Doing Business in India – 2025: Key Legal, Tax & Regulatory Insights for Global Investors

India, the world's most populous country with over 1.4 billion people, has emerged as one of the most attractive destinations for global business in 2025. Fueled by strong economic growth, a burgeoning middle class, robust government reforms and technological adoption, India is rapidly transforming into a global economic powerhouse. However, tapping into its potential requires a clear understanding of the regulatory landscape, market dynamics and appropriate business structures.

India's Economic Landscape in 2025

India’s nominal GDP in 2025 stands at $3.73 trillion, with a growth rate of 6.5% fueled by domestic consumption, export growth and robust industrial output. Inflation has moderated to 3.5%, while unemployment has dropped to 7.1% due to job creation in manufacturing, IT and services. Foreign Direct Investment (FDI) inflows reached $55.6 billion in 2025, reflecting increasing investor confidence.
Government initiatives like Digital India, Make in India and the Production-Linked Incentive (PLI) schemes are enhancing the ease of doing business and attracting foreign capital. Budget 2025-26 focuses on digital infrastructure, green energy and startup support, cementing India’s status as a favorable investment destination.

Entry Strategies for Foreign Businesses

India offers a range of entry options for foreign investors, depending on operational goals and regulatory flexibility:

Liaison Office (LO)
Primarily a communication channel, an LO can promote the parent company’s interests in India without engaging in commercial activities. It requires RBI approval and is ideal for market exploration or brand presence.

Branch Office (BO)
A BO can undertake export/import and professional services, excluding retail and direct manufacturing. It’s suited for companies looking to maintain operational oversight without forming a separate legal entity.

Project Office (PO)
Used for executing specific contracts in India, a PO operates until the project concludes. It can be established without RBI approval if certain funding or contractual conditions are met.

Wholly Owned Subsidiary (WOS)
A WOS allows 100% foreign ownership in sectors under the automatic route. It functions as a domestic entity and is subject to Indian corporate laws, offering operational independence and full market access.

Joint Venture (JV)
Ideal for sectors with FDI caps or for leveraging local expertise, a JV involves shared ownership and governance. A well-drafted JV agreement covering roles, equity, dispute resolution and exit strategy is crucial for long-term success.

Limited Liability Partnership (LLP)
Combining the benefits of a partnership and limited liability, LLPs are gaining popularity due to simpler compliance requirements. FDI in LLPs is allowed under the automatic route in sectors with 100% FDI and no performance conditions.

FDI Policy Updates and Sectorail Liberalization

India’s FDI policy allows foreign investment via two routes:

Automatic Route: No prior government approval is needed.
Government Route: Required for sectors with restrictions or national security considerations.

Recent reforms have increased FDI caps in several sectors:

Insurance: Up to 100%
Defense: 74% under the automatic route
Single Brand Retail & E-commerce: 100% allowed, with conditions
Space Sector: 100% FDI allowed as of February 2024

There are also restrictions on FDI from neighboring countries like China and Pakistan, requiring prior government approval.

Taxation: Corporate Incentives for Foreign Investors

India has rationalized its corporate tax structure to enhance investor appeal:

Section 115BAA

Applicable to domestic companies, this section offers a reduced tax rate of 22% (effective 25.17% including surcharge and cess) if the company forgoes certain deductions and incentives.

Section 115BAB

This applies to new manufacturing companies set up after October 1, 2019, and operational before March 31, 2025. It offers a concessional tax rate of 15% (effective 17.16%) under strict conditions, including restrictions on the use of old plant/machinery and exemption claims.

Both options are irrevocable and exclude the applicability of Minimum Alternate Tax (MAT), making them attractive for long-term investments.

India’s Tax System: Key Highlights for Businesses and Individuals

India’s tax structure comprises both direct and indirect taxes, aimed at ensuring transparency and compliance. For companies, the Minimum Alternate Tax (MAT) mandates a 15% tax on book profits if the regular tax liability is lower, except for those opting for concessional tax regimes under sections 115BAA and 115BAB, who are exempt from MAT and cannot carry forward MAT credit.

Foreign companies are liable to MAT only if operating through a Permanent Establishment in India under a DTAA. MAT doesn’t apply to income from capital gains, interest, royalty or technical services.

For individuals, tax liability depends on residential status. India offers an old regime (with deductions and exemptions) and a new, lower-rate regime without them. The Finance Act 2020 further tightened residency rules for high-income citizens not taxed abroad.

Understanding International Taxation and Transfer Pricing

In today’s globalized economy, international taxation and transfer pricing play a critical role for multinational businesses operating across borders. Here’s a quick overview of the key concepts every global business should know:

Double Taxation Avoidance Agreements (DTAA)

DTAA helps prevent the same income from being taxed in two countries. If a foreign company earns income in India, it can avail of the DTAA between India and its home country to pay tax at concessional rates or avoid double taxation altogether. India has signed DTAAs with most major countries, ensuring smoother cross-border investments.

Tax Information Exchange Agreements (TIEAs)

To curb tax evasion, India has signed TIEAs with 23 countries. These agreements enable the exchange of tax-related information, especially with tax havens, enhancing transparency and global tax compliance.

Transfer Pricing

Transfer Pricing rules apply to transactions between associated enterprises (AEs) within a multinational group. These include sales, services, loans, or licensing arrangements. India mandates that such transactions be priced at Arm’s Length Price (ALP)—the price that would apply if unrelated parties were involved.

Methods to Determine ALP

There are several prescribed methods to calculate ALP:

Comparable Uncontrolled Price (CUP)
Resale Price Method (RPM)
Cost Plus Method (CPM)
Profit Split Method (PSM)
Transactional Net Margin Method (TNMM)
Other prescribed methods

Transfer Pricing Compliance

Taxpayers must file Form 3CEB by 31st October each year, certified by a Chartered Accountant, and maintain a Transfer Pricing Study Report for audit purposes.

Penalties

Non-compliance can lead to severe penalties, emphasizing the importance of accurate documentation and adherence to transfer pricing regulations

Audit & Assurance

Statutory audits in India fall under various regulatory acts, such as the Companies Act, 2013, the Insurance Act and GST laws. These include:

Financial Audit

Mandatory for all companies, regardless of turnover or profitability. It ensures the accuracy of financial statements and the integrity of accounting records.

Internal Audit

Required for listed companies and large private/public companies as per specific financial thresholds. It strengthens internal controls and helps mitigate risks.

Tax Audit

Required under the Income Tax Act for businesses with turnover exceeding ₹1 crore (or ₹10 crores if cash transactions are <5%) and professionals earning over ₹50 lakhs.

GST Audit

Conducted to validate turnover, tax payments and Input Tax Credit (ITC) claims. It can be initiated either by tax authorities or through a special audit involving appointed Chartered Accountants.

Labour Laws in India

India has long followed a complex labour law regime. However, the labour law landscape is evolving with the introduction of four consolidated Labour Codes aimed at simplifying compliance and improving worker welfare.

Key Existing Labour Laws:

Employees Provident Fund Act: Mandates joint contributions for employee retirement benefits.
Gratuity Act: Applicable after 5 years of continuous service; offers financial security post-employment.
Maternity Benefit Act: Ensures paid leave and benefits for women before and after childbirth.

New Labour Codes

Consolidating 29 laws into 4 major codes, these reforms aim to:

Simplify wage definitions
Ensure worker rights (including FTEs and gig workers)
Improve workplace safety and compliance
Promote ease of doing business

The implementation of these codes is still awaited, but once in effect, they will significantly impact employer obligations and employee entitlements.

Conclusion: Unlocking India’s Growth Potential

India in 2025 stands as a major global investment hub, driven by strong economic growth, liberalized FDI policies and supportive government reforms. With multiple entry options, competitive tax incentives and evolving labour laws, the country offers vast opportunities for foreign businesses.

However, navigating India’s regulatory and compliance landscape requires careful planning and informed decision-making. Choosing the right business structure, understanding tax implications and adhering to audit and labour regulations are essential for long-term success.

In short, India presents high growth potential, backed by a complex but manageable legal framework. With the right strategy, global investors can thrive in one of the world’s most dynamic markets.

Ready to Expand in India?
At UJA Global Advisory, we specialize in helping global investors and businesses seamlessly enter and grow in the Indian market. From choosing the optimal entry structure to ensuring full legal, tax and regulatory compliance, our team of experts delivers end-to-end support tailored to your goals.