Setting Up a Branch Office in India: Everything You Need to Know
Thinking about expanding your business to India? You’re not alone — India has become one of the hottest global destinations for businesses looking to scale. With its massive consumer base, skilled workforce, and growing economy, India offers a fertile ground for international businesses.
But how exactly can you tap into this vast market? One of the most common methods is by setting up a branch office in India. Let’s break down exactly what that means and how you can make it happen.
What is a Branch Office?
A branch office is essentially an extension of a foreign company, carrying out its business in India while being wholly dependent on the parent company abroad. Think of it like a satellite that stays tied to the mothership.
Branch Office vs. Liaison Office vs. Subsidiary
Confused between these? You’re not alone.
- A liaison office acts purely as a communication channel — no revenue generation.
- A subsidiary is a fully incorporated Indian company, separate legal entity.
- A branch office is a revenue-generating extension of the foreign parent company.
Legal Framework for Branch Offices in India
India has clear rules when it comes to foreign business entities.
- FEMA Guidelines
Foreign Exchange Management Act (FEMA) lays down the framework on how a branch office can remit profits, deal with foreign exchange, and more.
- RBI Approvals
The Reserve Bank of India (RBI) regulates the establishment of branch offices. Without RBI approval, you cannot legally operate a branch office.
- Companies Act Compliance
A branch office must also register with the Registrar of Companies (RoC) and comply with the Companies Act for corporate reporting.
Advantages of Setting Up a Branch Office in India
Wondering why so many companies choose this route? Here’s why:
- Market Expansion Opportunities
India’s billion-plus population is a giant market waiting to be explored.
- Cost Efficiency
Compared to other countries, India offers lower operational costs for staff, office space, and resources.
- Brand Presence
A branch office helps establish a long-term brand reputation on the ground.
Disadvantages and Limitations
Not all roses, though — there are a few thorns you should be aware of.
- Restrictions on Business Activities
A branch office cannot engage in manufacturing directly. Its activities are limited to those approved by the RBI.
- Profit Repatriation Rules
While profits can be sent back to the parent company, this comes with compliance checks under FEMA and RBI.
Eligibility Criteria for Branch Office Setup
Before you jump in, check whether you’re eligible.
- Track Record Requirements
Your foreign parent company must have a track record of profitability for the last 5 years. - Net Worth Requirements
A minimum net worth of USD 100,000 is usually expected to prove financial soundness.
Permissible Activities for a Branch Office
So what exactly can a branch office do?
- Revenue-Generating Activities
You can provide professional services, carry out import/export, act as a buying/selling agent, conduct research, or offer consultancy.
- Activities Requiring Prior Approval
Manufacturing, retail trading, or anything beyond your original permission needs separate RBI approval.
Step-by-Step Process to Register a Branch Office in India
Let’s get practical. Here’s the actual roadmap:
- Filing the Application with RBI
File Form FNC with the RBI, along with the required documents.
- Approval from AD Category I Bank
The RBI will route its approval through an Authorised Dealer (AD) bank.
- Registration with RoC
After RBI approval, you must register with the RoC within 30 days.
- Obtaining PAN, TAN, GST
These tax registrations are essential before starting operations.
Documents Required to Set Up a Branch Office
Be ready with the paperwork!
1. Parent Company Documents
- Incorporation certificate
- Audited accounts of the last 5 years
2. Proposed Activities Details
A clear description of what the branch will do.
3. Declaration and Affidavits
Compliance declarations, affidavits of no criminal proceedings, etc.
Taxation for Branch Offices in India
Taxes are unavoidable, so let’s get real.
- Income Tax Applicability
Branch offices pay corporate tax on their India-sourced income.
- GST and Other Indirect Taxes
GST registration is mandatory if your branch is providing goods or services in India.
- Transfer Pricing Considerations
Arm’s length pricing rules apply to transactions with the parent company.
Banking and Financial Compliance
No branch can survive without a bank account.
- Opening Bank Accounts
Only after RBI approval, you can open current accounts in India.
- Foreign Exchange Compliance
Quarterly filings and annual activity certificates are a must under FEMA.
Labour Law and HR Compliance
Your employees need protection, too.
- Employee Contracts
Draft solid employment agreements covering statutory benefits.
- Provident Fund, ESI, Gratuity Obligations
Mandatory contributions are required if you employ Indian staff.
Common Challenges in Setting Up a Branch Office
- Regulatory Delays
Government processes can be slow — patience is key!
- Compliance Burdens
Indian compliance rules can feel like a labyrinth.
- Cultural Differences
Understanding Indian work culture and etiquette takes time.
How K.B. Chandna & Co. Can Help
Setting up a branch office sounds intimidating? That’s where experts come in.
- Advisory Support
K.B. Chandna & Co. has been supporting clients since 1961, offering deep expertise in branch office setups.
- End-to-End Registration Assistance
From RBI approvals to RoC filings — handled seamlessly.
- Ongoing Compliance
Their professional team ensures you stay compliant with all tax, FEMA, and labour laws.
Conclusion
Setting up a branch office in India is one of the smartest ways to enter the Indian market while maintaining control from your head office. With the right guidance, a strong local team, and compliance support, you can ride India’s growth wave with confidence.
FAQs
- What is the minimum capital required for a branch office?
There’s no minimum capital, but the parent company must have a net worth of at least USD 100,000. - How long does it take to set up a branch office in India?
Usually 2–3 months, depending on document completeness and RBI approvals. - Can a branch office buy property in India?
It can lease property but cannot buy immovable property except for own use with RBI permission. - What taxes does a branch office pay?
Corporate tax, GST, and other local taxes as applicable. - Who can approve a branch office in India?
The Reserve Bank of India (RBI) is the primary authority.