Set Up as a Foreign Entity in India Liaison, Branch or Project Office
A foreign company can operate in India without forming an Indian company by opening a liaison office, branch office or project office. These offices are extensions of the foreign company rather than separate Indian companies. They are set up under the Foreign Exchange Management Act (FEMA), usually with approval through an Authorised Dealer Category-I bank (the Reserve Bank of India decides some cases), and must register with the Registrar of Companies after they open. KNM India helps foreign companies choose the right office, apply for approval and stay compliant.
Liaison, branch and project offices compared
| Point | Liaison office | Branch office | Project office |
|---|---|---|---|
| Purpose | Represent the parent: promote its products, build contacts, share information | Carry out permitted business activities for the parent | Carry out one specific project in India |
| Can earn income in India? | No. All expenses are paid by remittances from the parent | Yes, for permitted activities | Yes, from the project |
| Not allowed | Any commercial, trading or industrial activity | Manufacturing (except in a Special Economic Zone) and retail trading | Activities outside the project |
| Approval | Through an AD Category-I bank under FEMA; RBI in specified cases | Through an AD Category-I bank under FEMA; RBI in specified cases | Often no separate approval if the RBI’s general conditions are met (for example, a contract with an Indian company and funding from abroad or an Indian lender) |
| Track record and net worth (verify against the current RBI Master Direction before publishing) | Profits in the last 3 financial years; net worth of at least USD 50,000 | Profits in the last 5 financial years; net worth of at least USD 100,000 | Not applicable |
| Duration | Approval usually for a fixed period, renewable | Ongoing while permitted activities continue | Closed when the project ends |
| Tax | Taxed as part of a foreign company (where it has taxable income) | Taxed as a foreign company | Taxed as a foreign company |
Filings after the office is set up
- Register with the Registrar of Companies as a foreign company (Form FC-1) within 30 days of establishing a place of business in India.
- Obtain PAN and TAN, and GST registration where the office makes taxable supplies.
- File the Annual Activity Certificate with the AD bank each year (verify the current due date before publishing).
- File annual accounts with the Registrar of Companies, and income-tax returns where the office has income.
Liaison Office
Branch Office
Project Office
Frequently asked questions
No. A liaison office can only represent the parent company. It cannot carry out commercial activity, and its expenses must be paid from the parent’s remittances.
A branch office can carry out activities the RBI permits for branches, such as export and import, professional or consultancy services, research, and representing the parent. It cannot manufacture, except in a Special Economic Zone.
Often not. The RBI has granted general permission for a project office when conditions are met, for example a contract with an Indian company and funding from abroad or an Indian lender. Some cases still need approval.
A subsidiary is a separate Indian company with limited liability and domestic company tax rates, and it can do any lawful business. A branch office is part of the foreign company, is limited to permitted activities and is taxed as a foreign company. Most companies planning long-term operations choose a subsidiary.
Yes. A foreign company must file Form FC-1 within 30 days of establishing a place of business in India.
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