How to Open a Holding Company in India

A holding company in India can successfully be used for non-commercial activities. Our lawyers in India can help you set up this type of structure and benefit from risk management and liability protection solutions.

Quick Facts
Legal entities used	private limited company (Pvt Ltd)
Incorporation time	2 – 4 weeks (approx.)
Shareholding structure	The parent company manages and controls subsidiary companies, by owning a percentage of their shares.
Minimum capital to open a company	No statutory minimum share capital (the INR 1 lakh minimum was abolished in 2015)
Corporate income tax (CIT) rate	15% – 30%, depending on turnover and other special conditions. Additional surcharge and cess also apply.
Accounting and reporting	Companies must pay tax in advance in four quarterly installments throughout the financial year.
Number of double taxation treaties	94 (approx.)
General steps for opening a holding company	Obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN); Select an available name for the company; Submit all relevant information about the company; Draft the statutory documents; Register with Registrar of Companies (ROC); Register for tax matters; Assign shares to an Indian company.
Company name requirements	Must be approved by the ROC
Address requirements	Our lawyers can provide you with a local Indian address.
Bank account required (YES/NO)	YES
Possible tax advantages for holding companies	– lower tax rates on dividends, – incentives for Special Economic Zones (SEZ) companies, – reduced capital gains tax, etc.
Liquidation of an Indian holding company	Our attorneys can help you wind up your holding company.
Hiring employees	Possible, for managerial or administrative positions.
Assistance	Our law firm assists in the entire procedure of opening a holding company.

What is a holding company in India?

A holding company is a business which is set up for the purpose of holding stock in other corporations or holding other types of assets, such as intellectual property rights.

Investors who open a holding company in India will not use it for commercial or trading purposes, meaning that this company will not produce goods or offer services.

Holding companies are incorporated as per the Companies Act, the provisions of which can be detailed by our team of lawyers in India.

How is a holding company used?

The main purpose of opening a holding company in India is to own and control the remaining shares of the subsidiary companies. In the end, the parent company then manages the capital of the remaining subsidiary companies.

How do I open a holding company in India?

In general, there are four steps, summarized below by our team:

Select a company name that is not already registered in India.
Collect all registration documents of the company with the authorities.
Once you have the documents, you must file them with the Registrar of Companies (via the MCA portal, SPICe+ form).
The last part of the process is to register with the EPFO and ESIC (employee social security schemes) when you hire employees.

What type of company should I choose for my holding?

The private limited company is the most commonly used business form. Investors should be mindful of the following:

This business form grants the founders limited liability – they are liable only up to the extent of their investment in the business;
The company incorporation cost is estimated to start at around Rs 8,000 (which amounts to about USD 100). However, in practice, this cost is not the same throughout all the states in the country, and it is higher in Punjab, for example. These are not the only required costs and fees, and investors should also add the annual compliance costs for their new business;
Once it is incorporated, the LLC used as a holding company in India is subject to all the applicable compliance requirements, the annual filings with the Registrar of Companies, and other conditions, as may be applicable on a case-by-case basis.

Is full foreign ownership permitted in India?

For the purposes mentioned herein, used in the case of a holding company, full foreign ownership is permitted.

Are there any conditions on foreigners opening a holding company in India?

While investments in some business sectors can be subject to prior Government approval, holding companies are not involved in trading or doing business in sensitive sectors; however, foreign investment in a company engaged only in investing in other Indian companies requires prior Government approval unless it is registered with the RBI as an NBFC.

What are the advantages of a holding company in India?

A holding company has several important advantages, among which we can mention:

Asset diversification and risk segregation;
Strategic flexibility, bringing added value to the overall corporate strategy;
Flexible capital allocation options;
Added value through tax optimization/tax efficiency.

What should I pay attention to when setting up a holding company?

Generally, the following issues should be taken into account:

The management structure of the company;
Issues that may be related to, or caused by, complexities in the setup structure;
Regulatory and compliance matters. Our attorney in India can answer any questions related to local laws;
Potential conflicts of interest, and others.

Contact our law firm in India for more information on the setup and structuring of a holding company.