Foreign businesses can enter India through a Branch Office, Liaison Office, Project Office, or wholly-owned subsidiary. Each structure offers a different level of operational freedom and legal separation.
Companies sometimes select a representative structure and later find that it cannot invoice customers, hire staff, sign contracts, manufacture, or expand. Reviewing the next two to three years is more useful than choosing only by setup speed.
This guide compares branch office vs subsidiary India options by commercial purpose, duration, Reserve Bank of India and FEMA route, taxation, liability, and ongoing compliance.
Branch Office vs Subsidiary India: At-a-Glance Comparison
| Comparison Factor | Branch Office | Liaison Office | Project Office | Wholly-Owned Subsidiary |
| Best suited for | Restricted commercial activities connected with the foreign parent’s business | Market research, promotion, communication, and relationship building | Executing a specific Indian contract or project | Full-scale, long-term, and scalable Indian operations |
| Legal status | Extension of the foreign parent; not a separate legal entity | Extension of the foreign parent; not a separate legal entity | Extension of the foreign parent for the project | Separate Indian legal entity |
| Can it earn Indian revenue? | Yes, but only from permitted activities | No | Yes, from the authorized project | Yes |
| Permitted activities | Import/export, consultancy, research, IT services, technical support, and other permitted activities | Representation, communication, market research, and promotion | Activities directly connected with the awarded project | Any lawful activity subject to FDI policy, sectoral rules, and licenses |
| Major restrictions | Limited to approved activities; ordinary retail trading and direct manufacturing are generally unsuitable | Cannot trade, invoice, provide paid services, or earn operating income | Cannot conduct unrelated or continuing general business | Subject to sectoral caps, prohibited sectors, licenses, and FDI conditions |
| Approval or establishment route | Form FNC through an Authorized Dealer Category-I bank under RBI guidelines; RBI UIN before approval; direct RBI approval in specified cases | Form FNC through an Authorized Dealer Category-I bank; RBI UIN before approval; direct RBI approval in specified cases | General permission may apply where contract, clearance, and funding conditions are met | MCA incorporation; FDI under the automatic route in most sectors, subject to sectoral conditions and government-route cases |
| Key eligibility | Five-year profit-making record and net worth of at least USD 100,000, or a qualifying Letter of Comfort | Three-year profit-making record and net worth of at least USD 50,000, or a qualifying Letter of Comfort | Indian contract, regulatory clearance, and qualifying funding conditions | No BO or LO financial track-record test; eligibility depends on sector and investor-related restrictions |
| Liability | Foreign parent is directly exposed | Foreign parent is directly exposed | Foreign parent is directly exposed | Normally limited to the parent’s investment and guarantees |
| Tax treatment | Indian income is generally taxed at foreign-company rates | Should ordinarily have no operating income; exceeding the approved scope may create tax exposure | Project income is taxed under the applicable foreign-company and permanent-establishment rules | Taxed as a domestic company; transfer-pricing rules apply to related-party transactions |
| Repatriation | After-tax branch profits may be remitted with audited accounts and CA certification | No operating profit; closure surplus may be remitted after liabilities and compliance are addressed | Project surplus may be remitted after providing for Indian liabilities and completing supporting certification | Dividends, royalties, fees, and exit proceeds may be repatriated subject to tax, FEMA, and transfer-pricing rules |
| Indicative setup time | Approximately 6–10 weeks, depending on bank review and documentation | Approximately 6–10 weeks | Approximately 3–6 weeks where general permission applies | Approximately 2–4 weeks after complete legalized documents are available |
| Ongoing compliance | Annual Activity Certificate, tax returns, audit, ROC filings, and FEMA compliance | Annual Activity Certificate, ROC filings, banking restrictions, and FEMA compliance | Annual Activity Certificate, project accounts, tax, and project-specific compliance | Board and shareholder compliance, audit, tax, ROC filings, FDI reporting, and transfer pricing |
| Duration | Continuing, subject to approval conditions | Generally three years, subject to extension rules | Limited to the tenure of the project | Perpetual until legally closed |
Branch Office in India
A Branch Office gives foreign companies a commercial presence in India.
What Is a Branch Office?
A Branch Office is an extension of its foreign parent, not an independent Indian company. It may earn income from permitted activities, while the parent remains responsible for obligations and liabilities. It lacks the separation offered through a wholly-owned subsidiary.
Who Qualifies to Establish a Branch Office?
Applicants need profits during the preceding five financial years and net worth of at least USD 100,000. A qualifying parent or group company may provide a Letter of Comfort. The RBI Master Direction sets these requirements.
RBI and AD-Bank Approval Process
- Choose a designated Authorized Dealer Category-I bank.
- Submit Form FNC with legalized documents.
- The bank reviews KYC, promoters, funding, activities, and eligibility.
- RBI allots a Unique Identification Number before bank approval.
Direct RBI or government-linked review applies in specified cases.
Permitted and Prohibited Activities
Permitted activities include import-export, consultancy, professional services excluding legal practice, research, IT/software services, technical support, buying/selling agency, and airline/shipping representation. Other activities need permission. Qualifying Special Economic Zone branches follow a separate framework.
Documents, Cost, and Timeline
Key documents include incorporation and constitutional records, audited financials, bank report, board resolution, activities, KYC, ownership information, and Letter of Comfort. Costs vary with legalization, sector review, banking requirements, and registrations.
An engineering consultancy may deliver specialized parent-related services through a Branch Office.
Liaison Office vs Branch Office India
A Liaison Office supports a presence without revenue-generating operations.
What Is a Liaison Office?
A Liaison Office is a representative office of the foreign parent. It cannot conduct commercial or industrial activity, invoice customers, or earn operating income. Expenses must be funded through permitted inward remittances from the overseas parent.
Common Use Cases
Uses include market research, brand promotion, supplier identification, distributor discussions, customer communication, and promoting imports, exports, or collaborations.
Eligibility and Approval
Applicants need a three-year profit-making record and net worth of at least USD 50,000. Form FNC is filed through a designated Authorized Dealer Category-I bank. RBI allots a Unique Identification Number before approval. Validity is three years, subject to exceptions and extension requirements under the RBI Master Direction.
Do not call a Liaison Office tax-free. Contract negotiation, orders, or service delivery beyond its scope may create FEMA and tax exposure. A consumer brand may explore Indian distributors without selling or invoicing.
Project Office India
A Project Office supports contract-specific operations without creating a permanent Indian business presence.
What Is a Project Office?
A Project Office is a temporary Indian establishment created by a foreign company to execute a specific contract. It cannot conduct unrestricted or unrelated business, and its validity generally follows the project’s tenure rather than continuing indefinitely.
When General Permission Applies
General permission may apply when the company has secured an Indian contract, obtained clearances, and met a prescribed funding condition. Funding may come through inward remittance, bilateral or multilateral financing, or qualifying Indian institutional or bank finance.
Typical Use Cases
Typical uses include infrastructure, EPC, power, energy, industrial installation, transport, and large-equipment contracts.
Repatriation and Compliance
The office may need project-specific bank accounts, an Annual Activity Certificate, accounts, and tax compliance. Surplus may be remitted after providing for Indian liabilities; intermittent remittance requires auditor or Chartered Accountant certification.
An overseas EPC contractor executing one Indian infrastructure contract may use this structure.
Wholly-Owned Subsidiary in India
Subsidiaries support long-term operations.
What Is a Wholly-Owned Subsidiary?
A wholly-owned subsidiary is an Indian company incorporated under the Companies Act, 2013. Its overseas parent owns 100% where foreign direct investment (FDI) rules permit. It has a separate legal identity and can contract, invoice, employ staff, and hold assets in its own name.
Why Is It the Usual Long-Term Default?
Limited liability and commercial freedom support hiring, manufacturing, sales, services, and expansion. It suits customers, employees, banks, and investors. The Department for Promotion of Industry and Internal Trade permits up to 100% FDI in most sectors, subject to restrictions.
Incorporation and FDI Route
Review sectoral FDI rules, ownership, and capital. Legalize parent and director documents, complete Ministry of Corporate Affairs incorporation, receive funds through permitted channels, file Foreign Exchange Management Act reports, and obtain required registrations.
Taxation and Repatriation
Subsidiaries are taxed domestically. For Assessment Year 2026–27, Section 115BAA offers eligible companies a 22% rate, plus applicable surcharge and cess, with conditions restricting deductions. Related parties need transfer pricing. Dividends, royalties, service fees, or exit proceeds remain subject to tax and foreign-exchange rules. Other foreign-company income is taxed at 35%.
A foreign SaaS company planning Indian contracts, sales staff, and a permanent development team may prefer this structure. FinGuru India’s Foreign Subsidiary Registration in India service explains the incorporation, documentation, and foreign investment reporting process.
Which Entity Structure Should a Foreign Company Choose in India?
Your choice should reflect what the Indian operation must do now and later.
- Will it invoice customers? No: consider a Liaison Office. Yes: continue.
- Is it limited to one awarded contract? Yes: consider a Project Office.
- Is the activity permitted for a Branch Office? Yes: a Branch Office may suit. No: consider a subsidiary.
- Will you manufacture, retail, add activities, or scale? Yes: a subsidiary is generally better. No: compare Branch Office restrictions with your plan.
- Does the parent want Indian liabilities separated? Yes: prefer a subsidiary. No: a Branch or Project Office may work.
- Is the investment under the automatic route? Check sectoral caps, government approval, beneficial ownership, licences, investor-country restrictions, pricing, and reporting.
Market testing: Liaison Office. One project: Project Office. Restricted commercial work: Branch Office. Long-term growth: wholly-owned subsidiary.
Before making the final decision, review the applicable FEMA compliance requirements for foreign companies, including foreign investment reporting, annual filings, related-party transactions, and repatriation obligations.
