A subsidiary alliance was a treaty between an Indian state and a European East India Company, in which the Indian ruler who formed a treaty with the company would be provided with military protection in exchange for control over their foreign affairs and the acceptance of British forces in their territory. The system was developed by Lord Wellesley, who planned the British policy of subsidiary alliance. Some of the key features of the subsidiary alliance include:

• The Indian ruler entering into a subsidiary alliance with the British had to dissolve their own armed forces and accept British forces in their territory.
• The ruler would not form an alliance with any other power, nor would they declare war against any power without the permission of the British.
• The ruler would not employ any Europeans other than the British, and if they were already doing so, they would dismiss them.
• In case of a conflict with any other state, the British would decide what to do, and the ruler would accept their solution.
• The ruler would acknowledge the East India Company as the power in India.
• In return for the ruler accepting its conditions, the Company undertook to protect the state from external dangers and internal disorders.
• If the Indian rulers failed to make the payments required by the alliance, then part of their territory was to be taken away as a penalty.

The system of subsidiary alliances was pioneered by the French East India Company governor Joseph François Dupleix, who established treaties with the Nizam of Hyderabad and other Indian princes in the Carnatic region in the late 1740s. The kingdom of Awadh was the first to enter into an alliance like this through the Treaty of Allahabad in 1765, after its defeat in the Battle of Buxar in 1764. Other states also accepted this alliance, including Tanjore/Mysore, Peshwa, Bhonsle, and the Nizam of Hyderabad. The advantages of the subsidiary alliance laid mostly with the British, as it increased the power and resources of the company and maintained the troops at the cost of the native powers.