Setting up a GCC in India: the finance and tax side

What a GCC is

A global capability centre (GCC) — also called a captive or offshore centre — is a unit in India that provides engineering, analytics, operations, finance or support services to its own group, rather than to outside customers. Most are set up as an Indian private limited subsidiary that charges the parent its costs plus a markup.

Entity and setup

• Subsidiary is the usual choice: foreign investment under the automatic route for IT and business services, limited liability and room to grow.
• Before hiring, many groups use an employer-of-record for the first few people, then move them to the subsidiary once it is incorporated.
• Timeline: incorporation, PAN/TAN and a bank account, then the capital inflow and FC-GPR within 30 days of allotting shares.
• A resident director — at least one director in India for 182 days or more in the financial year.

Transfer pricing: the main tax decision

• The Indian entity must be paid at arm’s length — typically cost plus a markup benchmarked against comparable independent service providers.
• Safe harbour: from tax year 2026-27, eligible IT services — software development, IT-enabled services, KPO and contract R&D — can accept a 15.5% markup on cost (up to ₹2,000 crore of transactions) and avoid a benchmarking dispute. Details in our transfer pricing guide.
• Advance pricing agreements give multi-year certainty for larger centres.
• Documentation: an intercompany services agreement, a cost base that is clearly defined (including ESOP costs from the parent), and the annual accountant’s report on international transactions.

GST on exported services

• Services to the foreign parent can qualify as an export of services — zero-rated — when all the conditions are met, including payment in convertible foreign exchange.
• File a Letter of Undertaking (LUT) each year to export without paying IGST, and claim refunds of accumulated input tax credit.
• From 30 March 2026 the special place-of-supply rule for “intermediary” services was removed, which helps Indian entities that support a foreign group’s sales.

Hiring and payroll

• Payroll with TDS on salaries, provident fund, ESI where applicable, professional tax and gratuity provisioning.
• Stock options from the parent: Indian tax on exercise, valued by a SEBI-registered merchant banker — see US parent ESOPs.

Reporting to the parent

• A monthly close on the parent’s calendar, with a mapping from Indian GAAP / Ind AS to the group’s reporting.
• The annual FLA return to RBI by 15 July, statutory audit, tax audit and income-tax return.
• Budget vs actuals on the cost base, since it drives the service fee.

Need the whole setup handled? See company setup in India.

Running an Indian subsidiary for a foreign parent? See Indian subsidiary compliance and repatriating profits from India.

Frequently asked questions

Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.