Project Office (PO) Establishment in India

A Project Office (PO) can be set up in India by a foreign company awarded a contract for a specific project, operating for a limited duration until the project's completion.

Setting up a Project Office (PO) in India

The Reserve Bank of India (RBI) grants permission to foreign companies to establish a Project Office (PO) if they have a contract with an Indian company for a specific project and meet one of the following conditions:

The project is funded through inward remittance from abroad.
The project is financed by an international financing agency.
The project has received approval from relevant authorities.
The Indian entity awarding the contract has obtained a term loan from a public financial institution or bank in India.

If none of these criteria are met, the foreign entity must seek approval from RBI’s Central Office.

Requirements for Setting up a Project Office in India

Specific cases require prior approval from the RBI:

The parent company is registered in Pakistan.
The parent company is based in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, or Macau, and the PO is proposed in Jammu & Kashmir, the Northeastern region, or the Andaman & Nicobar Islands.
The applicant’s principal business falls within Defense, Telecom, Private Security, or Information and Broadcasting sectors.
The applicant is an NGO, non-profit organization, or foreign government entity, requiring an FCRA certificate if operating under the FCRA Act, 2010.

Exceptions: Entities from Pakistan, Bangladesh, Sri Lanka, Iran, Afghanistan, China, Macau, or Hong Kong may be granted permission for restricted regions with Government of India consultation. Defense-related project offices with Ministry of Defence contracts do not need additional approval.

Initial Registrations Required for Project Office (PO)

PAN (Permanent Account Number) / TAN (Tax Deduction and Collection Account Number)
Goods and Services Tax (GST) registration
Professional Tax registration (specific to certain states)
Shops and Establishment Act registration (state-specific)
Importer Export Code (IEC)

Applicable Income Tax Rates and Compliance for Project Offices (PO) in India

A Project Office (PO) in India is subject to corporate tax on its net income as per foreign company 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).

Minimum Alternate Tax (MAT) rates may apply in specific cases:

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 compliance requirements include:

No extra tax on profit repatriation.
Compliance with Indian Transfer Pricing (TP) regulations, including annual income tax returns, TP documentation, a TP certificate, and periodic withholding tax returns.