A foreign company can open a liaison office, branch office or project office in India under the FEMA Branch Office, Liaison Office and Project Office Regulations of 2016. The application in Form FNC goes to an AD Category-I bank. RBI prior approval is needed in specified cases, such as applicants from China, Pakistan or Hong Kong and businesses in defence or telecom. Within 30 days of opening, the office registers with the Registrar of Companies in Form FC-1.
- Law
- FEMA BO/LO/PO Regulations 2016
- Applied to
- AD Category-I bank (Form FNC)
- Registrar
- Form FC-1 within 30 days
- Every year
- Annual activity certificate
Liaison, branch and project office compared
| Liaison office | Branch office | Project office | |
|---|---|---|---|
| Purpose | Representation, promotion, communication channel | Specified commercial activities | Executing a specific contract in India |
| Can earn income in India | No | Yes, within permitted activities | Yes, from the project |
| Track record usually required | Profit in previous 3 years; net worth at least USD 50,000 | Profit in previous 5 years; net worth at least USD 100,000 | A secured contract with the required funding |
| Validity | Usually 3 years, extendable | No fixed term | Until the project ends |
| Funding | Inward remittances from the parent | Parent remittances and Indian income | Parent remittances or project receipts |
An applicant that does not meet the track record test but is a subsidiary of a company that does can usually rely on a letter of comfort from its parent. Liaison offices for some sectors, such as non-banking finance and construction and development, have a shorter initial validity.
Choosing between an office and a subsidiary
A liaison office is useful for testing the market: meeting distributors, supporting customers who buy from the parent, and gathering information before committing capital. It is cheap to run and simple to close. But it cannot earn a rupee, and the tax authorities watch closely for liaison offices that in fact negotiate prices, accept orders or manage sales staff. When that happens, the parent may be treated as having a permanent establishment in India, with tax, interest and penalties on the profits attributed to it.
A branch office suits a parent that wants one legal entity worldwide, for example for professional services, research or technical support of its own products. Its drawbacks are that the parent is directly liable for everything the branch does, it is taxed as a foreign company, and its permitted activities are narrow. A project office is the natural choice for foreign contractors on infrastructure, engineering and equipment supply contracts with a defined end.
For most businesses that plan to hire staff and sell locally over the long term, a wholly owned subsidiary is more flexible. We set out the comparison for your activities, and the cost of each route over three years, before you apply.
What each office may and may not do
A liaison office may represent the parent, promote export and import, promote technical or financial collaboration and act as a communication channel. It cannot sign contracts for sale, raise invoices, earn commission or take orders in India. All its expenses are met from inward remittances.
A branch office may export and import goods, render professional or consultancy services, carry out research in the parent's line of business, promote collaborations, represent the parent as buying or selling agent, provide IT and software development services, provide technical support for products supplied by the parent, and act for a foreign airline or shipping company. It cannot manufacture, except in a special economic zone, and cannot carry on retail trading. Profits may be remitted abroad after tax.
A project office exists to execute a contract with an Indian company, funded by inward remittance, a bilateral or multilateral international agency, an Indian bank or financial institution, or the Indian client. It closes when the project ends.
When the AD bank route is enough and when RBI must approve
Most applications are decided by the AD Category-I bank. Prior RBI approval, taken in consultation with the Government of India where required, is needed when:
- the applicant is a citizen of, or registered or incorporated in, Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau, and wants to open a liaison, branch or project office (with specific rules for each);
- the principal business falls in defence, telecom, private security or information and broadcasting, subject to the exceptions in the Regulations;
- the applicant is a non-governmental organisation, non-profit organisation or a body or agency of a foreign government.
Approval cases take materially longer, so we plan the India timeline around them and prepare the security and ownership disclosures the government asks for.
How the application works from abroad
The parent submits Form FNC to the AD bank with its certificate of incorporation, constitutional documents and latest audited balance sheets, legalised in its home country, together with a board resolution and a power of attorney for the person signing in India. The bank conducts KYC on the parent and its beneficial owners, and the RBI allots a unique identification number.
Within 30 days of establishing the place of business, the office files Form FC-1 with the Registrar of Companies under section 380 of the Companies Act, giving details of the parent, the principal officer and the authorised representative in India. It then obtains a PAN and opens its bank account. A branch office also deals with GST and tax registration where its activities require them. Signing documents abroad is covered on our power of attorney page.
Ongoing compliance
- Annual activity certificate from a chartered accountant, with audited financial statements, filed with the AD bank (and, for some offices, the tax authorities) each year.
- Companies Act filings for the place of business, including annual accounts of the foreign company and Indian operations.
- Income tax: a branch or project office is taxed as a foreign company on its Indian income; a liaison office files its own statements to show it has earned no income.
- Extension of a liaison office before expiry, or conversion into a subsidiary as activity grows.
Liaison offices that start taking orders or negotiating prices may be treated as a permanent establishment for tax purposes. Keep activities within the permission and document them.
Closing an office and repatriating funds
To close a liaison, branch or project office, the parent applies to the AD bank with an auditor's certificate showing how remaining assets will be repatriated, a tax clearance or no-dues confirmation, confirmation that there are no pending proceedings, and evidence of FC-1 deregistration steps. Unspent funds and sale proceeds are remitted abroad once these are in place. Many companies instead convert into a subsidiary, which is often simpler than running two entities.
Documents you need
The AD bank will usually ask for:
- Form FNC signed by the authorised signatory
- Certificate of incorporation and constitutional documents of the parent, legalised and translated if needed
- Audited balance sheets for the last 3 or 5 years, as applicable
- Board resolution approving the office and naming the person in charge in India
- Power of attorney for the authorised representative in India
- Letter of comfort from the parent group if track record is not met
- KYC of the parent and its beneficial owners
- Proof of the proposed office premises in India
How we handle it for you
Eligibility check
We confirm which office fits your activities and whether RBI approval is required.
Document pack
Board resolution, power of attorney and Form FNC drafted; legalisation instructions sent.
Bank filing
Application lodged with the AD bank and queries handled until approval and UIN.
Registration in India
FC-1, PAN, bank account and any GST or local registrations.
Annual compliance
Activity certificate, accounts and renewals diarised and filed.
Why clients choose ProudLegal
Built for clients abroadVideo calls in your time zone and documents signed where you live.
Advocates who appear in Indian courtsYour case is drafted and argued by enrolled advocates in India.
Written fee quote firstScope and fees confirmed in writing before any work starts.
Updates after every stepScans of every filing and order on WhatsApp and email.
Frequently asked questions
Can a liaison office sign contracts in India?
No. A liaison office may only represent and promote the parent. It cannot sign sales contracts, raise invoices or earn any income in India.
How long is a liaison office approval valid?
Usually three years, extendable on application to the AD bank. Some sectors receive a shorter initial period.
Can a branch office manufacture in India?
Generally no. Manufacturing is permitted only for branch offices set up in special economic zones, subject to conditions.
Do we need RBI approval if our parent is in Hong Kong?
Yes. Applicants registered or incorporated in Hong Kong or Macau are in the list requiring prior RBI approval, in consultation with the government.
Is a branch office taxed differently from a subsidiary?
Yes. A branch is taxed as a foreign company on its Indian income, generally at a higher rate than an Indian company, and branch profits can be remitted after tax.
What is Form FC-1?
It is the form by which a foreign company registers its place of business with the Registrar of Companies under section 380 of the Companies Act, within 30 days of establishment.
Can a liaison office be converted into a subsidiary?
Yes. A subsidiary is incorporated, the liaison office is closed through the AD bank and its assets are transferred or repatriated.
Who must be in India to run the office?
A person in charge, usually resident in India, who is authorised by power of attorney to deal with banks, the Registrar and authorities.