Foreign Company India Entry — Branch, LO, Subsidiary

A foreign company may enter India as a Liaison Office, Branch Office, or Project Office under FEMA Notification No. 22(R)/2016, or incorporate a wholly owned subsidiary as a private limited company under the Companies Act 2013. Liaison and Branch Offices require prior RBI approval via Form FNC, while a subsidiary requires no RBI approval but must comply with Foreign Direct Investment policy under FEMA 20(R)/2017-RB. A Branch Office can repatriate profits after payment of applicable taxes, but a Liaison Office cannot earn income in India. The subsidiary route is most favoured for full commercial operations because it allows 100% FDI under the automatic route in most sectors.

No. A Liaison or Branch Office may only open a bank account after receiving the Reserve Bank of India's approval letter under Regulation 5 of FEMA Notification No. 22(R)/2016, which must then be submitted to an AD Category-I bank along with the Certificate of Incorporation and Memorandum of Association of the foreign company. The AD bank will conduct its own KYC under the RBI Master Direction on KYC (updated 2024) before activating the account. Until the approval is granted, the foreign company cannot conduct any financial transactions in India through that office structure.

Every foreign company with a place of business in India must file Form FC-3 annually with the Registrar of Companies under Section 381 of the Companies Act 2013, containing a balance sheet, profit and loss account, and list of Indian business places. Additionally, Form FC-4 (annual return) must be filed within 60 days of the end of each financial year under Section 384 read with Rule 14 of the Companies (Registration of Foreign Companies) Rules 2014. Failure to file attracts a penalty of Rs 1,000 per day of default under Section 392 of the Companies Act 2013, with a maximum of Rs 5 lakh on the company and Rs 1 lakh on the officer in default.

Yes. Any payment from the Indian subsidiary to its foreign parent for services, royalties, brand fees, or management charges constitutes an international transaction subject to transfer pricing under Section 92 of the Income Tax Act 1961, and must be at arm's length price as per Section 92C. The Indian entity must maintain contemporaneous documentation under Rule 10D of the Income Tax Rules 1962, and if the aggregate value of international transactions exceeds Rs 1 crore, an accountant's report in Form 3CEB must be filed under Sec 92E, IT Act 1961 (≡ §172, IT Act 2025). The Transfer Pricing Officer can make additions if the price deviates from the arm's length standard, with penalties under Section 271AA for documentation failures.

Payments of royalties or fees for technical services by an Indian company to a non-resident foreign parent are subject to withholding tax under Section 195 of the Income Tax Act 1961, typically at 10% plus surcharge and cess under Section 115A, unless a lower rate applies under the relevant Double Taxation Avoidance Agreement. Before remitting, the Indian payer must determine tax treaty applicability, obtain a Tax Residency Certificate from the foreign company under Section 90(4), and file Form 15CA (Part C) along with a CA-certified Form 15CB as required under Rule 37BB of the Income Tax Rules 1962. Failure to withhold makes the Indian company an assessee-in-default under Section 201, liable for interest under Section 201(1A) at 1.5% per month.