A foreign parent deciding whether to incorporate in India can usually find out what incorporation costs. What it cannot easily find out is what the entity costs every year afterwards, which is the number that actually matters.
Running an India subsidiary carries four recurring costs: statutory audit, ROC and secretarial compliance, accounting and tax filing, and payroll where you have employees. For a small entity with no revenue the annual total is modest. It scales with headcount and transaction volume rather than with turnover.
Working out an India budget? WhatsApp us your expected headcount and we will map what applies.
Quick Summary — What Recurs Every Year
| Cost | Applies when | Driver |
| Statutory audit | Always, from year one | Entity exists, not turnover |
| ROC and secretarial | Always | Annual return, financials, director KYC |
| Accounting and bookkeeping | Always | Transaction volume |
| Income tax return | Always | Entity exists |
| GST compliance | If registered | Return frequency, invoice volume |
| Payroll | If you have employees | Headcount |
| Transfer pricing report | International related-party transactions above the threshold | Group structure |
💡 TaxKitab Tip:
The cost most foreign parents forget is not a fee at all — it is the cost of a year that has to be reconstructed. An entity that runs for twelve months on informal records, then engages someone in March to produce audited accounts, pays for the reconstruction as well as the audit, and pays it every year that the pattern continues. Monthly bookkeeping looks like the more expensive option on a quote and is almost always the cheaper one on an annual invoice. — From our GST Filing Mistakes Guide (Book 1). Available at taxkitab.com/books (Rs 179)
Statutory Audit, Which Is Not Optional
Every company incorporated in India is audited annually, regardless of size, turnover or whether it traded at all. Parents from jurisdictions with small-company audit exemptions consistently budget for this incorrectly, because they assume a dormant entity escapes it.
The audit must be signed by an independent practising Chartered Accountant, and under Section 144 of the Companies Act that auditor cannot also be the firm maintaining the books. So the audit fee sits separately from your accounting fee, by law rather than by preference.
Fees scale with the volume of transactions and the state of the records rather than with revenue. A clean set of books for a small entity audits quickly. A year that has to be reconstructed first does not.
ROC and Secretarial Compliance
The annual return and financial statements are filed with the Registrar. Directors complete annual KYC. Board meetings are held and minuted, and statutory registers are maintained.
None of this pauses for an entity with no revenue, and the filings carry their own government fees alongside the professional cost.
One item foreign parents often miss: a non-resident director needs a Digital Signature Certificate to sign filings, and it has to be renewed. Obtaining one for a director abroad takes longer than most people allow, particularly where documents need notarisation or apostille.
Accounting and Bookkeeping
The largest variable. It scales with the number of transactions, the number of bank and card accounts, and whether reconciliations are done monthly or reconstructed annually.
For a foreign parent there is an additional layer that pure-domestic businesses do not carry: the India books are maintained under Indian accounting standards, while the parent consolidates under its own framework. Someone has to bridge the two, either monthly in a reporting pack or annually at consolidation. Decide which, because both cost something and neither is free.
Tax Filings
The income tax return is filed every year whether or not there was income. Where the entity is GST-registered, returns run monthly or quarterly with monthly input tax credit reconciliation. TDS returns are quarterly once you deduct.
Advance tax applies once the estimated liability crosses the threshold, which for a loss-making early-stage subsidiary often does not arise.
Payroll
Applies from your first employee, not from a headcount threshold. Salary TDS from the first payslip, professional tax where the state levies it, and EPF and ESIC once you cross the respective thresholds.
The EPF wage ceiling rose to Rs 25,000 on 17 September 2026, which raised employer cost for anyone previously capped at the old figure. Budget on the current ceiling rather than on older guidance.
Transfer Pricing, Where It Applies
If the India entity transacts with the parent — service fees, cost recharges, intercompany loans — transfer pricing applies once international related-party transactions cross the prescribed threshold, along with an accountant’s report.
This is a specialist engagement rather than part of standard compliance, and it should be budgeted separately. Captive back-office arrangements priced at cost with no margin attract particular scrutiny, so the pricing basis is worth settling early rather than at assessment.
What Actually Moves the Number
Headcount, because payroll compliance scales with people. Transaction volume, because bookkeeping does. Whether you hold a GST registration, because that adds a monthly rhythm. Whether the books are maintained monthly or reconstructed annually, which is the single biggest swing. And whether transfer pricing applies.
Turnover, notably, is not on that list for most of these costs. A dormant entity and a trading one pay similar amounts for audit, ROC and the income tax return.
Frequently Asked Questions
Does a dormant India subsidiary still cost money to run? Yes. Statutory audit, ROC filings and the income tax return all apply from the first financial year regardless of turnover.
Can our existing auditor abroad audit the India entity? Only if they are eligible to audit under Indian law and independent of whoever keeps the books. In practice, an independent practising Chartered Accountant in India is appointed.
Why is audit charged separately from accounting? Because Section 144 of the Companies Act prohibits the auditor from providing bookkeeping to the same company. The separation is legal, not commercial.
What is the biggest avoidable cost? Reconstruction. A year of informal records costs more to clean up than a year of monthly bookkeeping costs to maintain.
Do we need transfer pricing documentation? Only where international related-party transactions cross the prescribed threshold. Where the India entity works for the parent, it usually does eventually.
Does the cost drop if we have no revenue? Marginally. Most of the recurring compliance attaches to the entity existing rather than to what it earns.
References
- Companies Act, 2013 — Sections 139 to 144, audit and auditor independence
- Companies Act, 2013 — annual return, financial statements and director KYC
- Income-tax Act, 1961 — return filing, transfer pricing and accountant’s report
- Notification S.O. 5109(E) dated 17 September 2026 — EPF wage ceiling
⚠️ Fees vary by provider, city and the state of your records, and statutory requirements change by notification. Treat this as a structure for budgeting rather than a quotation.
Related Reading: Who Actually Does What: A Vendor Map for Your India Subsidiary · Your India Entity Has No Revenue. It Still Files. · India’s Financial Year Ends in March. Your Parent’s Doesn’t.
Call or WhatsApp: +91 7448200422 Email: info@taxkitab.com See our Global Desk service, or explore Managed Compliance if you want the full India calendar handled.
