Compliance watch-outs
Permanent establishment
After Hyatt International (25 July 2025), parent-company control over Indian operations can create a fixed place PE under the treaty. Keep decision rights and secondee roles documented, and make sure the inter-company agreement reflects how the centre is actually run. A PE is taxed as a foreign company at 36.40–38.22% effective; see tax and zones.
Transfer-pricing margin
The 15.5% safe harbour suits routine cost-plus centres. Higher-value R&D or AI work may attract a claim for a higher margin. Benchmark annually or seek an APA; the government has said it will fast-track IT-services APAs and aim to conclude them within two years.
Labour Codes
The Labour Codes are in force from 21 November 2025. Fixed-term employees get benefits equal to permanent staff and gratuity after one year. Review offer letters and pay structures before the first cohort joins. The EPF Scheme, 2026 was notified on 29 June 2026 under the Code on Social Security. See Labour Codes and GCC people and hiring.
Personal data
DPDP core obligations apply from 13 May 2027. Failing to take reasonable security safeguards can attract a penalty of up to ₹250 crore. Consent Managers register from 13 November 2026, and the Data Protection Board operates immediately.
Incentive lock-ins
State incentives carry conditions. Maharashtra requires 10 years of operation from registration; Uttar Pradesh and Gujarat pay over several years against claims. A subsidy that looks large on paper is worth less if the centre may move or shrink within the lock-in.
Expatriate staffing
Employment visas are for highly skilled professionals, not routine jobs. Plan leadership transfers early, since visas must be in place before travel. See visas and expatriates.
Set-up points that catch new entrants
Registering for state incentives too late
Several state policies require registration before or alongside the investment. Maharashtra issues a Registration Certificate through the Commissionerate of Services, and incentives cannot be claimed without it.
Signing the lease before checking stamp duty relief
Several state GCC policies tie stamp duty relief to IT parks, SEZs and STPIs. Confirm relief, and whether STPI or SEZ registration is needed, before signing.
Missing land-border ownership
Press Note 2 (2026), in legal effect from 2 May 2026, tests beneficial ownership as under PMLA (over 10% or control). A non-controlling holding up to 10% is automatic with prior reporting on the FIF/NSWS portal; anything else needs government approval. See land-border investors.
Assuming foreign law firms can litigate
Registered foreign lawyers and firms may advise on foreign and international law and arbitration in non-litigious work only, and may not practise before Indian courts (BCI rules of March 2023, amended 13 May 2025).
Relying on the tier-2 national framework
The national framework for GCCs in tier-2 cities, announced in Union Budget 2025-26, was at draft stage in January 2026. For now, state policies are what pay for tier-2 locations.
What to check next
- Review who in the parent directs the captive’s work and document it before go-live.
- Benchmark the margin each year, or decide on an APA if the centre’s work goes beyond routine services.
- Update offer letters and pay structures for the Labour Codes, including fixed-term gratuity.
- Build security safeguards and breach reporting now to meet the 13 May 2027 DPDP date.
- Read the lock-in and claim terms of the chosen state’s policy before counting the incentive.