Branch Office in India

A foreign company must obtain prior approval from the Reserve Bank of India under Regulation 5 of the 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 (FEMA BO/LO/PO Regulations 2016). The application is submitted to an AD Category-I bank in Form FNC, and the RBI evaluates the applicant on profitability track record and nature of activities. Sectors such as defence, telecom, private security, and information and broadcasting additionally require prior Government approval before the RBI application is made.

A Branch Office may carry on the same activities in India as the parent company carries on abroad, subject to the negative list in Schedule I of the FEMA BO/LO/PO Regulations 2016. Permitted activities include export/import trading, professional or consultancy services, research, representing the parent, and acting as a buying or selling agent. A Branch Office cannot engage in manufacturing directly, cannot accept deposits, and cannot raise External Commercial Borrowings. All income must be repatriated; only branch operating expenses may be met from local receipts.

Within 30 days of establishing a place of business in India, the foreign company must file Form FC-1 with the Registrar of Companies under Section 380 of the Companies Act 2013 read with Rule 3 of the Companies (Registration of Foreign Companies) Rules 2014. The filing must include certified copies of the charter or memorandum and articles, a list of directors, the Indian principal place of business address, and the name of the authorised representative resident in India. Failure to register within the 30-day window attracts a penalty under Section 392 of the Companies Act 2013.

A registered Branch Office must file Form FC-3 (financial statements of Indian operations) and Form FC-4 (annual return) with the RoC each year under Sections 381 and 384 of the Companies Act 2013. On the FEMA side, an Annual Activity Certificate (AAC) from a Chartered Accountant must be submitted to the AD Category-I bank confirming activities remain within the RBI-approved scope, as required under the FEMA BO/LO/PO Regulations 2016. The Branch Office must also maintain separate books of account for Indian operations under Section 382 of the Companies Act 2013.

A Branch Office of a foreign company is taxed as a non-resident on income that accrues or arises in India or is received in India under Section 5(2) of the Income-tax Act 1961 (applicable for FY 2025-26 income). The standard corporate tax rate for a foreign company branch is 40% plus surcharge and health and education cess. If India has a Double Taxation Avoidance Agreement with the parent company's country, branch profits may be taxable only where a Permanent Establishment exists under Article 5 of the relevant DTAA read with Section 90 of the ITA 1961 (Section 159/160 of ITA 2025 for TY 2026-27 onwards). Transactions between the branch and its head office are subject to transfer pricing provisions under Sections 92 to 92F of the ITA 1961.