Introduction
Global Capability Centre is an offshore or nearshore entity, fully owned and operated by a parent company, built to house specialised functions ranging from information technology and R&D to finance, HR, and increasingly AI-led product work.1 India’s GCC story has genuinely become one of scale. There are now around 1,700 such centres in the country, employing something in the order of 1.6 million professionals, and Bengaluru, Hyderabad and Pune have emerged as the clear hubs where most of that action is concentrated. These centres together now inject more than $64.6 billion into the Indian economy every year, a figure that keeps rising as more global companies realise that India is no longer just a cost play, but where the work actually gets done.2
In a GCC, the foreign parent owns the Indian entity outright, controls its people and its intellectual property, and carries full legal responsibility for how that entity behaves under Indian company law, tax law, foreign exchange law, employment law, and data protection law.3 The first and the foremost step required to be complied for setting up GCC is to specify what the GCC would actually be engaged in. This is important because based on this the GCC will choose the correct legal structure, the data protection compliances, FDI routes, etc. Let’s say for example if a GCC is engaged in product development, then it needs strong IP clauses but on the other hand if its handling customer or employee data, then it will require strong data protection and cybersecurity clauses.4 The rest of this guide walks through exactly how to get that structuring right and further compliance requirements.
Choosing the Right Legal Entity and Incorporation Process
The single decision that shapes everything downstream is the choice of legal vehicle. Foreign companies setting up a GCC in India can generally choose between a wholly owned subsidiary, a branch office, a liaison office, a limited liability partnership, or occasionally a joint venture where sectoral restrictions demand a local partner.5 In practice, the wholly owned private limited company is the most suitable choice. It gives the parent full control, supports long-term hiring and expansion, and doesn’t carry the operational restrictions that branch and liaison offices are saddled with under Reserve Bank of India rules.6
Branch offices can look tempting because they are quicker to set up, but they restrict the scope of permitted activity and keep the entity under closer regulatory monitoring, which becomes a real constraint the moment the centre wants to scale beyond a narrow support function.7 A limited liability partnership has its place too, mainly for smaller or narrowly scoped operations, though it trades away some of the equity-raising flexibility that larger GCCs eventually need.8 Once the entity is fixed, incorporating the private limited entity itself is fairly mechanical i.e. director identification numbers and digital signature certificates for the proposed directors, name reservation through the Ministry of Corporate Affairs portal via SPICe+, drafting the memorandum and articles of association, and finally filing the incorporation documents with the Registrar of Companies.9 None of this is glamorous work, but skipping a step here tends to surface as a much bigger problem eighteen months later, usually right when the centre is trying to open a new bank account or bid for a state-level incentive.
Foreign Exchange and FDI Compliance
Since a GCC is funded from abroad, the Foreign Exchange Management Act, 1999 sits underneath almost every structural decision. Most GCC-relevant sectors, information technology, business process management, and engineering or R&D support, fall under the automatic route, meaning up to 100% foreign investment without prior government approval.10 That doesn’t mean the compliance burden disappears; it simply moves from approval to reporting. Form FC-GPR has to be filed within the prescribed window after shares are allotted to the foreign parent, and ongoing filings such as the FC-TRS and the annual FLA return keep the Reserve Bank’s records current on who owns what. Alongside it also has to comply with ECB reporting for overseas borrowing, and ODI filings for foreign subsidiaries.11
GCCs also tend to run considerably more complex intercompany flows than a typical IT exporter as it often deals with intercompany transactions, cross-border ESOP settlements, and occasional external commercial borrowing, and each of these triggers its own reporting obligation under FEMA.12 Assuming that standard export-of-services compliance is enough is a costly mistake, GCCs face far more FEMA obligations. With RBI consolidating oversight through data-driven platforms such as FIRMS, GCCs can no longer afford to let FEMA filings slip.
Tax Structuring, Transfer Pricing, and Permanent Establishment Risk
A GCC incorporated in India is treated as a resident entity for tax purposes and is liable to corporate tax under the Income-tax Act, 1961, with the applicable rate depending on which tax regime the company elects into.13 The bigger structural risk, though, is not the headline rate, it is transfer-pricing and permanent establishment exposure. Because a GCC typically serves its overseas group companies almost exclusively, every service it renders to an affiliate must be priced at arm’s length and backed by proper benchmarking documentation.14 If any mistake happens here, then the exposure is not a one-time penalty, it is a multi-year audit trail that follows the entity around.
Equally important is defining clear, well-documented standard operating procedures that govern how employees of the Indian centre interact and collaborate with those of the parent multinational and other group entities. Without this discipline, the day-to-day working relationship between the two sides can inadvertently create a taxable presence for the foreign entity, triggering permanent establishment exposure under the Indian tax regime. What matters here isn’t contractual language that merely says the right things on paper, but genuinely operationalised protocols around who instructs whom, who signs off on deliverables, and where strategic decisions are actually made.15 Section 195 withholding on cross-border payments, GST on inter-company invoicing, and the periodic Form 3CEB transfer pricing filing, round out the annual tax calendar.16 Depending on location, some centres can still access Special Economic Zone benefits or state-specific incentive schemes, though the era of blanket tax holidays for GCCs has largely wound down.17
Employment, Data Protection, and Intellectual Property
Labour compliance in India is not a single statute to comply at once; it is a running obligation spanning provident fund contributions, gratuity, maternity benefits, working-hour limits, and, increasingly, careful documentation distinguishing employees from independent contractors.18 Getting employee classification wrong, causes trouble right away. It tends to surface later, once the company has scaled, or when an audit, inspection, or legal dispute forces a closer look. By then, the cost of fixing it has multiplied: unpaid benefits, penalties, interest, and legal fees all stack up, turning what could have been a straightforward correction into a genuinely expensive problem. Sound governance such as embedding a code of conduct, an anti-bribery policy, and compliance with the Sexual Harassment of Women at Workplace Act must be complied from beginning rather than waiting for a regulator to ask for it.
Data protection has become the sharper edge of GCC compliance in recent years. The DPDP Act, 2023 sets out obligations around consent, lawful processing, breach notification, and grievance redressal, and it applies with real force to centres that routinely handle employee, customer, and business data flowing in from multiple jurisdictions.19 Building a privacy governance framework is not optional paperwork here, it is what stands between the centre and a genuinely damaging breach notification down the line.
Intellectual property deserves the same seriousness. Every GCC generates code, designs, trade secrets, and proprietary processes, and unless assignment clauses in employee and contractor agreements are airtight, ownership of that work product can become genuinely contestable, particularly once an employee leaves or a vendor relationship ends.20 It has to be ensured that all innovations and proprietary information are protected by clear IP ownership clauses, strong NDAs and timely patent and copyright protection.21
Conclusion
India has become one of the world’s go-to destinations for setting up a Global Capability Centre and it’s easy to see why, deep talent pools, a mature digital ecosystem, and policy that’s finally catching up to what businesses actually need. But incorporating the entity is just the starting line. What actually determines whether a GCC thrives isn’t the launch but whether the legal and compliance groundwork was done properly at the start.
That means choosing a legal structure that fits the business, staying on top of FEMA, tax, labour, data protection, and IP obligations as they arise rather than after the fact, and building governance practices that can actually bear weight as the centre scales. If this groundwork is not complied properly, it leads to storing of risks for later which may have a drastic effect on GCC. So, getting it right will lead to the GCC stops being just a cost-efficient delivery arm and instead becoming something the parent enterprise can genuinely lean on for innovation and strategic value.
1How to Set up a Global Capability Center (GCC), Zinnov (last updated June 16, 2026), https://zinnov.com/centers-of-excellence/how-to-set-up-a-captive-center-or-global-capability-center-gcc-blog/.
2Ministry of Heavy Industries, Government of India. PM E-DRIVE Scheme to Propel India’s EV Revolution. Press Information Bureau March 5, 2025) https://www.pib.gov.in/PressReleasePage.aspx?PRID=2106222®=3&lang=2 3How to Set Up a GCC in India: Legal, FEMA & Compliance Guide (2026), LegalJini (June 22, 2026), https://legaljini.com/blogs/legal/how-to-set-up-gcc-in-india/.
4Supra at 3.
5Setting Up a GCC in India: A Legal and Strategic Guide for Multinational Corporations, Legal 500 (2026), https://www.legal500.com/developments/thought-leadership/setting-up-a-gcc-in-india-a-legal-and-strategic-guide-for-multinational-corporations/.
6Setting Up a Global Capability Centre (GCC) in India: Legal and Regulatory Framework, Mondaq (June 2026), https://www.mondaq.com/india/cybersecurity/1804204/setting-up-a-global-capability-centre-gcc-in-india-legal-and-regulatory-framework.
7How to Set Up a Global Capability Centre in India – Complete Checklist, MS Associates (May 27, 2026), https://www.msassociates.pro/articles/set-up-a-global-capability-centre-in-india/.
8Legal Compliances for GCCs in India: 2026 Practical Guide, eSparkInfo (Apr. 30, 2026), https://www.esparkinfo.com/global-capability-center/legal-compliance.
9 Supra at 7
10Setting Up Global Capability Centers (GCCs) in India 2026: Legal, Tax & Talent Strategies, Khanna & Associates (Feb. 4, 2026), https://khannaandassociates.com/blog/global-capability-centers/.
11Global Capability Centres (GCCs) and the New Forex Regime – A Practical FEMA Compliance Playbook, FEMA Expert (May 7, 2026), https://www.femaexpert.com/fema-expert-blogs/global-capability-centres/.
13 Supra at 7
15 Supra at 5
16 Supra at 7
18 Supra at 10
