India-US Cross-Border Compliance: The Checklist for SMEs Running Both Entities

An India-parent that opens a US subsidiary — or a US company that opens an India entity — doesn't get one compliance calendar. It gets two, running in parallel, filed with two different regulators, and a single-country bookkeeper will reliably miss half of it. Here's what actually has to happen on both sides.

The two calendars don't merge

India-side compliance runs through the RBI/FEMA framework. US-side compliance runs through the IRS and state authorities. Nothing about filing correctly in Mumbai satisfies a Delaware or IRS requirement, and nothing about a clean US 1120 satisfies RBI reporting. Treat them as two checklists tracked by one team, not one merged list.

India-side: what an Indian parent owes RBI

• Form FC (overseas direct investment reporting): filed via an Authorised Dealer bank at the time capital moves to the foreign subsidiary. This is the single most commonly missed step — founders wire money to set up the US entity and never file the corresponding ODI report.
• Annual Performance Report (APR): filed every year for as long as the foreign entity exists, reporting its financial position back to the RBI. Miss this and future remittances to the same entity can get held up at the bank.
• LRS limits, if relevant: the Liberalised Remittance Scheme caps individual outward remittance at $250,000/year — most SME entity funding goes through the separate ODI route, not LRS, but founders sometimes confuse the two channels.

US-side: what an India-owned US entity owes the IRS

• EIN: required before the entity can open a US bank account, file anything, or pay anyone. Apply as soon as incorporation is confirmed.
• Form 1120 (C-corp) or pass-through filings (LLC): annual federal return, due regardless of whether the entity made any money.
• Form 5472 + pro-forma 1120: required for any US entity that is 25%+ foreign-owned and has "reportable transactions" with its foreign owner — intercompany loans, management fees, cost allocations. This is the filing that trips up the most India-owned entities, and the penalty starts at $25,000 per omitted form, per year.
• BOI (Beneficial Ownership Information) report to FinCEN: most US entities must disclose beneficial owners; an India-based founder counts.
• State-level registration and franchise tax: varies by state of incorporation (Delaware franchise tax, for instance, applies even to entities with no US revenue).

Where the DTAA actually helps — and where it doesn't automatically

The India-US Double Taxation Avoidance Agreement exists so the same income isn't taxed twice in both countries. It is real relief, but it is not automatic on either side. To claim it:

• Obtain a Tax Residency Certificate (TRC) from the tax authority of your home country.
• File Form 10F alongside your return in the country where you're claiming the treaty benefit.
• Match the income category correctly — dividends, royalties, and business profits have different DTAA articles and different withholding rates.

Founders who assume the treaty "just applies" without filing the paperwork end up paying full tax in both jurisdictions and reclaiming it later, which is slower and sometimes not fully recoverable.

Bank structuring: decide before incorporation, not after

How money moves between the India parent and the US subsidiary determines which RBI reporting gets triggered. Equity investment, an intercompany loan, and a management-fee arrangement are three different structures with three different filing obligations — and switching structures after the entity already exists is more expensive than choosing correctly at setup. Decide the funding structure with both a CA (India side) and a CPA (US side) in the room before wiring the first dollar.

A practical minimum checklist

• India: Form FC filed at investment, APR filed annually, funding route documented (ODI vs LRS).
• US: EIN obtained, Form 1120 + Form 5472 filed annually if 25%+ foreign-owned, BOI report filed, state registration current.
• Both: TRC + Form 10F filed wherever DTAA relief is being claimed.
• One team, not two: your India CA and US CPA need visibility into each other's filings, not separate silos.

See our US entity formation and compliance service — we run both calendars under one CA/CPA-partnered team so nothing falls in the gap between "that's not my jurisdiction" on either side.