension of your existing UK company in India, not a new legal entity. But it carries three structural problems that make it wrong for almost every UK company entering India.
Problem 1: RBI approval takes 90–120 days
Unlike a subsidiary (which only requires an FCGPR filing after the fact), a branch office requires prior approval from the Reserve Bank of India. This takes 90–120 days and requires submitting audited financial statements, a business plan, and UK company documents. During those 90–120 days, you cannot operate in India at all.
Problem 2: It can only do what your UK company does
A branch office can only conduct business activities that are identical to those of the UK parent company. Any expansion into new activities requires fresh RBI approval.
Problem 3: Permanent Establishment risk on your global revenue
A branch office is not a separate legal entity — it is legally your UK company operating in India. The Indian tax authority (CBDT) can classify this as a Permanent Establishment and assess tax on your global UK revenue, not just India income. This has happened to UK companies operating Indian branches.
A branch office may be appropriate if you operate in a sector where 100% FDI in a subsidiary is not permitted and a branch is explicitly allowed instead. In all other cases, a subsidiary is faster, safer, and cheaper.
What is FEMA and what does it mean every time you send money from the UK to India?
FEMA is the Foreign Exchange Management Act — India's law governing all cross-border money flows. Every pound you transfer from your UK entity to your Indian subsidiary is classified as an FDI (Foreign Direct Investment) transaction. These transactions are welcome but must be reported.
Within 30 days of every capital transfer from the UK to India, you must file an FCGPR (Foreign Currency-Gross Provisional Return) with the Reserve Bank of India. This is a step most first-time entrants miss because no one tells them about it.
The penalty for a late or missed FCGPR filing is 3× the transaction amount. Transfer £50,000 to your Indian subsidiary without filing within 30 days: the maximum penalty exposure is £150,000.
Most sectors — technology, manufacturing, professional services, B2B retail, e-commerce, healthcare, education — allow 100% FDI under the "automatic route," meaning no government approval is required before investing. A handful (multi-brand retail, defence above 74%, media) require government approval. Check your sector's FDI ceiling before committing to a structure.
FEMA also governs repatriation. When your Indian subsidiary pays dividends back to your UK parent, you'll need a Tax Residency Certificate (TRC) from HMRC to claim the reduced withholding tax rates under the UK–India DTAA.
How does the UK–India Double Taxation Avoidance Agreement reduce your tax bill?
The UK–India DTAA (Double Taxation Avoidance Agreement) prevents the same income from being taxed in both the UK and India. For a UK company with an Indian subsidiary, it affects three types of payment flowing from India to the UK.
| Payment type | Standard India withholding | DTAA rate | Annual saving on £100,000 |
|---|---|---|---|
| Dividends | 20% | 15% | £5,000 |
| Royalties | 20% | 10–15% | £5,000–10,000 |
| Technical service fees | 20% | 10–15% | £5,000–10,000 |
The DTAA benefit is not automatic. To claim the reduced rate, your UK company needs three things in place before any payment is made from India: a valid Tax Residency Certificate (TRC) from HMRC, Form 10F filed with the Indian tax authority, and properly structured intercompany agreements defining what the payment is for.
Many UK companies discover this after the fact — they've already received payments at the 20% rate and overpaid Indian withholding tax that cannot be easily reclaimed. Structure this on day one.
When does transfer pricing apply, and what does it cost to get it wrong?
Transfer pricing rules apply whenever your UK parent company transacts with your Indian subsidiary — management fees, software licences, shared services charges, intercompany loans, technical consulting fees, and IP royalties. There is no minimum transaction threshold.
These transactions must be priced at arm's length — what two unrelated parties would charge each other — and documented in an annual Transfer Pricing Study filed with your Indian Income Tax Return.
What happens if transfer pricing isn't documented?
The CBDT (Central Board of Direct Taxes) audits intercompany transactions between foreign parent companies and Indian subsidiaries aggressively — particularly in technology and professional services. If documentation is absent or inadequate, the CBDT can re-price the transaction, assess additional tax on the difference, and levy a penalty of 2% of the transaction value for inadequate documentation. On a £500,000/year intercompany arrangement, that's £10,000 in minimum penalties before any tax adjustment.
A robust annual Transfer Pricing Study costs £1,200–2,400 per year depending on complexity — the insurance premium against penalties that can run to 200%+ of the undocumented adjustment amount.
What does the full subsidiary setup process look like, step by step?
The complete process for a UK company incorporating a Wholly Owned Subsidiary in India. The FCDO apostille step is the longest single step and should start on day one.
| Step | What you do | What happens in India | Time |
|---|---|---|---|
| 1. Confirm structure | Confirm 100% FDI is permitted in your sector. Decide share capital (minimum recommended: INR 100,000 ≈ £950). | CA confirms FDI route and entity type. | Day 1 |
| 2. Name selection | Propose 2–3 company name options. Avoid generic words like "Tech" or "Solutions" without a distinctive prefix. | RUN application filed with MCA. | Days 1–3 |
| 3. UK document apostille | Send Companies House CoI + Board Resolution to FCDO Legalisation Office for apostille. | — | 7–15 working days |
| 4. DIN application | Proposed directors submit passport, address proof, and DSC (Digital Signature Certificate) application. | DIN (Director Identification Number) obtained per director. | Days 3–7 |
| 5. SPICe+ filing | Review and digitally sign incorporation documents. | SPICe+ form submitted to MCA. | Day 8 (after apostille) |
| 6. Certificate of Incorporation | — | MCA issues CoI, CIN, PAN, TAN. | 7–15 working days |
| 7. GST registration | Confirm registered office address. | GST number applied for and issued. | 3–7 working days |
| 8. Bank account | Provide KYC documents for UK directors. | Account opened at HDFC, ICICI, or Axis Bank. | 7–10 working days |
| 9. First capital transfer | Wire share capital from UK to Indian account. Keep SWIFT confirmation. | FCGPR filed with RBI within 30 days. | Within 30 days of transfer |
| 10. Ongoing compliance | Confirm bookkeeping, payroll, and GST filing arrangements. | Monthly GST-3B, TDS returns, payroll cycle begins. | First month after incorporation |
What does it actually cost to run an Indian subsidiary from the UK?
A realistic full-year cost model, excluding employee salaries. All figures in GBP.
| Cost item | One-off or annual | Cost (GBP) | Notes |
|---|---|---|---|
| Subsidiary incorporation | One-off | £650 – £950 | Professional fees + govt. fees at actuals |
| Resident Director | Annual | £500 – £750 | Mandatory under Companies Act 2013 |
| Virtual office / registered address | Annual | £160 – £320 | Mumbai, Pune, Bengaluru, or Delhi |
| Managed bookkeeping & all filings | Monthly (×12) | £2,880 – £5,760 | £240–480/month; covers GST, TDS, ROC |
| Statutory audit | Annual | £400 – £800 | Mandatory for all Indian companies |
| Transfer pricing documentation | Annual | £1,200 – £2,400 | Required if any intercompany transactions |
| Payroll (per employee) | Monthly | £40 – £65 / employee | PF, ESI, TDS, professional tax, payslips |
| Total year 1 (5 employees, excl. salaries) | £8,390 – £14,580 | Incorporation + all compliance + 5 on payroll |
For context: a senior software engineer in Bengaluru costs £15,000–25,000/year in total employment cost. Five engineers via a subsidiary with all compliance included typically costs £90,000–140,000/year all-in — versus £180,000–250,000+ for equivalent seniority in London.
What official India entry guidance doesn't tell UK companies
The Indian government's official guidance for foreign companies describes an idealised path. These are the friction points that only emerge in practice — and in the case of the last two, from direct experience advising funded companies through complex cross-border structures.
The FCDO Legalisation Office (UK) apostille postal service currently takes 7–15 working days, not the "5 days" quoted on their website. Their same-day premium service requires in-person attendance in Milton Keynes or London. Plan your apostille early — this is the most common cause of timeline slippage.
30% of company name applications are rejected on first submission. Generic words — "Tech", "Solutions", "Services", "Global" — without a distinctive prefix are the most common cause. Submit 2–3 name options simultaneously to reduce this to near-zero in practice.
Startups raising Series A or B need their India structure set correctly before the round closes — not after. In fundraises totalling $52M across Series A, B, and secondary sales, the India entity structure directly affected investor KYC, FEMA compliance on incoming foreign capital, and cap table mechanics. Getting this wrong mid-round is very difficult to fix.
A funded Indian company that wants to set up subsidiaries in the US or Singapore faces ODI (Overseas Direct Investment) regulations — the outbound mirror of inbound FDI. This requires RBI approval, FEMA-compliant capital transfers, and ongoing annual reporting in both jurisdictions. We have guided Indian companies through this into both the US and Singapore.
UK founders assume the UK–India tax treaty applies by default. It doesn't. Without a valid HMRC Tax Residency Certificate and Form 10F filed in India, India defaults to 20% withholding on all payments to the UK. Overpaid withholding tax is difficult to reclaim retrospectively.
If your parent company is publicly listed — on the LSE, SIX, or any exchange — the Indian subsidiary's CS (Company Secretarial) obligations are substantially higher. Board documentation, related-party transaction disclosures, and filings must align with both Indian company law and the parent's exchange obligations. We manage this full CS function for the Indian subsidiary of a listed Swiss company.
One more that almost no adviser mentions: the Indian financial year runs April–March, not January–December. If you incorporate in January, your first statutory audit covers only 3 months (January–March). You'll pay audit fees for that short period, then again for a full year from April. Factor this into your incorporation timing if audit cost is a concern.
What a UK company's India entry actually looked like
Their UK solicitor advised a branch office — "simpler than a subsidiary." It wasn't. A branch would have taken 90–120 days and created Permanent Establishment exposure on their UK SaaS revenue. The right structure was a Wholly Owned Subsidiary.
We started 6 engineers on EOR within 5 days while beginning subsidiary incorporation in parallel. Their chosen company name was rejected on first MCA submission — a word was flagged as too generic. A revised name was approved on day 3. FCDO apostille on their UK documents took 11 working days (they'd expected 5). Certificate of Incorporation arrived on day 14 from filing.
Total time from first call to operational subsidiary with bank account: 31 days. The 6 EOR engineers migrated to subsidiary payroll in month two. 6 more joined directly. Total incorporation cost: £820.
How should a UK founder decide which structure to use?
The decision comes down to three questions asked in order.
How many people do you need to hire in India, and how fast? If it's 1–5 people and you need them within 2 weeks, start with EOR. If it's 6+ people or you have a 30-day runway, go straight to subsidiary.
Does your India operation need to hold assets, sign contracts, or hold IP? If yes, you need a subsidiary. An EOR cannot do any of these. A branch can sign contracts but only for your UK parent's existing activities.
Are you certain India is a long-term commitment? If yes, the subsidiary's higher setup cost (£650–950) is irrelevant against the operational advantages and the EOR cost savings beyond 8–10 employees. If you're genuinely uncertain, EOR for 6–12 months lets you validate before committing.
For most UK founders: start EOR in week one and begin subsidiary incorporation simultaneously, targeting a 30-day transition. You get speed and the right permanent structure without sacrificing either.