Five things that go wrong in year one of an India subsidiary.

The incorporation almost always goes fine. It's what happens in the twelve months after that trips up most foreign-parented India entities.

By the time an India subsidiary is incorporated, the hard part feels done — the entity exists, the bank account is open, the team is hiring. In practice, year one is where most of the real mistakes happen, because incorporation is a one-time event with professional help close at hand, while the first year of ongoing compliance is a long, quiet stretch with no equivalent checkpoint.

1. The FC-GPR filed late, or not at all

Once the foreign parent remits share-subscription money and shares are allotted, FC-GPR has to be filed with RBI through the bank within 30 days of allotment. It's the single most commonly missed step in year one, usually because the people handling the remittance and the people handling the RBI filing aren't the same team, and nobody owns the handoff between them.

2. No intercompany agreement before the first invoice

The moment an India subsidiary transacts with its parent — even a simple services arrangement — that pricing needs to be transfer-pricing-defensible from day one, documented in a signed intercompany agreement. Skipping this in week one and "formalising it later" is the most expensive shortcut in the whole setup: it anchors the transfer-pricing position for every subsequent year, and retrofitting a defensible price onto a year of invoices already raised is far harder than setting it up correctly once.

3. Treating the resident-director requirement as a formality

Every Indian company needs at least one director who stays in India 182 or more days in the financial year. Groups sometimes nominate a director who travels frequently or relocates mid-year without realising the requirement is tested annually, not just at incorporation — and a shortfall surfaces at the worst time, during the annual compliance review.

4. GST and LUT sequencing missed

For a subsidiary exporting services back to its parent, filing the LUT (Letter of Undertaking) lets export invoices go out without charging GST. Missing this sequencing means either charging GST unnecessarily on intercompany invoices (creating a refund headache) or, worse, not charging it when required and facing the shortfall later.

5. Assuming a quiet year means a clean year

The most dangerous assumption in year one is that no one has raised a problem, so there isn't one. RBI's FLA return, the income-tax return with transfer-pricing documentation, and MCA's annual filings (AOC-4, MGT-7) all run on fixed, unforgiving calendars regardless of how quiet operations have been — a subsidiary that did almost nothing commercially in year one still owes the full filing set.

How Advisory Monks Consulting helps

Our India Entry desk coordinates these five points from the day of incorporation — the FC-GPR deadline, the intercompany agreement, the director residency test, the GST/LUT sequencing, and the full filing calendar — so year one doesn't become the year the gaps compound.

General information, not advice.

This note is general guidance, not tax or legal advice. Positions depend on your specific facts — speak with a partner before acting.