Foreign Company in India — Branch / Liaison / Project Office
Establish your Branch Office, Liaison Office, or Project Office in India with full RBI and MCA compliance. TaxClue handles Form FNC application, RBI/AD Bank approval, MCA registration (FC-1), annual filings (FC-3, FC-4), Annual Activity Certificate, and FEMA compliance — end-to-end.
What You Need to Know
Foreign companies looking to establish a presence in India without incorporating a separate Indian company can set up a Branch Office (BO), Liaison Office (LO), or Project Office (PO). These are extensions of the foreign parent — not separate legal entities — and are governed by FEMA 1999, FEMA 22(R)/2016 Regulations, and RBI Master Directions.
Each type serves a different purpose: LOs handle communication and market research (no revenue), BOs carry on business activities (earn revenue), and POs execute specific project contracts. All require RBI approval via an Authorised Dealer (AD) Category-I Bank using Form FNC, followed by MCA registration under Section 380 of the Companies Act 2013.
TaxClue manages the entire lifecycle — from Form FNC application, RBI/AD Bank approval, and MCA registration (FC-1) to annual compliance (FC-3, FC-4), Annual Activity Certificate (AAC), and eventual closure/remittance.
RBI Draft Regulations 2025 — Proposed Changes (Not Yet Notified)
On 3 October 2025, RBI released Draft FEMA (Establishment in India of a Branch or Office) Regulations, 2025 proposing: removal of net worth/profit thresholds, no tenure limit for LOs, simplified AD Bank approvals, automatic closure for non-filing of AAC for 3 years, and a formal appeal mechanism. As of March 2026, these draft regulations have not been notified — FEMA 22(R)/2016 remains in force.
Branch, Liaison & Project Office — Explained
Under FEMA 22(R)/2016 and Section 2(42) of the Companies Act 2013, a foreign company can establish three types of offices in India:
| Type | Purpose | Can Earn Revenue? | Tenure |
|---|---|---|---|
| Liaison Office (LO) | Communication, market research, liaison between parent and Indian parties. No commercial activity. | ✗ No | 3 years (extendable by 2 years; further by RBI) |
| Branch Office (BO) | Carry on business activities as permitted under Schedule I of FEMA 22(R)/2016. Can earn revenue. | ✓ Yes | No fixed tenure (continues till closure) |
| Project Office (PO) | Execute a specific project awarded by an Indian company. Limited to the project duration. | ✓ Yes (project-specific) | Project duration (closes on completion) |
Key distinction from Indian subsidiary: BO/LO/PO are not separate legal entities — they are extensions of the foreign parent company. The parent is directly liable for all obligations. In contrast, an Indian subsidiary (Pvt Ltd) is a separate legal entity with limited liability.
Why Establish a Foreign Office in India?
Market Entry Without Incorporation
Test the Indian market without forming a separate company.
Execute Specific Projects
PO for infra, engineering, or consultancy contracts awarded by Indian entities.
Market Research & Liaison
LO for communication, market research, and building relationships before committing.
Revenue-Generating Operations
BO for export/import, consulting, R&D, IT services, and permitted activities.
Faster Than Subsidiary
BO/LO setup in 4–6 weeks via AD Bank. No SPICe+ incorporation needed.
Convertible
LO/BO can later be converted to a WOS (wholly owned subsidiary) or JV.
Benefits by Office Type
| Benefit | LO | BO | PO |
|---|---|---|---|
| Market presence without incorporation | ✓ | ✓ | ✓ |
| Earn revenue in India | ✗ | ✓ | ✓ (project) |
| Hire Indian employees | ✓ | ✓ | ✓ |
| Open Indian bank accounts | ✓ | ✓ | ✓ |
| Purchase property (operational use) | ✗ | ✓ | ✓ |
| Repatriate profits to parent | N/A | ✓ (after tax) | ✓ (after tax) |
| Convert to subsidiary/JV later | ✓ | ✓ | ✓ |
| No min paid-up capital requirement | ✓ | ✓ | ✓ |
Is This Right For You?
Market Explorers (LO)
Foreign companies exploring India market before committing to subsidiary.
IT & Consulting Firms (BO)
Offering services from India, R&D, or technical support operations.
Infrastructure Contractors (PO)
Executing construction, engineering, or turnkey projects awarded by Indian entities.
Export/Import Companies (BO)
Promoting exports/imports of parent company's products.
R&D Centres (BO)
Research and development collaborations with Indian entities.
Financial Services (BO)
Banks, insurance companies (with sectoral regulator approval).
Eligibility Criteria
| Criteria | Liaison Office | Branch Office | Project Office |
|---|---|---|---|
| Net Worth | ≥US$50,000 (or equivalent) | ≥US$100,000 (or equivalent) | No minimum specified |
| Profit Track Record | Profit in 3 of preceding 5 FYs | Profit in 3 of preceding 5 FYs | No requirement |
| Approval Route | AD Bank (auto) or RBI (govt route) | AD Bank (auto) or RBI (govt route) | AD Bank (auto) for funded projects |
| Restricted Countries | Entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau — require prior RBI/Govt approval + security clearance | ||
| Prohibited Activities | Commercial/revenue activity | Manufacturing (generally), retail | Activities outside project scope |
Note: RBI Draft 2025 Regulations propose removing net worth and profit track record requirements. However, until officially notified, the above criteria under FEMA 22(R)/2016 remain applicable.
Documents You'll Need
Certificate of Incorp
Apostilled/notarised
Board Resolution
Authorising India office
Audited Financials
Last 5 years (for BO/LO)
Net Worth Certificate
From CPA/auditor
Company Profile
Activities, structure, history
Letter of Comfort
If subsidiary applying (from parent)
Authorised Rep
PAN, Aadhaar, DSC of India rep
Rent Agreement
For India registered office
NOC from Landlord
For office premises
Utility Bill
< 2 months old
Project Contract
Copy of awarded contract
Funding Proof
Inward remittance / bilateral aid / Indian entity funding
Project Details
Duration, value, scope
Prepared by TaxClue
Form FNC application, activity plan, supporting annexures, Letter of Comfort (if needed), MCA registration documents (FC-1), and all compliance filings.
Step-by-Step Process
Determine Office Type
TaxClue assesses your business objectives and recommends LO, BO, or PO based on permitted activities, revenue requirements, and India strategy.
Prepare Form FNC Application
Complete application with all supporting documents — parent company financials, net worth certificate, Board Resolution, activity plan, and India office details.
Submit to AD Category-I Bank
Form FNC submitted to the designated Authorised Dealer Bank. AD Bank processes under automatic route or escalates to RBI for government route.
RBI Approval & UIN Allotment
AD Bank grants approval (or RBI, for restricted categories). Unique Identification Number (UIN) allotted by RBI. Office must open within 6 months of approval.
Register with MCA (Form FC-1)
Within 30 days of establishment, register with the Registrar of Companies under Section 380 of Companies Act 2013 using Form FC-1.
Obtain PAN & TAN
Apply for PAN (Form 49A) and TAN for the India office. Required for tax filing and TDS compliance.
Open Bank Accounts
Open INR and/or foreign currency bank accounts with the AD Bank for operational and remittance purposes.
Post-Setup Compliance ✅
GST registration (if applicable), annual filings (FC-3, FC-4), Annual Activity Certificate (AAC), income tax return, and RBI reporting.
CRITICAL — 6-Month Opening Deadline
Office must be opened within 6 months of RBI/AD Bank approval. If not opened, approval is automatically cancelled. AD Bank may grant a further 6-month extension for reasons beyond control.
Turnaround Time
| Step | Timeline |
|---|---|
| Document preparation & Form FNC | 5–10 days |
| AD Bank processing (automatic route) | 2–4 weeks |
| RBI processing (government route) | 4–8 weeks |
| MCA registration (FC-1) | 7–10 days |
| PAN + TAN + bank account | 7–14 days |
| Total (automatic route) | 4–6 weeks |
| Total (government route) | 8–12 weeks |
Government Fees & Charges
| Component | Amount |
|---|---|
| Form FNC application (AD Bank) | As per AD Bank fee schedule |
| MCA registration (FC-1) | ₹6,000 (prescribed fee) |
| PAN application | ₹131 (Form 49A) |
| TAN application | ₹65 |
| DSC (for authorised representative) | ₹1,500–₹2,500 |
| Annual filing (FC-3 + FC-4) | ₹6,000 per filing (MCA fee schedule) |
| Annual Activity Certificate (AAC) | CA certification fees (varies) |
Tax Implications — BO / LO / PO
Tax treatment differs significantly based on office type. Foreign companies are taxed under the Income Tax Act 1961 at rates higher than domestic companies, and Section 115BAA (22% concessional rate) is NOT available to foreign companies.
| Tax Aspect | Liaison Office | Branch Office | Project Office |
|---|---|---|---|
| Basic Tax Rate | Generally not taxable (no income accruing in India) | 35% on India-source income | 35% on project income |
| Surcharge | — | 2% (income ₹1Cr–₹10Cr) / 5% (>₹10Cr) | Same as BO |
| Health & Edu Cess | — | 4% on tax + surcharge | Same as BO |
| Effective Rate | — | ~38.22% to ~41.60% | Same as BO |
| MAT (Section 115JB) | — | 15% of book profits (if normal tax < MAT) | Same as BO |
| Section 115BAA | NOT available — only for domestic companies | ||
| ITR Form | ITR-6 (if filing required) | ITR-6 | ITR-6 |
| TDS Obligations | If paying Indian residents | Yes — on salaries, rent, contractors, etc. | Same as BO |
| Transfer Pricing | Generally N/A | Yes — Section 92 (international transactions) | Yes — if arm's length issues |
| DTAA Benefits | ✓ (may avoid PE) | ✓ (PE established — DTAA rate applies) | ✓ (project PE provisions apply) |
| GST | Generally exempt (no revenue) | Required (if turnover exceeds threshold) | Required (for project services) |
| Withholding on Remittance | Generally nil | After filing Form 15CB/15CA, CA certification, tax clearance | Same as BO |
DTAA — Critical for Tax Optimisation
India has Double Taxation Avoidance Agreements (DTAAs) with 90+ countries. A Branch Office generally creates a Permanent Establishment (PE) under the DTAA, making India income taxable. However, DTAA rates may be lower than domestic rates. A Liaison Office may avoid PE status if it strictly limits activities to auxiliary/preparatory functions. TaxClue provides DTAA-specific advisory.
Annual Compliance Requirements
| Compliance | Deadline | Details |
|---|---|---|
| Annual Activity Certificate (AAC) | By 30 September annually | CA-certified certificate confirming activities are within RBI-approved scope |
| FC-3 (Annual Return) | Within 60 days of FY-end of parent company | With RoC under Section 384, Companies Act 2013 |
| FC-4 (Financial Statements) | Within 6 months of FY-end of parent company | Audited financials of parent company with RoC |
| Income Tax Return (ITR-6) | 31 October (if audit applicable) | For BO and PO; LO may file nil return |
| Tax Audit (Section 44AB) | If turnover exceeds threshold | Form 3CB/3CD |
| Form 49C | With ITR | Accounts of non-resident's India business |
| TDS Returns | Quarterly — 26Q, 24Q | If TDS obligations exist |
| GST Returns | Monthly/quarterly | If GST registered |
| Transfer Pricing Report | By 31 October | Form 3CEB (for BO/PO with international transactions) |
| Advance Tax | 15 Jun, 15 Sep, 15 Dec, 15 Mar | Quarterly advance tax for BO/PO |
| Form 15CA/15CB | Before each remittance | For repatriating funds to parent company |
Non-Filing of AAC for 3 Consecutive Years
Under proposed RBI Draft 2025 Regulations, non-filing of Annual Activity Certificate for 3 consecutive years triggers automatic closure notice from AD Bank. Failure to respond within 30 days results in closure. Even under current regulations, non-compliance attracts RBI scrutiny and potential FEMA penalties.
Penalties for Non-Compliance
| Default | Penalty |
|---|---|
| Non-filing of FC-1 (MCA registration) | ₹1,000/day of delay; prosecution of officers |
| Non-filing of FC-3 / FC-4 | ₹1,000/day of delay (under Companies Act) |
| Non-filing of AAC | RBI scrutiny; potential FEMA compounding; auto-closure risk (under draft 2025 regs) |
| Activities beyond approved scope | FEMA contravention — compounding penalty up to 3x the amount involved |
| Operating without RBI approval | FEMA prosecution; penalty up to 3x amount or ₹2 lakh (whichever is more) + ₹5,000/day for continuing contravention |
| Non-filing of Income Tax Return | Section 234F: ₹5,000 (or ₹1,000 if income < ₹5 lakh); interest under 234A/B/C |
| Non-compliance with TDS | Interest (1%–1.5% per month) + penalty under Section 271C |
| Remittance without Form 15CA/15CB | Prosecution; penalty under Section 271-I (₹1 lakh) |
Why Choose TaxClue?
FEMA/RBI Specialists
Deep expertise in FEMA 22(R)/2016 and RBI Master Directions for BO/LO/PO.
Form FNC to Closure
End-to-end: application, approval, MCA registration, annual compliance, and closure.
Income Tax & DTAA Advisory
PE assessment, tax rate optimisation, TDS, transfer pricing, Form 49C, 15CA/15CB.
Annual Activity Certificate
CA-certified AAC prepared and submitted to AD Bank on time.
AD Bank Coordination
Liaison with Authorised Dealer Bank for all approvals and reporting.
100% Remote
Foreign parent need not visit India. Everything handled online.
TaxClue's Process
Consultation & Office Type Selection
Assess business objectives. Recommend LO vs BO vs PO vs Subsidiary. DTAA and tax impact analysis.
Document Preparation
Collect parent company financials, Board Resolution, net worth certificate, India office details.
Form FNC + AD Bank Filing
Prepare and submit Form FNC to designated AD Bank. Track approval.
MCA Registration (FC-1)
Register with RoC within 30 days of establishment.
PAN, TAN, Bank Account, GST
Complete all tax and banking setup.
Ongoing Compliance ✅
AAC, FC-3, FC-4, ITR-6, Form 49C, TDS, GST, transfer pricing — all managed.
What Our Clients Say
Foreign Offices Across Industries
Comparison of Entry Routes
| Parameter | Liaison Office | Branch Office | Project Office | Indian Subsidiary |
|---|---|---|---|---|
| Legal Entity | Extension of parent | Extension of parent | Extension of parent | Separate (Indian Pvt Ltd) |
| Revenue in India | ✗ No | ✓ Yes | ✓ Project | ✓ Yes |
| Parent Liability | Unlimited | Unlimited | Unlimited | Limited to investment |
| Tax Rate | Nil (generally) | ~38–42% | ~38–42% | ~25% (115BAA) |
| 115BAA Available | — | ✗ No | ✗ No | ✓ Yes |
| Approval | RBI/AD Bank | RBI/AD Bank | AD Bank (auto) | MCA (SPICe+) |
| Tenure | 3+2 years | No limit | Project duration | Perpetual |
| Setup Time | 4–6 weeks | 4–6 weeks | 2–4 weeks | 2–4 weeks |
| Best For | Market research | Services, trading | Specific contracts | Full operations |
Frequently Asked Questions
Amendments (2024–2026)
- 2016FEMA 22(R)/2016 — current regulations governing BO/LO/PO establishment (in force)
- Oct 2025RBI released Draft FEMA (Establishment in India of a Branch or Office) Regulations, 2025 — removes net worth thresholds, no LO tenure limit, automatic closure for non-filing AAC 3 years
- Jul 2024Budget 2024: Foreign company tax rate reduced to 35% (from 40%). LTCG on unlisted shares → 12.5%
- Feb 2025Budget 2025: No further changes to foreign company tax rate. MAT continues at 15%.
- 2025FDI equity inflows reached US$81.04 billion in FY 2024–25 (18% increase)
- Mar 2026Draft 2025 Regulations not yet notified. FEMA 22(R)/2016 remains in force. Final notification expected FY 2026–27.
Real Clients. Real Results.
German Manufacturer — Liaison Office, Mumbai
Exploring India market before committing. TaxClue set up LO in 4 weeks. After 2 years, converted to WOS with full FEMA transition. LO closure handled seamlessly.
UK IT Company — Branch Office, Bengaluru
Software services BO with full tax compliance. DTAA (India-UK) optimised tax liability. ITR-6, TDS, Form 15CA/15CB for quarterly profit remittances.
Japanese Contractor — Project Office, Delhi
₹500 crore infrastructure contract. PO setup via AD Bank automatic route in 3 weeks. Project-specific tax compliance and closure managed on project completion.
You Might Also Need
Foreign Company in India —
RBI Approved, Tax Optimised, Fully Compliant.
Form FNC, RBI/AD Bank approval, MCA registration, income tax, DTAA advisory, annual compliance, and closure — all handled.