Establishing a Branch Office in India

A branch office is an extension of a foreign company's operations within India. Setting up a Branch Office in India is especially beneficial for foreign companies looking to explore the Indian market and expand market presence. This type of company structure offers physical presence, brand visibility, and local access—all without the long-term obligation of forming a separate Indian company.

Stratrich Consulting offers expert advice and support to foreign companies looking to establish a Branch Office in India. Our experts possess in-depth knowledge of Indian regulations and procedures that can swiftly guide you through the registration process.

Benefits of a Branch Office in India

Setting up a Branch Office in India has become a strategic move for many international companies due to the following advantages:

Access to a Large Market

Companies can expand their reach to the vast consumer base of the Indian market by establishing a Branch Office.

Simplified Process

Branch Office has a simpler, more straightforward registration process compared to other business structures and legal entities.

Brand Recognition

Branch Office offers a perfect structure for companies looking to enter the Indian market, as it helps in building strong brand awareness and credibility. This also facilitates more efficient communication with customers.

Cost-Effective

A Branch Office is more cost-effective than setting up a full-fledged subsidiary or new company.

Operational Flexibility

A Branch Office does not require full operational autonomy to manage operations.

Tax Benefits

Branch Offices are eligible for tax exemptions, reduced rates and other financial advantages.

Local Expertise

Companies get a better understanding of the regulatory environment, cultural nuances, and market trends while exploring the Indian market.

Eligibility Criteria for setting up a Branch office in India

A Branch Office can be established in India, provided the following criteria is met:

  • A profit driven track record during the immediately preceding five (5) financial years in the home country.
  • Net worth of the foreign company establishing the Branch Office shall be at least USD 100,000 or its equivalent amount.
  • Proprietary concerns set up abroad are not allowed to establish Branch office in India

Permitted Activities of Branch Office in India

  • Export and import-related activities.
  • Professional or consultancy services, subject to sectoral regulators policy or approval.
  • Conduct research work for areas where the parent company is engaged.
  • Engage in activities which promote technical or financial collaboration between Indian companies and parent or overseas group company.
  • Act as a buying or selling agent in India or to represent the parent/group company.
  • Engage in any business or technical activities for software development or for the rendering of any service-related information technology.
  • Provide technical support services to the clients in India for the goods or services supplied by parent/group company.
  • Act as an authorised representative for a foreign shipping or airline company in India.

Prohibited Activities of Branch Office in India

  1. Retail trading activities of any nature are not allowed.
  2. Carrying out manufacturing or processing activities in India, directly or indirectly.
  3. Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.

Process of Setting up a Branch Office in India

A Branch Office in India is required to carry out the same trading activities as its parent company. It is, however, not permitted to carry out manufacturing activities but can outsource manufacturing related activities to an Indian manufacturer.

  1. Step 1: Submission of Application to RBI via Authorized Dealer (AD) Bank

    The first step in setting up a Branch Office in India is to apply to the Reserve Bank of India (RBI) through an Authorized Dealer (AD) bank. The AD Bank is an intermediary between the applicant and the RBI. The application should include all the necessary documents, such as a board resolution from the parent company approving the establishment of the branch, a copy of the parent company's certificate of incorporation, and details about the expected activities of the branch office.

  2. Step 2: KYC Verification

    The parent company is required to provide Know Your Customer (KYC) information from its banking institution. These records typically include a letter of recommendation, bank statements, and other relevant financial information. The AD Bank reviews these documents to verify their authenticity and assess the financial standing of the parent company.

  3. Step 3: Prior approval from RBI

    In some cases, the business activities of the branch office do not align with RBI's procedure. This requires prior permission from the RBI, which can be secured by providing a comprehensive and detailed justification.

  4. Step 4: Registering a Branch Office with the Registrar of Companies (ROC)

    After the RBI’s approval of the Branch Office, the next step is to register with the Registrar of Companies (ROC) in the specific state where the office will be located. This can be done by filing Form 44 through the Ministry of Corporate Affair’s online portal. To complete this registration, the applicant must submit the required documents, pay the applicable fees, and provide supporting documentation, including the RBI permission letter, the parent company's certificate of incorporation, and the company's articles of association and memorandum.

  5. Step 5: Bank Account

    The Branch Office needs to acquire a Permanent Account Number (PAN) from the Income Tax Department for conducting financial transactions and ensuring compliance with tax regulations. The Branch Office should also obtain a Tax Deduction Number (TAN) and open a bank account in India to facilitate its financial operations.

  6. Step 6: GST and Import-Export code registration

    If the Branch Office engages in the sale of goods or provision of services, it is required to register for the Goods and Services Tax (GST). Additionally, if the branch office plans to import or export goods, it must obtain an Import Export Certificate (IEC) code from the Directorate General of Foreign Trade (DGFT).

How Can Stratrich help in Establishing a Branch Office in India?

Stratrich Consulting specialises in assisting foreign companies and investors in entering the Indian market and establishing their business operations. We provide the following services for setting up a Branch Office in India:

  • Legal Advisory: Consultation with our legal experts to understand company formation options and financial implications.
  • Documentation Support: Preparation and filing of incorporation documents.
  • Regulatory Compliance: Ensuring compliance with Indian laws and regulations.
  • Online and Offline Registration: Incorporation services and guidance for seamless offline and digital registration services.

Why Choose Stratrich?

  • Single point access for pre-incorporation and post-incorporation compliance
  • Access to an experienced team of CA, CS and legal professionals
  • Complete handholding to foreign investors, stakeholders and NRIs
  • Provision for recruitment and market research on a need basis
  • Smooth and efficient registration process with quick turnaround time

Frequently Asked Questions (FAQs)

A Branch Office is an extension of a foreign company. It has the same business activities as the parent company.

Any foreign company can open a Branch Office in India provided it complies with Reserve Bank of India (RBI) guidelines.

The branch office does not have a separate legal status and is an extension of the foreign entity headquartered outside India.

A branch office is allowed to carry out the following activities:

  • Export/Import of goods.
  • Rendering professional or consultancy services.
  • Carrying out research work, in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  • Representing the parent company in India and acting as buying/selling agent in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by parent/group companies
  • Foreign airline/shipping company

  • 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

The registration process of a Branch Office takes about 4-6 weeks, assuming all documents are in order.

Yes, but only through activities approved by the RBI.

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.

Yes, the Branch Office is allowed to hire local as well as foreign employees. The Indian labour laws are applicable (the Branch Office needs to comply with PF, TDS, professional tax, and employee contracts).

An application of a foreign entity for opening of a Branch Office in India shall require prior approval of Reserve Bank of India in the following cases:

  • The applicant is a citizen of or is registered/incorporated in Pakistan.
  • The applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a branch office in Jammu and Kashmir, North-East region and Andaman and Nicobar Islands.
  • The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting. However, prior approval of Reserve Bank of India shall not be required in cases where Government approval or license/permission by the concerned Ministry/Regulator has already been granted.
  • The applicant is a Non-Government Organisation (NGO), Non-Profit Organisation, Body/Agency/Department of a foreign government. However, if such entity is engaged, partly or wholly, in any of the activities covered under Foreign Contribution (Regulation) Act, 2010 (FCRA), they shall obtain a certificate of registration under the said Act and shall not seek permission under Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016.

The closure of a Branch Office in India involves the below steps:

  • Obtain auditor’s certificate indicating the manner in which the remittable amount has been calculated.
  • Tax clearance certificate from Indian tax authorities.
  • Confirmation from the applicant that no legal proceedings are pending, and that there is no legal impediment to the remittance.
  • Report and approval from Registrar of Companies.
  • Application to Authorized Dealer Bank with aforesaid documents for closure of Branch Office.

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