Doing Business in India (2026): A Practical Step-by-Step Guide for Foreigners & NRIs

Doing Business in India

Doing Business in India: A Practical Step-by-Step Guide (for Foreigners, NRIs & Global Founders)

India is one of the world’s largest and fastest-digitizing markets—massive domestic demand, strong talent pool, and a huge B2B opportunity across manufacturing, services, tech, trade, healthcare, education, and energy. But India is also compliance-heavy: incorporation, tax registrations, state-level labor rules, and sector-specific licensing must be planned early.

This guide is built to be practical—what to do first, what to avoid, and how to set up something scalable and compliant.

Disclaimer: General information only (not legal/tax advice). Regulations and thresholds can change by state and over time.

Quick Start Checklist

Choose your entry model

Sell remotely, distributor, India subsidiary, LLP, or branch/liaison office.

Confirm FDI route & sector rules

Check automatic vs approval route, caps, and conditions for your business activity.

Pick the entity type

Private Limited vs LLP vs others, including ownership and shareholding plan.

Incorporate the company

Complete MCA process and obtain core registrations (PAN, TAN, etc.).

Apply for PAN / TAN

PAN is mandatory; TAN is required if you will deduct TDS.

GST registration strategy

Mandatory vs voluntary registration based on goods/services, turnover, and state category.

Banking & compliance setup

Open bank accounts and set up invoicing, accounting, and monthly compliance rhythm.

Hiring setup

Employee contracts, payroll, and EPFO/ESIC registration when applicable.

Import / Export compliance

Obtain IEC (Importer-Exporter Code) if you plan to import or export.

Data protection readiness

Align with Digital Personal Data Protection Act, 2023: consent, safeguards, and breach intimation.

Step 1: Choose your entry model (don’t incorporate before this)

Option A — Sell into India without an India entity

Good for: consulting/services delivered remotely, testing demand, software exports.
Watchouts: withholding taxes, invoicing complexity, enterprise procurement barriers.

Option B — Distributor / reseller / channel partner in India

Good for: physical products, regulated goods, government tenders via local partner.
Watchouts: brand control, pricing discipline, after-sales obligations.

Option C — India entity (subsidiary / JV) for long-term operations

Good for: hiring locally, enterprise sales, contracts, building an India team, raising credibility.

Option D — Branch/Liaison/Project Office (foreign entity presence)

RBI provides the framework and FAQs around Branch/Liaison/Project offices under FEMA regulations.
Good for: specific presence models (often non-revenue liaison activities, project-linked setups).
Watchouts: strict activity scope; approvals and ongoing compliance.

Step 2: Pick the right entity type (common choices)

1) Private Limited Company (most scalable)

Best when you want: fundraising, equity, ESOPs, enterprise contracts, clear governance.

2) LLP (lighter compliance than a company in some cases)

Best when you want: professional services firm / partner-led operations; simpler structure.

3) Proprietorship / Partnership (simpler, but limited for foreign owners)

Often used by local founders; not ideal for foreign ownership structures.

For foreigners/NRIs: structure is usually driven by FDI policy + tax + sector licensing (don’t guess—verify).

Step 3: Foreign investment (FDI) basics you must know

India’s FDI framework includes sector caps, conditions, and routes (automatic vs government approval). DPIIT publishes FDI policy material and updates.

Important example: FDI in e-commerce

FDI is generally allowed up to 100% (automatic) in marketplace model, while FDI is not permitted in inventory-based model (policy conditions apply). If your business is e-commerce or anything platform-based, plan this early—structure mistakes here are painful to unwind.

Step 4: Core registrations you’ll deal with (PAN, GST, etc.)

PAN (Permanent Account Number)

PAN is the base identity used across many tax/financial processes. The Income Tax Department lists official routes to apply online (Protean/NSDL, UTIITSL, or instant e-PAN options in some cases).

GST (Goods and Services Tax) registration

GST registration is based on turnover thresholds that vary by:
1. goods vs services, and
2. normal vs special category states.

Practical advice: even if you’re below threshold, voluntary GST registration can help if your clients demand GST invoices or you need input tax credit—otherwise it can add compliance load.

Step 5: Corporate tax basics (high level)

India’s Income Tax Department lists domestic company tax rates, including special optional regimes under sections like 115BAA (22%) and 115BAB (15%) (subject to conditions and surcharges/cess).

Practical advice for new businesses:

1. Set up monthly bookkeeping from day 1 (don’t wait for year-end).
2. Build a TDS/GST calendar so nothing becomes “panic compliance”.

Step 6: Hiring & payroll compliance (EPFO, ESIC, and the new labor codes)

EPFO (Provident Fund)

EPFO materials commonly state registration applies when an establishment crosses the eligibility threshold (often referenced at 20+ employees for specified establishment types), and registration can be done online.

ESIC (Employee State Insurance)

ESIC provides an online registration process and guidance documents for employer registration via its portal.

Big update: India’s 4 Labour Codes

A PIB release states the Government announced implementation of the four Labour Codes (Wages, Industrial Relations, Social Security, OSH) effective 21 November 2025. As of early 2026, public reporting and professional updates indicate ongoing rule-making/clarifications and industry preparation.

What you should do: ask your payroll/HR provider to confirm how wage definitions, CTC structures, gratuity provisions, and social security contributions may be impacted in your specific state/industry.

Step 7: Importing/exporting (IEC is key)

If you import or export, the Importer-Exporter Code (IEC) is a key business identification number and is described by DGFT as mandatory for imports/exports.
DGFT also lists prerequisites like PAN, bank account, and address in the firm name for IEC application.

Step 8: Product & sector compliance (don’t ignore standards)

If you sell regulated products, India may require approvals depending on category (examples: food, cosmetics, medical devices, electronics, toys, chemicals, etc.).

BIS (standards / compulsory certification for some products)

BIS states that while certification is generally voluntary, for a number of products compliance is made compulsory by the Central Government under various considerations.

Practical approach:

before pricing or shipping, confirm:
1. product classification,
2. whether BIS or any other regulator applies,
3. labeling requirements,
4. importer/manufacturer responsibilities.

Practical advice: even if you’re below threshold, voluntary GST registration can help if your clients demand GST invoices or you need input tax credit—otherwise it can add compliance load.

Step 9: MSME benefits (Udyam registration)

If you qualify as an MSME, Udyam registration can help in accessing certain schemes/benefits. The official Udyam portal states registration is online, based on self-declaration, with no fee, and Aadhaar is required as per entity type.

Step 10: Online business & data protection (DPDP Act)

If you operate a website/app and collect personal data (names, phone numbers, emails, addresses), India’s Digital Personal Data Protection Act, 2023 sets a framework of obligations and rights.

Practical starter pack:

1. Privacy policy (India-aligned)
2. Consent + opt-out for marketing
3. Vendor/processor agreements (basic)
4. Reasonable security safeguards
5. A simple breach response process

Common mistakes (save yourself months)

1. Incorporating first, then discovering FDI restrictions block your actual business model.
2. Ignoring state-level realities (Shops & Establishment, professional tax, local registrations).
3. Delaying GST/TDS planning until you already have invoices and collections.
4. Importing without confirming standards/regulator requirements (BIS/others).
5. Collecting customer data without basic DPDP hygiene.

Practical advice: even if you’re below threshold, voluntary GST registration can help if your clients demand GST invoices or you need input tax credit—otherwise it can add compliance load.