A Project Office (PO) is a temporary establishment set up by a foreign company in India to execute a specific project in India. The regulatory framework for a PO 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
In this article, we cover key aspects related to setting up a PO in India:
- Definition: What is a Project Office?
- Eligibility Criteria: Conditions under which a foreign company can establish a PO
- Set-up Process: Procedure to set up a PO
- Timeline: Duration for setting up a PO
- Additional Guidelines: Operational and legal requirements
- Compliance Checklist: Ongoing and event-based compliance
- Closure Process: How to close a PO after the project ends?
By understanding these points, foreign companies can decide whether a PO aligns with their project execution strategy in India.
I. What is a Project Office (PO)?
As per Regulation 2(f) of FEMA 22(R)/2016:
“Project Office” means a place of business in India to represent the interests of the foreign company executing a project in India, but excludes a Liaison Office.
A PO is a temporary establishment permitted to execute a specific contract in India awarded to a foreign company by an Indian entity.
II. Eligibility Criteria
There is a general permission to a non-resident company to establish POs in India, provided
- It has secured a contract to execute a project in India from an Indian company,
- the project must have secured all the required regulatory clearances, and
- is funded by any of the following means:
| The project is funded directly by inward remittance from abroad. |
| The project is funded by a bilateral or multilateral International Financing Agency[1] |
| The company/entity in India awarding the contract has been granted term loan by a Public Financial Institution or bank in India for the project. |
[1] ‘a bilateral or multilateral International Financing Agency’ means the World Bank or the International Monetary Fund or similar other body1
III. Process for establishing a PO
| Step | Action |
|---|---|
| 1 | File Form FNC with an AD Category-I Bank (AD Bank) |
| 2 | Attach the following documents with Form FNC: Certificate of IncorporationMemorandum of Association Articles of Association 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 AD bank as per the guidelines given by the RBI. However, before issuing the approval letter, the AD bank shall forward a copy of Form FNC along with the details of the approval proposed to be granted to the RBI. No Unique Identification Number (UIN) is allotted in case of a PO. |
| 4 | The AD Bank shall issue the approval letter to the non-resident entity for establishing a PO in India. |
| Notes: | |
| 1 | In the following cases, the AD Bank shall forward the application to the RBI, which shall process the applications in consultation with the Government of India: a. The applicant is a citizen of or is registered/incorporated in Pakistan. b. 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 PO in Jammu and Kashmir, North East region, and Andaman and Nicobar Islands. c. 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. In the case of proposal for opening a PO relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/entered into an agreement with the Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings. d. 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 Bank is generally mandatory for foreign entities to establish a PO in India, the following exceptions apply: 1. 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. 2. 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. |
IV. Timeline and Validity
| Aspect | Guideline |
| Timeline for opening PO | A PO 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 Bank may grant an extension of up to six more months. Any extension beyond this period will require prior approval from the RBI. |
| Validity | Generally, the PO remains operational till the completion or winding up of the project. |
V. Additional Guidelines for PO
| Aspect | Guidelines |
| Bank Accounts | A person from any country other than Pakistan who has been awarded a contract for a project by a Government authority/ Public Sector Undertaking may open a bank account with an AD BA person from any country other than Pakistan who has been awarded a contract for a project by a Government authority/ Public Sector Undertaking may open a bank account with an AD Bank without any prior approval from the RBI. An entity from Pakistan shall need prior approval from the RBI to open a bank account for its PO in India. The permitted Credits and Debits to the account shall be: A. Credits – foreign currency receipts from the Project Sanctioning Authority -remittances from the parent/group company abroad or bilateral/multilateral international financing agency B. Debits – payment of project-related expenditure |
| Remittance | Intermittent remittances by a PO are permitted pending winding up/completion of the project, subject to submission of the following: – an Auditor’s / Chartered Accountant’s (CA) certificate to the effect that sufficient provisions have been made to meet the liabilities in India, including Income Tax, etc.; and – An undertaking from the PO that the remittance will not, in any way, affect the completion of the project in India and that any shortfall of funds for meeting any liability in India will be met by inward remittance from abroad. |
VI. Compliance Checklist for Project Office (PO)
| Stage | Compliance Item | Timeline |
| Initial | Apply for Permanent Account Number (PAN) | Immediately after approval. |
| Register with the concerned Registrar of Companies (ROC) (Form FC-1) | Within 30 days of establishment. | |
| Obtain other registrations | GST, Shops & Establishment, etc., if applicable. | |
| Ongoing | File Annual Activity Certificate (AAC) with the RBI/AD Bank | As at the end of 31st March, on or before 30th September of that year |
| Audit of accounts | By a practicing CA in India, or a firm or Limited Liability Partnership (LLP) of practicing CAs | |
| File financial statements along with a list of all places of business established by the foreign company in India with RoC (in Form FC-3) | Within 6 months of the close of every financial year | |
| File annual return with ROC (in Form FC-4) | Within 60 days from the close of the financial year | |
| Report changes | For example, an address change, parent company details, or signatories | |
| Income Tax Compliance | File income tax return annually and comply with other provisions, if applicable | |
| GST Compliance | Obtain GSTIN and comply with other provisions, if applicable | |
| Other laws compliance | As applicable |
VII. Closure Process for PO
Request for the closure of the PO and allowing the remittance of winding up proceeds of the PO may be submitted to the AD Bank along with the following documents:
| Step | Document / Action |
| 1️⃣ | Copy of the RBI’s/AD bank’s approval for establishing the PO. |
| 2️⃣ | Auditor’s certificate: i. 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; ii. 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; and iii. confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India. |
| 3️⃣ | Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the PO and there is no legal impediment to the remittance. |
| 4️⃣ | The designated AD bank has to ensure that the PO had filed its AACs. |
| 5️⃣ | Any other document/s specified by the RBI/AD bank while granting approval. |
VIII. Conclusion
A PO offers an efficient structure for foreign companies to execute specific projects in India without forming a separate entity. It is suited for time-bound, contract-based work funded by inward remittances or qualified Indian sources.
Proper compliance with FEMA, RBI Master Directions, and the Companies Act is crucial to avoid penalties and facilitate smooth closure.
✅ Seeking professional advisory support can ensure a smooth setup, operation, and closure of your PO.
📌 Coming Up in the India Entry Series
Stay tuned for more practical guides and sector-specific strategies for entering the Indian market.
At CorpNinja Advisors, we assist foreign companies through the complete lifecycle of Project Offices in India—from obtaining RBI approvals to compliance, filings, and closure.
📩 Contact 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.