A Guide for Japan Residents to Start a Business in India

It has never been a better time to invest specifically in India than today. India has established itself as one of the most appealing locations for Investment for Japanese Companies and Investors in 2025. The economic relationship has continued to develop towards being a "Special Strategic and Global Partnership," resulting in new policies supporting this growth, a developing network of Japanese Industrial Townships in India, and the simplification of the FDI regulations in India, making it an excellent time to invest.

In addition to the above, the differences in the legal and regulatory environment between Japan and India when starting a business and setting up a corporate entity in India must be understood. Japanese residents must learn the specific steps to register their companies in India, including the Foreign Exchange Management Act (FEMA). A proper understanding of the steps involved will help to ensure a smooth transition into India for Japanese Companies and Investors.

This guide will provide the necessary documentation and information necessary to begin a business in India in an efficient and compliant manner.

1. Why India?

In addition to being a vast market for Japanese investors, India also has the following advantages:

• Size: Over 1.4 billion digitally connected people.
• Manufacturing Hub: The "Make in India" movement has established India as a key manufacturing location, especially for products like electronics, automobiles, and heavy machinery.
• FDI Friendly: Japan is one of the only countries with a dedicated desk (Japan Plus) at Invest India to facilitate quicker investments into India..

2. Choosing Your Entry Vehicle

There are many ways to set up a business in India. The most common option for a foreign company to establish an Indian presence is to create a wholly owned subsidiary (WOS) / private Limited company, which allows 100% ownership (100% of the equity shares) by a Japanese national (individual) or Japanese parent company. The WOS / private Limited company provides limited liability and uses Indian tax provisions in its tax reporting as an Indian company.

• Additionally, in recent years, the use of joint ventures (JVs) to forge strategic alliances with Indian partners has increased significantly in many Indian cities, as many foreign investors realize the importance of local market expertise.
• Another potential option would be establishing either a liaison office or an Indian branch office for the foreign parent company. These two types of offices provide an extension of the foreign company's brand name but may have limited ability to generate income in India or elsewhere. Therefore, establishing a private limited company is the preferred option for most serious businesses that want to establish a presence in India.

3. Guidelines for Foreign Direct Investments

• You must consult your jurisdiction's guidelines for Foreign Direct Investments prior to applying for registration.
• Automatic Approach: There are generally very few restrictions to Japanese investments of 100% ownership in almost all sectors (including Information Technology, Manufacturing, Automotive, etc.) in Japan without obtaining a government permit. After you have incorporated the business, you will notify the Reserve Bank of India.
• Government Approach: There are a few different types of sectors such as Defence (a certain percentage of foreign investment limitations), Publishing (Print Media), and Multi-Brand Retail that must receive approval from the respective government ministry prior to making any investments.

4. Essential Requirements

• When preparing to register a Private Limited Company you need to fulfil the following minimum requirements:
• Directors - A minimum of two (2) directors are necessary with one (1) being a Resident Indian (i.e. someone who has resided in India for more than 182 days in the immediately preceding financial year) and a second being a resident of Japan.
• Shareholders - Minimum of two (2) shareholders (either an individual or corporate entity can be your parent company in Japan).
• Registered Address - An Indian physical address is required to accept legal correspondence and a virtual office is acceptable to utilise for registration if the virtual office will accept physical mail.

5. The Registration Process: Step-by-Step

The Company registration India process is fully digital but document-intensive.

Step 1: Documentation & Apostille (The Critical Step)

This is where most delays happen. Documents originating in Japan (like the Japanese company’s registry papers, Board Resolutions, or the Japanese Director’s ID proof) cannot simply be scanned and sent. They must be:

1. Notarized in Japan.
2. Apostilled by the Ministry of Foreign Affairs in Japan.
   Note: India and Japan are both members of the Hague Apostille Convention, so consular legalization is generally not required if the document is apostilled.

Step 2: Digital Signature Certificate (DSC)

All directors must obtain a DSC. This is an encrypted digital key used to sign the incorporation forms.

Step 3: Name Reservation

You must apply for a unique company name through the "RUN" (Reserve Unique Name) service on the Ministry of Corporate Affairs (MCA) portal. Ensure the name does not infringe on existing trademarks in India.

Step 4: Incorporation (Form SPICe+)

This is the master form. It integrates multiple applications:

• Company Incorporation.
• Director Identification Number (DIN) allotment.
• PAN (Tax ID) and TAN (Tax Deduction ID) issuance.
• Bank Account opening assistance.

Once approved, the Registrar of Companies (RoC) issues the Certificate of Incorporation (COI) .

6. The FEMA Angle: Bringing Capital into India

Once your company is formed, you cannot just wire money and start spending. You must follow the strict FEMA guidelines managed by the Reserve Bank of India (RBI).

1. Open a Bank Account: Use your COI and PAN to open a current account in India.
2. Infuse Capital: Transfer the share subscription money from your Japanese bank account to your new Indian company's bank account. This must come through normal banking channels.
3. FIRC/KYC: Your Indian bank will issue a Foreign Inward Remittance Certificate (FIRC) and KYC report.
4. File Form FC-GPR: This is the most critical compliance step. You must report the receipt of foreign investment to the RBI within 30 days of allotting shares. Failure to file Form FC-GPR attracts heavy penalties and Compounding proceedings.

7. Taxation for Japanese Companies in India

• Corporate Tax: New domestic manufacturing companies can opt for a concessional tax rate of 15% (plus surcharge/cess). Other new companies are taxed at 22% (plus surcharge/cess).
• DTAA Benefit: India and Japan have a Double Taxation Avoidance Agreement (DTAA), which prevents you from being taxed twice on the same income and offers reduced withholding tax rates on dividends, royalties, and technical fees.

Conclusion

Japanese investors can earn substantial rewards by establishing a business in India. However, successfully completing the step of establishing your business requires significant documentation and compliance with Foreign Exchange Management Act (FEMA) regulations. In many cases, penalties for missing FEMA reporting will exceed the start-up costs of establishing a business in India.

In order for your entry into India to be successful, it is critical that you partner with an expert who understands the complete process for incorporating a business in India, and the rules governing the movement of capital across borders.

Don't let regulatory barriers hinder your ability to grow in India! The experts at FEMA Consultant, have extensive knowledge of the complete life-cycle process of establishing a business in India from incorporation to filing of FGPRs.
To get started on the path to building your business in India with confidence, please reach out to us today at femaconsultant.com