How to Set Up a Branch Office in India by a Foreign Company?
India now ranks as the world’s 6th-largest economy, with a GDP of around ₹380 lakh crore in 2026. Foreign companies from the US, UK, Germany, Japan, and Singapore are actively expanding as they set up a branch office in India by a Foreign Company.
A branch office allows foreign companies to expand their operations, engage directly with clients, and retain full control through the parent company. It also removes the need to create a separate Indian entity. India’s 1.4 billion consumers, skilled workforce, and strong digital infrastructure make it a top destination for international expansion.
This complete 2026 guide to know about the foreign company branch office setup in India. It walks you through eligibility, the step-by-step procedure, cost, and compliance requirements.
What is a Branch Office in India?
A branch office is an overseas extension of a foreign parent company. Foreign companies set up branch offices to carry out permitted business activities in India under FEMA, 1999, and the Companies Act, 2013. These offices are regulated by the Reserve Bank of India (RBI). It is not a separate legal entity and can conduct permitted business activities. It operates under the same name and identity as the parent company.
In simple terms, a foreign branch office allows a non-Indian company to serve Indian clients, trade in goods, or offer technical and consulting services. The parent company retains full ownership and decision-making authority. Many foreign founders first evaluate how to register a company in India before choosing between a branch office, subsidiary, or LLP model.
Legal Framework Governing Branch Offices in India
A branch office in India must comply with multiple regulatory frameworks. Each authority plays a specific role in approving, registering, and monitoring the branch’s operations.
- Foreign Exchange Management Act (FEMA), 1999: Governs the entry, operations, and approval of branch offices by foreign companies. The RBI enforces FEMA rules.
- Companies Act, 2013: Covers the registration of the branch office with the Registrar of Companies (ROC) through Form FC-1.
- Reserve Bank of India (RBI): Grants initial approval under the Automatic Route or Government Route, depending on the sector and country.
- Ministry of Corporate Affairs (MCA): Oversees corporate compliance, annual filings, and disclosures.
- Income Tax Act, 1961: Governs the taxation of income earned by the branch in India.
- Goods and Services Tax (GST) Act, 2017: Applies if the branch supplies taxable goods or services in India.
To set up a branch office, the foreign company must first obtain approval from the RBI under FEMA, 1999. The application is routed through an Authorized Dealer (AD) Bank using Form FNC. Once approved, the branch must register with the ROC within 30 days by filing Form FC-1. The process typically takes 4 to 8 weeks to complete.
Note: Regulatory timelines, tax rates, and eligibility conditions may change based on updates from the RBI, MCA, and Income Tax authorities. Always consult a qualified professional before making decisions.
Eligibility Criteria to Register a Branch Office in India
The RBI has set strict eligibility rules to ensure only credible foreign companies can enter the Indian market.
Before registering a branch office in India, the parent company must meet the following requirements:
| Criteria | Requirement |
| Entity Type | Must be a body corporate incorporated outside India |
| Net Worth | Minimum of ₹85 lakh (USD 100,000), certified by a Chartered Accountant or CPA |
| Profit Track Record | Must have earned profits in each of the last 5 financial years in the home country |
| Business Activity | The proposed activity must fall within the RBI’s list of permitted activities for branch offices |
| Country Restrictions | Applicants from Pakistan, China, Bangladesh, Sri Lanka, Afghanistan, Iran, Hong Kong, or Macau need prior government approval |
| Name Requirement | The branch office must operate under the same name as the parent company |
| Authorized Signatory | The parent company must appoint an authorized representative in India via a Power of Attorney |
| Banker’s Report | A satisfactory banker’s report from the applicant’s home country bank is mandatory |
| FATF Compliance | Applicants must belong to a country that complies with Financial Action Task Force (FATF) norms |
Note: If the applicant company does not meet the financial benchmarks on its own, it can still qualify. In such cases, the applicant must submit a Letter of Comfort (LoC) from its parent or group company, confirming financial backing.
What Activities Can a Branch Office Do and Not Do in India?
A branch office in India can perform only specific activities approved by the RBI. Here’s a clear breakdown of what your branch office is allowed to do and what stays off-limits.
Permitted Activities
- Export and import of goods
- Professional and consulting services
- Research work related to the parent company’s business
- Technical and financial collaboration with Indian firms
- Acting as a buying or selling agent for the parent company
- IT services and software development
- Technical support for products supplied by the parent company
- Running offices of foreign airlines and shipping companies
- Providing after-sales service for products sold in India
- Promoting collaborations in specialised sectors like banking, insurance, and infrastructure (subject to sectoral regulators)
Activities Not Allowed
- Retail trading of any kind (including online retail)
- Direct or indirect manufacturing or processing in India (outsourcing to an Indian contractor is permitted)
- Real estate or agricultural activities
- Activities outside the scope approved by the RBI in the original Form FNC application
Choosing the right scope of activities is critical. Stepping outside the RBI’s approved list can lead to penalties or cancellation of the UIN. Many foreign companies prefer to set up a Private Limited Company in India as a subsidiary to gain greater operational flexibility. Service-driven businesses, on the other hand, typically opt for LLP Registration for easier scalability and compliance.
Which Approval Route Applies When Setting Up a Branch Office in India?
Before filing Form FNC, every foreign company must decide which approval route applies to its case. The RBI has defined two clear pathways under FEMA, 1999, and the choice depends on the sector, country of origin, and nature of business.
| Approval Route | When Applicable | Approval Timeline |
| Automatic Route | Sectors where 100% FDI is permitted | 2–4 weeks |
| Government Route | Sectors outside the automatic FDI list, NGOs, NPOs, or applicants from restricted jurisdictions | 6–8 weeks or more |
Most foreign companies qualify under the Automatic Route, which is faster and more straightforward. The Government Route applies when the proposed activity requires prior government approval. It also applies when the applicant belongs to a restricted country like Pakistan, China, Bangladesh, Sri Lanka, Afghanistan, Iran, Hong Kong, or Macau.
FDI caps and sector-specific conditions for branch offices are governed by India’s FEMA regulations, which define the compliance framework for foreign investments.
How Foreign Companies Open Branch Offices in India?
Opening a branch office in India by a foreign company involves RBI approval, ROC registration, and tax compliance. In practice, most foreign companies complete this process through an AD Bank with legal assistance. Here’s the complete procedure in eight simple steps:
Step 1. Appoint an Authorized Dealer (AD) Bank: Appoint an AD Category-I Bank in India. This bank acts as the official intermediary for all RBI communication and filings.
Step 2. File Form FNC: File Form FNC (Annex-1) with the AD Bank, along with notarized and apostilled supporting documents from the home country.
Step 3. Complete KYC Verification via SWIFT: The AD Bank verifies the parent company’s KYC through its foreign banker using SWIFT-based confirmation.
Step 4. RBI Approval and UIN Allotment: Under the Automatic Route, the AD Bank forwards the application to the RBI, which issues a Unique Identification Number (UIN).
Under the Government Route, the RBI reviews the case with the Ministry of Finance before approving.
Step 5. Receive the Approval Letter: Once the UIN is allotted, the AD Bank issues the formal approval letter, officially authorising the branch office.
Step 6. Register with the Registrar of Companies (ROC): Within 30 days of RBI approval, file Form FC-1 with the MCA, along with the RBI approval letter, MoA, AoA, and Power of Attorney, to complete the procedure to register a branch office in India.
Step 7. Apply for PAN, TAN, and GST Registration: Apply for PAN and TAN from the Income Tax Department. If the branch supplies taxable goods or services, complete GST Registration as well.
Step 8. Open an INR Bank Account: Open a non-interest-bearing INR current account through the same AD Bank. Some applicants, especially from restricted countries, may also need to register with local state police authorities.
The entire setup typically takes 4 to 8 weeks, depending on the approval route and document verification speed.
Cost of Setting Up a Branch Office in India
The fees of setting up a branch office in India depend on several factors, including business activity, location, professional fees, and document legalisation charges.
Here’s a detailed breakdown of the major cost components to set up a branch office in India:
| Cost Component | Approximate Range (INR) |
| RBI Application and AD Bank Processing | ₹25,000 – ₹75,000 (varies by bank) |
| Document Legalisation (Apostille / Notarization) | ₹4,200 – ₹42,000 per document |
| Translation Charges (if documents are not in English) | ₹1,000 – ₹5,000 per document |
| ROC Filing (Form FC-1 & FC-4) | ₹6,000 – ₹10,000 (government fees) |
| Professional Fees (CA / CS / Legal Consultant) | ₹75,000 – ₹2,50,000+ |
| Registered Office Setup (Physical or Virtual Office) | ₹10,000 – ₹1,00,000+ |
| PAN, TAN, and GST Registration | ₹2,000 – ₹10,000 |
| Digital Signature Certificate (DSC) for Signatory | ₹1,500 – ₹3,000 |
| Annual Compliance (ITR, AAC, ROC Returns) | ₹50,000 – ₹1,50,000 per year |
Many foreign founders use a virtual office for the registered address to reduce costs. It helps reduce setup costs while meeting the regulatory requirements. The overall investment usually stays between ₹2 lakh and ₹7 lakh for a standard branch office, excluding rental and operational expenses.
Tax and Compliance Rules for a Branch Office in India
A branch office in India is treated as a Permanent Establishment (PE) of the foreign parent company under the Income Tax Act, 1961. It is taxed only on income earned from its Indian operations, not on the parent company’s global income.
Here’s a clear overview of the tax rates and compliance framework applicable to a branch office in India:
| Tax / Compliance Type | Applicable Rate / Rule |
| Corporate Income Tax | ~35% (plus applicable surcharge and 4% cess) |
| Minimum Alternate Tax (MAT) | Not applicable under the new tax regime in most cases |
| GST on Services | 18% |
| GST on Goods | 5% – 28% (based on the HSN code) |
| TDS | As per applicable sections of the Income Tax Act |
| Transfer Pricing | Applies to all transactions with the parent company |
| DTAA Benefits | Available under treaties with 85+ countries |
| Profit Repatriation Tax | No dividend tax; profits remittable after paying Indian taxes (with CA certificate) |
Annual Compliance Calendar for Branch Offices in India
A branch office must meet recurring statutory filings under FEMA, the Companies Act, and Income Tax rules. Here’s a quick calendar of the key deadlines:
| Compliance Requirement | Form / Authority | Due Date |
| ROC Annual Return | Form FC-4 (MCA) | By 30 May |
| Annual Activity Certificate (AAC) | Submitted via AD Bank to RBI | By the end of February |
| Income Tax Return | ITR-6 | September / October (based on audit requirement) |
| GST Returns | GSTR-1 & GSTR-3B | Monthly or Quarterly |
| Transfer Pricing Report | Form 3CEB | By 31 October |
| Tax Audit Report (if turnover > ₹1 crore) | Form 3CA/3CB + 3CD | By 30 September |
Any delay in filings or tax payments can attract penalties that may extend up to ₹5 lakh per default, depending on the nature and severity of the non-compliance. It may also lead to regulatory scrutiny from the RBI, ROC, and the Income Tax Department.
Common Mistakes to Avoid When Setting Up a Branch Office in India
Many foreign companies face unexpected delays or compliance issues during the branch office setup process. Being aware of these common pitfalls helps you stay on track and avoid costly errors. Here are the key mistakes to watch out for:
- Submitting outdated or incomplete financial statements during the Form FNC filing
- Missing the 30-day ROC filing deadline after receiving RBI approval
- Selecting the wrong approval route (Automatic vs Government Route)
- Using unverified or unauthenticated address documents for the registered office
- Delaying PAN, TAN, or GST registration after ROC approval
- Ignoring the FATF compliance requirement for the applicant’s country
- Skipping the apostille or notarization step for foreign-origin documents
- Misinterpreting permitted activities, leading to scope violations under FEMA
- Failing to maintain consistent transfer pricing documentation for parent-branch transactions
- Missing the Annual Activity Certificate (AAC) filing through the AD Bank
Avoiding these mistakes from the start saves time, money, and regulatory friction. At RegisterKaro, our experts handle every step of your branch office setup, from Form FNC filing and RBI liaison to ROC registration and post-setup tax compliance. We make sure your foreign branch office in India stays fully compliant from day one. Contact us today for a free consultation with our cross-border specialists.
