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Setting Up an India R&D Centre: A Guide for Japanese and Korean Companies

How Japanese and Korean companies can decide whether an India R&D centre fits, which entity and ownership routes apply, and which questions on talent, IP and tax to settle before committing.

أبحاث Nirji Ventures
قراءة في 4 دقائق قراءةJapan · South Korea · India
محتوى معلوماتي عام. ليس نصيحة استثمارية أو قانونية أو ضريبية.

Executive summary

Japanese and Korean companies increasingly look at India for engineering and R&D capacity, not only for sales. An India R&D centre can be a small product-engineering team or part of a larger global capability centre (GCC). This guide sets out the decisions that matter most: whether India fits the work, which legal route applies, and what to settle on talent, intellectual property and tax before committing. It relies on official Indian sources and says plainly where the evidence stops.

Decide what the centre is for

Start with the work, not the location. Common mandates are:

•Product engineering: for a specific product line, often embedded software, electronics or mechanical design.
•Digital and IT engineering: supporting global platforms.
•Localisation R&D: adapting products for Indian and other emerging-market customers.
•Testing, validation and simulation: work that scales with engineering headcount.

A narrow mandate is easier to staff, measure and protect. If several functions are planned, read our India GCC overview and the GCC setup guide, which cover the multi-function model.

Most foreign companies run R&D through a wholly owned private limited subsidiary. Under India's FDI policy, most sectors allow up to 100% foreign ownership under the automatic route, meaning no prior government approval, subject to sectoral conditions. Investors from countries that share a land border with India follow a separate approval route; Japan and Korea do not fall in that group, but group structures with such shareholders need checking.

Other options include a branch or liaison office (narrower permitted activities), an engineering contract with an Indian service provider, or a build-operate-transfer arrangement. Each carries different control, cost and IP consequences.

Company law sets basic requirements. A private company needs at least two directors, and section 149(3) of the Companies Act, 2013 requires at least one director who stays in India for at least 182 days in the financial year.

Treaty context for Japanese and Korean companies

India has a Comprehensive Economic Partnership Agreement with Japan (in force 1 August 2011) and with Korea (in force 1 January 2010), according to India's Ministry of Commerce and Industry. These agreements cover trade, services and investment, but they do not approve or fund any specific centre. India also has income-tax treaties with both countries; how they apply to cost-plus R&D service income, secondments and royalties is a question for qualified tax advisers.

Settle five questions before committing

1.Talent model. – Will you hire locally, second staff from Japan or Korea, or both? Language, time-zone overlap and decision rights matter as much as salary levels.
2.Intellectual property. – Who owns what the team creates? Employment contracts, assignment clauses and intra-group agreements should be in place before work starts.
3.Transfer pricing. – Captive R&D centres are commonly remunerated on a cost-plus basis; the margin and documentation need professional review.
4.City and site. – Bengaluru, Hyderabad, Pune, Chennai and the National Capital Region have deep engineering pools, but supplier, cost and attrition conditions differ. States run their own incentive programmes.
5.Pilot or full launch. – Many companies start with a small team or partner arrangement before building a full centre. See our guide to running a pilot project in India.

What this guide does not tell you

•It does not give salary, cost-saving or timeline figures; these vary by role, city and year and should be benchmarked for your case.
•Incentives are scheme- and state-specific and are approved case by case; none is an entitlement.
•Treaty and tax statements here are general and are not tax advice.

How Nirji Ventures engages

The Nirji Community is a private network for companies and startups exploring Asia Pacific expansion; expressing interest is free and does not promise funding, introductions or programme admission. NirjiX, the group's consulting firm, takes on paid market-entry, partner-diligence and project-execution engagements. The two paths are separate: Community participation is not a consulting engagement, and consulting enquiries do not require Community membership.

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كتب بواسطة

Nirji Ventures Research

Market Entry Team

Nirji Ventures مجموعة يقودها مشغّلون ومقرها سنغافورة، تربط المستثمرين والمبتكرين والشركات الناشئة والشركات القائمة في منطقة آسيا والمحيط الهادئ. ومن خلال رأس المال وبناء المشاريع والمشاريع المشتركة والشراكات والتحالفات، نساعد الشركات الآسيوية على بناء أعمالها والتوسع دولياً.

اجعل الرؤى الإقليمية نقطة انطلاق للحوار.

هل تستكشف سوقًا أو فرصة لشراكة أو مشروع مشترك أو بناء شركات ناشئة؟ أخبرنا بما تعمل عليه والقدرات التي تقدمها.

الأسئلة المتكررة

Can a Japanese or Korean company fully own an R&D subsidiary in India?

In most sectors foreign direct investment up to 100% is permitted under the automatic route under India's consolidated FDI policy, but sectoral caps and conditions apply, and investors from countries sharing a land border with India need government approval. Check the current policy for your activity before structuring.

Does an Indian subsidiary need a resident director?

Yes. Section 149 of the Companies Act, 2013 requires every company to have at least one director who stays in India for at least 182 days in the financial year, applied proportionately in the year of incorporation.

Is an India R&D centre the same as a GCC?

Not necessarily. A global capability centre usually bundles several functions, such as engineering, IT and finance operations. A focused R&D centre can be smaller, narrower and tied to one product line.