A branch office (India regulates it under FEMA) is an extension of a foreign parent company that carries on the same business as its parent, without being a separate legal entity (Treelife). It can earn revenue only from activities the RBI permits, such as export/import of goods and professional or consultancy services (Treelife). The parent must show a profit-making track record over the immediately preceding five financial years and a net worth of not less than USD 100,000 (Treelife). Applications go in Form FNC to an AD Category-I bank (RBI). Branch profits are taxed at the foreign-company corporate rate, cut from 40 to 35 per cent in the Union Budget 2024-25 (PIB), and may be remitted net of applicable Indian taxes (RBI). This guide sets out those rules as they stand for 2026.
What is a branch office in India?
A Branch Office (BO) lets a foreign company operating outside India establish a temporary presence in India that carries on the same business as its parent, without being a separate legal entity (Treelife). It is not an Indian company but an extension of the overseas parent (Treelife).
Liabilities incurred by the branch office extend to the parent company (India Briefing).
A BO can earn revenue in India only from activities specifically permitted by the RBI, and must fund its expenses through remittances from the head office or through RBI-approved local revenue (Treelife). Only foreign companies engaged in manufacturing or trading activities are eligible to set up a BO in India (Treelife).
Office scope and reporting sit under FEMA directions through designated AD Category-I banks (RBI). For domestic-company tax treatment, see the subsidiary section and our wholly owned subsidiary in India guide.
What can a branch office do, and what is off-limits?
A branch office is allowed to conduct the same business as the parent company, including import and export of goods, consultancy and professional services, among others (India Briefing). Permitted BO activities include:
- Export or import of goods (Treelife)
- Professional or consultancy services (excluding legal practice) (Treelife)
- Research work aligned with the parent company (Treelife)
- Technical or financial collaboration promotion between Indian and overseas group companies (Treelife)
- Acting as a buying or selling agent (Treelife)
- Representing the parent company (Treelife)
- Rendering IT and software development services (Treelife)
- Providing technical support for parent or group company products (Treelife)
- Representing a foreign airline or shipping company (Treelife)
A branch office is not permitted to engage in retail trading or processing activities (India Briefing). Manufacturing is permitted if subcontracted to an Indian manufacturer (India Briefing).
There is a general permission for non-resident companies to establish a BO in Special Economic Zones (SEZs) (RBI). That permission covers manufacturing and service activities subject to the conditions in Regulation 3.c. of the Notification (RBI).
A liaison office sits in a different box. An LO is not allowed to conduct any revenue generating business activity in India (India Briefing). Permission to set an LO is initially granted for a period of 3 years (India Briefing).
Who qualifies to open a branch office in India?
The non-resident entity applying for a BO should have a profit-making track record during the immediately preceding five financial years in the home country (Treelife). Net worth must be not less than USD 100,000 or its equivalent (Treelife). India Briefing states the same bar. Net worth should be greater than or equal to US$100,000 or its equivalent (India Briefing). The parent must show a profit track record during the immediately preceding five financial years in the home country (India Briefing).
Net worth is the total of paid-up capital and free reserves, less intangible assets (Treelife). The figure comes from the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name called (Treelife). The non-resident entity should have a financially sound track record as provided in Regulation 4 (a) of the Notification (RBI).
An applicant that is not financially sound and is a subsidiary of another company may submit a Letter of Comfort (LOC) from its parent/group company (RBI). The parent/group company must satisfy the prescribed criteria for net worth and profit (RBI).
Prior approval of the Reserve Bank of India is required in these cases (RBI):
- The applicant is a citizen of or is registered/incorporated in Pakistan (RBI)
- The applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a BO/LO/PO in Jammu and Kashmir, North East region and Andaman and Nicobar Islands (RBI)
- The principal business of the applicant falls in Defence, Telecom, Private Security and Information and Broadcasting (RBI)
- The applicant is a Non-Government Organisation (NGO), a Non-Profit Organisation, or a Body/Agency/Department of a foreign government (RBI)
If the applicant's principal business falls under sectors where 100 percent FDI is allowed, the AD Category-I bank may consider the application under delegated powers (RBI).
How do you set up a branch office in India?
Applications for establishing a BO, LO, PO or any other place of business in India shall be considered by the AD Category-I bank as per RBI guidelines (RBI). India Briefing lists a setup time of 6 - 8 weeks for a branch office (India Briefing).
- Submit Form FNC to a designated AD Category-I bank with the prescribed documents and the LOC, wherever applicable (RBI).
- The AD Category-I bank exercises due diligence on the applicant's background and extant KYC norms, then may grant approval (RBI).
- Before the approval letter, the bank forwards Form FNC and the proposed approval details to RBI CO Cell, New Delhi, for allotment of a Unique Identification Number (UIN) to each BO/LO (RBI).
- After receipt of the UIN, the AD Category-I bank issues the approval letter to the non-resident entity (RBI).
- If the BO is not opened within six months from the date of the approval letter, the approval shall lapse (RBI). For reasons beyond the entity's control, the AD bank may grant a further six months. Any further extension requires prior RBI approval (RBI).
- Obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up the office and report it in the AACs (RBI).
- Register with the Registrar of Companies (ROCs) if such registration is required under the Companies Act, 2013 (RBI).
- Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan shall register with the State Police authorities (RBI).
Foreign companies supplying goods or services in India must obtain GST registration, filed on Form GST REG-01 for regular registration, within 30 days of becoming liable to GST registration (CompaniesNext). For the full process, see our GST registration guide for foreign companies.
If your India plan needs entity design or a clean BO versus subsidiary choice, Talk to an India market specialist.
What is the income tax rate for a branch office in India?
Branch profits are taxed at the corporate rate for foreign companies (PIB). The Union Budget 2024-25 reduced the corporate tax rate on foreign companies from 40 to 35 per cent (PIB).
BOs may remit branch profit outside India net of applicable Indian taxes, on production of the documents in Regulation 4.i.I. of the Notification to the satisfaction of the AD Category-I bank handling the remittance (RBI).
A wholly owned subsidiary, such as a private limited company, is treated as a domestic company under India's Income Tax Law (India Briefing). It is eligible for all exemptions, deductions, and benefits as applicable to any other Indian company (India Briefing). India Briefing states an effective tax rate of 25.17% for domestic companies and 17.16% for new manufacturing companies established after October 1, 2019 (India Briefing).
When does a subsidiary beat a branch office?
Only foreign companies engaged in manufacturing or trading activities are eligible to set up a BO, and BO revenue is limited to RBI-permitted activities (Treelife). A wholly owned subsidiary, by contrast, is treated as a domestic company under India's Income Tax Law (India Briefing).
| Dimension | Branch office | Liaison office | Wholly owned subsidiary |
|---|---|---|---|
| Legal status | Not a separate legal entity (Treelife) | Non-revenue place of business (India Briefing) | Domestic company under Income Tax Law (India Briefing) |
| Permitted scope | RBI-permitted activities only (Treelife); no retail trading or processing; manufacturing if subcontracted; SEZ manufacturing/services with conditions (India Briefing; RBI) | No revenue generating activity (India Briefing) | Treated as a domestic company under India's Income Tax Law (India Briefing) |
| Eligibility | Five-year profits; net worth ≥ USD 100,000; manufacturing or trading parent (Treelife) | Net worth ≥ US$50,000; three-year profits (India Briefing) | Treated as a domestic company under India's Income Tax Law (India Briefing) |
| Tax treatment | Foreign-company rate cut from 40 to 35 per cent (PIB); remittance net of Indian taxes (RBI) | Not allowed to conduct any revenue generating business activity in India (India Briefing) | 25.17% effective for domestic companies; 17.16% for new manufacturing cos. after 1 Oct 2019 (India Briefing) |
For a manufacturer, the branch perimeter is the deciding constraint: direct manufacturing is off-limits outside SEZs, while manufacturing subcontracted to an Indian manufacturer is permitted (India Briefing), and SEZ branches may undertake manufacturing subject to RBI conditions (RBI). Budget planning for either route sits in our India market entry costs guide, and hiring before an entity exists is covered in our employer of record guide.
For the WOS route, use our wholly owned subsidiary in India guide.
What compliance does a branch office face after approval?
The Annual Activity Certificate (AAC) as at the end of March 31 each year needs to be submitted (RBI). The LO/BO submits the AAC to the designated AD Category-I bank and to the Director General of Income Tax (International Taxation), New Delhi (RBI).
A BO/LO/PO, even if present in multiple locations, must transact through the designated AD Category I bank, which remains responsible for due diligence and KYC norms (RBI).
A BO may open a bank account with any AD Category-I Bank in India for its business operations (RBI). Credits should represent Head Office funds received through normal banking channels for office expenses and any legitimate receivables from business operations (RBI). Debits shall be for BO expenses and for remittance of profit or winding-up proceeds (RBI).
If offices exceed 4 (one BO/LO in each zone: East, West, North and South), the applicant must justify additional offices and obtain prior RBI approval (RBI).
Requests to add activities beyond what was first permitted go to the Reserve Bank through the designated AD Category-I bank, with justification (RBI).
BOs/LOs/POs have general permission to carry out permitted or incidental activities from leased property subject to a lease period not exceeding five years (RBI).
Frequently asked questions
Can a branch office manufacture in India?
A branch office is not permitted to engage in retail trading or processing activities (India Briefing). Manufacturing is permitted if subcontracted to an Indian manufacturer (India Briefing). There is a general permission for non-resident companies to establish a BO in Special Economic Zones (SEZs) (RBI). That permission covers manufacturing and service activities subject to the conditions in Regulation 3.c. of the Notification (RBI).
How long does it take to set up a branch office?
India Briefing lists a setup time of 6 - 8 weeks for a branch office (India Briefing). If the BO for which approval has been granted is not opened within six months from the date of the approval letter, the approval shall lapse (RBI).
Can a liaison office be upgraded to a branch office?
Yes. The existing PAN and bank accounts can be continued when an LO is permitted to upgrade into a BO (RBI). An LO is not allowed to conduct any revenue generating business activity in India; a BO is (India Briefing).
Does a branch office need GST registration?
Foreign companies supplying goods or services in India must obtain GST registration, filed on Form GST REG-01 for regular registration, within 30 days of becoming liable to GST registration (CompaniesNext). For step-by-step detail, use our GST registration guide for foreign companies in India.
For entity choice, FEMA filing, or tax routing on an India market entry, Talk to an India market specialist.
Written by Tileo, an operator with a decade of Europe-Asia industrial trade programs.
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