Entity Guide

Liaison, Branch & Project Office in India

When a subsidiary is more than you need, a Liaison, Branch or Project Office lets a foreign company have a defined presence in India under RBI approval — for representation, permitted commercial activity or a specific contract.

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In short: A Liaison Office is a non-revenue representative presence; a Branch Office may carry out specified commercial activities like export/import, professional services and R&D; a Project Office is set up to execute a specific Indian contract. All three need RBI approval through an AD-bank and are taxed as a Permanent Establishment of the parent. For open-ended operations, a wholly owned subsidiary is usually a better fit.

Liaison Office (LO)

A Liaison Office is a representative office of a foreign parent — its role is limited to acting as a communication channel between the parent and Indian customers, suppliers and regulators.

Permitted: market research, promotion, export/import liaison and parent-Indian coordination
Prohibited: any commercial, trading or industrial activity or earning income in India
Funding: entirely by inward remittance from the parent
Eligibility: profit-making track record for 3 preceding years and net worth ≥ USD 50,000
Approval: RBI, via the AD Category-I bank; usual tenure 3 years, renewable

Branch Office (BO)

A Branch Office lets a foreign company undertake specific commercial activities in India, with income attributable to the branch taxed as a Permanent Establishment.

Permitted: export/import of goods, professional/consultancy services, research, IT/software, technical support to parent products and representing the parent as buying/selling agent
Prohibited: retail trading and manufacturing (manufacturing may be undertaken in a SEZ subject to conditions)
Eligibility: profit-making track record for 5 preceding years and net worth ≥ USD 100,000
Approval: RBI, via the AD Category-I bank; sensitive sectors need prior clearance
Compliance: annual audit and Annual Activity Certificate (AAC) filed with the AD bank and RBI

Project Office (PO)

A Project Office is set up specifically to execute a contract awarded to the foreign parent in India.

Eligibility: an Indian contract, funded by inward remittance, an international financing agency or a term loan from an Indian bank
Approval: general permission where conditions are met; otherwise RBI approval via AD-bank
Tenure: linked to the underlying contract; closes once the project ends
Repatriation: surplus of the project can be remitted after tax and audit

LO vs BO vs PO — side by side

Feature	Liaison	Branch	Project
Revenue in India	Not permitted	Permitted (specified activities)	Only from the project
Approval route	RBI via AD-bank	RBI via AD-bank	General permission / AD-bank
Tenure	3 years (renewable)	Ongoing subject to renewal	Duration of the project
Tax status	Not taxable (no income)	Taxed as foreign company PE	Taxed as PE on project income
Best for	Representation, market study	Services, export/import, R&D	Executing an Indian contract

Closure & repatriation

All three offices close through the AD-bank with a certificate from a Chartered Accountant, cancellation of registrations (PAN, GSTIN, professional tax) and a final AAC. Repatriation of the residual balance is allowed after tax and RBI clearance.

Frequently asked questions

What is the difference between a liaison, branch and project office?

A Liaison Office (LO) can only carry out representative activities — no revenue. A Branch Office (BO) can undertake specified commercial activities like export/import, professional services and R&D. A Project Office (PO) is set up to execute a specific contract in India.

Which is best for a foreign company entering India?

For sustained commercial operations, a wholly owned subsidiary is usually better than a branch or liaison office. Choose an LO, BO or PO only when the activity is limited, exploratory or contract-specific and does not justify a full Indian company.

Who approves an LO / BO / PO in India?

The RBI, through the Authorised Dealer (AD Category-I) bank of the applicant. Sensitive sectors (defence, telecom, private security, information & broadcasting, etc.) additionally require prior RBI/government approval.

Can a liaison office earn income in India?

No. A Liaison Office is prohibited from any commercial, trading or industrial activity in India and cannot earn income. It is funded entirely by inward remittances from the parent.

How is a branch office taxed in India?

A branch office is treated as a Permanent Establishment (PE) of the foreign parent and taxed as a foreign company at 35% plus surcharge and cess on its India-attributable profits, with an annual audit and transfer-pricing study.

Reviewed by CA Regi Tom Antony, Regi Tom Antony & Associates. Last updated: July 2026.

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