What is a branch office in India?
A branch office is an extension of a foreign company in India that can carry out specified commercial activities, such as exports, imports and professional or consultancy services, with RBI permission. It is not a separate legal entity, so the parent is liable for its obligations and its profits are taxed at the rate for foreign companies.
Key takeaways
- A branch can earn income, unlike a liaison office
- It is not a separate legal entity, so the parent carries liability
- RBI permission and eligibility conditions apply
- Profits are taxed at foreign company rates, and annual filings are mandatory
A branch office lets a foreign company do business in India without forming a separate Indian company. It suits specific, defined activities where the parent wants direct control. It comes with RBI conditions and tax consequences you should understand before you apply.
1. What a branch office is
A branch office is part of the foreign company, not a separate legal entity. Because it is an extension of the parent, the parent is directly liable for the branch's actions and obligations. The branch can transact in India within the activities approved for it and can generate income, which a liaison office cannot do.
2. Permitted activities
Typical permitted activities include exporting and importing goods, rendering professional or consultancy services, carrying out research in the parent's field, promoting technical or financial collaborations, and providing support services for the parent's products. A branch may also act as a buying or selling agent. Retail trading and several other activities are restricted, so check the exact scope in your approval.
3. Eligibility and RBI approval
Applications are made to an authorised dealer bank, which forwards them to the RBI where required. Eligibility normally considers the parent's profit-making track record, net worth and standing in the home country. A branch in a sector subject to separate regulation may need extra approvals. See our branch office registration service for the typical document list and process.
4. Tax treatment
Income of a branch office is taxed under the rules for a foreign company, which differ from those for a domestic subsidiary. Remittances of profit to the parent follow the rules for branch profits. The branch also registers for GST where applicable and deducts TDS on payments. Because tax rates and treaty provisions change, take current advice and consider treaty relief where it applies.
5. Compliance after registration
A branch must register with the registrar of companies as a place of business of a foreign company, file annual accounts of the parent and the branch, and appoint an authorised representative in India. It also submits annual activity certificates to the RBI through its bank and files tax returns. These filings are separate from the parent's home-country reporting.
6. Branch versus subsidiary
A branch is quick to set up and simple to close, and the parent keeps full control. The trade-offs are unlimited parent liability, narrower permitted activities and a different tax profile. A subsidiary separates risk and allows broader activity. For long-term operations with local staff and assets, most groups prefer a subsidiary, and our guide on the wholly owned subsidiary route explains that choice.
7. Closing a branch
Closing a branch needs RBI approval for remittance of the winding-up proceeds, tax clearances and notification to the registrar. Start the process early, because pending tax or statutory filings can delay the final remittance. A well-planned closure protects the parent from residual claims.
Branch office (BO) registration in India
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Learn moreFrequently asked questions
What activities can a branch office carry out?
Typical permitted activities include export and import of goods, professional or consultancy services, research work in the parent's field, technical support for products and acting as buying or selling agent, subject to RBI conditions.
Can a branch office do retail trading or manufacturing?
Retail trading is not permitted for branches. Manufacturing is generally done through a subsidiary or in approved special economic zones, subject to the rules in force.
Is a branch office taxed differently?
Yes. Its income is taxed under the rules for foreign companies, which are usually at a different rate from domestic companies. Check current rates with a tax adviser.
Why do many foreign companies prefer a subsidiary?
A subsidiary limits the parent's liability, can undertake wider activities and can raise local capital, while a branch keeps liability with the parent but is simpler to close.
This guide is for general information only and is not legal, tax or financial advice. Rules and fees change; confirm current requirements with a qualified professional before acting.
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