Closing a foreign-owned subsidiary in India: FEMA, RBI, and 15CA/15CB compliance

Last updated 14 July 2026

The step founders and overseas parents miss

A US-based SaaS company incorporated an Indian WOS in 2020 to run a development team. By 2025, the parent had shifted engineering elsewhere and decided to shut the Indian entity down. The local team handled the STK-2 filing competently — board resolution, indemnity bond, nil balance sheet — and assumed closure was done once the gazette notification came through. What they missed: the Indian entity still held roughly Rs 40 lakh in its bank account, meant to be returned to the US parent as a return of capital before the account could show a nil balance. Without a 15CB certificate and 15CA filing, no bank in India will remit that sum abroad — the STK-2 filing itself actually requires the account to already be at nil, so the repatriation has to happen before the strike-off application, not after.

This sequencing — repatriate first, then strike off — is where most FEMA-related delays in foreign subsidiary closures originate. Shunya's CA team handles both this remittance compliance and the underlying company closure together, precisely because they can't be sequenced correctly if handled by two separate parties who aren't talking to each other.

Why repatriation isn't a simple bank transfer

Under the Foreign Exchange Management Act (FEMA) 1999, any remittance from an Indian resident (including an Indian company) to a non-resident is regulated. Rule 37BB of the Income Tax Rules requires that most outward remittances be accompanied by a certificate from a chartered accountant (Form 15CB) confirming the nature of the remittance, the applicable tax rate under the Income Tax Act or a Double Taxation Avoidance Agreement (DTAA), and whether tax has been correctly deducted at source. The remitter then files Form 15CA online on the income tax e-filing portal, declaring the remittance details, before the AD bank (the bank authorised to handle foreign exchange transactions) will process the transfer.

A very small list of payments is exempt from this requirement — mostly routine imports and specified personal remittances. Capital account transactions like returning surplus capital, dividend distribution, or liquidation proceeds to a foreign shareholder are not on that exempt list, so 15CA/15CB applies in virtually every subsidiary-closure scenario.

Step 1 — determine what needs to be repatriated

Before any ROC filing, work out exactly what the Indian subsidiary needs to send back to the foreign parent: residual cash balance, sale proceeds of any assets, or a final dividend if the company still has distributable profits. Each has a different tax character — a dividend is taxed differently from a return of share capital or a liquidation distribution — so the CA needs to classify the payment correctly before certifying it.

Step 2 — obtain the CA-certified Form 15CB

A practicing chartered accountant reviews the nature of the remittance, checks whether any tax is payable in India (accounting for DTAA relief if the parent is resident in a treaty country), confirms TDS deduction where applicable, and issues Form 15CB. This certificate is a prerequisite — the online Form 15CA portal will not accept certain categories of remittance without a valid 15CB reference number attached.

Step 3 — file Form 15CA online

The company (or its authorised signatory) logs into the income tax e-filing portal and files Form 15CA, referencing the 15CB certificate where required, and selecting the correct part of the form (Part C typically applies where the remittance exceeds Rs 5 lakh in a financial year and a 15CB has been obtained; Part D applies to remittances not chargeable to tax). The system generates an acknowledgement, which is submitted to the AD bank along with the 15CB certificate and supporting documents.

Step 4 — AD bank clearance and the outward remittance

The AD bank reviews the 15CA acknowledgement, the 15CB certificate, and standard KYC documentation (board resolution authorising the remittance, invoice or reason for payment, and the company's FEMA-related registrations) before processing the outward transfer. Banks are conservative here — any mismatch between the stated purpose of remittance and the supporting documents typically triggers a query, so getting the CA certification and paperwork consistent up front avoids delays.

Step 5 — close out RBI/FEMA reporting obligations

If the Indian entity received foreign direct investment and has been filing the annual FLA (Foreign Liabilities and Assets) return to the RBI, this must be filed for the final year of operations — even a company being closed still needs to reflect the closure in its last FLA submission, or intimate the RBI that the entity has ceased to exist as an FDI recipient. If the original investment was reported via Form FC-GPR at the time shares were issued to the foreign parent, no further FC-GPR filing is needed at closure, but the company should retain that filing along with the closure paperwork in case of any future RBI query about the investment's lifecycle.

Step 6 — proceed with STK-2 or the appropriate closure route

Only after the residual funds have actually left India and the bank account reflects a nil balance should the company proceed with STK-2 strike off (or voluntary liquidation, if the company holds other assets beyond cash). Attempting to file STK-2 while repatriation is still pending — hoping to "clean up" the bank balance later — routinely results in ROC queries or outright rejection, since the statement of accounts attached to STK-2 must show the company already has no assets.

Where this differs from a purely domestic closure

A domestically-owned company closing under STK-2 only needs to worry about MCA and income tax compliance. A foreign-owned subsidiary adds a parallel compliance track — FEMA, RBI reporting, and 15CA/15CB certification — that has its own timeline and its own set of professionals (the CA certifying 15CB is often, though not always, the same CA handling the company closure). Coordinating the two tracks, so that repatriation completes before the nil-balance closure filing, is the part that most commonly goes wrong when the two workstreams are handled independently.

This article is for general information only. For your specific situation, consult a practicing CA.