India has become one of the fastest-growing economies, attracting foreign companies to expand their presence. Opening a Branch Office (BO) is a popular route for foreign entities to operate in India without incorporating a separate subsidiary.
However, it comes with specific taxation rules and compliance requirements that must be followed strictly.
A Branch Office is an extension of a foreign company in India that can:
Represent the parent company
Carry out limited commercial activities
Promote business and provide after-sales support
📌 Note: A Branch Office is not allowed to conduct retail trading or manufacturing in India directly.
Before applying, the foreign company must ensure:
Profit-making track record of at least 5 years in its home country
Minimum net worth of USD 100,000 (or equivalent)
RBI (Reserve Bank of India) approval or automatic route as per sector
Application to RBI 🏦
Submit Form FNC (Foreign National Company application) through an Authorized Dealer bank.
Approval from RBI
RBI examines the application based on sector, business activity, and financial standing.
Registration with ROC 📂
File e-Form FC-1 under the Companies Act, 2013 with the Ministry of Corporate Affairs (MCA).
Tax Registrations
Obtain PAN, TAN, and GST (if applicable).
A Branch Office is treated as a foreign company for tax purposes.
| Tax Type | Rate |
|---|---|
| Corporate Tax | 40% plus applicable surcharge and cess |
| GST | Applicable on supply of goods/services |
| Withholding Tax | On payments to the parent company |
| Transfer Pricing | Applies on transactions with parent company/related parties |
📌 No tax benefits available under Startup India or MSME schemes, as BO is not a domestic entity.
To remain compliant in India, a Branch Office must:
Maintain proper books of accounts 📚
File Annual Activity Certificate with RBI 📄
File Annual Return and Balance Sheet with MCA 🏛
Pay applicable income tax and file annual tax returns 💵
Comply with GST filings (if registered) 🧾
Adhere to FEMA guidelines for foreign exchange transactions 💱
Failure to comply with RBI, MCA, or tax regulations may lead to:
Monetary penalties 💰
Cancellation of Branch Office permission 🚫
Legal proceedings ⚖️
Opening a Branch Office in India is an effective way for foreign companies to establish their presence without setting up a wholly owned subsidiary. However, strict tax and compliance requirements apply, and the entity is taxed at a higher rate compared to domestic companies.
Foreign companies considering a Branch Office in India must carefully evaluate:
Eligibility and RBI approval
Higher tax rates compared to Indian companies
Ongoing compliance obligations with RBI, MCA, and tax authorities