In comparison with the branch office and liaison office, a wholly owned subsidiary company provides maximum flexibility for conducting business in India and it can also undertake manufacturing activities in India. The Indian operations of the company can be funded either through equity or debt (both foreign and local) or through internal accruals. However, the exit procedure norms of companies are more cumbersome as compared to other forms of business such as branch, liaison and project offices.
The subsidiary company, incorporated under the laws of India, is treated as a domestic company for tax purposes and accordingly domestic company tax rates and benefits will apply. However, Indian transfer pricing regulations shall be applicable to such companies. No approval is required for the repatriation of dividends.