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RBI Annual Activity Certificate (AAC) and FEMA Compliance Checklist for Branch, Liaison and Project Offices in India (2026–27)

Setting up a branch, liaison or project office in India is usually the easy part. The RBI or your bank grants a Unique Identification Number, the Registrar of Companies registers the place of business, a PAN arrives, and the team gets to work. What surprises headquarters later is how much recurring paperwork an unincorporated office carries, and how many different authorities want it: the Reserve Bank of India through your authorised dealer bank, the Registrar of Companies, the Income Tax Department, and in some cases the sector regulator.

The document that sits at the centre of all this is the Annual Activity Certificate (AAC). This guide explains what it is, who signs it and who receives it, how it fits with the other filings, what the penalties look like, and what to do if a year has been missed. A timely note: the AAC for the year ended 31 March 2026 fell due on 30 September 2026. If yours is still pending, the section on late filing below is the one to read first.

The short version: Every Branch Office (BO) and Liaison Office (LO) must submit an Annual Activity Certificate, issued by its Indian statutory auditor (a practising chartered accountant) along with the audited balance sheet, once a year for the year ended 31 March, on or before 30 September. It goes to the authorised dealer (AD Category-I) bank and a copy to the Director General of Income Tax (International Taxation), New Delhi. Project Offices also certify their activity annually. Alongside it, the office has to file ROC forms FC-3 and FC-4, tax filings, and, for a liaison office, Form 49C.

1. How often must a branch, liaison or project office submit a compliance certificate?

This is the question we are asked most. The answer under the RBI Master Direction on establishing branch, liaison and project offices (read with FEMA Notification No. 22(R)/2016-RB) is: once every financial year, in the format of the Annual Activity Certificate annexed to the Master Direction. In practice:

  • March year-end (the usual case). The certificate as at 31 March, together with the audited balance sheet, is due by 30 September of that year.
  • A different balance sheet date. Where an office’s accounts are finalised to a date other than 31 March, the AAC and balance sheet may be submitted within six months from the balance sheet date.
  • More than one office in India. If a foreign company has several offices, a combined certificate covering all of them is typically submitted through the nodal office. Confirm the arrangement with your AD bank.

Some history is useful. Before 2010 the deadline was 30 April. RBI moved it to 30 September, in line with the Indian audit calendar, after offices struggled to finish audits so quickly. You may still see older guidance quoting 30 April.

Who receives the AAC?

Office Primary recipient Copy / second recipient Other
Liaison Office (LO) AD Category-I bank that holds the UIN record Director General of Income Tax (International Taxation), New Delhi The relevant ministry or regulator, where approval was under the government route.
Branch Office (BO) AD Category-I bank Director General of Income Tax (International Taxation), New Delhi Sectoral regulator, where applicable.
Project Office (PO) AD Category-I bank The Master Direction treats the AAC as applying to BO, LO and PO; confirm with your bank whether a copy to the DGIT is also expected The project sanctioning authority on completion or closure.

 

What does the chartered accountant actually certify?

The AAC is not a formality. It is an attestation given after the auditor has examined the Indian books, bank statements, invoices and employment records. Broadly:

  • For a Liaison Office: that the office carried out only the activities permitted in its approval, that all its expenses were met out of inward remittances from the head office through normal banking channels, and that it earned no income and carried on no prohibited activity.
  • For a Branch Office: that its activities fall within the permitted list, and details of the business done, income, expenses and remittances for the year.
  • For a Project Office: the status of the project, and that receipts and expenses in India relate only to the contract for which the office was approved.

The certificate must be signed by the office’s statutory auditor, who must be a practising chartered accountant, and should carry a verifiable 18-digit ICAI UDIN. It should also report the office’s PAN, which every BO and LO must obtain when it is set up.

2. Permitted and prohibited activities: where the real risk sits

Whenever we audit a liaison office, the highest-risk question is the same: did the team stay inside its permission? Because a liaison office is allowed to do very little, it is surprisingly easy to step across the line. An India country head who “just helps close a deal”, a local employee who answers customer support calls, or a team member who negotiates prices for the parent are all common examples.

If the AD bank or the tax department concludes that a liaison office has engaged in commercial activity, two consequences can follow together:

  • FEMA contravention. Section 13 of FEMA, 1999 provides for a penalty of up to three times the sum involved, or up to ₹2 lakh where the amount cannot be quantified, plus a further penalty for each day a contravention continues.
  • Permanent establishment and business connection. The tax authorities may treat the office as a business connection under Section 9(1)(i) of the Income-tax Act and a permanent establishment under the applicable tax treaty, attributing a share of the parent’s Indian revenue to it and taxing it at the foreign company rate (35% plus surcharge and cess, up to 38.22%), with interest and penalties for under-reporting or misreporting of income.
Office What it may do Red lines
Liaison Office Represent the parent in India; promote exports and imports to and from India; promote technical or financial collaboration between the parent or group and Indian companies; act as a communication channel between the parent and Indian companies. No signing of commercial contracts, invoicing or negotiating prices or terms for the parent. No commission, fee or income in India. No borrowing or lending. No purchase of immovable property (leasing up to five years is allowed). No after-sales or installation support.
Branch Office Export and import of goods; professional or consultancy services; research in the parent’s area; promoting technical or financial collaboration; acting as buying or selling agent in India; IT and software services; technical support for products supplied by the parent or group; operations of a foreign airline or shipping company. No retail trading of any kind. No manufacturing or processing in India, unless set up in a Special Economic Zone with the necessary approval. No new line of business without prior permission.
Project Office Execute the specific contract awarded to the foreign company by an Indian company or government agency, funded by inward remittance, a multilateral agency such as the World Bank, or a term loan from an Indian bank or financial institution. No second or unrelated project under the same registration without fresh approval. Funds should not be held beyond what the project needs.

 

If your office is drifting towards commercial activity, the better answer is usually to move the business into an Indian subsidiary, rather than to stretch the permission. Our guide to setting up a wholly owned subsidiary covers that path, and our team at consultancy services to foreign companies in Delhi can assess whether your activities fit the current permission.

3. The annual compliance calendar: four authorities, many forms

A foreign company with a place of business in India, whether it is a liaison office, a branch office or a project office, is a “foreign company” under Section 2(42) of the Companies Act, 2013 and must register with the Registrar of Companies in addition to its RBI and bank reporting. The table below shows the recurring cycle.

Filing Law and authority Applies to Due date Notes
Form FC-1 registration of place of business Companies Act, s.380 (ROC) LO, BO, PO Within 30 days of establishing the place of business Needs the parent’s documents (apostilled), the RBI or AD bank approval, and an authorised representative in India.
Form FC-4 annual return Companies Act, s.384 LO, BO, PO Within 60 days of the financial year end (30 May for a March year) Covers directors, share capital and the Indian place of business.
Form 49C annual statement Income-tax Act, s.285 and Rule 114DA Liaison Office Within 60 days of the financial year end (30 May for a March year) Discloses Indian expenses, salaries and group entities in India. Signed digitally by a CA or authorised signatory.
Annual Activity Certificate RBI Master Direction; FEMA 22(R)/2016-RB LO, BO, PO 30 September (March year-end) Statutory auditor, with UDIN. Goes to the AD bank and, for LO and BO, a copy to DGIT (International Taxation).
Form FC-3 audited Indian accounts and list of places of business Companies Act, s.381 LO, BO, PO Within 6 months of the financial year end (30 September for March year-end). The Registrar may extend by up to 3 months. Audited Indian accounts, plus the foreign parent’s latest financial statements, translated into English where needed.
Tax audit and income tax return Income-tax Act, ss.44AB and 139(1) BO and PO with taxable income; LO if it has any taxable income For FY 2025-26: audit report 21 October 2026 and return 21 November 2026 (both extended); Form 3CEB 31 October and return 30 November where transfer pricing applies Taxed at 35% plus surcharge and cess. Tax withholding compliance is checked. See note below on the 2025 Act.
Form FC-2 change in charter, directors or address Companies Act, s.380 LO, BO, PO Within 30 days of the change Triggered by changes at the foreign parent as well as in India.

 

A note on the Income-tax Act, 2025. The new Act came into force on 1 April 2026 and applies from Tax Year 2026-27 (the year ending 31 March 2027), so the first returns under it will be filed in 2027. The year just closed, FY 2025-26, is still handled under the 1961 Act. When the 2026-27 cycle begins, expect renumbered sections and some new form numbers, so check the portal for the right form for Form 49C and the tax audit report rather than assuming the old ones.

Police verification. For applicants from certain countries that the Master Direction names, police verification is part of the approval process. It is not a general annual filing for every office, so be wary of checklists that list it as one. Your AD bank will tell you if it applies to you.

The filing trap on Form FC-2: Many head offices change a director on the global board, or move registered address, without telling their Indian CA. Under Section 380 of the Companies Act, such changes must be reported to the Registrar in India on Form FC-2 within 30 days, usually with an apostilled board resolution. This is the filing most often missed, simply because the person who changes the board has no idea that India needs to know.

4. Validity, renewal and what happens when you are late

Liaison office validity

A Branch Office stays valid until it is closed. A Project Office is valid for the life of the project. A Liaison Office is different: the initial approval is for three years, and the AD bank can extend it for further periods of three years each, provided the renewal is requested before expiry and every earlier AAC has been filed. Shorter validity can apply to specific sectors such as NBFCs and construction and development, so check the conditions attached to your own approval letter. A late AAC is therefore not just a reporting issue: it can block the renewal of the office itself, and an office that operates after its validity has expired without renewal is in contravention of FEMA.

If a year has been missed

Here is the sequence we follow for clients who discover they have missed one or more AACs:

  • Get the accounts audited. Each missing year needs audited financial statements and an AAC signed by a practising chartered accountant with a UDIN.
  • Prepare a short explanation of the delay. AD banks expect a covering letter, and they respond better to a clear, factual account than to a long one.
  • Expect a hold on remittances. Until the AACs are regularised, the bank can restrict remittance of profits, reimbursement of head office expenses and closure applications.
  • Be ready for compounding if the matter is more than a reporting delay. Where the office has operated beyond its validity or carried on activities outside its permission, the RBI can require an application for compounding of the contravention under Section 15 of FEMA, 1999. Late reporting on its own is usually dealt with through the bank, but whether any fee applies depends on the circumstances, so ask us before assuming.

The fastest fixes are the ones taken early. Each additional year of delay makes the regularisation file bigger and the conversation with the bank harder.

5. Branch office: remitting profits

A Branch Office may remit its net profit, after Indian income tax, to its head office through its AD bank without prior RBI approval. The bank expects to see:

  • a certified copy of the audited balance sheet and profit and loss account for the year;
  • a chartered accountant’s certificate showing how the remittable profit was calculated, confirming that it was earned only from permitted branch activities, and that it does not include profit from revaluation of the branch’s assets;
  • Form 15CA, with a chartered accountant’s certificate in Form 15CB, confirming that Indian tax has been paid.

This is another reason the annual audit and AAC need to be done on time. A bank is unlikely to release a profit remittance for a year where earlier certificates are still pending.

6. Closing an office: the winding-up checklist

Closing an unincorporated office is often more involved than opening one. The AD bank will not close the UIN or release the surplus until it has seen the following (the exact list depends on the bank and the office, but this is the usual core):

  • a copy of the original approval letter;
  • an auditor’s certificate showing how the remittable amount was arrived at, with a statement of assets and liabilities and how assets were disposed of; that all Indian liabilities, including gratuity and other employee dues, statutory TDS and GST dues and lease obligations, have been paid or provided for; and that no income from outside India, such as export proceeds, remains unrepatriated;
  • a confirmation from the parent that no legal proceedings are pending against the office in any Indian court and nothing prevents the remittance;
  • confirmation from the Registrar of Companies that the Companies Act requirements are met, including Form FC-2 for ceasing the place of business and filing of all earlier FC-3 and FC-4 returns;
  • all Annual Activity Certificates up to the date business stopped; and
  • tax clearance, or confirmation from the Income Tax Department, that no demand is outstanding, together with closure or surrender of the registrations the office holds, such as TAN and GST.

If the plan is to move the operations into a new company, remember that a liaison office cannot be “converted” into a private limited company by filing one form. The parent forms a new subsidiary, transfers contracts, leases and assets at fair value, and closes the old office through the AD bank and the Registrar. We map out that transition step by step in our guide to setting up a subsidiary in India.

7. A simple yearly rhythm that avoids last-minute stress

  • April: close the books for the March year end. Collect bank statements, expense records and the staff roster.
  • By 30 May: file Form FC-4 and, for a liaison office, Form 49C.
  • June to August: audit the Indian accounts and prepare the foreign parent’s financial statements for Form FC-3, with a certified English translation if needed.
  • By 30 September: submit the AAC and audited balance sheet to the AD bank, with a copy to DGIT (International Taxation) for BO and LO, and file Form FC-3.
  • October to November: file the tax audit report and income tax return, with the transfer pricing report where applicable. Confirm exact dates, because extensions are common.
  • Throughout the year: report any change in directors, name or address to the Registrar within 30 days of the event.

Good bookkeeping makes all of this much easier. If you do not have a finance person in India, consider outsourcing the accounting so that a CA-supervised team keeps the books audit-ready all year.

Frequently asked questions

Does a liaison office have to file an income tax return if it already files Form 49C and the AAC?

A liaison office that sticks to permitted liaison activity and earns no taxable income in India files Form 49C by 30 May, and the AAC by 30 September. But if it earns even incidental income, such as bank interest, or the Assessing Officer asks for a return, a return must be filed. We check this each year, rather than assuming the answer is the same as last year.

Why does Form FC-3 need the foreign parent’s global accounts?

Under Section 381 of the Companies Act, 2013, a registered foreign company must file the balance sheet and profit and loss account of its Indian business, and also a copy of the parent’s latest financial statements, with a certified English translation where the originals are in another language. This surprises many headquarters, because the global accounts are a business-level document that India’s Registrar now holds on its public record.

Can any chartered accountant sign the AAC?

No. It must be signed by the office’s statutory auditor, a practising chartered accountant or firm holding a valid certificate of practice from ICAI, and it should carry an 18-digit UDIN.

What if we move our office address?

Tell the AD bank and file Form FC-2 within 30 days. A move within the same city generally needs only intimation to the bank, while moving to a different city requires prior approval from the AD bank.

Can a liaison office be converted into a branch office or a subsidiary?

Not by a simple conversion. A branch office needs its own approval, and a subsidiary is a new company. In both cases the old office is closed in an orderly way as the new structure is set up.