India is one of the fastest-growing markets in the world, offering huge business potential for international companies. Many global brands are entering India to expand their operations, sell products, and offer services. But before doing so, they must establish a proper legal presence in the country. One of the most popular options for this is registering a Branch Office in India.
In this blog, we will explain how foreign companies can start operations in India through a Branch Office, along with its eligibility, procedure, documents required, and benefits.
1. What Is a Branch Office in India?
A Branch Office (BO) is an extension of a foreign company established in India to carry out business activities on behalf of the parent company. It acts as a representative arm, not a separate legal entity.
The branch office helps the parent company explore the Indian market, handle sales, provide customer support, and build brand recognition. However, it must follow the rules set by the Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA).
2. Who Can Open a Branch Office in India?
Foreign companies that are financially sound and have a profitable track record can apply to set up a Branch Office in India.
Here are the eligibility criteria as per RBI guidelines:
- The foreign company must have a profit-making record for the past five financial years.
- The net worth of the company should be at least USD 100,000 or its equivalent.
- The company must be engaged in business activities that are allowed in India.
If these conditions are met, the company can proceed with the registration process.
3. Permitted Activities for a Branch Office in India
A Branch Office in India can undertake only specific activities approved by the RBI. These include:
- Import and export of goods
- Providing professional or consultancy services
- Carrying out research work in areas where the parent company is engaged
- Representing the parent company in India and acting as a buying or selling agent
- Providing technical support to products supplied by the parent company
- Promoting collaborations between Indian and foreign companies
- Acting as a communication channel between the parent company and Indian customers
However, a Branch Office cannot engage in retail trading, manufacturing, or direct commercial trading in India.
4. Regulatory Approvals Required
To start operations in India, a Branch Office needs prior approval from the Reserve Bank of India (RBI). The RBI grants approval under two routes:
- Reserve Bank Route – For companies from countries that have a good relationship with India and engage in business activities allowed by the RBI.
- Government Route – For companies from countries like Pakistan, Bangladesh, Sri Lanka, Iran, or China, or if the proposed activities are not covered under the automatic route.
Once the RBI approval is received, the branch office must be registered with the Registrar of Companies (ROC) under the Companies Act, 2013.
5. Documents Required for Branch Office Registration
Here is a list of essential documents needed for registration:
- Certificate of Incorporation of the parent company
- Memorandum and Articles of Association (duly attested)
- Latest audited financial statements of the parent company
- Board resolution authorizing the setup of the Branch Office in India
- Details of directors and key management personnel
- Address proof of the proposed office in India
- Banker’s report from the parent company’s bank confirming good financial standing
All these documents must be notarized and apostilled in the home country before submission in India.
6. Step-by-Step Process of Branch Office Registration in India
Let’s look at the complete procedure for registering a Branch Office:
Step 1: Application to RBI
The parent company must apply to the Reserve Bank of India (RBI) through an authorized dealer (Category I Bank). The bank verifies documents and submits them to the RBI for approval.
Step 2: RBI Approval
Once the RBI reviews and approves the application, it issues a Unique Identification Number (UIN) to the branch office.
Step 3: Registration with ROC
The company then needs to register the branch office with the Registrar of Companies (ROC) using Form FC-1 within 30 days of RBI approval.
Step 4: Obtain PAN and TAN
After ROC registration, the Branch Office must apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.
Step 5: Open a Bank Account
A current account must be opened in an Indian bank to manage operational expenses and transactions.
Step 6: GST Registration (if applicable)
If the branch provides taxable services or sells goods, it must obtain GST registration.
Step 7: Other Registrations
Depending on business type, the branch may need additional registrations like Shops & Establishment License, Professional Tax, or Import Export Code (IEC).
7. Compliance Requirements for Branch Offices in India
After registration, the Branch Office must follow ongoing compliance requirements under Indian laws. These include:
- Annual filing with ROC: Submission of Form FC-3 (annual accounts) and Form FC-4 (annual activity report).
- Income tax compliance: Filing of annual income tax returns in India.
- Audit of accounts: The branch office must maintain proper books of accounts and get them audited by a Chartered Accountant in India.
- Reporting to RBI: Annual activity certificates must be submitted to the RBI through the authorized dealer bank.
Non-compliance with these requirements can lead to penalties or cancellation of the branch license.
8. Advantages of Opening a Branch Office in India
Here are the main benefits of establishing a branch office in India:
Market Expansion
It allows foreign companies to expand into one of the largest consumer markets in the world.
Direct Business Operations
Unlike liaison offices, a branch office can carry out direct business and earn income in India.
Brand Presence
It helps the parent company build brand recognition and maintain direct control over Indian operations.
Technical and Customer Support
A branch office can provide after-sales service and technical assistance to Indian customers, increasing customer satisfaction.
Ease of Setup
The process is simpler compared to incorporating a subsidiary company, and RBI approval ensures regulatory transparency.
9. Limitations of a Branch Office
While a branch office offers flexibility, it also has some limitations:
- It cannot carry out manufacturing or retail trading in India.
- It is taxed as a foreign company, often at a higher rate than domestic companies.
- All liabilities of the branch are borne by the parent company.
- It must strictly follow RBI guidelines for operations, remittances, and reporting.
10. Taxation of Branch Office in India
A Branch Office is considered a foreign company for taxation purposes in India. The income earned in India is taxable under the Income Tax Act, 1961.
The current tax rate for a foreign company is around 40% (plus applicable surcharge and cess). However, India has Double Taxation Avoidance Agreements (DTAAs) with several countries, which help reduce the overall tax burden.
11. Closing a Branch Office
If a company wishes to close its branch office in India, it must:
- Obtain approval from the RBI.
- Submit audited financial statements and a no-objection certificate from the parent company.
- Apply for deregistration with the ROC.
- Settle all taxes and liabilities before remittance of funds abroad.
Once the RBI and ROC approve the closure, the branch office can cease operations legally.
Before You Go
Setting up a Branch Office in India is one of the best ways for foreign companies to explore business opportunities, provide services, and establish a strong presence in the Indian market. With proper planning, compliance, and expert assistance, the process can be smooth and profitable.
If you are planning to register your branch office in India, it is advisable to consult professionals who specialize in RBI and ROC compliance to ensure stress-free setup and operation.
For expert guidance and complete assistance in Branch Office Registration in India, you can connect with Groom Tax, your trusted partner for company registration, compliance, and legal advisory services in India.
