Sector Guide — SaaS / IT

India Entry for SaaS & IT Services

India is the world’s top destination for software talent and Global Capability Centres. Setting up a SaaS or IT subsidiary is fast — the nuance is in exports GST, transfer pricing and where you locate.

Plan Your India GCC WOS Setup →

In short: SaaS and IT-services companies enter India most often as a wholly owned subsidiary under the 100% automatic FDI route — frequently as a Global Capability Centre (GCC) or R&D/development centre. Key considerations are Bengaluru/Hyderabad talent, GST treatment of software and service exports (zero-rated with an LUT), transfer pricing on inter-company charges, and STPI/SEZ options.

Why India for SaaS & IT?

India has the world’s deepest pool of software, R&D and product engineering talent, at a fraction of onshore cost, and hosts the largest existing base of Global Capability Centres. For a foreign SaaS or IT-services firm, the choice is less “whether India” and more “which city and which structure”.

Entity & FDI

IT and IT-enabled services are on the 100% automatic FDI route, so a wholly owned subsidiary — often a captive GCC — is the standard vehicle. No prior approval, only FC-GPR reporting to the RBI post-allotment. Confirm your specific activity on FDI entry routes.

Where to set up

Bengaluru, Hyderabad and Pune lead for tech talent, with Gurugram and Chennai adding scale. See best locations for foreign companies, and the state hubs for Karnataka and Telangana.

GST on software & service exports

Export of software and services is zero-rated under GST. Filing a Letter of Undertaking (LUT) lets you export without paying IGST and then claim refunds of input GST on your Indian costs — critical for a captive centre’s cash flow.

Transfer pricing for captive centres

A captive GCC that bills its foreign parent on a cost-plus basis must meet India’s arm’s-length transfer-pricing rules. Options for certainty include electing a Safe Harbour margin or applying for an Advance Pricing Agreement (APA) with the tax authorities.

STPI & SEZ options

STPI registration for software exporters — bonded operation and reporting
IT SEZ units — tax and duty benefits under the SEZ framework
Choice affects compliance, incentives and future exit — decide at setup

Frequently asked questions

What is the best structure for a SaaS company entering India?

A wholly owned subsidiary (private limited company) under the 100% automatic FDI route — often set up as a captive Global Capability Centre that provides R&D or support services to the foreign parent on a cost-plus basis.

What is a Global Capability Centre (GCC)?

A GCC is a captive offshore centre a foreign company sets up in India to run engineering, R&D, product, analytics or support functions in-house rather than outsourcing — India hosts the world's largest GCC base.

Is software export taxed under GST in India?

Export of software and services is zero-rated under GST. With a Letter of Undertaking (LUT) you can export without charging IGST and claim refunds of input GST.

Do I need transfer pricing for an India development centre?

Yes. A captive centre billing its overseas parent must price the services at arm's length under India's transfer-pricing rules. A Safe Harbour margin or an Advance Pricing Agreement can give certainty.

Reviewed by CA Regi Tom Antony, Regi Tom Antony & Associates. Last updated: July 2026.

Standing up an India tech team?

We handle the WOS, GST/LUT and transfer-pricing setup for your captive centre.

Get in Touch