October 31, 2025 / Business Registration

How to Open a Liaison Office in India: Complete Procedure

Expanding into India can be a strategic move for global companies looking to tap into one of the fastest-growing markets in the world. One of the most common ways for foreign businesses to establish a presence without engaging in full-scale commercial operations is by setting up a Liaison Office.

At KB Chandna & Co., we guide foreign entities through every step of this process — from approval to compliance — ensuring a seamless setup experience.

Understanding Liaison Office in India

A Liaison Office (LO) acts as a communication bridge between a foreign parent company and its Indian stakeholders. As per the Reserve Bank of India (RBI) guidelines, it serves only as a representative office — not as a profit-generating entity.

Permitted Activities

Promoting import/export relationships
Representing the parent company in India
Acting as a communication channel
Coordinating between head office and Indian parties

Restrictions

A liaison office cannot undertake any commercial, trading, or industrial activity in India. It must operate solely on inward remittances from the parent company.

Benefits of Opening a Liaison Office in India

Market Exploration: Helps assess business potential before establishing a larger setup.
Brand Presence: Builds visibility and trust with local clients and regulators.
Cost-Effective: Requires minimal investment and compliance compared to a subsidiary.
Networking: Facilitates stronger ties with local authorities, clients, and partners.

Eligibility Criteria for Setting Up a Liaison Office

According to RBI guidelines:

The parent company should have a track record of profit in the previous three financial years.
Minimum net worth of USD 50,000 or equivalent.
Must be engaged in a sector where foreign investment is allowed.

Governing Authorities

Reserve Bank of India (RBI): Grants permission to establish the Liaison Office.
Ministry of Corporate Affairs (MCA): Oversees registration and annual compliance.
Authorized Dealer (AD) Category-I Bank: Processes applications and monitors transactions.

Step-by-Step Procedure to Open a Liaison Office in India

Step 1: Determine Eligibility

Ensure that the parent company meets all financial and legal requirements as per RBI regulations.

Step 2: Obtain RBI Approval via AD Bank

The application (Form FNC) must be submitted through an Authorized Dealer Bank to the RBI for approval.

Step 3: Documentation Process

Gather and submit necessary documents such as incorporation certificate, financials, and parent company charter.

Step 4: PAN Application

Apply for a Permanent Account Number (PAN) for tax identification purposes.

Step 5: Registration with ROC

Step 6: Opening a Bank Account

Open a special Liaison Office bank account to receive inward remittances from the parent company.

Step 7: Post-Approval Compliance

Inform RBI and ROC about the commencement of operations and maintain records of all transactions.

Documents Required

Certificate of Incorporation of the parent company
Memorandum and Articles of Association
Audited financial statements for the past three years
Letter of authority from the parent company
KYC of authorized representatives
Banker’s report and financial stability proof

Timeline for Setting Up a Liaison Office

RBI Approval: 4–6 weeks
ROC Registration: 2–3 weeks
Bank Account Setup: 1 week
On average, the entire process takes 8–10 weeks under normal conditions.

Post Incorporation Compliance

Annual filing of Activity Certificate to RBI via AD Bank.
Audit of accounts by a practicing Chartered Accountant.
Filing of Annual Return (Form FC-3) with ROC.
Renewal or closure filings when applicable.

Validity and Renewal of Liaison Office

RBI grants approval typically for 3 years, extendable upon request. Renewal applications must be submitted before expiry along with updated documents.

Taxation for Liaison Offices in India

A Liaison Office is not liable for income tax unless it engages in commercial activities. However, it must still:

File annual tax returns.
Maintain proper accounting records.
Follow transfer pricing regulations for any service interactions.

Conversion into Branch or Subsidiary Office

Once the business grows, the Liaison Office can be converted into:

Branch Office: To engage in limited commercial activity.
Wholly Owned Subsidiary: For complete operational control.

This conversion requires RBI and MCA approvals.

Common Challenges Faced

Lengthy approval timelines.
Difficulty in document authentication and notarization.
Coordination between multiple government departments.

How KB Chandna & Co. Can Help

At KB Chandna & Co., we offer end-to-end support for foreign companies looking to open a Liaison Office in India, including:

Application drafting and RBI coordination.
Documentation and registration with MCA.
Accounting, taxation, and compliance management.
Our experienced professionals ensure your setup is compliant, efficient, and hassle-free.

Conclusion

Setting up a Liaison Office in India is a strategic first step for global businesses to establish a soft footprint in the Indian market. While the process involves multiple regulatory approvals, with expert guidance from KB Chandna & Co., you can ensure a smooth, compliant, and successful establishment.

FAQs

1. What is the difference between a Liaison Office and a Branch Office?
A Liaison Office cannot earn income or conduct business, while a Branch Office can engage in specific commercial activities.

2. Can a Liaison Office earn revenue in India?
No, it can only operate through funds received from the parent company.

3. How long does it take to set up a Liaison Office in India?
Generally, it takes around 8–10 weeks from documentation to final approval.

4. Is RBI approval mandatory?
Yes, all foreign entities must obtain RBI approval before establishing a Liaison Office.

5. Can a Liaison Office hire Indian employees?
Yes, it can employ Indian staff for liaison activities, subject to compliance with local labor laws.