“It’s easy to think that once you register your company, you’re done. Actually, that’s just where the paperwork starts breathing.”
When Registration Is Just the First Page
Setting up a business in India is a milestone—no doubt about it.
You sign papers, get approvals, and even celebrate. But what no one claps for is what comes next: the relentless, often quiet, march of compliance.
It’s not the dramatic stuff that trips foreign entrepreneurs up.
It’s the simple things—a form not filed on time, a tax return skipped by mistake, a GST payment missed because no one flagged the date.
And when that happens?
The system doesn’t slam the door.
It just starts tightening the screws.
This guide isn’t about rules for the sake of rules.
It’s about understanding what you need to file, report, and stay ahead of—so that your company doesn’t just exist on paper, but survives, grows, and stays clean in one of the world’s most complex business ecosystems.
Your Business Structure Sets the Rules You Follow
Before we dive into taxes and filings, quick reality check:
Not every foreign company is treated the same.
In India, your company structure matters—a lot.
Options Foreign Entrepreneurs Typically Choose:
- Wholly Owned Subsidiary (WOS): This is a private limited company owned 100% by a foreign parent company.
- Branch Office: Direct extension of a foreign company. Can generate income in India.
- Liaison Office: Just for communication and marketing. Can’t generate revenue.
- Project Office: Temporary setup for specific contracts or projects.
Each comes with different filing requirements under different laws—MCA, FEMA, GST, and the Income Tax Act.
If you’re running a WOS, your compliance track looks much heavier, because you’re treated like any Indian private limited company for most practical purposes.
Annual Compliance Checklist for Foreign-Owned Businesses
If you own or operate a company in India, here’s what you must do every year without fail:
MCA Compliance (Ministry of Corporate Affairs)
- Annual Return Filing (Form MGT-7): Including details about the company structure, shareholders, and directors.
- Financial Statements (Form AOC-4): Audited financials submitted to MCA.
- Director KYC (DIR-3 KYC): Every director with a DIN must verify details yearly.
- AGM (Annual General Meeting): Must be conducted every year within the prescribed time limit.
Miss any of these? MCA late fees start stacking daily, and your company can be flagged as non-compliant.
Tax Compliance (CBDT)
- Corporate Tax Return (ITR-6): Every company registered in India must file an annual income tax return with the Central Board of Direct Taxes (CBDT)—even if there’s no profit earned. Silence or inactivity isn’t an excuse; the paperwork must be filed.
- Advance Tax Payments: India’s system expects estimated tax payments four times a year, not just one lump sum at year-end. These advance installments are also monitored closely by the CBDT for compliance.
- Tax Deducted at Source (TDS) Compliance: When you’re paying out salaries, hiring contractors, covering rent, or paying for services, you need to hold back a slice for Tax Deducted at Source (TDS)—and deposit it with the government every month.
- TDS must be deducted when paying salaries, rent, contractor fees, royalties, etc.
- Monthly TDS payments + Quarterly TDS returns (Form 24Q for salaries, 26Q for other payments).
Corporate tax rates differ based on company type—but most foreign subsidiaries pay around 30% + surcharge and cess (check latest slabs).
To learn more about taxation for foreign entrepreneurs, check our blog “Taxation Essentials for Foreign Entrepreneurs in India.”
How Does Advance Tax Work in India?
In India, the tax system doesn’t wait politely for year-end reports.
It expects you to pay as you earn, quarter by quarter.
After deducting TDS, if your total tax liability for a year is more than ₹10,000, you’re required to calculate and pay Advance Tax.
No exceptions. No excuses.
Here’s how it breaks down:
- June 15: 15% of the estimated total tax due
- September 15: 45% cumulative
- December 15: 75% cumulative
- March 15: 100% final installment
If you miss any installment?
You’ll owe 1% monthly interest on the unpaid amount—even if you end up paying the full tax later.
Advance Tax isn’t some extra charge.
It’s just India’s way of making sure you stay honest before the financial year closes.
GST Compliance (Goods and Services Tax)
If you cross the registration thresholds or deal in interstate supply, GST applies:
- GSTR-1: Outward sales every month/quarter.
- GSTR-3B: Summary return and tax payment.
- GSTR-9: Annual return if turnover is more than ₹2 crore.
- GSTR-9C: GST Audit if turnover is greater than ₹5 crore.
FEMA and RBI Compliance
For foreign-owned companies, FEMA (Foreign Exchange Management Act) rules matter:
- FC-GPR filing after issuing shares to a foreign parent.
- Foreign Liabilities and Assets or FLA Return every year to the RBI.
Delay in FEMA filings? RBI may fine you heavily and restrict future investments.
Monthly and Quarterly Duties You Can’t Ignore
| Requirement | Frequency | Notes |
| GST Returns (GSTR-1, GSTR-3B) | Monthly/Quarterly | Must file even if no sales. |
| TDS Deposit | Monthly | 7th of every month. |
| TDS Returns (Form 24Q/26Q) | Quarterly | April, July, October, January. |
| Advance Income Tax | Quarterly | June 15, Sept 15, Dec 15, March 15. |
Common Mistakes Foreign Entrepreneurs Make
Thinking registration means you’re done.
Incorporation gets your company born. Compliance keeps it breathing.
- Missing advance tax deadlines.
In India, skipping quarterly tax payments invites interest penalties, and the government won’t wait for apologies.
- Forgetting the Director KYC (DIR-3) filing.
If you miss it, your Director Identification Number (DIN) gets deactivated — and without a valid DIN, you can’t legally operate.
- Assuming small turnover means no GST headache.
Even minimal sales require timely GST returns if you’re registered. Skipping filings triggers automatic penalties.
- Ignoring FEMA reporting after foreign investments.
The Reserve Bank of India (RBI) carefully and closely observes foreign fund movements. Late or missing reports can restrict your company’s ability to raise or repatriate capital.
- Blind trust in accountants or consultants.
“They said they’ll handle it” is not a defense when a notice shows up. Owners must supervise filings personally, even when they delegate.
What Happens If You Ignore Compliance?
Missing compliance isn’t a small mistake.
It invites penalties, late fees, and in worst cases, losing your right to operate.
- Income Tax Late Filing: ₹5,000–₹10,000 penalty, depending on how late you file and your total income.
- MCA Late Filing: ₹100 per day, per form. Forgetting one filing can pile up into thousands very quickly.
- GST Late Filing: ₹50 per day for missing a return, plus 18% annual interest on any unpaid tax.
- TDS Defaults: 1.5% interest per month on missed deductions, plus stiff penalties if filings aren’t made on time.
And if non-compliance keeps building?
- Your company can get struck off the official registry.
- Your directors can be blacklisted from forming or running any new companies in India.
The system doesn’t shut you down in anger.
It just squeezes tighter with every missed deadline until the cost of fixing things becomes heavier than the cost of running them right in the first place.
Final Thought: Paperwork Isn’t a Nuisance. It’s Proof You’re Still Alive & Kicking.
You didn’t come here to chase signatures and stamps.
You came to build something that lasts.
But in India, registration is just the opening act.
After that, every filing, every return, every piece of compliance you complete—it’s what keeps your company breathing inside the system.
Ignore it, and it doesn’t explode overnight.
It suffocates, quietly.
First through penalties. Then restrictions. And finally, by shutting the doors you never even saw closing.
Compliance is not the enemy of business. It’s the silent partner that lets you stay here, scale here, and be taken seriously here. Breathe life into your business—the right way. File what matters. Protect what you’ve built.
Because in India, staying compliant isn’t about pleasing regulators.
It’s about making sure your business doesn’t just start.
It stays alive long enough to matter.
FAQ
Is GST registration mandatory for all foreign-owned companies in India?
Not automatically.
If your company’s annual turnover crosses ₹20 lakh (for services) or ₹40 lakh (for goods), or if you make inter-state sales, GST registration becomes mandatory. Even if you don’t cross these limits, some sectors or contracts may specifically require GST compliance. Better to check early, not when the first notice arrives.
What happens if I miss filing the Annual Return (MGT-7) with the MCA?
You’ll face a ₹100 per day late fee—per filing—with no cap.
The longer you wait, the costlier it gets. Plus, your company’s status on public records shows as “non-compliant,” which can damage credibility with clients, banks, and investors.
Is Advance Tax mandatory if I’m just starting out and barely earning?
Yes, but only if the total tax you owe for the year is more than ₹10,000.
Even in your first year, if you’re expected to pay more than ₹10,000 in tax overall, India asks you to start paying it early—in four installments across the year. It doesn’t matter whether your business is small or still picking up—the rule stays the same.
If you miss these payments, you’ll owe 1% monthly interest on the unpaid amount.
Can I run my company without doing Director KYC (DIR-3)?
You can—but not for long. If you don’t complete the Director KYC (DIR-3) yearly, your DIN gets deactivated. That means you can’t legally sign forms, approve filings, or operate as a director until it’s reactivated—and that reactivation comes with penalties too.
Is FEMA compliance needed even if I’m not bringing more investment after registration?
Yes. Even if no new foreign investment comes in, once you have foreign ownership, you must file annual FEMA reports like the FLA Return to the RBI.
Skipping FEMA filings quietly builds up penalties—and can block future remittance or capital movements.
Can I avoid penalties just by showing I didn’t know the rules?
No. In India, ignorance is never a legal defense. The system expects you to know, comply, or appoint someone who ensures compliance on your behalf. Missing filings, taxes, or deadlines simply invites fines—no excuses accepted.
