Introduction
A Branch Office (BO) enables foreign companies to conduct business operations in India without the need to incorporate a separate Indian entity. It acts as an extension of the foreign parent and can engage in limited commercial activities, unlike a Liaison Office (LO).
The regulatory framework is mainly governed by:
- Foreign Exchange Management Act, 1999 (FEMA)
- 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 issued by the Reserve Bank of India (RBI) (FEMA 22(R)/2016)
- RBI Master Direction No. 10/2015-16
- Companies Act, 2013
This article outlines the legal provisions, permitted activities, conditions for setup, approval process, compliance checklist, and closure procedure for a BO in India.
I. Definition
As per Regulation 2(d) of FEMA 22(R)/2016:
“Branch Office in relation to a company, means any establishment described as such by the company.”
A BO can engage in commercial activities, but is subject to restrictions and sectoral conditions.
II. Permitted Activities
As per Regulation 4(b) of FEMA 22(R)/2026, read with Annex B – Schedule I, a BO may undertake:
| ✅ Permitted Activities |
| • Export/import of goods |
| • Rendering professional or consultancy services |
| • Carrying out research work in which the parent company is engaged |
| • Promoting technical/financial collaborations between Indian companies and parent or overseas group companies |
| • Representing the parent company in India and acting as a buying/selling agent in India |
| • Providing IT services and software development services in India |
| • Technical support for products supplied by the parent/group companies |
| • Representing a foreign airline/shipping company |
III. Conditions for Establishment
| Criteria | Requirement |
| Profit Track Record | Profit-making track record for the immediately preceding 5 years in the home country |
| Net Worth[1] | Minimum USD 500,000 or equivalent |
| Exceptions to Profit Track Record and Net Worth: If a foreign company is not financially sound but is a subsidiary of another company, it can still apply to set up a BO in India by submitting a Letter of Comfort from its parent company. This is allowed only if the parent company meets the required net worth and profitability criteria. | |
[1] Net Worth total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name called.1
IV. Approval Process
| Step | Action |
| 1 | File Form FNC with an AD Category-I Bank |
| 2 | Attach the following documents with Form FNC: Certificate of IncorporationMemorandum of Association Articles of Association Audited balance sheet of the applicant company for the last five years (If the applicant’s home country laws/regulations do not insist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted) Bankers’ Report from the applicant’s banker in the host country/country of registration showing the number of years the applicant has had banking relations with that bank Power of Attorney in favour of the signatory of Form FNC in case the Head of the overseas entity is not signing the Form FNC |
| 3 | The application shall be considered by an Authorised Dealer (AD) Category – I bank as per the guidelines given by the RBI. However, before issuing the approval letter, the AD Category-I bank shall forward a copy of Form FNC along with the details of the approval proposed to be granted to the RBI for allotment of Unique Identification Number (UIN) |
| 4 | After receipt of the UIN, the AD Category-I bank shall issue the approval letter to the non-resident entity for establishing a BO in India. |
| Notes: | |
| 1 | In the following cases, the AD Category-I Bank shall forward the application to the RBI, which shall process the applications in consultation with the Government of India: The applicant is a citizen of or is registered/incorporated in Pakistan. 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 in Jammu and Kashmir, North East region, and Andaman and Nicobar Islands. The principal business of the applicant falls in the four sectors, namely Defence, Telecom, Private Security, and Information and Broadcasting. However, prior approval of the RBI shall not be required in cases where Government approval or license/permission by the concerned Ministry/Regulator has already been granted. The applicant is a Non-Government Organisation (NGO), Non-Profit Organisation, Body/ Agency/ Department of a foreign government. However, if such an entity is engaged, partly or wholly, in any of the activities covered under the Foreign Contribution (Regulation) Act, 2010 (FCRA), they shall obtain a certificate of registration under the said Act and shall not seek permission under FEMA 22(R)/2016. |
| 2 | While prior approval of the RBI/AD Category-I is generally mandatory for foreign entities to establish an LO in India, the following exceptions apply: Banking Companies: A banking company incorporated outside India is not required to obtain approval under FEMA for establishing an office in India, provided it has obtained the necessary approvals under the Banking Regulation Act, 1949. Insurance Companies: An insurance company incorporated outside India is exempt from RBI approval under FEMA if it has obtained the requisite approval from the Insurance Regulatory and Development Authority of India (IRDAI), established under the Insurance Regulatory and Development Authority Act, 1999. Branch Offices in Special Economic Zones (SEZs): A company incorporated outside India does not require RBI approval to set up a branch office in an SEZ for undertaking manufacturing and service activities, subject to the following conditions: a. The branch office operates in a sector where 100% Foreign Direct Investment (FDI) is permitted under the automatic route. b. The branch office complies with Chapter XXII of the Companies Act, 2013 (Companies incorporated outside India). c. The branch office functions on a stand-alone basis. |
| 3 | All applications for establishing a BO in India by foreign banks and insurance companies will be directly received and examined by the Department of Banking Regulation (DBR), Reserve Bank of India, Central Office, and the Insurance Regulatory and Development Authority (IRDA), respectively. No UIN for such representative offices is required from the RBI. |
V. Timeline for opening BO
A BO must be opened within six months from the date of the approval letter. If it is not opened within this period, the approval will be cancelled. In case the delay is due to reasons beyond the control of the foreign company, the AD Category-I bank may grant an extension of up to six more months. Any extension beyond this period will require prior approval from the RBI.
VI. Compliance Requirements
📌 Key Compliance Requirements for a Branch Office in India
| Compliance Area | Obligation |
| Company Law | Register BO with MCA within 30 days (Form FC-1) |
| Company Law | Get annual accounts audited by a Chartered Accountant |
| Company Law | File annual financial statements within 6 months of the financial year-end (Form FC-3) |
| Company Law | File annual return within 60 days of the financial year-end (Form FC-4) |
| FEMA / RBI | File the Foreign Liabilities and Assets (FLA) return by 15 July each year |
| FEMA / RBI | File Annual Activity Certificate (AAC) as on 31 March each year |
| Income Tax | Obtain a Permanent Account Number (PAN) after setup |
| Income Tax | File income tax return annually and comply with other provisions, if applicable |
| Goods and Services Tax | Obtain GSTIN and comply with other provisions, if applicable |
| State/Local Laws | Comply with state/local laws, if applicable |
VII. Additional Guidelines
| Guideline | Details |
| Multiple Los | Allowed with approval from the AD Category-I BankIf the number of offices exceeds 4 (i.e., one in each zone), the applicant needs to justify and obtain prior approval from the RBIMay identify one office as the nodal office to coordinate the activities of all of its offices in India |
| Bank Accounts | The permitted Credits and Debits to the account shall be:Credits funds received from Head Office through normal banking channels for meeting the expenses of the office.any legitimate receivables arising in the process of its business operations.Debits the expenses incurred by the BO in connection with its operations in India.remittance of surplus funds (net of Indian expenses) to the Head Office, subject to payment of applicable taxes and submission of necessary documents to the Authorized Dealer Bank. |
| Prior approval for a change in address | If shifting to another city, prior approval from the AD Category-I bank is required. If shifting to another place in the same city, no approval is required. The new address needs to be intimated to the designated AD Category-I bank. |
| Remittances | BOs are permitted to remit outside India the profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the AD Category-I bank through whom the remittance is affected: a. A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year. b. A Chartered Accountant’s certificate certifying I. The manner of arriving at the remittable profit; II. that the entire remittable profit has been earned by undertaking the permitted activities; and III. that the profit does not include any profit on revaluation of the assets of the branch. |
VIII. Closure Process
To close the BO, the following documents must be submitted through the AD Category-I bank to the RBI:
| Copy of approval for establishing the BO |
| Auditor’s certificate:indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets;confirming that all liabilities in India, including arrears of gratuity and other benefits to employees, etc., of the office have been either fully met or adequately provided for; andconfirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India. |
| Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the office and there is no legal impediment to the remittance. |
| A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the branch office/liaison in India. |
| The designated AD bank has to ensure that the BO had filed the AACs; |
| Any other document(s) specified by the RBI/AD bank while granting approval. |
Conclusion
A Branch Office is a strategic model for foreign companies seeking to explore the Indian market through commercial operations, without forming a subsidiary. However, it comes with strict compliance requirements under FEMA, RBI, and the Companies Act.
📌 Foreign entities are strongly advised to seek professional guidance to navigate sectoral eligibility, approvals, and ongoing compliance.
📩 Need help with Branch Office setup or compliance? Write to us at hello@corpninjaadvisors.com
Disclaimer: This article is for general information purposes only and does not constitute any advice. Please get in touch with your consultant before taking any step(s). We shall not be responsible for any loss incurred due to the step(s) taken basis the information shared in this article.