Branch Office (BO) Establishment in India

Foreign companies can establish branch offices to carry out specific business activities in India, complying with the necessary registration and regulatory requirements to operate legally and efficiently.

Registration Requirements from Authorized Dealer (AD) Bank/RBI

A body corporate incorporated outside India can establish a Branch Office (BO) with specific approval from an Authorized Dealer Category-I bank as per Reserve Bank of India (RBI) guidelines. This applies where 100% FDI is permitted under the automatic route. Applications requiring additional permissions are considered by the RBI in consultation with the Ministry of Finance, Government of India.

Set-up Criteria

If the parent company is registered/incorporated in Pakistan, prior RBI approval is required.
If the parent company is incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, or Macau, and proposes a BO in Jammu & Kashmir, the North-East region, or the Andaman & Nicobar Islands.
If the applicant’s primary business is in Defense, Telecom, Private Security, or Information and Broadcasting. Note: RBI approval is not needed if government or Ministry approval has been granted.
If the applicant is an NGO, Non-Profit, or governmental body, FCRA registration may be required.
BOs are allowed in SEZs for 100% FDI sectors, provided they operate standalone in the SEZ.

Permitted Activities for a Branch Office (BO) in India

Exporting and importing goods.
Providing professional or consultancy services.
Conducting research related to the parent company’s area of business.
Facilitating technical or financial collaborations between Indian and overseas group companies.
Representing the parent company in India as a buying/selling agent.
Offering Information Technology services and software development.
Providing technical support for products supplied by the parent company.
Representing a foreign airline or shipping company.

Note: AD Category I banks cannot approve BOs for legal practice under FEMA, and violations must be reported to RBI.

Initial Registrations Required for Branch Office (BO)

PAN / TAN
Goods and Services Tax (GST)
Professional Tax (state-specific)
Shops and Establishment Act Registration (state-specific)
Importer Export Code (if applicable)
Registrar of Companies (ROC) Registration

Applicable Income Tax Rates and Compliance

The Branch Office (BO) in India is subject to income tax on its net earnings as per corporate tax rates:

For income below INR 1 crore: 36.4% (including surcharge and education cess).
For income between INR 1 crore and INR 10 crore: 37.13% (including surcharge and education cess).
For income above INR 10 crore: 38.22% (including surcharge and education cess).

In certain cases, Minimum Alternate Tax (MAT) rates apply as follows:

For income below INR 1 crore: 15.6% (including surcharge and education cess).
For income between INR 1 crore and INR 10 crore: 15.91% (including surcharge and education cess).
For income above INR 10 crore: 16.38% (including surcharge and education cess).

Additional tax requirements include:

No further tax on profit repatriation.
Compliance with Indian transfer pricing (TP) regulations, including annual income tax returns, TP documentation, TP certificate, and periodic withholding tax returns.