How to open a Branch office of a Foreign Company in India- Step-by-Step process

Comprehensive Guide to Setting Up a Branch Office (BO) in India

A Branch Office (BO) in India serves as an extension of a foreign company, facilitating various business operations without engaging in manufacturing activities. Governed by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), 1999, setting up a Branch Office is a strategic choice for international businesses aiming to expand in India.

1. Eligibility Criteria for Establishing a Branch Office in India

Foreign companies must meet the following eligibility criteria to set up a BO in India:

✅ Profitable Track Record: Minimum of 5 years of profitable operations.

✅ Net Worth: At least USD 100,000 (or its equivalent).

2. Permitted Activities for a Branch Office

Branch Offices in India can conduct the following activities:

✅ Export and import of goods (trading activities).

✅ Provide professional or consultancy services (excluding legal services).

✅ Conduct research aligned with the parent company’s activities.

✅ Promote financial or technical collaboration between the parent company and Indian companies.

✅ Represent the parent company in India as a buying or selling agent.

✅ Offer IT and software development services.

✅ Provide technical support for parent company products.

✅ Function as a representative office for foreign airlines or shipping companies.

Activities Not Permitted for a Branch Office

A Branch Office is prohibited from engaging in the following activities:

❌ Retail trading in India.

❌ Direct or indirect manufacturing (though it may subcontract to Indian companies).

❌ Conducting activities without RBI approval.

❌ Earning income outside of approved services.

3. Step-by-Step Process to Set Up a Branch Office in India

Step 1: Obtain RBI Approval (Form FNC Submission)

1) Submit Form FNC through an Authorized Dealer (AD) Category-I Bank.

2) Required Documents:

i. Form FNC (Application Form)

ii. Certificate of Incorporation and Memorandum of Association (MOA) of the parent company (Notarized & Apostilled)

iii. Board Resolution approving the Branch Office establishment

iv. Audited Financial Statements (last 5 years)

v. Net Worth Certificate

vi. KYC details of directors or authorized signatories

3) Timeline: 4-6 weeks

Step 2: Register with the Ministry of Corporate Affairs (MCA)

Upon RBI approval, file Form FC-1 with the MCA.

Required Documents:

i. RBI Approval Letter

ii. Approved Form FNC

iii. Details of Directors or Authorized Representatives

iv. Digital Signature Certificate (DSC)

v. PAN & TAN registration details

Timeline: 2-3 weeks

Step 3: Open a Bank Account

Open a corporate bank account with the same AD Bank that processed the RBI approval.

Timeline: 1-2 weeks

Step 4: Register with Tax Authorities

i. Apply for PAN (Permanent Account Number)

ii. Obtain TAN (Tax Deduction & Collection Account Number)

iii. Register for GST if applicable

Timeline: 1-2 weeks

Step 5: Obtain Other Mandatory Registrations

i. Shops & Establishment Registration (State-specific)

ii. EPF & ESI Registration (for employee benefits)

iii. Professional Tax Registration (if applicable)

Timeline: Varies by states to states

4. Timeline for Setting Up a Branch Office

Stage	Estimated Time
RBI Approval (Form FNC)	4-6 weeks
MCA Registration (Form FC-1)	2-3 weeks
Bank Account Opening	1-2 weeks
Tax Registrations	1-2 weeks
Total Estimated Time	8-12 weeks

5. Annual Compliance for Branch Offices

A Branch Office must adhere to the following annual compliance requirements:

✅ RBI Filings: Annual Activity Certificate (AAC).

✅ MCA Filings: Form FC-4.

✅ Tax Compliance: Income Tax Return (ITR), GST, and TDS filings.

✅ Financial Audit: Mandatory audit of financial statements.

Estimated Annual Compliance Cost: ₹1,00,000 – ₹3,00,000

6. Governing Laws and Regulations

A Branch Office in India is governed by the following laws and regulations:

Foreign Exchange Management Act (FEMA), 1999

• Section 6(6) of FEMA, 1999 – Governs the establishment of a Branch Office by a foreign company in India.
• Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any Other Place of Business) Regulations, 2016 – Specifies conditions for opening and operating a BO.

Reserve Bank of India (RBI) Guidelines

• The BO must obtain prior approval from RBI through an Authorized Dealer (AD) Category-I Bank.
• Master Direction on Establishment of Branch Office (BO), Liaison Office (LO), and Project Office (PO) in India, 2016 – Provides detailed guidelines on permitted activities, compliance, and closure.

Companies Act, 2013

• A Branch Office must register with the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013.
• It must file Form FC-1 within 30 days of RBI approval.
• Must comply with annual filings, audit requirements, and statutory disclosures.

Income Tax Act, 1961

• A BO is considered a permanent establishment (PE) of the foreign company and is taxed under Indian income tax laws.
• It must pay corporate tax at 40% (plus applicable surcharge & cess) on its income earned in India.

7. Conclusion

Setting up a Branch Office in India is a strategic choice for foreign companies looking to expand their operations. It involves approvals from the RBI, MCA registration, tax compliance, and ongoing regulatory filings. Due to the complexities, hiring a qualified Chartered Accountant (CA) or Company Secretary (CS) is recommended to ensure smooth registration and compliance.

For professional assistance with setting up your Branch Office in India, contact our expert team today!