How to close an Indian subsidiary: Strike off, Voluntary liquidation and BO closure

A foreign parent company can close its Indian subsidiary through two routes: strike off under Section 248 of the Companies Act 2013 for defunct companies with no assets or liabilities, or voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code (IBC) 2016 for solvent companies that need a final, court-recognised exit with repatriation of surplus. Branch, liaison and project offices close through a separate application to the designated Authorised Dealer (AD) Category-I bank under the Foreign Exchange Management Act (FEMA) 1999. Strike off typically takes 3 to 6 months. Voluntary liquidation typically takes 9 to 15 months end to end, including repatriation of funds to the parent.

What is a foreign subsidiary in India and which closure route applies

A foreign subsidiary in India is a private or public limited company incorporated under the Companies Act 2013, in which the foreign parent holds more than 50% of the share capital. It is a separate legal entity from its parent. This is distinct from a branch office (BO), liaison office (LO) or project office (PO), which are unincorporated presences of the foreign company itself.

Under Section 2(42) of the Companies Act 2013, a “foreign company” is any company or body corporate incorporated outside India that either has a place of business in India (whether by itself or through an agent, physically or through electronic mode) or conducts any business activity in India in any other manner. A foreign company operating through a BO, LO or PO is not an incorporated subsidiary. It is the foreign company itself operating in India. The closure process differs completely.

The route you use to close depends on what the entity is:

• Incorporated Indian subsidiary (private or public limited company): Companies Act 2013 routes (strike off or voluntary liquidation) apply
• Unincorporated BO, LO or PO of a foreign company: FEMA 22(R)/2016 route through the AD bank applies

Both are covered in this guide. If you are unsure which category your India presence falls into, the certificate of incorporation issued by the Ministry of Corporate Affairs (MCA) is the test: an incorporated subsidiary has a CIN; a BO, LO or PO has an RBI/AD bank approval letter and a registration under the Companies (Registration of Foreign Companies) Rules 2014, not a CIN.

Why foreign parents close their Indian subsidiaries

Understanding why the exit is happening matters because the reason often points directly to the right route and the sequencing of pre-closure steps.

The most common triggers we see in practice:

• Business restructuring or strategic exit: The parent has reoriented its global strategy and India no longer fits the product or revenue model. The India team has been absorbed elsewhere or the function has been offshored back.
• Flip to a foreign holding structure: A founder who moved the parent to Delaware or Singapore now needs to wind down the legacy Indian entity that pre-dated the flip.
• Merger or acquisition: The parent has been acquired, and the acquirer has its own India entity or does not want the liability trail of the existing one.
• Market conditions or sustained losses: The India entity ran losses, burned through the parent’s capital, and the parent decided the working capital requirement does not justify continued presence.
• Compliance burden: Escalating annual compliance, director KYC, FEMA reporting, and GST obligations for a non-operational entity become expensive relative to the entity’s purpose.
• Pivot to an asset-light model: The parent decided to serve the Indian market through a distributor or channel partner rather than a wholly owned subsidiary.

The reason matters for route selection. A company with no operations for two financial years and a nil balance sheet is a direct candidate for strike off. A company with surplus cash, receivables, or operating history needs voluntary liquidation or a pre-filing surplus extraction. A company that may re-enter India within two to three years is better parked as a dormant company under Section 455 of the Companies Act 2013 rather than dissolved outright.

Closure of subsidiary company: choosing the right route

India does not have a single “close company” filing. The route depends on what the entity is and what is left inside it.

Table 1: Route selection for closing a subsidiary company in India

Route	Applies to	Best when	Governing law	Typical timeline
Strike off	Private/public company	No operations for 2+ financial years, nil assets and liabilities	Section 248, Companies Act 2013	3 to 6 months
Voluntary liquidation	Company or LLP, solvent	Assets, surplus cash or operating history exist; parent wants a final, clean exit	Section 59, IBC 2016	9 to 15 months
Branch / liaison / project office closure	BO, LO or PO of a foreign company	Entity is an office, not an incorporated subsidiary	FEMA 22(R)/2016 and RBI Master Direction	2 to 4 months after documents are ready

Two alternatives sit outside formal closure. You can sell the entity, which transfers the problem along with the company, and works when the entity holds licences or carried-forward value a buyer wants. Or you can park it as a dormant company under Section 455 of the Companies Act 2013, which keeps the entity alive at minimal compliance cost if there is any chance of returning to India within a few years. Reviving a dormant company is far cheaper than incorporating again.

A common mistake is picking strike off because it is cheaper, then discovering the company has assets, a bank balance, or pending receivables. Strike off requires the company to be a shell at the time of filing. If there is surplus to repatriate, you either extract it first through a dividend or capital reduction, or you choose voluntary liquidation, where distribution to shareholders is built into the process. For most foreign-owned subsidiaries with real operating history, voluntary liquidation is the cleaner answer, and it is the only route that ends with a tribunal order of dissolution.

Selling the Indian subsidiary instead of closing it

Where the India entity holds a valuable licence (NBFC registration, FSSAI approval, a contract with a government counterparty), a strategic customer base, or tax losses that a buyer could use, sale is worth evaluating before committing to dissolution. The mechanics: the parent transfers its shares in the Indian company to the buyer, which triggers a share transfer deed, stamp duty at the state rate applicable on the share transfer, and intimation to the Reserve Bank of India (RBI) through the AD bank on Form FC-TRS under FEMA (Overseas Investment) Regulations 2022. The parent recognises a capital gain on the sale, taxed in India if treaty protection is unavailable. The buyer inherits the company’s complete liability history, which is why buyers almost always require a thorough due diligence and representations and warranties on the compliance trail.

Dormant company as a pause option

A dormant company under Section 455 of the Companies Act 2013 is a company that has not made any significant accounting transactions during the financial year, or a company incorporated with a future project in mind but not yet engaged in any business. To obtain dormant status, the company files Form MSC-1 with the Registrar of Companies (ROC). Annual compliance reduces to filing Form MSC-3 (the annual return for dormant companies) and maintaining a minimum number of directors. The company can be restored to active status by filing Form MSC-4. Dormant status is worth considering when the parent may re-enter India within two to three years. The revival cost is far lower than a fresh incorporation.

Before you file anything: the cleanup that decides your timeline

The filing is the easy part. The cleanup before it is where timelines are actually decided. Every item below has stalled at least one exit we have seen.

FEMA reporting history. Every equity remittance from the parent should have a corresponding FC-GPR filing, annual FLA returns should be current, and any overseas investment by the Indian entity needs its ODI reporting closed through the AD bank. Liquidators and AD banks check this history. A missed FC-GPR from 2019 surfaces in 2026 and adds months, because compounding or regularisation with RBI comes first.

Income tax. File returns up to the final year. Chase pending refunds before you start, because a refund due to a company in liquidation is slow money. Surrender TAN once TDS obligations end.

GST. Apply for cancellation in Form REG-16, reverse input tax credit on any stock or capital goods on hand, and file the final return in GSTR-10 within three months of the cancellation order. An open GST registration with nil returns piling up is a standing penalty generator.

Employees. Full and final settlements, gratuity for anyone past five years of service, and retrenchment compliance under the Industrial Disputes Act 1947 for workmen, including notice or pay in lieu and retrenchment compensation. Employee dues rank ahead of the shareholder in any distribution, and unresolved dues are the most common objection to a closure.

Contracts and licences. Exit leases, terminate vendor contracts, surrender the Import Export Code, shops and establishment registration, and any sectoral licences.

Banking. Reduce to one operating account. In a voluntary liquidation the liquidator opens a dedicated account for the process; in a strike off all accounts must be closed before filing, with closure certificates in hand.

Do this cleanup first and either route runs close to its stated timeline. Skip it and the timeline belongs to the regulator.

Pre-closure statutory compliance checklist for closing a subsidiary company in India

This table maps every statutory obligation to be cleared before filing, in addition to the narrative above. It is designed to be used as a working checklist for the company’s finance and legal teams.

Table 2: Statutory compliance checklist before filing for closure

Compliance area	Specific action required	Authority	Relevant law
Income tax	File ITR up to final year, surrender TAN, chase pending refunds	Income Tax Department	Income-tax Act 2025 (formerly 1961 Act)
GST	File REG-16 cancellation application, reverse ITC, file GSTR-10 final return	GST authorities	CGST Act 2017, Rule 81
TDS	Deduct and deposit all pending TDS, file final TDS returns	Income Tax Department	Income-tax Act 2025
Provident Fund (EPF)	Settle all employee PF dues, close establishment registration with EPFO	EPFO	Employees’ Provident Funds Act 1952
ESI	Settle all ESI dues, deregister with ESIC	ESIC	Employees’ State Insurance Act 1948
Gratuity	Pay gratuity to all eligible employees (5+ years of service)	Labour department	Payment of Gratuity Act 1972
Shops and Establishment	Surrender the registration certificate	State authority	State-specific Shops and Establishment Acts
Import Export Code (IEC)	Surrender IEC to DGFT	DGFT	Foreign Trade (Development and Regulation) Act 1992
Professional tax	Deregister from state professional tax authority	State authority	State Professional Tax Acts
FEMA (FC-GPR / FLA)	Verify all FC-GPR filings are complete, file final FLA return, close ODI if applicable	AD bank / RBI	FEMA 1999, FEMA (Overseas Investment) Regulations 2022
Sectoral licences	Surrender NBFC registration (RBI), SEBI registration, IRDAI licence, or other sectoral approvals as applicable	Relevant regulator	Sector-specific statutes
Bank accounts	Close all accounts (strike off) or reduce to one (voluntary liquidation); obtain closure certificates	Bank	N/A
Vendor contracts	Formally terminate or assign all vendor agreements	Counterparties	Indian Contract Act 1872
Lease agreements	Exit all leases; obtain NOC from landlord	Landlord	Transfer of Property Act 1882
Receivables	Collect all outstanding receivables; write off bad debts with board approval before process begins	Board	Companies Act 2013
Annual filings	Ensure MGT-7 and AOC-4 are filed and current with the ROC	MCA / ROC	Companies Act 2013, Sections 92, 137

Route 1: strike off under Section 248 of the Companies Act 2013

Strike off is the administrative removal of the company’s name from the register. Since May 2023, all voluntary strike off applications are processed centrally by C-PACE, the Centre for Processing Accelerated Corporate Exit, instead of regional ROCs. Processing has become noticeably faster and more uniform since.

Eligibility

A company can apply voluntarily under Section 248(2) if it has not commenced business within one year of incorporation, or has not carried on any business for the two immediately preceding financial years and has not applied for dormant status under Section 455.

Before filing, the company must extinguish all liabilities and pass a special resolution, or obtain consent of 75% of members by paid-up share capital.

Section 249 then blocks the application if, in the previous three months, the company changed its name, shifted its registered office between states, disposed of property or rights for value, or engaged in any activity other than what was necessary for closing. A company being wound up under the IBC or with a pending compromise or arrangement application cannot apply either.

Process of closing a foreign subsidiary in India via strike off: step-by-step procedure

The procedural sequence from board resolution to dissolution notice follows eight stages. A foreign-owned subsidiary typically adds two to three extra weeks purely for the overseas director paperwork described in Stage 1.

Stage 1: Board meeting and authorisation The board of directors passes a resolution approving the closure and authorising a director or officer to take all steps required. A board meeting notice must be sent at least 7 days before the meeting with a detailed agenda. For a foreign-owned subsidiary, every director signing documents outside India will need those documents notarised and apostilled before they can be used in India (covered in the dedicated section below).

Stage 2: Shareholder resolution Within a reasonable period after the board resolution, a general meeting of shareholders is convened. An Extraordinary General Meeting (EGM) or Annual General Meeting (AGM) passes a special resolution approving the closure and authorising the directors to proceed. Alternatively, the company may obtain written consent of 75% of members by paid-up share capital, which avoids convening a formal meeting but still requires documented consent from each shareholder.

Stage 3: Filing Form MGT-14 with the ROC The special resolution must be filed with the ROC in E-Form MGT-14 within 30 days of passing the resolution, along with the certified copy of the resolution and explanatory statement. This step is specifically required for a special resolution under Section 117 of the Companies Act 2013 and is missed by many advisors who jump straight to the STK-2.

Stage 4: Filing Form STK-2 with C-PACE The main strike off application is filed on the MCA V3 portal in Form STK-2, with a government fee of ₹10,000. The supporting documents are listed in the next section.

Stage 5: C-PACE scrutiny C-PACE reviews the application and documents. If any deficiency is found, a query is raised and the applicant has a specified period to respond. Deficiencies in apostilled documents or missing NOCs from regulators are the most common reasons for queries at this stage.

Stage 6: Public notice in Form STK-6 C-PACE publishes a public notice in Form STK-6 on the MCA website and in the Official Gazette, inviting objections from any interested party within 30 days.

Stage 7: Objection review If no objection survives scrutiny, C-PACE proceeds. If a creditor, employee, or government authority files an objection, the process pauses until the objection is resolved.

Stage 8: Dissolution notice in Form STK-7 C-PACE issues the strike off and dissolution notice in Form STK-7. The company stands dissolved from the date of that notice.

Requisites and documents required for closing a subsidiary company in India via strike off

Table 3: Documents required with Form STK-2

Document	Form/Format	Notes
Indemnity bond from each director	Form STK-3	Must be notarised; for directors outside India, apostilled or consularised
Affidavit from each director	Form STK-4	Same notarisation/apostille requirement
Statement of accounts showing nil assets and nil liabilities	Form STK-8	Certified by a practising Chartered Accountant; dated no earlier than 30 days before filing
Copy of special resolution or 75% written consent	Board/shareholder certified copy	Attested by all directors
Bank account closure certificates	Issued by bank	All accounts must be closed before filing
NOC from sectoral regulator	RBI (for NBFCs), SEBI, IRDAI, others	Required only where the company is governed by a sectoral regulator
Latest income tax return acknowledgement	ITR-V	For all financial years up to closure
Board resolution authorising the filing	Certified copy	Authorising the director/officer filing the application
Statement on pending litigation	Self-declaration	Stating nil litigation or disclosing pending matters
Delisting order from stock exchange	Exchange order	Only applicable if securities are listed or were listed

What strike off does not do

Strike off removes the name from the register. It does not extinguish liability. Under Section 248(7), the liability of every director, manager and officer continues and can be enforced as if the company had not been dissolved. And the company can be restored to the register by the National Company Law Tribunal (NCLT) on an application by a creditor, workman or the company itself for up to 20 years under Section 252.

This is why filing a strike off with an undisclosed creditor or a pending tax demand is a false economy. The closure is only as final as the cleanup behind it.

Apostille, notarisation and overseas director documents

For a foreign-owned subsidiary, every document signed by directors or authorised signatories outside India must be notarised by a notary public in the country of signing, and then apostilled by the competent authority in that country (for countries that are members of the Hague Apostille Convention 1961). For countries that are not members of the Convention (a small but significant group), the documents must be consularised at the Indian consulate or embassy in the country of signing.

The apostille requirement affects Form STK-3 (indemnity bond), Form STK-4 (affidavit), and any board resolution or consent document signed abroad. With directors across two or three jurisdictions, the logistics of getting notarised and apostilled sets from each director is the single most common cause of delay in strike off applications. Build two to three weeks into the plan purely for this step, and start the signature pack before the MCA forms are ready, not after.

Countries that are NOT members of the Hague Apostille Convention as of 2026 include several ASEAN and African jurisdictions. If any director is based in one of these countries, the Indian embassy or consulate in that country must authenticate the documents in lieu of apostille. Check the current convention membership before drafting the package.

Route 2: voluntary liquidation under Section 59 of the IBC

Voluntary liquidation is the structured wind-down for a solvent company. An insolvency professional takes over as liquidator, claims are invited and settled, assets are realised, surplus is distributed to shareholders, and the NCLT passes a dissolution order. It is the only route that combines repatriation of surplus with a final tribunal order, which is exactly what a foreign parent’s auditors and board want to see.

The process is governed by Section 59 of the IBC read with the IBBI (Voluntary Liquidation Process) Regulations 2017, which have been amended several times, most recently in 2025 and 2026. The current sequence:

1. Declaration of solvency. A majority of directors declare by affidavit that the company has no debt or will be able to pay its debts in full from the proceeds of assets, and that the liquidation is not intended to defraud anyone. The declaration is accompanied by audited financial statements for the previous two years and, where the company has assets, a valuation report from a registered valuer. Since the IBBI amendment notified on 25 February 2026, that valuation report must follow the format specified by the IBBI, with supporting documentation maintained as prescribed. Directors must also disclose pending proceedings or assessments before statutory authorities.

2. Shareholders’ special resolution. Within four weeks of the declaration, members pass a special resolution to liquidate and appoint an insolvency professional as liquidator.

3. Creditor approval. If the company owes any debt, creditors representing two-thirds in value must approve within seven days of the resolution. A company with no debt skips this stage.

4. Intimation. The company notifies the ROC and the IBBI within seven days of the resolution or creditor approval. Liquidation commences from the date of the special resolution.

5. Public announcement and claims. The liquidator makes a public announcement within five days of appointment, in one English and one regional newspaper and on the company’s website, calling for claims within 30 days. Claims come in on prescribed forms by category (covered below).

6. Tax intimation. The liquidator notifies the jurisdictional income tax officer of the appointment within 30 days under Section 178 of the Income-tax Act 1961 (now Section 178 of the Income-tax Act 2025 for assessments from FY 2026-27). The officer can require an amount to be set aside for anticipated tax dues. Skipping this step creates personal liability for the liquidator, so no competent insolvency professional (IP) skips it.

7. Realisation and distribution. The liquidator opens a dedicated bank account, realises assets, settles verified claims, and distributes the surplus to shareholders.

8. Final report and dissolution. The liquidator submits the final report with Form H compliance certificate and applies to the NCLT for dissolution under Section 59(7). The regulations expect the process to be completed within 90 days of commencement where there are no creditors, and 270 days where creditor approval was involved. The NCLT order dissolves the company under Section 59(8), and the order is filed with the ROC within 14 days.

In practice, the liquidator-side work fits the 90/270 day frame if the cleanup was done. The NCLT hearing and order add anywhere from two to six months depending on the bench. End to end, plan for 9 to 15 months.

Eligibility for voluntary liquidation under Section 59(1) of the IBC

A corporate person (company or LLP) may initiate voluntary liquidation under Section 59(1) only if it has not committed any default. This is a strict condition: a company that has any outstanding debt that it cannot pay on time is not eligible for voluntary liquidation and would need to use a different route. A solvent company that has surplus but owes amounts to creditors can still proceed, provided creditors representing two-thirds in value approve the liquidation at Stage 3 above.

The declaration of solvency by directors is the mechanism by which the board certifies this eligibility. A director who signs a false declaration of solvency is exposed to criminal liability under Section 448 of the Companies Act 2013.

What changed recently in voluntary liquidation

Three updates matter if your reference point is an article written before 2025.

First, the process went digital. Since the IBBI amendment of 28 January 2025, liquidators file electronic forms VL1 to VL4 on the IBBI portal at each stage, with a late fee of ₹500 per form per month of delay. Unclaimed dividends and undistributed proceeds now sit in a Corporate Voluntary Liquidation Account maintained with a scheduled bank, with stakeholder-wise and tax details captured at deposit.

Second, valuation got standardised. The February 2026 amendment prescribes the format and documentation for valuation reports, closing a gap where valuation quality varied widely between cases.

Third, there is now an exit from the exit. The Insolvency and Bankruptcy Code (Amendment) Act 2026, which received assent on 6 April 2026, amends Section 59 to allow a company in voluntary liquidation to terminate the process before dissolution, with the specified member and creditor approvals, by intimating the IBBI and the ROC; the process stands terminated from the date of intimation. The IBBI operationalised this through a new Regulation 42 effective 1 June 2026, requiring the termination resolution to state the reasons. Earlier, a company that changed its mind mid-process had no clean statutory route back. The same Amendment Act also prescribes that voluntary liquidation be completed within a period not exceeding one year, with provisions taking effect as notified, and the accompanying regulatory changes tightened claims handling, requiring stakeholders to update claims that have been partly or fully satisfied and liquidators to record reasons for rejecting any claim.

Role and duties of the liquidator in voluntary liquidation

The insolvency professional appointed as liquidator has specific statutory duties under the IBBI (Voluntary Liquidation Process) Regulations 2017. Understanding these duties matters for the parent company, because the liquidator’s actions directly determine how fast the surplus reaches the foreign shareholder.

The liquidator’s core duties include:

• Verifying all claims submitted by creditors and stakeholders and preparing a list of admitted claims
• Carrying on the business of the company, if necessary, for its beneficial liquidation
• Valuing, selling, recovering and realising all assets and amounts due to the company in a time-bound manner
• Opening a dedicated bank account in the name of the company suffixed with “In Liquidation” for receiving all proceeds
• Paying and settling all admitted creditor claims in the priority order prescribed under the IBC
• Distributing the surplus to shareholders within six months of receiving the liquidation proceeds
• Preparing a preliminary report within 45 days of the liquidation commencement date, covering the company’s capital structure, estimated assets and liabilities, and claims received to that point
• Preserving physical or electronic copies of all reports, registers and books of accounts for at least 8 years after dissolution, either with the liquidator or with an information utility

Claims forms under IBBI (Voluntary Liquidation Process) Regulations 2017

Claims must be submitted on forms prescribed in Schedule I of the Regulations:

Table 4: Prescribed claim forms under IBBI Voluntary Liquidation Regulations

Form	Claimant category	Submission mode
Form A	Public announcement (by liquidator, not a claim form)	Newspaper, company website, IBBI portal
Form B	Operational creditors (other than workmen and employees)	In person, post or electronic means
Form C	Financial creditors	Electronic means only
Form D	Individual workmen and employees	In person, post or electronic means
Form E	Authorised representative for multiple workmen/employees	In person, post or electronic means
Form F	Any other stakeholder (including shareholders)	In person, post or electronic means

Unclaimed proceeds and the Companies Liquidation Account

Where any proceeds remain unclaimed after the liquidator distributes to verified stakeholders, the liquidator applies to the NCLT for an order to transfer the unclaimed amount to the Corporate Voluntary Liquidation Account (under the 2025 digital amendment) or to the Companies Liquidation Account in the public account of India (under Regulation 39 of the Regulations). Any stakeholder who believes they are entitled to money paid into that account may apply to the IBBI for release. Unclaimed amounts that remain in that account for fifteen years from the dissolution order are transferred to the general revenue account of the Central Government.

From the parent’s perspective: collect your distribution promptly once the liquidator declares it. A foreign parent that misses the distribution window has a long and bureaucratic recovery path.

The money path: how surplus actually leaves India

This is the section most closure guides skip, and it is the section your board cares about. Getting ₹20 crores of surplus out of a liquidating Indian subsidiary is a tax event and a FEMA event, and both have to be sequenced correctly.

Tax in the foreign shareholder’s hands

When a shareholder receives money or assets from a company in liquidation, Indian tax law splits the receipt into two parts.

The portion attributable to the company’s accumulated profits is treated as a deemed dividend under Section 2(22)(c) of the Income-tax Act 1961. For a foreign parent, that dividend is taxable in India, and the liquidator withholds tax on it, at 20% plus surcharge and cess under domestic law, or at the lower treaty rate where the parent qualifies, commonly 5% to 15% depending on the treaty and shareholding.

The balance is taxed as capital gains under Section 46(2): the money plus the fair market value of any assets received, minus the deemed dividend portion, is treated as consideration for the shares, against the parent’s cost of acquisition. For shares held over 24 months, the gain is long term, taxed at 12.5% without indexation. Treaty relief on capital gains is largely unavailable for shares acquired on or after 1 April 2017 under the amended Mauritius, Singapore and Cyprus treaties, so most parents should budget for Indian capital gains tax on this leg.

On the company side, Section 46(1) provides that a distribution of assets in specie to shareholders on liquidation is not a transfer by the company, so the company itself has no capital gains on that distribution. If the liquidator sells assets and distributes cash, the company is taxed on those sales first.

One transition note your advisors must handle: the Income-tax Act 2025 replaced the 1961 Act with effect from 1 April 2026. The liquidation distribution rule in Section 46 now lives in Section 68 of the new Act [VERIFY: confirm the final section number in the Income-tax Act 2025 as enacted; the Bill mapped Section 46 to Clause 68], and other familiar section numbers have moved with it. The substance described above is unchanged, but every withholding certificate and assessment from FY 2026-27 onwards will cite the new Act.

Dividend, buyback and capital reduction: comparing surplus extraction routes before closure

If the company has surplus but you have chosen strike off, the surplus must be extracted before filing. Three routes are available. The choice depends on the quantum, the holding period, the applicable DTAA, and whether the company law cap on buyback is a constraint.

Table 5: Comparing pre-closure surplus extraction routes

Route	Tax in parent’s hands	Withholding rate (domestic)	DTAA rate (illustrative)	Cap or approval	When to use
Dividend	Taxable as income (deemed dividend treatment under Section 2(22) does not apply here; a declared dividend is taxed under Section 115A)	20% plus surcharge and cess	5% to 15% depending on treaty and shareholding threshold	None	Best when surplus is large and a low DTAA rate is available
Buyback	Taxable as capital gains in shareholder’s hands from 1 April 2026	12.5% (long-term, shares held 24+ months) or 20% (short-term)	Treaty benefit availability depends on the applicable DTAA and grandfathering rules	Capped at 25% of paid-up capital and free reserves under Section 68, Companies Act 2013; each buyback requires board and shareholder approval	Useful for partial extraction where a low capital gains treaty rate applies
Capital reduction under Section 66	Treated as deemed dividend to the extent of accumulated profits, balance as capital gains	20% on deemed dividend portion; 12.5% on capital gains	Same DTAA rates as above	Requires NCLT approval; takes 4 to 6 months for the NCLT order	Used when the company needs to return paid-up capital itself, not just distributable reserves

Subsidiaries with meaningful surplus almost always pick voluntary liquidation over pre-filing extraction: the liquidation process has no cap on the amount distributed, the tax is handled by the liquidator directly, and the NCLT dissolution order provides finality that pre-filing extraction does not.

FEMA and the actual remittance

The remittance of liquidation proceeds to the foreign parent is made through the AD Category-I bank under the Foreign Exchange Management (Remittance of Assets) Regulations 2016. The bank will ask for the liquidator’s or auditor’s certificate on how the remittable amount was arrived at, confirmation that all liabilities have been met or provided for, a no-objection or tax clearance from the income tax department, and confirmation that no legal proceedings are pending. The remittance itself rides on Form 15CA with a 15CB certificate from a chartered accountant covering the withholding position.

Close the FEMA loop after the money moves: final FLA return, closure of the entity’s records in the RBI FIRMS system through the AD bank, and an ECB-2 closure report if the company ever borrowed externally. If the Indian entity held overseas investments, the ODI disinvestment reporting closes through the same bank.

Transfer pricing and inter-company balances at exit

This is a step most closure guides do not cover, and it is one that has created assessment problems for foreign parents long after the dissolution order was issued.

Before the liquidation or strike off process starts, all inter-company receivables and payables between the Indian subsidiary and the foreign parent (or other group entities) must be cleared at arm’s length. This means:

• Trade receivables (amounts the parent owes the subsidiary for services rendered) must be collected in full, documented at the agreed transfer price, and brought into India before the process starts
• Trade payables (amounts the subsidiary owes the parent for management fees, software licences, or shared services) must be settled and documented, with a contemporaneous transfer pricing study confirming the arm’s length nature of the amounts
• Any outstanding related-party loans must be repaid with appropriate interest documentation under the arm’s length principle

The risk of not doing this: the income tax department can, under Section 92CA of the Income-tax Act (now mapped to the corresponding section of the Income-tax Act 2025), refer the inter-company transactions to the Transfer Pricing Officer even after the company is dissolved, and raise a demand against the parent on the basis that the subsidiary should have charged more (or paid less). A demand of this nature against a dissolved entity lands back on the directors under Section 248(7) of the Companies Act 2013. The transfer pricing documentation must be maintained for the prescribed period (currently 8 years from the relevant assessment year) even after dissolution.

Practical step: before filing for strike off or passing the voluntary liquidation resolution, obtain a transfer pricing position paper from your advisor confirming that all cross-border balances are settled at arm’s length and the documentation is in order.

Route 3: closing a branch, liaison or project office

If your India presence is a branch office, liaison office or project office rather than an incorporated subsidiary, the Companies Act closure routes above do not apply. The closure runs through the designated AD Category-I bank under FEMA 22(R)/2016 and the RBI’s Master Direction on establishment of BO/LO/PO.

The application to the AD bank includes:

• Copy of the original RBI or AD bank approval for establishing the office, plus any sectoral regulator approval
• Auditor’s certificate showing how the remittable amount was arrived at, supported by a statement of assets and liabilities, confirming that all liabilities in India including gratuity and employee benefits have been met or provided for, and that no income from sources outside India remains un-repatriated
• No-objection or tax clearance from the income tax authorities
• Confirmation from the parent that no legal proceedings are pending in any Indian court and there is no impediment to remittance
• Report from the Registrar of Companies on the closure of the foreign company’s place of business, filed under the Companies (Registration of Foreign Companies) Rules 2014

The AD bank allows the remittance of the winding up proceeds and reports the closure to the RBI. For a branch office, remember that the BO was a taxable presence in India: file the final return, close the assessment trail, and obtain the tax NOC before expecting the bank to remit. Liaison offices are lighter because they cannot earn income, but the annual activity certificate trail must be complete. Project offices close on completion of the project through the same bank route.

Once the document pack is complete, bank-side processing typically runs 8 to 16 weeks. The pack is the hard part, not the bank.

Closure of a foreign parent Indian subsidiary: post-closure compliance and intimations

Once the MCA issues the strike-off notice (Form STK-7) or the NCLT passes the dissolution order under Section 59(8) of the IBC, the entity is dissolved. But the compliance trail does not end there. The following steps must be completed after dissolution to fully close the FEMA loop and prevent future queries.

Post-closure checklist:

• AD bank intimation letter: Submit a formal closure intimation letter to the AD bank attaching the MCA strike-off order or NCLT dissolution order and the bank account closure certificate. The AD bank updates the RBI.
• Single Master Form (SMF) on FIRMS portal: The AD bank updates the entity’s records in the RBI’s FIRMS (Foreign Investment Reporting and Management System) portal to reflect the closure. The parent should obtain written confirmation from the AD bank that this update has been made.
• Final FLA return: The Foreign Liabilities and Assets return must be filed for the final financial year on the RBI’s FLAIR portal, reflecting the dissolution. File this before the 15 July deadline for the relevant year.
• ECB-2 closure report: If the Indian entity ever borrowed through external commercial borrowings, the AD bank files an ECB-2 closure report with the RBI after the dissolution and repayment.
• ODI disinvestment reporting: If the Indian entity had made overseas direct investments, the disinvestment (closure of the overseas entity or sale of shares) must be reported through the AD bank on the RBI’s OID portal under FEMA (Overseas Investment) Regulations 2022.
• Surrender of remaining registrations: If any registration was not surrendered before filing (such as a state-specific licence or a professional tax registration), surrender it using the dissolution order as supporting evidence.
• Tax assessment trail: Ensure that no assessment is pending for any year. Where an assessment notice arrives post-dissolution, the liquidator (in a voluntary liquidation) or the directors (in a strike off) remain liable to respond. File a representation attaching the dissolution order and seek closure of the assessment.
• Books and records: Preserve all books of account, statutory registers, and compliance records for the period prescribed under the Companies Act 2013 (typically 8 years) even after dissolution. In a voluntary liquidation, the liquidator holds these.

What happens if you just stop filing

Some parents quietly abandon the Indian entity instead of closing it. This is the most expensive option on the menu.

Late filing of annual forms accrues an additional fee of ₹100 per day per form with no upper cap. After the company fails to file financial statements or annual returns for three consecutive financial years, every director is disqualified for five years under Section 164(2), which also poisons their directorships in other Indian companies. The ROC can strike the company off on its own motion, but a suo moto strike off gives directors none of the protection of a planned exit: liabilities survive under Section 248(7), the company can be restored for up to 20 years, and the parent’s name sits in the public record next to a defaulting entity. For a foreign group that may want to re-enter India, or whose other entities bank and raise capital here, that record is a real cost.

Timelines and costs at a glance

Table 6: Timeline and cost comparison across all closure routes

Item	Strike off	Voluntary liquidation	BO/LO/PO closure
Government fee	₹10,000 (STK-2)	NCLT and filing fees	Nil (bank charges apply)
Professional cost (typical market range)	₹0.5 to 1.5 lakhs	₹3 to 8 lakhs including liquidator and valuer	₹1 to 3 lakhs
Core timeline	3 to 6 months	90/270 days liquidator-side, 9 to 15 months end to end	2 to 4 months after documents ready
Surplus repatriation	Not through the process; extract before filing	Built into the process	Built into the process
Finality	Dissolution by ROC notice; restorable up to 20 years	NCLT dissolution order	RBI-reported closure

Professional cost ranges are market estimates for straightforward cases and move with complexity, asset count and litigation history.

Where exits get stuck

Five patterns from mandates we have run.

FEMA history surfaces late. A missed FC-GPR or FLA return from years ago is found by the liquidator or AD bank mid-process. Regularisation comes first, everything else waits. Audit the FEMA file before you start, not after.

The income tax no-objection. The Section 178 intimation and the tax clearance for remittance are where months disappear, especially if there is an open assessment, a pending refund, or unreconciled TDS credits. Get the tax file current and chase refunds before commencement.

Receivables and small balances. A struck-off or dissolving company cannot chase debtors. Collect receivables, write off the dead ones with board approval, and empty the balance sheet before the process starts.

Director paperwork across time zones. Strike off needs notarised and apostilled documents from every director. With directors across three countries, this alone has added a month to filings. Start the signature pack early.

Choosing strike off to save money. If the company has assets, surplus cash or any creditor history, strike off either fails scrutiny or leaves liability hanging. The cheaper route is the one that actually closes.

Treelife practitioner note

In the India entity closure mandates we have run at Treelife, the two questions that come in every time are: “Can we just not file for a couple of years?” and “Why does this take nine months?” The first answer is covered in the abandonment section above. The second deserves a more specific answer.

The nine-to-fifteen month timeline for voluntary liquidation breaks down as: two to four weeks for pre-liquidation board and shareholder resolutions, one to two months for the Section 178 tax intimation and the income tax officer’s response, thirty days for the public announcement and claims window, one to three months for the liquidator to verify claims and realise assets, and then two to six months for the NCLT bench to schedule and pass the dissolution order. The NCLT is the variable no one controls.

What we do in practice to shorten this: start the pre-filing cleanup twelve months before the target dissolution date, not six. Reconcile the FEMA history at least one FLA cycle before the liquidation resolution. Chase pending income tax refunds aggressively. Collect receivables before the process starts, because the liquidator has no authority to chase debtors of a third party after the company is in liquidation.

The one regulatory nuance that most advisors miss: the director’s disclosure of pending proceedings before statutory authorities is now a mandatory part of the solvency declaration under the February 2026 IBBI amendment. A director who signs without disclosing a pending GST assessment or income tax appeal is in a difficult position if that assessment resurfaces. We flag this to every director before they sign.

Case study

Situation: European SaaS parent with a 6-year-old Indian development subsidiary in Bengaluru. Parent had been acquired. The acquirer had its own India entity and wanted no part of the legacy subsidiary’s compliance history.

Challenge: Missed FC-GPR filing for a 2021 ESOP exercise, a pending GST assessment from FY 2022-23, and three directors based across Germany, the Netherlands and the United States who needed apostilled documents.

What Treelife did: Ran a FEMA compounding application with the RBI for the missed FC-GPR, resolved the GST assessment by filing a revised return with the correct ITC reversal, coordinated the apostille sequence across three jurisdictions in parallel, and managed the voluntary liquidation through to NCLT dissolution.

Outcome: Dissolved in 13 months from mandate start. Surplus of ₹4.8 crores repatriated to the German parent at the treaty withholding rate of 10% on the deemed dividend portion, saving approximately ₹48 lakhs compared to the domestic rate. Zero director liability exposure at close.

FAQs on closing an Indian subsidiary of Foreign Parent

Q: Can a foreign parent company close its Indian subsidiary?
A: Yes. The parent, as shareholder, approves the closure and the Indian entity executes it through strike off under Section 248 of the Companies Act 2013 or voluntary liquidation under Section 59 of the IBC. RBI approval is not separately required for the closure itself; FEMA compliance is handled through the AD bank.

Q: How long does it take to close a company in India?
A: Strike off typically takes 3 to 6 months through C-PACE. Voluntary liquidation typically takes 9 to 15 months end to end, including the NCLT dissolution order and repatriation. Branch and liaison office closures take 2 to 4 months once the document pack is complete.

Q: What does it cost to close an Indian subsidiary?
A: The government fee for strike off is ₹10,000. All-in professional costs typically run ₹0.5 to 1.5 lakhs for a strike off and ₹3 to 8 lakhs for a voluntary liquidation, depending on complexity. BO/LO/PO closures typically cost ₹1 to 3 lakhs in professional fees.

Q: What is the difference between strike off and winding up?
A: Strike off is an administrative removal of a defunct, nil-asset company from the register. Winding up, in the voluntary form under Section 59 of the IBC, is a full process with a liquidator, claims, distribution of surplus and an NCLT dissolution order. If there are assets or surplus to repatriate, winding up is the route.

Q: What is the tax on liquidation proceeds received by a foreign parent?
A: Indian tax law splits the receipt into two parts. The portion attributable to accumulated profits is a deemed dividend under Section 2(22)(c), taxed at 20% plus surcharge and cess (or lower DTAA rate, typically 5% to 15%). The balance is taxed as capital gains: 12.5% for long-term gains (shares held 24+ months) without indexation. DTAA relief on capital gains is largely unavailable for shares acquired after 1 April 2017 under the Mauritius, Singapore and Cyprus treaties. The liquidation distribution rule is now in Section 68 of the Income-tax Act 2025 (effective 1 April 2026).

Q: What DTAA withholding rates apply on the deemed dividend portion?
A: The rate depends on the treaty between India and the parent’s country of residence and the percentage shareholding. Common rates: USA (15% or 25%), UK (15%), Germany (10%), Singapore (5% or 15%), Mauritius (5% or 15%), Netherlands (10%). The foreign parent must furnish a Tax Residency Certificate to claim the lower treaty rate.

Q: Can a struck-off company be revived?
A: Yes. The NCLT can restore a struck-off company on an application by the company, a member, creditor or workman for up to 20 years under Section 252. Director and officer liability also survives strike off under Section 248(7).

Q: How do we repatriate the remaining funds to the parent?
A: In a voluntary liquidation, the liquidator distributes surplus to shareholders after settling claims, withholding Indian tax on the deemed dividend portion, and the AD bank remits the proceeds under the Foreign Exchange Management (Remittance of Assets) Regulations 2016 against Form 15CA/15CB and a tax no-objection. In a strike off, funds must be extracted before filing, through dividend, buyback or capital reduction.

Q: Is RBI approval needed to close the subsidiary?
A: No separate RBI approval is needed for closing a wholly owned subsidiary. FEMA compliance runs through the AD Category-I bank, which reports the closure and processes the remittance. Branch and liaison office closures are also routed through the AD bank under the RBI’s framework.

Q: How do we close a branch office of a foreign company in India?
A: Apply to the designated AD Category-I bank with the auditor’s certificate on the remittable amount and liabilities, the income tax no-objection, a no-litigation confirmation, the ROC closure report and the original establishment approval. The bank remits the winding up proceeds and reports the closure to the RBI.

Q: What happens if we simply stop filing instead of closing?
A: Late fees of ₹100 per day per annual form accrue without cap, directors face five-year disqualification under Section 164(2) after three years of non-filing, and the ROC can strike the company off suo moto with director liability fully intact under Section 248(7).

Q: Does the new Income-tax Act 2025 change the tax on liquidation?
A: The substance is unchanged. The liquidation distribution rule moves from Section 46 of the 1961 Act to Section 68 of the Income-tax Act 2025, effective from 1 April 2026, so documents from FY 2026-27 onwards cite the new Act.

Q: What happens to unclaimed liquidation proceeds?
A: The liquidator applies to the NCLT to transfer unclaimed proceeds to the Corporate Voluntary Liquidation Account (or Companies Liquidation Account under Regulation 39). Any stakeholder can apply to the IBBI for release. Amounts unclaimed for fifteen years from dissolution are transferred to the central government’s general revenue account.

Q: What are the FEMA reporting steps after the dissolution order?
A: After dissolution, the parent must: submit the dissolution order to the AD bank for SMF update on the FIRMS portal; file the final FLA return on the FLAIR portal; file an ECB-2 closure report if external commercial borrowings were availed; and complete ODI disinvestment reporting if the Indian entity held overseas investments. These steps close the FEMA record entirely.

Q: What transfer pricing risk exists at the time of closure?
A: The income tax department can raise a transfer pricing adjustment on inter-company transactions even after the company is dissolved, under the provisions now carried into the Income-tax Act 2025. All related-party receivables and payables must be cleared at arm’s length before the closure process starts, with contemporaneous transfer pricing documentation maintained for the prescribed period.

Closing a chapter properly

A clean India exit is mostly decided before the first form is filed: FEMA history reconciled, tax file current, employees settled, balance sheet emptied to match the route chosen. Done in that order, strike off and voluntary liquidation are predictable processes, not open-ended ones.

Treelife runs India entity closures end to end for foreign parents: route selection, the pre-filing cleanup, liquidator coordination, the tax and FEMA leg of repatriation, and branch or liaison office closures through the AD bank. If you are weighing an India exit, write to us with the entity’s last two years of financials and its FEMA filing history, and we will tell you which route fits and what it will take.

Regulatory references

• Companies Act 2013: Sections 248, 249, 252, 455, 66, 68, 92, 117, 137, 164(2), 448
• Insolvency and Bankruptcy Code 2016: Section 59(1), 59(4), 59(5), 59(7), 59(8)
• IBBI (Voluntary Liquidation Process) Regulations 2017, as amended January 2025 and February 2026
• IBBI Regulation 42 (new), effective 1 June 2026 (termination of voluntary liquidation process)
• Insolvency and Bankruptcy Code (Amendment) Act 2026 (assent 6 April 2026)
• Income-tax Act 2025, Section 68 (liquidation distribution; effective 1 April 2026)
• Income-tax Act 1961, Sections 2(22)(c), 46(1), 46(2), 92CA, 115A, 178
• Foreign Exchange Management Act 1999
• FEMA (Remittance of Assets) Regulations 2016
• FEMA (Establishment in India of a Branch Office or a Liaison Office or a Project Office) Regulations 2016 (FEMA 22(R)/2016)
• FEMA (Overseas Investment) Regulations 2022
• Companies (Registration of Foreign Companies) Rules 2014
• Payment of Gratuity Act 1972
• Industrial Disputes Act 1947
• Employees’ Provident Funds and Miscellaneous Provisions Act 1952
• Employees’ State Insurance Act 1948

External sources

• Ministry of Corporate Affairs
• Income Tax India
• Reserve Bank of India
• Insolvency and Bankruptcy Board of India
• GST Council / CBIC