Not every India entry needs a company. FEMA offers three establishment routes for a foreign company to operate in its own name: the liaison office (representation only), the branch office (a defined list of commercial activities) and the project office (execute one awarded contract). They are quicker to close down than a subsidiary and keep everything on the parent’s books – but come with activity restrictions, a 35%-bracket foreign-company tax rate on branch profits, and RBI oversight. This guide covers eligibility, the Form FNC process, compliance and when each office beats (or loses to) a subsidiary.
The three offices at a glance
| Feature | Liaison Office (LO) | Branch Office (BO) | Project Office (PO) |
|---|---|---|---|
| Purpose | Represent parent, market research, promote exports/imports, liaison – no commercial activity, no income | Carry on permitted business of the parent in India | Execute a specific contract awarded by an Indian entity |
| Parent track record | Profit in 3 preceding years; net worth ≥ USD 50,000 | Profit in 5 preceding years; net worth ≥ USD 100,000 | Secured contract (with specified funding conditions) |
| Approval | AD Category-I bank under RBI’s delegated (general permission) route; RBI/government approval where the applicant is from a sensitive country (see the PN framework), an NGO/trust, or the sector is restricted (defence, telecom, private security, information & broadcasting) | General permission if contract conditions met; else AD/RBI | |
| Funding | Entirely by inward remittance from parent | Parent remittance + own India earnings | Project receipts/remittances |
| Tax | No income = no tax (but see PE risk below) | Foreign-company rate (35% bracket + surcharge/cess) on India profits | Same as BO on project income |
| Life | 3 years initially (extendable; NBFC/construction 2 years) | Open-ended while compliant | Project duration |
What a branch office may (and may not) do
- Permitted: export/import of goods; professional or consultancy services; research in the parent’s field; promoting technical/financial collaborations; representing the parent and acting as buying/selling agent; IT and software development services; technical support for parent products; foreign airline/shipping activity.
- Not permitted: retail trading of any nature; manufacturing or processing in India (directly) – a branch in an SEZ may manufacture within its sector; adding activities beyond the approved list without fresh approval.
The Form FNC process
| Step | Detail |
|---|---|
| 1. Application | Form FNC to an AD Category-I bank with: parent COI + charter (apostilled/consularised), latest audited accounts showing the profit/net-worth test, board resolution, activity description, India office details, banker’s report |
| 2. Scrutiny | AD bank verifies (KYC on parent, sector, country); refers to RBI where the approval route applies; RBI allots a UIN |
| 3. ROC registration | Form FC-1 with the Registrar within 30 days of establishment (foreign company provisions, Chapter XXII Companies Act) + PAN/TAN, bank account, GST if applicable, state registrations |
| 4. Operate | Within approved activities only; expansion/second office needs fresh permission |
Annual compliance
- Annual Activity Certificate (AAC) from a chartered accountant to the AD bank (and authorities as prescribed) – the core FEMA filing for LO/BO/PO;
- ROC foreign-company filings: FC-3 (accounts) and FC-4 (annual return);
- Income tax: return for BO/PO; TDS compliance for all three (an LO deducting salary TDS is normal);
- Books, audit and the parent’s global accounts extracts as required;
- Closure: AD-bank route with closure documents, tax clearances and remittance of surplus – simpler than winding up a company, one of the format’s genuine advantages.
Office vs subsidiary: the honest comparison
Weighing an office against a subsidiary?
We prepare the Form FNC pack, handle AD-bank and ROC registration, and run the AAC and tax compliance annually.
Talk to My Cloud AccountantFrequently asked questions
How long does branch/liaison office approval take?
Through the AD bank on the general-permission route, typically 4–8 weeks including KYC; approval-route cases (sensitive countries/sectors) take materially longer.
Can a liaison office earn any income in India?
No – an LO cannot earn income; all expenses are met by parent remittances. Earning income is the clearest trigger for PE taxation and FEMA breach.
What if the parent does not meet the profit track record?
A parent below the 3-year/5-year profit or net-worth tests may still apply through the approval route with a comfort letter from its parent company meeting the criteria – or simply incorporate a subsidiary, which has no such test.
Can a branch office be converted into a subsidiary?
There is no statutory conversion – the practical path is incorporating a subsidiary, transferring the business, and closing the branch through the AD bank. Plan tax on the transfer.
Based on FEMA (Establishment in India of a Branch Office or Liaison Office or Project Office) Regulations and Companies Act Chapter XXII. Last reviewed: July 2026.