# Holding Company Structuring

> A holding company owns shares in operating companies to centralise control, investments and succession. Dividends it receives are taxable, but it can deduct dividends it distributes onward under Section 80M, avoiding a cascade. If financial assets and financial income each exceed half of its total, it may need RBI registration as an NBFC or core investment company, so the structure must be designed with that test in mind.

Practice: Tax Planning & Business Advisory — https://www.industax.com/services/advisory/

Holding structures also help ring-fence businesses, bring in investors at different levels, and pass control to the next generation by transferring holding-company shares rather than each business.

We model tax on dividends and exits, test the NBFC criteria, and implement transfers into the holding company tax-efficiently.

## Key facts

| Item | Detail |
| --- | --- |
| Dividend cascade relief | Section 80M |
| NBFC risk | Financial assets and income each > 50% |
| Uses | Control, ring-fencing, succession, investments |

## Who needs this

- Promoter families with several companies
- Groups planning investments or listing
- Families planning succession

## What's included

- Structure design
- Tax and NBFC analysis
- Implementation plan

## Documents

- Group shareholding
- Financials
- Future plans

## Process

1. **Analyse** — Current structure and goals.
2. **Design** — Target structure and steps.
3. **Implement** — Transfers and filings.

## FAQs

### Does every holding company need RBI registration?

No. Registration is needed only when it meets the NBFC principal business criteria or qualifies as a core investment company above the thresholds; many operating-group holding companies are exempt or below them.

### Is transferring shares to a holding company taxable?

Usually yes, as a transfer of shares, unless done through a qualifying amalgamation or other exempt route. The tax cost must be weighed against the benefits.

### Can an LLP be a holding entity?

Yes, and LLP profit shares are exempt in partners' hands, but LLPs can't issue shares to investors, which limits flexibility.

## Official sources

- incometaxindia.gov.in: https://www.incometaxindia.gov.in/
- Reserve Bank of India — NBFC regulation: https://www.rbi.org.in/

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This is general information, not advice for your specific facts.