Before Anything Else: Three Questions

1. Do you actually need to trade in the parent’s name?

This is the question that decides everything, because it is the only real reason to choose a branch over a subsidiary.

Some foreign companies must contract in their own corporate name — a specific licensing requirement, a global framework agreement that names the parent, a regulated activity that cannot be sub-delegated to a subsidiary, a banking or insurance operation with its own regulatory regime. For these, a branch is appropriate.

But if the reason is simply “we want a presence in India”, that is not a reason to accept unlimited liability and a 40% tax rate. A wholly-owned subsidiary gives you a presence, limited liability, and the 25.17% rate. The branch’s disadvantages are real and permanent; the reason to accept them must be equally real.

2. Does your parent meet the eligibility bar?

The RBI applies criteria that are stricter than for a Liaison Office, and many applicants fail them:

• A profit-making track record during the immediately preceding five financial years in the home country
• Net worth of not less than USD 100,000 or its equivalent, certified by the parent’s statutory auditor

Note the contrast with a Liaison Office — five years of profit versus three, and USD 100,000 net worth versus USD 50,000. A parent that qualifies for an LO may not qualify for a branch. Where the applicant does not meet the criteria but is a subsidiary of a company that does, that parent’s Letter of Comfort with its own qualifying financials may be submitted.

3. Which route does your application take?

Most applications go through the RBI route — the AD Category-I bank processes and approves under delegated authority. The Government route, requiring prior clearance in consultation with the relevant ministry, applies where:

• The applicant is from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau, or
• The proposed office is in Jammu and Kashmir, Ladakh, or the North East region, or
• The principal business falls within Defence, Telecom, Private Security, or Information and Broadcasting

Government-route applications add several months. We determine the route in the first conversation.

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What a Branch Office Can and Cannot Do

The permitted scope is defined by the RBI regulations, and it is a specific list — broader than a Liaison Office, but narrower than a full commercial company, with one defining prohibition.

Permitted activities

• Export and import of goods — trading, subject to conditions
• Rendering professional or consultancy services
• Carrying out research work in areas in which the parent is engaged
• Promoting technical or financial collaborations between Indian companies and the parent or overseas group
• Representing the parent and acting as its buying or selling agent in India
• Rendering services in information technology and development of software in India
• Rendering technical support for products supplied by the parent or group
• Operating as a foreign airline or shipping company

The defining prohibition — no manufacturing

A Branch Office cannot carry out manufacturing or processing activities in India, directly or indirectly. It may sub-contract these to an Indian manufacturer, but it cannot manufacture itself. This is the single most important limitation and the one that pushes many foreign companies toward a subsidiary — if your India plan involves making anything, a branch cannot do it.

Also not permitted

• Retail trading of any form
• Manufacturing or processing, directly or indirectly, as above
• Any activity not expressly permitted by the RBI approval
• Acquiring immovable property other than by lease for its own use — leases up to five years are permitted; beyond that requires prior RBI approval

On income and remittance

A Branch Office may remit its profits outside India, net of applicable Indian taxes, on production of the required documentation to the AD bank. This is a genuine distinction from a Liaison Office, which has no income to remit. The branch is funded by inward remittance from the parent to the extent it needs working capital, and generates its own revenue from permitted activities.

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The Tax Position — The 40% Question

This is where the Branch Office structure costs money, and the arithmetic should be run before the structure is chosen.

A Branch Office is a permanent establishment by definition — it exists to carry on business and earn income in India. Its Indian-source income is therefore taxable in India at the foreign company rate, currently around 35% plus surcharge and cess, giving an effective rate in the region of 40% depending on income level.

Compare that with an Indian subsidiary, which can opt for the concessional rate under Section 115BAA at 22%, roughly 25.17% effective. On the same profit, a branch pays materially more tax than a subsidiary — and this is a permanent feature of the structure, not a one-off cost.

The other tax consequences:

• Annual income tax return reporting the branch’s Indian income, as an audit case
• Transfer pricing — Form 3CEB on all dealings between the branch and the parent or its affiliates. Because a branch and its head office are the same legal person, the attribution of profit between them is done on an arm’s-length basis and is a recurring point of scrutiny
• TDS on the branch’s payments, and TDS deducted by Indian customers on payments to the branch
• No further tax on profit remittance — unlike a subsidiary’s dividend, a branch’s after-tax profit can generally be remitted without an additional dividend-style withholding, which is one point in the branch’s favour and partially offsets the higher headline rate

The honest comparison is between a branch at ~40% with clean remittance, and a subsidiary at ~25.17% with dividend withholding of 20% (often reduced by treaty) on distributed profit. For a business that reinvests most of its profit in India, the subsidiary wins clearly. For a business that repatriates everything and values contracting in the parent’s name, the gap narrows. We run this calculation on your actual numbers.

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Is a Branch Office Actually Right for You?

Here is the honest comparison.

Choose a Branch Office where an established foreign business genuinely needs to trade, consult, provide technical services or act as an agent in its own corporate name across multiple engagements — and where it does not need to manufacture, does not need limited liability, and accepts the higher tax rate for the benefit of operating as the parent.

Choose a Wholly-Owned Subsidiary instead in most other cases. It gives limited liability, the 25.17% tax rate, the ability to manufacture and to do retail subject to FDI policy, and a vehicle that can be sold or listed. For a foreign company treating India as a serious market, this is the default.

Choose a Project Office instead if you have won a single time-bound contract and have no plans beyond it — it is faster to establish and purpose-built for one project.

Choose a Liaison Office instead if you have no revenue in India yet and only want to research the market and build relationships.

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Documents Required

From the parent company — all apostilled or consularised

• Certificate of Incorporation, attested by the Indian Embassy or a Notary Public in the country of registration
• Memorandum and Articles of Association, or equivalent constitutional documents, in English
• Audited financial statements for the last five financial years, establishing the profit track record
• Net worth certificate from the parent’s statutory auditor, certifying net worth of not less than USD 100,000
• Board resolution approving the establishment of the Branch Office and appointing the Authorised Representative
• Power of Attorney in favour of the Authorised Representative in India
• Letter of Comfort from the group parent with its financials, where the applicant does not itself meet the eligibility criteria
• Banker’s report from the parent’s banker in the home country
• Details of the proposed activities, mapped to the RBI’s permitted list

Application forms

From the Authorised Representative

• Passport and address proof, apostilled where a foreign national
• Photographs
• Where an Indian national: PAN, Aadhaar, address proof

For the office premises

• Lease deed or ownership documentation
• No Objection Certificate from the property owner
• Utility bill not older than two months

Note that a Branch Office cannot acquire immovable property other than by lease for its own use; leases beyond five years require prior RBI approval.

The apostille bottleneck

This is the single largest cause of delay and is consistently underestimated. If the parent’s country is a signatory to the Hague Apostille Convention, documents need notarisation followed by an apostille — budget two to four weeks. If not a signatory, documents must be consularised by the Indian Embassy, which takes longer. Note that the five-year financial requirement means more documents to apostille than for a Liaison Office. Documents not in English need certified translations; documents notarised but not apostilled are rejected. We provide the exact list in the exact required format before you begin.

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The Process, Step by Step

Step 1 — Eligibility, route and structure assessment (3–5 days) Verification of the five-year profit track record and USD 100,000 net worth, mapping of the intended activities to the RBI’s permitted list, determination of the RBI or Government route, and — importantly — an honest check on whether a branch is genuinely right or whether a subsidiary serves better. You receive a written note suitable for your board.

Step 2 — Document collection and apostille coordination (3–6 weeks — the variable) Jurisdiction-specific document list, with format review before you apostille. Five years of financials makes this step heavier than for an LO.

Step 3 — Form FNC filing with the AD bank (1 week) Submitted through the designated Authorised Dealer Category-I bank, which conducts KYC on the parent and forwards to the RBI.

Step 4 — Approval (6–10 weeks on the RBI route; 3–6 months on the Government route) The AD bank issues the approval letter with a Unique Identification Number (UIN) allotted by the RBI. Branch permissions do not carry the fixed validity period that a Liaison Office does — a branch operates until it is closed.

Step 5 — ROC registration in Form FC-1 (within 30 days of establishment) Registration as a foreign company under Section 380 of the Companies Act, 2013, with the apostilled parent documents and the RBI approval.

Step 6 — PAN, TAN and tax registrations (2–3 weeks) Essential, because the branch has taxable income and active TDS obligations from the outset.

Step 7 — Bank account (2–4 weeks) The designated account with the AD bank. The branch receives its own revenue and inward remittance from the parent for working capital.

Step 8 — Other registrations as applicable GST registration, generally required as the branch renders taxable supply; professional tax; EPFO and ESIC once employee thresholds are met; Import Export Code where the branch trades goods.

Realistic total: 8 to 12 weeks on the RBI route with documents apostilled. 4 to 7 months on the Government route. From a standing start with apostille pending, budget three to four months.

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Ongoing Compliance

A Branch Office has real income and full permanent-establishment tax exposure, so its compliance is the heaviest of the foreign-office structures and runs for as long as the branch operates.

Annual, permanently

Ongoing obligations

• Prior RBI/AD bank approval for any change in activities, additional offices, or the Authorised Representative
• Profit remittance on production of the AAC, audited accounts, and a Chartered Accountant’s certificate confirming taxes are provided for
• Transfer pricing documentation on head-office allocations and inter-branch dealings — a recurring scrutiny area, since branch and parent are the same legal person
• Employee compliance — EPFO, ESIC, professional tax and payroll TDS as an Indian employer
• Additional offices — a branch may open additional offices with approval; where more than one exists, activity reporting is coordinated

On additional branches

A foreign company may establish more than one Branch Office with RBI approval. Applications for additional branches must justify the need, and the activities of all offices are reported together. Setting up in multiple states brings state-specific registrations — professional tax, shops and establishment — for each.

This is what we do. Setup is a matter of weeks to months. Compliance runs for the life of the branch — see our annual compliance services.

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Converting or Closing a Branch Office

Converting to a subsidiary

Foreign companies frequently start with a branch and later decide a subsidiary serves better — usually because they want to manufacture, want limited liability, want the lower tax rate, or want to bring in investment or eventually sell the India business. None of these is available to a branch.

There is no mechanism to “convert” a branch into a company. The process is:

1. Incorporate a fresh wholly-owned subsidiary
2. Transfer the business, employees and contracts to the new entity, with the tax consequences of the transfer assessed — this can be a taxable event and needs structuring
3. Novate leases and vendor agreements
4. Close the Branch Office and repatriate any surplus
5. Settle the branch’s final tax position before closure

The transfer of an ongoing business from a branch to a subsidiary has real tax implications that a straightforward incorporation does not — plan it with tax input, six months ahead. See our company conversion services.

Closure

Closure requires an application to the AD bank with:

• The RBI approval under which the branch was established
• Auditor’s certificate confirming the manner of asset disposal, that all Indian liabilities are discharged or provided for, and the computation of the remittable surplus after Indian tax
• Income tax clearance — all returns filed, all taxes including on attributed profit paid
• Confirmation that no legal proceedings are pending in India
• ROC filings recording the closure
• The AD bank then permits repatriation of the remaining balance

Closure typically takes two to four months, and — as with a Project Office — it cannot complete while the tax position is unsettled or AAC filings are outstanding.

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Six Mistakes We See Repeatedly

1. Choosing a branch for “presence” rather than a genuine need to trade in the parent’s name. Unlimited liability and a 40% tax rate are a high price for something a subsidiary provides better.
2. Discovering the manufacturing prohibition after setup. A branch cannot manufacture or process, directly or indirectly. If the India plan involves making anything, the structure is wrong from the start.
3. Assuming the parent qualifies without checking. Five years of profit and USD 100,000 net worth, certified by the statutory auditor — a higher bar than a Liaison Office, and recently profitable or thinly capitalised parents fail it.
4. Missing the 30-day Form FC-1 deadline. ROC registration under Section 380 is separate from the RBI approval and is routinely overlooked.
5. Underestimating transfer pricing on head-office allocations. Because branch and parent are one legal person, the profit attribution between them is scrutinised, and management charges or cost allocations from head office need arm’s-length support.
6. Not planning the transfer to a subsidiary. When the branch’s limits bite — manufacturing, liability, tax — the move to a subsidiary is a taxable business transfer, not a simple incorporation, and needs structuring in advance.

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Why Delhi Legal Company

We tell you when a subsidiary is the better structure. A large share of enquiries asking for a Branch Office should incorporate a wholly-owned subsidiary — because the client wants a presence, not specifically to trade in the parent’s name, and has not weighed unlimited liability and a 40% tax rate against the alternative. That advice costs us nothing to give and saves the client a great deal.

We map your activities to the permitted list before filing. The RBI approves a branch for defined activities. Applying for activities outside the list, or discovering the manufacturing prohibition after approval, wastes months. We check the fit first.

FEMA, corporate and tax under one roof. The common failure is the gap between whoever filed Form FNC, a CA doing the AAC, and nobody owning the FC-1 deadline or the transfer-pricing position. We do.

We plan the transition to a subsidiary before you need it. When the branch’s limits bite, the move is a taxable business transfer. Building it into the plan is cheaper than improvising it.

Delhi-based, working across time zones. Connaught Place, central New Delhi, serving parent companies in the US, UK, EU, Japan, Singapore and the Gulf.

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Related Services

• Wholly-Owned Subsidiary for Foreign Companies — the better structure in most cases: limited liability, 25.17% tax, and the ability to manufacture
• Liaison (Representative) Office in India — market entry with no Indian revenue
• Project Office in India — executing a single time-bound contract
• Joint Venture (JV) Companies — where an Indian partner is needed
• Indian Private Limited Company with Foreign Shareholding — FDI routes, share pricing and FEMA reporting
• Private Limited Company Registration — the underlying incorporation process
• Annual ROC Compliance Services — FC-3, FC-4, AAC and tax filings
• Company Conversion Services — transitioning from a Branch Office to a subsidiary
• Registered Office Address in Delhi — Connaught Place address with NOC and utility documentation
• GST Registration — generally required, as a Branch Office renders taxable supply

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Start With a Conversation, Not a Quote

Tell us your sector, your parent’s jurisdiction and financials, what you intend to do in India, and — the deciding question — whether you genuinely need to trade in the parent’s own name. In thirty minutes we will tell you whether a Branch Office is right or whether a subsidiary serves you better, whether your parent meets the eligibility bar, whether you fall on the RBI or Government route, and what your realistic timeline looks like.

No charge, and no obligation to proceed.

[Book a Free Consultation] [WhatsApp Us] [Call +91 95993 32456]

4th Floor, E Block, Innov8 Workspaces, Harsha Bhawan, 13/29, Connaught Place, New Delhi – 110001 info@delhilegalcompany.com

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Frequently Asked Questions

1. How long does it take to set up a Branch Office in India? 

8 to 12 weeks on the RBI route where parent documents are already apostilled. On the Government route — applicable to certain jurisdictions, sectors and locations — 4 to 7 months. From a standing start with the apostille process ahead of you, budget three to four months. The five-year financial requirement means more documents to apostille than for a Liaison Office, and the apostille is the single largest variable.

2. What is the difference between a Branch Office and a Liaison Office? 

A Liaison Office cannot earn any income and is limited to market liaison and coordination. A Branch Office can trade, earn income, and undertake a defined list of commercial activities in the parent’s name. The eligibility bar is higher for a branch — five years of profit and USD 100,000 net worth, versus three years and USD 50,000 for an LO — and a branch’s Indian income is taxable at around 40%.

3. What is the difference between a Branch Office and a wholly-owned subsidiary? 

A branch is not a separate legal entity — it is the parent operating in India, so the parent carries unlimited liability and the branch’s income is taxed at the foreign company rate of around 40%. A wholly-owned subsidiary is a separate Indian company with limited liability, taxed at about 25.17%, able to manufacture and to be sold or listed. The branch’s only real advantage is trading in the parent’s own name; for most purposes the subsidiary is better.

4. Can a Branch Office earn income in India? 

Yes. Unlike a Liaison Office, a Branch Office carries on commercial activity and earns income from permitted activities — export-import trading, professional and consultancy services, IT and software development, technical support, research, and acting as the parent’s agent. It may remit its profits abroad net of Indian taxes. It cannot, however, manufacture or carry out retail trading.

5. Can a Branch Office manufacture in India? 

No. This is the defining prohibition. A Branch Office cannot carry out manufacturing or processing activities, directly or indirectly. It may sub-contract manufacturing to an Indian company, but it cannot manufacture itself. If your India plan involves making anything, you need a wholly-owned subsidiary, which can manufacture subject to the FDI policy.

6. What are the eligibility criteria for a Branch Office? 

A profit-making track record during the immediately preceding five financial years in the home country, and net worth of not less than USD 100,000 or equivalent, certified by the parent’s statutory auditor. This is stricter than the three-year, USD 50,000 requirement for a Liaison Office. Where the applicant does not meet the criteria but is a subsidiary of a company that does, that parent’s Letter of Comfort with qualifying financials may be submitted.

7. What is the tax rate for a Branch Office? 

A Branch Office is a permanent establishment, and its Indian-source income is taxed at the foreign company rate — around 35% plus surcharge and cess, giving an effective rate near 40% depending on income. This compares with about 25.17% for an Indian subsidiary under Section 115BAA. The gap is a permanent feature of the structure and the main financial reason to prefer a subsidiary, partially offset by the branch’s ability to remit after-tax profit without an additional dividend-style withholding.

8. What activities is a Branch Office permitted to carry out? 

Export and import of goods; rendering professional or consultancy services; carrying out research in the parent’s field; promoting technical or financial collaborations; representing the parent as buying or selling agent; IT and software development; technical support for the parent’s products; and operating as a foreign airline or shipping company. Manufacturing, processing and retail trading are all prohibited.

9. Can a Branch Office remit its profits to the parent? 

Yes, net of Indian taxes, on production to the AD bank of the Annual Activity Certificate, audited accounts, and a Chartered Accountant’s certificate confirming that taxes have been provided for. This is a genuine distinction from a Liaison Office, which has no income to remit, and unlike a subsidiary’s dividend the branch’s after-tax profit generally does not attract an additional withholding on remittance.

10. Do I need prior RBI approval for a Branch Office? 

Most applications go through the RBI route, where the AD Category-I bank approves under delegated authority and reports to the RBI. The Government route, requiring prior clearance in consultation with the relevant ministry, applies where the applicant is from a specified jurisdiction such as China, Hong Kong or Pakistan, where the proposed office is in Jammu and Kashmir, Ladakh or the North East, or where the business is in Defence, Telecom, Private Security, or Information and Broadcasting.

11. Do I need to register with the Registrar of Companies? 

Yes. Within 30 days of establishing the office, the foreign company must register under Section 380 of the Companies Act, 2013 by filing Form FC-1 with the apostilled charter documents and the RBI approval. This is a separate obligation from the RBI approval and is commonly overlooked because the RBI letter feels like the finish line.

12. What is the Annual Activity Certificate for a Branch Office? 

The AAC is a certificate from a Chartered Accountant, filed by 30 September each year with the AD bank and a copy to the Directorate General of Income Tax (International Taxation), confirming that the branch has undertaken only its permitted activities, along with audited accounts. It is also a document required for profit remittance and one the tax department examines when assessing the branch’s income.

13. What ongoing compliance applies to a Branch Office? 

The Annual Activity Certificate and audited accounts to the AD bank, Form FC-3 and FC-4 with the ROC, an annual income tax return, quarterly TDS returns, Form 3CEB for transfer pricing, and GST returns, plus employee compliance including EPFO, ESIC and professional tax. Because a branch has taxable income and full PE exposure, its compliance is the heaviest of the foreign-office structures.

14. Can a Branch Office buy property in India? 

Only by lease for its own use. A Branch Office cannot acquire immovable property in India by purchase; it may lease premises, and any lease exceeding five years requires prior RBI approval. Where the parent needs to own property in India, a subsidiary is the appropriate structure.

15. How long is a Branch Office permission valid? 

A Branch Office operates until it is closed — it does not carry the fixed three-year validity that applies to a Liaison Office. It continues as long as the parent maintains it and meets its compliance obligations, which is one respect in which a branch is more durable than an LO.

16. Can a Branch Office hire employees in India? 

Yes. The branch is an employer for Indian labour law purposes and must comply with EPFO, ESIC, professional tax and payroll TDS. It can hire the staff it needs for its permitted commercial activities, without the role restrictions that constrain a Liaison Office.

17. Does a Branch Office need GST registration? 

Generally yes. A Branch Office rendering services or trading goods in India makes taxable supply, so GST registration is usually required and the branch charges and accounts for GST on its activities. The precise position depends on the nature of the activity and the place of supply, which we assess at setup.

18. Can I convert my Branch Office into a subsidiary? 

Not by conversion — there is no mechanism for it. The process is to incorporate a fresh wholly-owned subsidiary, transfer the business, employees and contracts with the tax consequences assessed, novate leases, and close the branch. The transfer of an ongoing business is a taxable event that needs structuring, unlike a straightforward incorporation, so it should be planned with tax input six months ahead.

19. How do I close a Branch Office? 

Through an application to the AD bank with an auditor’s certificate confirming asset disposal, discharge of Indian liabilities and the computation of remittable surplus after tax, income tax clearance, confirmation that no proceedings are pending, and ROC closure filings. The AD bank then permits repatriation of the balance. Two to four months, and it cannot complete while the tax position is unsettled or AAC filings are outstanding.

20. Should I set up a Branch Office or a wholly-owned subsidiary? 

The deciding question is whether you genuinely need to trade in the parent’s own corporate name — because of a licensing requirement, a global agreement naming the parent, or a regulated activity. If you do, and you do not need to manufacture, a branch is appropriate. If the reason is simply a presence in India, a wholly-owned subsidiary is better in almost every respect: limited liability, roughly 25.17% tax instead of 40%, the ability to manufacture and do retail, and a vehicle that can be sold or listed.