India market entry for US investors and growth companies

Entry route, FDI position – and US parent / cap-table alignment. A US business may enter through direct contracting, a distributor, agent or franchise, a JV, an LLP, a company, or a branch, project or liaison office. The route should follow activity, customers, tax, FDI rules, people and control – and be tested against the US parent structure: Delaware or other US holdco, investor rights, SAFEs/preferred/ESOP, future fundraise, intercompany agreements and exit route. Getting the India entity wrong against the cap table creates problems at the next round or exit. → India company setup, India structuring.

India direct, GIFT City / IFSC, or a UAE-linked structure. For US investors, the better first question is whether the India route should be direct, IFSC-based or regionally structured. GIFT City / IFSC may be more appropriate for funds, financial services, treasury, investment platforms and structured capital – India-facing, internationally structured. A UAE-linked route may still help where there is Gulf or regional commercial purpose, holding, treasury, banking or investor-control logic. Neither should be inserted without substance, tax logic and implementation purpose. → GIFT City & IFSC, India–UAE business structuring.

Trade framework, customs and market access. The India–US framework and BTA negotiations are relevant, but visible benefit depends on implementation – treat it as a planning backdrop, not an automatic saving. Product-level review still matters: classification, rules of origin, tariff schedule, standards, conformity assessment, import licensing, customs valuation and non-tariff barriers. For goods, the operating-model choice is set out below under Make, assemble or export. → trade & customs, India tax.

Tax, withholding and permanent establishment. Tested before contracts are signed: Indian corporate tax, GST, withholding on royalties and fees for technical/included services, PE exposure, transfer pricing, management fees, cost-sharing, dividends and repatriation. A wrong contracting model can create tax exposure before the India operation is even ready. → India tax.

India–US tax treaty and the US-side view. The India–US income-tax treaty is in force and relevant to residence, PE, royalties, fees for included services, relief from double taxation and MAP – but access and positions turn on the facts. Separately, US tax classification (check-the-box), CFC/NCTI (formerly GILTI), foreign tax credits, transfer pricing and anti-deferral should be reviewed with US tax advisers where relevant. ATB aligns the India, UAE and IFSC side so the structure can be tested properly. → India tax.

FEMA, funding, banking and remittance. India’s exchange-control regime is a core issue: it governs inbound investment, share transfers, loans, guarantees, royalty and technical-fee payments, dividends and exit. For US investors this is often where the structure becomes practical – or impractical. Get the remittance and banking route right early, before it surfaces at exit or share-transfer. → FEMA advisory.

SaaS, AI, IP, data and technology contracts. For US SaaS, AI, software, edtech, healthtech and fintech businesses: IP ownership, licensing, customer data, cloud and hosting, cybersecurity, support obligations, liability, subscription terms – and the India withholding treatment a subscription or licence can trigger (revenue priced as subscription but treated as royalty / fees for included services in India). For regulated or physical products, add Indian product registration, standards, labelling, warranties, consumer-protection and liability caps. → software, IT & SaaS.

Export controls, sanctions and sensitive technology. More prominent here than on any other desk. AI, chips, GPUs, cloud, cybersecurity tools, aerospace, sensitive, dual-use and advanced-manufacturing activity may raise export-control, sanctions, end-user, end-use and technology-transfer issues – and the corridor’s own framework references cooperation on export controls and investment reviews. These checks belong before the commercial deal is negotiated, not after. → India structuring.

Partner, distributor, JV and channel control. The India agreement should control customer ownership, exclusivity, territory, pricing, audit rights, data, brand/IP use, payment collection, termination, non-compete, non-solicit, dispute forum and enforcement. A weak distributor agreement can leave the local partner controlling the customer, pricing, brand and termination.

For US companies, India partner and intermediary structures should also be reviewed for FCPA, anti-bribery, sanctions, beneficial-ownership, payment-control and government-interaction risk – and for how payment is actually collected (who invoices, who withholds, who bears tax, currency, late payment, and what happens on default). Risk allocation – warranties, indemnities and insurance (product, professional, cyber, D&O) – is set in the same pass.

People deployment, hiring – and no totalization shortcut. For US companies using India talent or deploying staff: immigration, payroll, tax residence, PE risk, employment law, contractor-classification and EOR risk, IP assignment, invention ownership, confidentiality and data access. There is no US–India social-security totalization agreement, so US–India deployment should not assume a social-security treaty shortcut – it needs separate planning. → India tax.

For US companies in India that sell physical goods, such as machinery, components, devices or consumer products, the trade position is now a cost line, not just background. Plan on the duties that apply today. Treat any saving from a future agreement as a probability, not a budget line.

The position at 12 October 2026. On 6 February 2026 India and the US announced only a framework for an interim agreement. Nothing has been signed, and India has not cut duty on US goods. The 18% US rate announced for India was never applied. Indian-made goods now enter the US at the normal duty plus 10% under the Section 301 “forced labour” action in force since 24 July 2026. Goods already covered by Section 232 (steel, aluminium, autos and parts, and listed derivatives) pay the Section 232 rate instead, and anti-dumping and countervailing duties come on top. From 18 October 2026, a US sanctions statute requires duties of up to 100% on all goods from any of the five largest buyers of Russian crude or gas that keep buying, unless the rate is reduced or waived, and India is exposed. The framework contains no investment protection, and there is no India–US bilateral investment treaty. For the legal detail, see India–US trade deal (2026): status, tariffs and what is legally in force (ATB Legal).

Three questions decide the operating model:

1. Where will the output be sold? India, the US, or third markets where India has preferential access (the UK, the UAE, the EFTA states and, once in force, the EU).
2. How much of the product is imported? Duty falls on imported inputs, and heavy imported content can stop Indian output from qualifying as Indian origin under India’s trade agreements.
3. How reversible must the commitment be? If the business case depends on a US tariff outcome, the model has to be easy to scale back.

Operating-model decision table

Distributor and sales subsidiary bear the same duty. The difference is margin, control of pricing and customers, and the permanent-establishment and transfer-pricing exposure a subsidiary carries; see Permanent establishment in India: employer of record and PE risk.

Worked example: a US machinery maker weighs an Indian plant

Illustrative only. Tax year 2026-27; FX INR 96 = USD 1 (FBIL reference rate, 12 October 2026, rounded). Duty rates are assumptions; check them by HS code at the date of import.

Midwest Machinery Inc., a Delaware company, sells USD 20m a year of industrial packaging machinery (Chapter 84) to Indian manufacturers through a distributor.

1. Keep exporting. Indian Basic Customs Duty assumed 7.5%, plus Social Welfare Surcharge of 10% of that duty (0.75%) = 8.25%. IGST (18% on most machinery) is left out because the buyer can usually credit it. Duty = USD 20m × 8.25% = USD 1.65m a year.
2. Keep exporting, and an agreement zero-rates the line. The saving would be USD 1.65m. At an assumed 50% chance of entry into force, the expected saving is 1.65m × 50% = USD 0.825m a year. Budget the expected figure, not the headline.
3. Build an Indian manufacturing subsidiary. Imported components: USD 12m × 8.25% = USD 0.99m of duty if cleared for home use (deferred under bonded manufacturing, MOOWR, for output that is re-exported). Profit before tax INR 40 crore (USD 4.17m). Corporate tax at 25.168% (22% + 10% surcharge + 4% cess) = INR 10.07 crore, leaving INR 29.93 crore. Dividend withholding at the 15% treaty rate = INR 4.49 crore (USD 0.47m). Total Indian tax = (10.07 + 4.49) ÷ 40 = 36.4% of profit. For a US C-corporation claiming the s.245A deduction, that withholding is generally a final cost; confirm with US advisers.
4. The plant exports USD 10m a year to the US. US normal duty assumed 0%, plus 10% under Section 301 = USD 1.0m. At the framework’s 18% it would have been USD 1.8m, so for US-bound output today’s position is better than the announced “deal” rate. If the machinery falls under Section 232 (steel or aluminium derivatives), the s.232 rate applies instead and can be higher. A sanctions-tariff designation of India would add up to 100%.

Read-out. If most output serves India and markets where India has preferential access, the subsidiary is viable without any US agreement. If the plant exists mainly to supply the US, Section 301 and the escalation risk dominate the case: phase the capacity and keep bonded options open.

India as a base for the UK, EU, Gulf and EFTA

India’s own agreements give Indian-made goods preferential access to markets that the India–US framework does not touch:

Origin rules decide whether a plant’s output qualifies. Under the UK CETA they are product-specific, typically a change of tariff heading or 35–45% qualifying value content; under the UAE CEPA, generally 40% value addition. A packaging line built in Pune can enter Dubai duty-free if it meets the CEPA rule. Shipped to Ohio, the same line pays the US normal duty plus 10%. For many US groups, an Indian plant is therefore a play for Europe and the Gulf as much as for India.

Contract and insurance, not the trade deal, protect the investment. Because there is no India–US BIT, the protections that work are contractual and insurance-based. Seat arbitration in a country whose awards India enforces directly (the legal article linked above lists the notified countries and the two-step route for a UAE seat). Add tariff pass-through and termination clauses and, where the counterparty is a state body, a sovereign-immunity waiver and a state or sovereign guarantee. A UAE holding company does not add treaty cover: Article 36.1 of the India–UAE BIT denies the treaty’s benefits to an investor owned or controlled, directly or indirectly, by persons of a non-Party; read literally, a UAE holding company owned by a US group is excluded whatever its substance, although no tribunal has yet ruled on the clause. A UAE holding company can still serve Gulf distribution, but only with real substance in the UAE, and it must also pass India’s tax tests after Tiger Global (January 2026). Political-risk insurance (US DFC, MIGA or private market) carries the risks the contract cannot. The comparison of holding jurisdictions is in Invest in India: choosing a holding company jurisdiction.

What to do now, by scenario (ATB Corporate view, not a forecast)

Checklist to forward internally

• Map the flows: what goes into India, what is made in India, and where Indian output ships
• Price Indian import duty by HS code, including surcharge and cesses; hold any agreement saving as a probability
• Price US duty on India-made goods: normal duty + 10% Section 301 (or the s.232 rate on covered goods) + any anti-dumping or countervailing duty; model a sanctions-tariff case
• Add tariff pass-through and termination rights to supply contracts
• Choose the holding route now on tax and operating grounds (a US-owned UAE holding company brings no UAE–India BIT cover on a literal reading of Article 36.1); test substance and India’s anti-avoidance rules
• Model 25.168% corporate tax and 15% dividend withholding against the US-side position
• Assess MOOWR, FTWZ and state incentives before committing capex
• Check UK, UAE, EFTA and (when in force) EU origin rules for the planned Indian content
• Review the plan monthly while the US position is moving

How ATB Corporate can help. ATB Corporate advises companies and investors on entering, structuring and operating in India and the UAE: choosing the entry route and holding structure, tax and exchange-control planning, regulatory compliance, and setting up and running the local business. To discuss your plans, contact ATB Corporate.

Sources

• Status, US tariffs and the sanctions statute: The White House, “United States–India Joint Statement” (6 February 2026); The White House, “Fact Sheet: The United States and India Announce Historic Trade Deal” (9 February 2026); Supreme Court of the United States, Learning Resources, Inc. v. Trump, No. 24-1287 (20 February 2026); Global Trade Alert, interventions 152679 and 152684 (India and US commitments under the framework for an interim agreement); Office of the US Trade Representative, Section 301 forced-labour action, 91 FR 47318 (28 July 2026); Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, Pub. L. 119-111 (18 September 2026).
• Corporate tax, dividend withholding, s.245A: PwC Worldwide Tax Summaries, “India: withholding taxes” (reviewed 11 May 2026); India–USA Double Taxation Avoidance Agreement (1989); Income Tax Department, tax rates for domestic companies; Finance Act 2026, s.3 (as reproduced by TaxGuru, 30 March 2026); IRS, Practice Unit, “Section 245A dividends received deduction”.
• Onward markets: UK Government, business.gov.uk, “The UK–India trade deal”; European Commission, “EU–India trade agreement” (updated 11 September 2026); Digital Policy Alert, “Council Decision on signing of Free Trade Agreement between EU and India”; India Briefing, “India’s FTA tracker 2026” (24 September 2026); EFTA, “EFTA–India Trade and Economic Partnership Agreement enters into force: Joint Communiqué” (1 October 2025); PIB, backgrounder on the India–EFTA TEPA (October 2025); PIB, India–UAE CEPA in force (1 May 2022); Middle East Briefing, “India–UAE CEPA, non-oil trade, and transshipment of goods”; CBIC Notification No. 62/2026-Customs (N.T.) of 3 July 2026, CETA rules of origin (as reproduced by World Trade Scanner); India–United Arab Emirates BIT (2024), treaty text.
• Enforcement and protection: Bar & Bench / JSA, “Time for reciprocity: why India should recognise UAE for enforcement of arbitral awards” (8 November 2025); Mondaq, “Enforcement of foreign decrees and awards in India” (12 May 2015); Philip Morris Asia Ltd v Commonwealth of Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility (17 December 2015); Argus Partners, Supreme Court in Tiger Global (16 January 2026); US International Development Finance Corporation, “Political risk insurance”.
• IEEPA refunds: Orrick, “Court of International Trade orders refunds for IEEPA tariffs” (5 March 2026); Withers (via Mondaq), “Update on IEEPA tariff refunds: eligibility for certain IEEPA refunds through CBP’s CAPE portal appealed to Federal Circuit” (26 June 2026).
• FX: Reserve Bank of India, FBIL reference rates (12 October 2026).
• NCTI (formerly GILTI): BDO USA, “New tax act changes numerous international tax provisions” (21 July 2025).

1. Route and control – direct India entity, distributor, JV, branch/project office, contractor model, a GIFT City / IFSC route, or a UAE-linked structure; tested against the US parent and cap table.
2. Trade, standards and regulatory access – tariff, classification, origin, standards, import licensing, sector approvals and the implementation status of any trade framework, and, for goods, the export, assemble or manufacture choice modelled by HS code against today’s US and Indian duties.
3. Tax, FEMA and remittance – withholding, GST, PE, transfer pricing, royalties, fees, dividends, loans, banking and exit.
4. IP, data, export-control and partner protection – technology transfer, customer data, end-use, brand/IP, payment collection, termination, dispute forum – and FCPA / third-party risk.
5. People and implementation – hiring, secondment, contractor classification, payroll, social-security exposure (no totalization), local licences, banking and timeline.

ATB provides senior-led, corridor-specific structuring support for US investors and growth companies before capital, counterparties or operating responsibility are committed. The focus is one coordinated view across entry route and FDI, the GIFT City / IFSC option, tax and FEMA, IP/data/export controls, partner and contract control, the people model, banking and remittance, dispute forum and implementation – a structure that can be licensed, taxed, banked, contracted, governed and put into use, not merely described. Structures are pressure-tested for the failure scenario: payment default, partner exit, IP misuse, customer poaching, termination and enforcement. With India execution capability through Bengaluru and cross-border structuring support through Abu Dhabi, the objective is a decision-ready position before a full transaction, tax or implementation workstream is launched.

A defined first step – India Structuring Review for US Companies. A focused, senior-led review with a defined scope and a decision-ready output, covering: entry route · FDI · the GIFT City / IFSC option · tax and FEMA flags · partner and contract control · IP / data / export controls · the people model · banking and remittance · dispute forum · and the implementation steps.

Where audit sign-off, formal tax opinions, US export-control or securities determinations, investment-review analysis, or local regulated advice are required, ATB frames the question precisely and works with the appropriate US and India specialists rather than overstating its own remit. US-side tax (check-the-box, CFC/NCTI (formerly GILTI), FTC, transfer pricing), export-control, sanctions, anti-boycott, securities or investment-review positions should be reviewed with US advisers where relevant; ATB’s role is to align the India and UAE/IFSC side so the structure can be tested properly.