The Feature That Sets a Project Office Apart

Unlike a Liaison Office or a Branch Office, a Project Office can often be established without prior RBI approval — under the general permission in the 2016 Regulations — provided all of the following conditions are met:

• The foreign company has secured a contract from an Indian company to execute a project in India, and
• The project is funded directly by inward remittance from abroad, or
• The project is funded by a bilateral or multilateral International Financing Agency, or
• The project has been cleared by an appropriate authority, or
• An Indian bank or public financial institution has granted a term loan for the project

If the funding condition is satisfied, the Authorised Dealer Category-I bank can grant permission directly, and the Project Office can be up and running in a matter of weeks rather than months.

Where none of these conditions is met — for example, a project funded from the foreign company’s own Indian-earned resources, or a party that does not fit the funding criteria — prior RBI approval is required, and the application routes through the AD bank to the RBI.

The Government route

As with other foreign offices, prior government approval applies regardless of funding where the foreign company is from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau, or where the project relates to Defence, Telecom, Private Security, or Information and Broadcasting, or is located in Jammu and Kashmir, Ladakh, or the North East region.

We determine which route applies in the first conversation, because it changes the timeline from weeks to months.

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Before Anything Else: Three Questions

1. Do you already have the contract?

A Project Office cannot be established in anticipation of winning work. The award — the signed contract from the Indian project owner — is the foundational document. Without it there is no project, and without a project there is no Project Office. If you are still bidding, you are not yet at the Project Office stage.

2. How is the project funded?

This is the question that decides whether you get general permission or need to approach the RBI. Direct inward remittance, an international financing agency, an appropriate-authority clearance, or an Indian term loan will get you the general route. Anything else means an RBI application. Have the funding structure clear before you file.

3. Is this genuinely one project, or the start of a business?

If you expect to win a second Indian contract, and a third, and to build a continuing presence, a Project Office is the wrong instrument. Each project would need its own office and its own closure, and none of them builds toward a durable entity. A wholly-owned subsidiary can execute unlimited projects, hire freely, and continue indefinitely. The Project Office earns its place only where the engagement genuinely ends when the contract does.

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What a Project Office Can and Cannot Do

The permitted scope is defined entirely by the project. This is narrower than a Branch Office and broader than a Liaison Office, and the boundary is the contract itself.

Permitted

• Undertaking and executing the specific project for which the office was established
• Activities incidental and directly related to the execution of that project
• Opening a designated bank account to receive project funds and meet project expenses
• Remitting the surplus of the project on completion, after taxes
• Acquiring immovable property where required for the project and permitted under FEMA — a distinction from a Liaison Office, which cannot

Not permitted

• Any activity unrelated to the sanctioned project
• Executing a different project — that requires a fresh permission and a fresh office
• Continuing to operate after the project completes
• Trading, or general commercial activity beyond the project scope
• Retail or manufacturing outside the project’s defined deliverables

The two bank accounts

A Project Office may, with AD bank permission, operate foreign currency accounts in addition to a rupee account, where the project is funded partly or wholly in foreign currency — subject to conditions, including that the responsibility for payment is with the project office and the account is closed on completion. This is a genuine operational advantage for foreign-currency-funded projects, and it is under-used because few advisers set it up.

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The Permanent Establishment Position — Different From a Liaison Office

A Liaison Office is structured specifically to avoid permanent establishment. A Project Office is the opposite: it is almost always a permanent establishment by design, because it exists to carry out commercial work in India that generates income.

The consequence is that the profits attributable to the Indian project are taxable in India — typically at the foreign company rate of around 40% plus surcharge and cess for the project’s Indian income, though the effective position depends on the applicable Double Taxation Avoidance Agreement and the nature of the work.

What this means in practice:

• The Project Office must file an Indian income tax return reporting the project’s income
• Profit attribution — determining how much of the overall contract profit is taxable in India — is the central tax question, and it is contentious. Where a contract has offshore supply, offshore services and onshore execution components, only the onshore portion (and sometimes part of the offshore) is taxable in India, and the split is frequently litigated
• TDS applies to the Project Office’s payments, and the Indian project owner will typically deduct tax at source on payments to the Project Office
• Transfer pricing applies to any dealings between the Project Office and the parent or its affiliates

This is why the tax structuring of the contract itself — how offshore and onshore scope is delineated in the award — matters enormously and should be addressed at the bidding stage, not after the office is established. We work with the contract terms, not just the office registration.

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Is a Project Office Actually Right for You?

Here is the honest comparison.

Choose a Project Office where you have won a single, time-bound, funded contract in India and have no plans beyond it. It is the fastest foreign-office route to establish when the funding conditions are met, and it is purpose-built for turnkey, EPC and defined-scope engagements.

Choose a Wholly-Owned Subsidiary instead if you expect more than one Indian project, want to hire a continuing team, or want the 25.17% domestic tax rate rather than the 40% foreign-company rate. For any foreign company treating India as a market rather than a one-off contract, this is the right answer.

Choose a Branch Office instead if you want to carry on ongoing commercial activity in your parent’s name across multiple engagements, not tied to a single project.

Choose a Liaison Office instead if you have no contract yet and want to research the market and pursue opportunities with no Indian revenue.

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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
• The project contract or award letter from the Indian project owner — the foundational document
• Evidence of the funding condition — the inward remittance arrangement, the international financing agency involvement, the appropriate-authority clearance, or the Indian term loan sanction
• Board resolution approving the establishment of the Project Office and appointing the Authorised Representative
• Power of Attorney in favour of the Authorised Representative in India
• Audited financial statements of the parent, most recent
• Banker’s report from the parent’s banker in the home country

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 for the project office
• No Objection Certificate from the property owner
• Utility bill not older than two months

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. Documents not in English need certified translations, and documents notarised but not apostilled are rejected. We provide the exact document list in the exact required format before you begin.

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The Process, Step by Step

Step 1 — Eligibility, route and funding assessment (3–5 days) Confirmation that a signed contract exists, verification of which funding condition is met and therefore whether general permission or RBI approval applies, determination of whether the Government route is triggered by jurisdiction or sector, and — critically — a look at the contract’s offshore/onshore split for the tax position. You receive a written note suitable for your board.

Step 2 — Document collection and apostille coordination (2–4 weeks — the variable) Jurisdiction-specific document list, with format review before you apostille.

Step 3 — Form FNC filing with the AD bank (1 week) Submitted through the designated Authorised Dealer Category-I bank with the contract, funding evidence and parent documents. The AD bank conducts KYC.

Step 4 — Permission (2–4 weeks on general permission; longer if RBI or Government route) Where the funding conditions are met, the AD bank grants permission and reports the opening to the RBI, which allots a Unique Identification Number (UIN). Where prior approval is required, the timeline extends accordingly.

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 permission.

Step 6 — PAN, TAN and tax registrations (2–3 weeks) Essential here, because unlike a Liaison Office the Project Office has taxable income and active TDS obligations from the outset.

Step 7 — Bank account (2–4 weeks) The designated project account with the AD bank, and a foreign currency account where the project is foreign-currency funded and conditions are met. The account receives project funds only — no unrelated income.

Step 8 — Other registrations as applicable GST registration, which is generally required as the Project Office renders taxable supply; professional tax; EPFO and ESIC once employee thresholds are met; Import Export Code where the project involves import of equipment.

Realistic total: 4 to 8 weeks on general permission with documents apostilled and funding conditions clearly met. 3 to 5 months where RBI or Government approval is required.

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Ongoing Compliance

A Project Office has real income and real tax exposure, so its compliance is heavier than a Liaison Office’s and runs for the life of the project.

Annual and periodic

Ongoing obligations

• Project funds only through the designated account, with no commingling of unrelated receipts
• Prior AD bank intimation for material changes
• Quarterly progress reporting to the AD bank on the project status, where required
• Employee compliance — EPFO, ESIC, professional tax and payroll TDS as an Indian employer
• Inter-project boundary — if the parent wins a second project, it cannot be run through the same office; a fresh permission and office are required

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

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Closing the Project Office

Closure is not optional and not open-ended — the office must close on completion of the project, and repatriation of the surplus is the point of the whole exercise.

The AD bank permits closure and remittance of the surplus on submission of:

• The RBI/AD bank approval under which the office was established
• Auditor’s certificate showing the manner of computing the remittable surplus, confirming that all liabilities in India have been met, and that the surplus is arrived at after providing for Indian taxes
• Confirmation that the project is complete, with the project owner’s acceptance or completion certificate
• Income tax clearance — confirmation that all returns are filed and taxes paid, including the tax on attributed profit
• Confirmation that no legal proceedings are pending in India
• ROC filings recording the closure

The remittable surplus is the net of project receipts over project expenses, after Indian tax. The AD bank scrutinises this closely, and the income tax position must be settled first — which is why an unresolved profit-attribution dispute can hold up repatriation for a long time.

Closure typically takes two to four months once the project is complete and taxes are settled. Where the profit-attribution question is contested, considerably longer.

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Six Mistakes We See Repeatedly

1. Trying to establish a Project Office before the contract is signed. The award is the foundational document. No contract, no project, no office.
2. Getting the funding condition wrong. General permission depends on one of the specified funding routes being met. Where it is not, prior RBI approval is required, and assuming general permission where it does not apply means an application rejected and a timeline blown.
3. Ignoring the contract’s tax structure. The offshore/onshore split in the award determines how much profit is taxable in India. This is set at the bidding stage and litigated afterwards — addressing it once the office exists is too late.
4. Running a second project through the same office. Each project needs its own permission and its own office. A second engagement cannot ride on the first office’s registration.
5. Missing the 30-day Form FC-1 deadline. ROC registration under Section 380 is separate from the AD bank permission and is routinely overlooked.
6. Leaving repatriation until the project is finished. The remittable surplus depends on a settled tax position. If profit attribution is disputed, the money is stuck until it is resolved — which is why the tax position should be managed throughout, not addressed at closure.

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Why Delhi Legal Company

We read the contract, not just the registration form. The single biggest determinant of a Project Office’s tax outcome is how the award splits offshore and onshore scope. Most providers register the office and ignore the contract. We work with both.

We get the funding route right the first time. Whether general permission applies or the RBI must be approached depends on the funding structure, and getting it wrong costs weeks. We confirm it before filing.

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 profit-attribution position or the FC-1 deadline. We do.

We manage repatriation from the start. The remittable surplus depends on the tax position, so we manage the tax position throughout the project rather than discovering a dispute at closure.

We tell you when a subsidiary is the better structure. If you expect more than one Indian project, a wholly-owned subsidiary is faster to reuse and taxed at 25.17% rather than 40%. That advice costs us the smaller engagement and we give it anyway.

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 right structure for more than one project or a continuing team
• Liaison (Representative) Office in India — market entry with no contract and no revenue yet
• Joint Venture (JV) Companies — where an Indian partner is needed to bid or execute
• 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
• Resident Director Services — required when you incorporate a subsidiary instead
• Registered Office Address in Delhi — Connaught Place address with NOC and utility documentation
• GST Registration — generally required, as a Project Office renders taxable supply

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Start With a Conversation, Not a Quote

Tell us who awarded the contract, how the project is funded, what the offshore and onshore scope looks like, and where the work will be performed. In thirty minutes we will tell you whether you qualify for general permission or need to approach the RBI, whether the Government route is triggered, what the profit-attribution position is likely to be, 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 Project Office in India? 

4 to 8 weeks on general permission, where a signed contract exists, the funding condition is clearly met, and parent documents are already apostilled. Where prior RBI approval or Government-route clearance is required — because the funding condition is not met, or the parent is from a specified jurisdiction, or the project is in a sensitive sector — 3 to 5 months. The apostille process is the largest variable and can take three to four weeks on its own.

2. Do I need prior RBI approval to open a Project Office? 

Often not. Under the general permission in the 2016 Regulations, the AD Category-I bank can grant permission directly, provided the foreign company has secured a contract and the project is funded by direct inward remittance, an international financing agency, an appropriate-authority clearance, or an Indian bank term loan. Where none of these funding conditions is met, prior RBI approval is required. Government approval applies regardless of funding for specified jurisdictions and sectors.

3. What is the difference between a Project Office and a Branch Office? 

A Project Office is tied to a single, specific, time-bound contract and closes when that project completes. A Branch Office carries on ongoing commercial activity in the parent’s name across multiple engagements, with no fixed end date. The Project Office is faster to establish when the funding conditions are met, but it cannot be used for anything beyond the sanctioned project.

4. What is the difference between a Project Office and a Liaison Office? 

A Liaison Office cannot earn any income and is limited to market liaison and coordination — it is structured to avoid being a permanent establishment. A Project Office earns income from executing its project, is almost always a permanent establishment, and pays tax on the profit attributable to India. They serve opposite purposes: one researches the market, the other executes a contract already won.

5. Is a Project Office taxable in India? 

Yes, almost always. A Project Office is a permanent establishment because it carries out income-generating work in India, so the profit attributable to the Indian project is taxable — typically at the foreign company rate of around 40% plus surcharge and cess, subject to the applicable Double Taxation Avoidance Agreement. It must file an Indian income tax return, deduct and deposit TDS, and comply with transfer pricing where it deals with the parent.

6. How is the taxable profit of a Project Office determined? 

Through profit attribution — deciding how much of the total contract profit relates to the Indian onshore work and is therefore taxable here. Where a contract has offshore supply, offshore services and onshore execution components, generally only the onshore portion (and sometimes part of the offshore) is taxable in India. This split is frequently contested by the tax authorities, which is why the offshore/onshore delineation in the contract itself matters so much and should be addressed at the bidding stage.

7. Can a Project Office acquire property in India? 

Yes, where the property is required for the project and its acquisition is permitted under FEMA — a distinction from a Liaison Office, which cannot acquire immovable property at all. The property is held for the project, and its disposal forms part of the closure and repatriation process when the project completes.

8. Can a Project Office open a foreign currency account? 

Yes, with AD bank permission, where the project is funded partly or wholly in foreign currency and the prescribed conditions are met — including that payment responsibility rests with the project office and the account is closed on completion. This is a genuine advantage for foreign-currency-funded projects and is under-used because few advisers set it up.

9. Can I run more than one project through a single Project Office? 

No. A Project Office is tied to the specific project for which it was permitted. A second contract requires a fresh permission and a separate Project Office. If you expect multiple Indian projects, a wholly-owned subsidiary is the better structure, since it can execute unlimited projects under one entity.

10. 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 permission. This is a separate obligation from the AD bank permission and is commonly overlooked because the permission letter feels like the finish line.

11. What is the Annual Activity Certificate for a Project 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 office has undertaken only activities related to its sanctioned project, along with audited accounts. It is one of the documents the tax department examines when assessing the office’s profit-attribution position.

12. What ongoing compliance applies to a Project 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 Project Office has taxable income, its compliance is materially heavier than a Liaison Office’s.

13. Does a Project Office need GST registration? 

Generally yes. A Project Office executing a contract in India renders taxable supply, so GST registration is usually required, and the office charges and accounts for GST on its project work. The exact position depends on the nature of the contract and the place of supply, which we assess at setup.

14. Can a Project Office hire employees? 

Yes, for the execution of the project. The office is an employer for Indian labour law purposes and must comply with EPFO, ESIC, professional tax and payroll TDS. Employees are engaged for the project and their engagement typically ends when the project and the office close.

15. How is a Project Office funded? 

Through inward remittance from the parent, receipts under the project contract, or the funding source that established eligibility — an international financing agency, an appropriate-authority clearance, or an Indian term loan. The designated project account receives project funds only and cannot take in unrelated income. A foreign currency account may also be operated where the project is foreign-currency funded.

16. What happens when the project is completed? 

The Project Office must close. The AD bank permits closure and repatriation of the remittable surplus on submission of an auditor’s certificate showing how the surplus was computed after Indian taxes, confirmation that the project is complete and all Indian liabilities met, income tax clearance, confirmation that no legal proceedings are pending, and ROC closure filings. The office cannot simply continue after the project ends.

17. How is the remittable surplus calculated? 

It is the net of project receipts over project expenses, after providing for all Indian taxes including tax on the attributed profit. The AD bank scrutinises the computation closely and requires an auditor’s certificate. Because the surplus is arrived at after tax, an unresolved profit-attribution dispute with the tax authorities can hold up repatriation until it is settled.

18. Can a Project Office be converted into a subsidiary or branch? 

Not by conversion — there is no mechanism for it. If a foreign company that came in for one project decides to establish a continuing presence, it incorporates a fresh wholly-owned subsidiary or applies for a branch office, transitions any ongoing work and staff, and closes the Project Office on completion of its sanctioned project. The two can run in parallel only to the extent each stays within its own permitted scope.

19. Which projects trigger the Government approval route? 

Prior government approval applies regardless of funding where the foreign company is from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau; where the project relates to Defence, Telecom, Private Security, or Information and Broadcasting; or where it is located in Jammu and Kashmir, Ladakh or the North East region. These require clearance in consultation with the relevant ministry and take considerably longer than general permission.

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

The deciding question is whether this is genuinely one project or the start of a continuing business. For a single, time-bound, funded contract with no plans beyond it, a Project Office is purpose-built and fast to establish. For more than one expected project, a continuing team, or a lower tax rate, a wholly-owned subsidiary is better — it executes unlimited projects under one entity and is taxed at 25.17% rather than the roughly 40% foreign-company rate on project income.