Short answer: there are two routes. Strike-off under Section 248 of the Companies Act, filed in STK-2 with a ₹10,000 fee, suits a subsidiary that has paid everything it owes, has nothing meaningful left to distribute, and has either never started business or has not carried on business for two financial years. Voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code (IBC) suits a subsidiary with capital or assets to return to the parent: a liquidator realises the assets, pays creditors and distributes the surplus, and the company is dissolved by order of the National Company Law Tribunal (NCLT). Neither route needs an income-tax 'clearance certificate' as such. Both need the tax, GST and ROC filings brought current first. The capital goes home through the authorised dealer (AD) bank under the RBI's rules for liquidation proceeds, not through FC-TRS.
| Strike-off (s.248(2)) | Voluntary liquidation (IBC s.59) |
|---|
| Suits | A company with nil or negligible assets | A company with capital, cash or assets to return |
| Who runs it | The directors file; the Registrar decides | A liquidator, who must be an insolvency professional |
| Liabilities | Must be extinguished before applying | Paid by the liquidator from the assets |
| Returns capital to the parent | Not by itself | Yes, as a liquidation distribution |
| Ends with | Notice in the Official Gazette | NCLT dissolution order |
| Can be reversed | NCLT restoration under s.252 | Once dissolved, a separate process |
| Typical duration | A few months once eligible | Around 12–18 months end to end |
The mistake to avoid is picking strike-off because it is cheaper and then finding that the cash in the bank has no lawful way out.
Eligibility. A company may apply to the Registrar of Companies (ROC) to remove its name after extinguishing all its liabilities, by special resolution or with the consent of members holding 75% of the paid-up capital. The application must rest on one of the grounds in Section 248(1). For a subsidiary that has wound down, that is usually that it has not carried on any business for the two immediately preceding financial years and has not applied for dormant status. A company that stopped trading last quarter is not yet eligible on that ground.
Filings must be current. Rule 4 of the Removal of Names Rules bars the application unless the financial statements (AOC-4) and annual returns (MGT-7) have been filed up to the end of the financial year in which business stopped. Once the Registrar has published its own strike-off notice under Section 248(5), a voluntary application is no longer possible. The fee concession for STK-2 under the Companies Compliance Facilitation Scheme ended on 15 September 2026; see what late ROC filing costs now.
Section 249 bars. A company cannot apply if, in the previous three months, it changed its name or registered office, disposed of property or rights outside the ordinary course, or did anything other than what was needed to close. It also cannot apply while a scheme application or winding-up is pending.
The file:
| Document | By whom |
|---|
| STK-2, with ₹10,000 fee | The company, through the C-PACE processing centre |
| STK-3 indemnity bond | Each director |
| STK-4 affidavit | Each director |
| Statement of accounts showing assets and liabilities, made up to a date not more than 30 days before the application | Certified by a practising Chartered Accountant |
| Special resolution, or the 75% consent | Members |
The statement of accounts in practice shows nil: the bank account is closed and every creditor paid before STK-2 is filed. The Registrar issues a public notice inviting objections, and the name is struck off after the notice period.
What strike-off does not end. Under Section 248(7), the liability of every director, officer and member continues and can be enforced as if the company had not been dissolved. The directors' STK-3 indemnities say the same. A struck-off company can be restored by the NCLT under Section 252, on an application by the company, a member, a creditor or a workman.
When. Voluntary liquidation under the IBC replaced the Companies Act's members' voluntary winding up from April 2017. It is the normal route for a solvent subsidiary with money to return.
The steps:
- Declaration of solvency. A majority of directors declare by affidavit that the company has no debt, or will be able to pay its debts in full from its assets, and that it is not being liquidated to defraud anyone. It comes with the audited accounts and a valuation report by a registered valuer.
- Special resolution, within four weeks of the declaration, to liquidate and to appoint an insolvency professional as liquidator.
- Creditors' approval, where the company owes any debt: creditors representing two-thirds in value approve within seven days.
- Public announcement and claims. The liquidator invites claims, verifies them, realises the assets and pays creditors, including the tax and GST departments.
- Distribution. The surplus is distributed to the shareholders, here the parent.
- Final report and dissolution. The liquidator files a final report and applies to the NCLT, which orders the company dissolved.
Timing. The IBBI's Voluntary Liquidation Process Regulations expect the liquidator to finish and submit the final report within 270 days where creditors had to approve the liquidation, and 90 days otherwise. The IBC (Amendment) Act 2026 writes an outer limit of one year into Section 59 and adds a way to terminate a voluntary liquidation that is no longer needed. The NCLT dissolution order comes after the final report and takes its own time. Twelve to eighteen months end to end is a realistic plan, not a statutory period.
No general 'tax clearance certificate' is required to file STK-2 or to start a voluntary liquidation. The tax position still drives the timetable, for four reasons:
- Returns and statements continue until the end. The company files its income-tax return for every year up to and including the year of closure. It files TDS statements for the final quarter, and the transfer pricing accountant's report for any year with transactions with the parent: Form 3CEB for years up to 2025-26, Form 48 from tax year 2026-27.
- Assessments outlive the company. An open scrutiny, a reassessment notice or an appeal does not lapse because the company is struck off or dissolved.
- Directors carry the risk. Under Section 179 of the 1961 Act, now Section 323 of the Income-tax Act 2025, tax due from a private company that cannot be recovered from it can be recovered from anyone who was a director in the relevant year, unless they prove the non-recovery was not due to their gross neglect, misfeasance or breach of duty. Foreign directors of an Indian subsidiary are not outside it.
- Transfers while proceedings are pending. Under Section 281 of the 1961 Act, now Section 499, a transfer of assets while tax proceedings are pending can be void against the department's claim, unless the Assessing Officer's permission is obtained first. Where anything is open, that permission is the nearest thing to a clearance and is worth applying for before the distribution.
In a liquidation, Section 178 of the 1961 Act, now Section 322, requires a liquidator to notify the Assessing Officer and set aside what the officer says is needed for tax before parting with assets. The section excepts the IBC. How it interacts with an IBC voluntary liquidation is a point for the liquidator to settle at the outset, not at the distribution.
Tax on what the parent receives. A liquidation distribution is treated as a dividend under the income-tax definition to the extent of the company's accumulated profits: Section 2(22) of the 1961 Act, Section 2(40) of the 2025 Act. The rest is a capital receipt, taxed in the parent's hands as capital gains against its cost of the shares under Section 46 of the 1961 Act, now Section 68. Tax is withheld under Section 195, now Section 393, at the treaty rate if the parent provides its tax residency certificate and Form 10F, now Form 41. Dividends paid before closure follow the same withholding logic: see dividends to a foreign parent.
- Apply to cancel the registration in REG-16 once taxable supplies have stopped.
- Pay back input tax credit on stock and capital goods held on the date of cancellation, under Section 29(5) of the CGST Act.
- File the final return, GSTR-10, within three months of the date of cancellation or the date of the cancellation order, whichever is later.
Cancellation does not end liability for earlier periods. Open GST notices should be closed before strike-off, and are a creditor claim in a liquidation.
The routes:
| Route | How the money leaves | Needs |
|---|
| Dividend of accumulated profits, before closure | Dividend to the parent | Board or members' approval; withholding tax |
| Reduction of capital under s.66 | Capital paid back to shareholders | Special resolution and NCLT confirmation |
| Liquidation distribution | Liquidator's distribution | The IBC process |
For most solvent subsidiaries the cleanest sequence is to pay out distributable profits as dividend while the company still trades, then liquidate to return the capital. Reducing capital under Section 66 followed by strike-off is possible, but it needs the NCLT's confirmation anyway, so it rarely saves time over liquidation.
FEMA on a liquidation. The RBI's Master Direction on Remittance of Assets, updated to June 2026, allows AD banks to permit remittances by Indian companies under liquidation, on the liquidator's order, against:
- an auditor's certificate that all liabilities in India have been fully paid or adequately provided for;
- an auditor's certificate that the winding up follows the Companies Act; and
- for a liquidation not under a court's supervision, an auditor's certificate that no legal proceedings are pending in India against the applicant or the company and there is no legal bar to the remittance.
FC-TRS does not apply. It reports transfers of shares between residents and non-residents, and a distribution by a liquidator is not a transfer. We are not aware of any FIRMS form that reports a liquidation distribution. The AD bank handles the remittance on the documents above, and the income-tax reporting runs through Form 145, with a CA's certificate in Form 146 where the remittance is taxable and above ₹5 lakh: see Forms 145 and 146. File the company's final FLA return. How the AD bank wants a capital reduction or buy-back reported to the RBI is less settled, and practice varies, so agree it with the bank before the payment. The filings the company made on the way in are in the FEMA filings foreign-funded companies miss.
- Decide the route on the balance sheet: what is left, what is owed, and what is open with the tax and GST departments.
- Bring every filing current. AOC-4, MGT-7, income-tax returns, TDS statements, the transfer pricing report and the GST returns.
- Stop the business in an orderly way. Settle employee dues, gratuity and final PF and ESI contributions, terminate leases and supplier contracts, and cancel the shops and establishments and professional tax registrations.
- Pay out distributable profits as dividend while the company is still an ordinary going concern, with withholding and Form 145.
- Cancel GST in REG-16, reverse credit on stock, and file GSTR-10.
- Deal with open tax matters, and apply for Section 281 (now Section 499) permission where proceedings are pending.
- Either: start voluntary liquidation, let the liquidator distribute the capital through the AD bank under the Remittance of Assets direction, and obtain the NCLT's dissolution order. Or, where nothing material remains, close the bank account, wait out the two-year ground if it applies, and file STK-2.
- Close the bank accounts last. The liquidator closes them after the final distribution; for strike-off, they are closed before STK-2 so that the statement of accounts shows nil.
- Keep the records. Books and papers should be retained in line with the Companies Act and tax limitation periods, because the directors' liability does not end with the company.
This note describes the general routes for closing a solvent private company owned by a foreign parent, as the law and RBI directions stood in September 2026. It is not advice on a particular closure. The choice of route, the tax on the distribution and the documents the AD bank will accept depend on the company's balance sheet, its open proceedings and the parent's treaty position. The 2026 IBC amendments and the RBI's reporting practice on capital reductions are still settling, so confirm the current position with the liquidator, the AD bank and the jurisdictional authorities before any resolution is passed.