Branch Office vs Project Office Setup in India – Complete Comparison Guide (2026)
Foreign companies planning to expand into India often face an important decision:
Should we open a Branch Office or a Project Office?
Both structures allow foreign entities to establish a presence in India, but they serve different purposes and come with distinct regulatory and compliance requirements.
In this detailed guide, we explain the difference between Branch Office and Project Office setup in India, including eligibility, activities allowed, taxation, compliance, and which option is suitable for your business.
What is a Branch Office in India?
A Branch Office (BO) is an extension of a foreign company established in India to conduct permitted commercial activities.
It is not a separate legal entity but operates as a representative office of the parent company.
Activities Allowed for Branch Office
A Branch Office can:
- Export/import goods
- Provide professional or consultancy services
- Conduct research work
- Promote technical or financial collaborations
- Represent parent company in India
- Provide IT and software services
- Offer technical support
⚠ Manufacturing is generally not permitted directly (except in SEZ under specific conditions).
What is a Project Office in India?
A Project Office (PO) is a temporary office set up in India for executing a specific project awarded to a foreign company.
It is project-specific and exists only for the duration of that project.
Activities Allowed for Project Office
A Project Office can:
- Execute specific infrastructure projects
- Perform turnkey contracts
- Handle government-approved projects
- Implement engineering or construction assignments
Once the project is completed, the Project Office must be closed.
Key Differences Between Branch Office and Project Office
| Basis | Branch Office | Project Office |
| Purpose | Ongoing business operations | Execution of a specific project |
| Duration | Continuous presence | Temporary (project duration) |
| Legal Status | Extension of foreign company | Extension for specific project |
| RBI Approval | Required (in most cases) | Required unless automatic route applies |
| Revenue Generation | Allowed from permitted activities | Allowed only for project work |
| Closure | Can continue indefinitely | Closed after project completion |
| Compliance | Ongoing compliance obligations | Compliance limited to project period |
Eligibility Criteria
Branch Office Eligibility
The foreign company must:
- Have a profit-making track record of at least 5 years
- Meet minimum net worth requirements (as per RBI guidelines)
Approval is generally obtained from the Reserve Bank of India (RBI) through an Authorized Dealer (AD) Bank.
Project Office Eligibility
A foreign company can establish a Project Office if:
- It has secured a contract from an Indian company
- The project is funded directly by inward remittance
- The project is funded by international financial institutions
- The project is cleared by an appropriate authority
In certain cases, Project Office setup may fall under the automatic route.
Registration Process in India
Branch Office Setup Process
- Application to RBI through AD Bank
- Submission of incorporation documents
- Board resolution from parent company
- KYC compliance
- PAN & TAN registration
- GST registration (if applicable)
- Opening bank account
Estimated timeline: 4–8 weeks.
Project Office Setup Process
- Secure project contract
- Apply through AD Bank
- Submit project-related documents
- Obtain registration
- PAN, TAN, and GST registration
- Open bank account
Estimated timeline: 3–6 weeks.
Taxation of Branch Office vs Project Office
Branch Office Taxation
- Taxed as a foreign company
- Corporate tax rate applicable to foreign entities
- Profits taxable in India
- Transfer pricing rules may apply
Project Office Taxation
- Taxed only on income generated from project
- Considered permanent establishment in India
- Subject to Indian corporate tax
Both structures must comply with Income Tax Act and GST regulations where applicable.
Compliance Requirements
Branch Office Compliance
- Annual financial statements
- Audit under Indian laws
- Annual Activity Certificate submission
- Income tax return filing
- GST filings (if registered)
Project Office Compliance
- Compliance during project duration
- Filing of tax returns
- Closure reporting after project completion
- Submission of completion documents
Branch Office has higher ongoing compliance compared to Project Office.
When Should You Choose a Branch Office?
A Branch Office is suitable if:
✔ You want long-term presence in India
✔ You plan continuous business operations
✔ You want to provide services or consultancy
✔ You aim to build brand presence
Best for:
- IT companies
- Consultancy firms
- Export-import businesses
- Service providers
When Should You Choose a Project Office?
A Project Office is suitable if:
✔ You have secured a specific government or private project
✔ You do not require long-term presence
✔ Your operations are project-based
✔ You want limited compliance burden
Best for:
- Infrastructure companies
- Construction firms
- EPC contractors
- Engineering companies
Branch Office vs Project Office – Which is Better?
There is no “better” option. The right choice depends on:
- Business objectives
- Duration of operations
- Nature of work
- Compliance capacity
- Investment plans
If you plan long-term expansion → Branch Office is ideal.
If you have a single project contract → Project Office is more practical.
Common Mistakes Foreign Companies Make
- Choosing Branch Office for short-term project
- Ignoring RBI compliance
- Underestimating tax obligations
- Not planning exit strategy for Project Office
- Delayed reporting to authorities
Professional advisory support can prevent regulatory complications.
FAQs – Branch Office vs Project Office in India
1. Is RBI approval mandatory for Branch Office?
Yes, in most cases approval through an Authorized Dealer Bank is required.
2. Can a Project Office continue after project completion?
No. It must be closed after the project is completed.
3. Can a Branch Office earn income in India?
Yes, from permitted activities.
4. Is GST registration required for Project Office?
If taxable supplies are made, GST registration is mandatory.
5. Can a Branch Office convert into a subsidiary company?
Yes, subject to legal restructuring and compliance.
Final Thoughts
Expanding into India offers immense opportunities for foreign companies, but choosing the correct business structure is critical.
A Branch Office provides long-term operational presence, while a Project Office is ideal for specific contractual projects. Understanding regulatory, tax, and compliance implications helps ensure smooth entry into the Indian market.
If your company is evaluating entry strategies into India, careful planning and professional guidance can make the process seamless and compliant.