Subsidiary, LLP, branch, liaison or project office: choosing how to enter India

Short answer: a foreign company can be present in India as a wholly owned subsidiary, an LLP, a branch office, a liaison office or a project office. The subsidiary needs no approval in most sectors and is taxed at 25.168% under the concessional regime; a branch needs AD bank approval, may do only listed activities, and is taxed at 35% plus surcharge and cess; a liaison office may not earn income at all. The choice usually follows from what the India team will do and who it will contract with.

The five forms at a glance

The branch office list, from the RBI Master Direction, is: export and import of goods; professional or consultancy services (not legal practice); research in the parent's field; promoting technical or financial collaborations; acting as buying or selling agent; IT and software development services; technical support for the group's products; and representing a foreign airline or shipping company. It does not include manufacturing — except for a branch in a special economic zone, which has general permission for manufacturing and services in sectors open to 100% FDI — or retail trading.

Who approves what

A subsidiary under the automatic route needs no prior approval. Money comes in through an AD bank, shares are allotted, and Form FC-GPR is filed within 30 days of allotment. Approval is needed only for sectors on the government route, or where the investor has land-bordering beneficial ownership under Press Note 3.

Branch and liaison offices are governed by the FEMA branch office regulations of 2016 and the RBI Master Direction (last updated 18 May 2021). The application is made in Form FNC to the AD bank, which approves after due diligence and obtains a unique identification number from the RBI.

Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan must also register with the state police.

Eligibility for a branch is a profit-making track record in each of the previous five financial years and net worth of at least USD 100,000; for a liaison office, three years and USD 50,000. An applicant that falls short and is itself part of a group may rely on a letter of comfort from a parent or group company that qualifies. A liaison office approval is valid for three years (two for non-banking finance companies and construction and development businesses), and the AD bank may extend it.

The RBI published draft replacement regulations on 3 October 2025 that would remove the net-worth and profit thresholds and the time limit on liaison offices. We have not found them notified as at the date of this note; until they are, the 2016 framework applies.

Tax: the headline rate and the full chain

The headline rate is not the whole comparison.

• Subsidiary dividends bear withholding tax when paid to the parent: 20% plus surcharge and cess under s.115A of the 1961 Act (s.207 of the 2025 Act), or the lower treaty rate where the parent holds a tax residency certificate. The full mechanics are in dividends to a foreign parent.
• Branch profits are taxed once. India has no separate tax on remitting them to the head office.
• LLP profits are taxed in the LLP, and the partners' share is exempt in their hands under s.10(2A) of the 1961 Act; the 2025 Act equivalent should be checked before relying on a section number. The foreign partner's home country may tax the share differently.
• A liaison office files an annual statement of its activities with the tax department — Form 49C under s.285 of the 1961 Act, due within eight months of the end of the financial year. Confirm the 2025 Act form and section before filing for tax year 2026-27.

Permanent establishment

Permanent establishment (PE) is the treaty concept that decides whether India may tax the foreign parent's own profits.

The liaison office row is where problems arise. A liaison office staffed by salespeople who in practice negotiate deals is both outside its FEMA approval and a PE. The wider exposure for a group with Indian operations is covered in PE risk for a foreign parent.

Repatriation and exit

Compliance load

• Subsidiary. The full Companies Act calendar — board meetings, statutory audit, AOC-4 and MGT-7 — plus the resident director requirement, FEMA reporting (FC-GPR, the annual FLA return), income tax, transfer pricing on dealings with the parent (Form 3CEB for FY 2025-26, Form 48 from tax year 2026-27), and GST.
• LLP. Lighter company law: an annual statement of account and an annual return, with audit only above set turnover or contribution levels. At least one designated partner resident in India for 120 days in the financial year.
• Branch. Registration with the ROC in Form FC-1 within 30 days of establishment, FC-3 (accounts) within six months of the year end, FC-4 (annual return) within 60 days, an annual activity certificate to the AD bank and the tax department, a tax return, and GST.
• Liaison office. FC-1, FC-3 and FC-4, the annual activity certificate, Form 49C, and a single bank account whose only credits are head office remittances.
• Project office. Annual activity certificate to the AD bank, tax return, and project-level accounts.

A subsidiary's director must include one who stays in India for at least 182 days in the financial year; the practical options are in the resident director requirement. A branch or liaison office has no board and so no equivalent rule, though it needs an authorised representative in India for the ROC.

When each makes sense

• Subsidiary — where the business will contract with Indian customers, hire at scale, hold assets, raise outside capital or offer employee equity, or where the parent wants Indian liabilities kept in an Indian entity. It is the usual answer for a service centre or captive, and the sequence is in setting up a company in India as a non-resident.
• LLP — where the activity is in an eligible sector, no equity will ever be issued, and the parent's home jurisdiction treats the LLP's profit share favourably.
• Branch — where the activity is on the RBI's list, the parent wants a single legal entity for contracting, and the higher headline rate is acceptable against the absence of dividend withholding.
• Liaison office — for market study and representation before a decision to trade, accepting that it cannot earn income and that its approval runs for a fixed period.
• Project office — for one defined contract, with a planned end.

A liaison office can later be upgraded to a branch, and a closing branch's assets can be sold to a new subsidiary for no more than book value, so an early choice is not permanent. It does, however, set the tax and PE position for the years it runs. Our foreign subsidiary practice handles each of these forms.

This note compares the five entry forms as at 23 September 2026 under the RBI Master Direction as last updated on 18 May 2021, the FEMA (Non-debt Instruments) Rules as amended, and tax rates for tax year 2026-27. It is a comparison, not a recommendation for any business. The draft 2025 branch office regulations, if notified, would change the eligibility and approval rows; treaty terms change the PE and dividend rows. Confirm the current rules, your treaty and your planned activity before applying.