Liaison, Branch and Project Offices Under FEMA
An LO only represents, a BO earns from a fixed list, a PO exists for one project. The numbers differ for each.
A foreign company that wants a presence in India without incorporating a subsidiary has three options under FEMA: a liaison office (LO), a branch office (BO) or a project office (PO). They differ in one thing above all: how much business each is allowed to do. An LO only represents, a BO may earn income from a fixed list of activities, and a PO exists for one project.
The AD Category-I bank is the gatekeeper for most applications, which is why the topic sits in the CCFE syllabus under FEMA for entities. The rules below are from RBI's Master Direction on establishing a BO, LO or PO, which implements the FEMA 22(R) regulations of 2016.
You save ₹200 today
- 5 full-length mocks
- 553 questions, chapter by chapter
- Rate & risk calculations
One payment, no subscription · Valid for 2 months
LO, BO and PO Side by Side
Purpose
Liaison office
Channel of communication with the parent; no commercial, trading or industrial activity
Branch office
Specified income-earning activities on behalf of the parent
Project office
Executing a specific project in India
Profit track record (home country)
Liaison office
Preceding 3 financial years
Branch office
Preceding 5 financial years
Project office
Not applicable; needs a contract from an Indian company
Net worth
Liaison office
At least USD 50,000
Branch office
At least USD 100,000
Project office
Not applicable
Approval
Liaison office
AD Category-I bank (RBI in specified cases)
Branch office
AD Category-I bank (RBI in specified cases)
Project office
General permission if the funding conditions are met
Funding
Liaison office
Remittances from head office through banking channels
Branch office
Own income plus head office funds
Project office
Inward remittance, multilateral funding or Indian term loan to the project awarder
Validity
Liaison office
Generally 3 years; 2 years for NBFCs and construction and development companies
Branch office
No fixed term stated
Project office
Tenure of the project
| Liaison office | Branch office | Project office | |
|---|---|---|---|
| Purpose | Channel of communication with the parent; no commercial, trading or industrial activity | Specified income-earning activities on behalf of the parent | Executing a specific project in India |
| Profit track record (home country) | Preceding 3 financial years | Preceding 5 financial years | Not applicable; needs a contract from an Indian company |
| Net worth | At least USD 50,000 | At least USD 100,000 | Not applicable |
| Approval | AD Category-I bank (RBI in specified cases) | AD Category-I bank (RBI in specified cases) | General permission if the funding conditions are met |
| Funding | Remittances from head office through banking channels | Own income plus head office funds | Inward remittance, multilateral funding or Indian term loan to the project awarder |
| Validity | Generally 3 years; 2 years for NBFCs and construction and development companies | No fixed term stated | Tenure of the project |
Eligibility Details Candidates Miss
- check_circleNet worth means paid-up capital plus free reserves, less intangible assets, per the latest audited balance sheet.
- check_circleA subsidiary that does not meet the profit or net worth test may apply with a letter of comfort from its parent or group company, provided the parent itself meets the criteria.
- check_circleBefore granting approval, the AD bank sends the application (Form FNC) to RBI, which allots a Unique Identification Number (UIN) to the office.
- check_circleRBI's prior approval is required where the applicant is a citizen of, or registered in, Pakistan; where an applicant from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau seeks an office in Jammu and Kashmir, the North East region or the Andaman and Nicobar Islands; and where the principal business is defence, telecom, private security or information and broadcasting.
What Each Office May Do
- Liaison office
- Represent the parent or group in India, promote exports and imports, promote technical or financial collaboration, and act as a communication channel between the parent and Indian companies. Its expenses are met from head office remittances; it earns no income in India.
- Branch office
- Export and import of goods; professional or consultancy services; research in the parent's line of business; promoting collaborations; acting as buying or selling agent; IT and software development; technical support for the parent's products; and representing a foreign airline or shipping company. Retail trading is not permitted. Profits may be remitted abroad net of Indian taxes, against an auditor's certificate and audited accounts.
- Branch office in an SEZ
- General permission exists for a BO in a Special Economic Zone to undertake manufacturing and service activities, in sectors open to 100% FDI.
- Project office
- Represents the foreign company executing a contract awarded by an Indian company. The AD bank may open up to two non-interest-bearing foreign currency accounts for a PO.
Eligibility, activities and AAC filing. No signup.
Annual Compliance and Closure
- check_circleEvery BO, LO and PO submits an Annual Activity Certificate (AAC) as at 31 March each year. BOs and LOs file it with the AD bank and the Director General of Income Tax (International Taxation), New Delhi; POs file with the AD bank only.
- check_circleWhere a foreign entity has several offices, one nodal office files a combined AAC for all of them.
- check_circleAn LO's validity can be extended by the AD bank if AACs have been filed and the office has been run in line with the approval.
- check_circleClosure goes through the AD bank, with the original approval, an auditor's certificate on how assets were disposed of and liabilities met, and confirmation that no legal proceedings are pending in India.
How CCFE Tests This
Questions pair a number with an office type (3 years and USD 50,000 for an LO; 5 years and USD 100,000 for a BO) and swap them in the wrong options. Others ask what an LO may not do (any income-earning activity), who files the combined AAC (the nodal office), or what triggers a PO (a contract from an Indian company). The common trap is assuming a PO needs RBI approval; it works under general permission when the funding conditions are met.
A Rewrite Is in Draft
In October 2025 RBI published draft regulations to replace the 2016 framework, proposing relaxed eligibility, a principle-based approach and simpler closure. The figures on this page are from the 2016 framework; check RBI's site for whether the new regulations have been notified before relying on them.
FAQs
What is the difference between a liaison office and a branch office?expand_more
A liaison office only represents the parent and cannot earn income in India. A branch office may earn income from a list of permitted activities, such as export and import, consultancy and IT services, and can remit profits abroad after tax.
What is the net worth requirement for a liaison office in India?expand_more
At least USD 50,000, with a profit-making record in the preceding three financial years in the home country. A branch office needs USD 100,000 and five years of profits.
Does a project office need RBI approval?expand_more
Not in the usual case. A foreign company with a contract from an Indian company can set up a PO under general permission, provided the project is funded by inward remittance, a bilateral or multilateral agency, or a term loan from an Indian bank or public financial institution to the awarding company.
Who submits the Annual Activity Certificate for a liaison office?expand_more
The LO itself, as at 31 March each year, to its AD bank and the Director General of Income Tax (International Taxation). If the foreign entity has several offices, a nodal office submits one combined AAC.
Next steps
- FDI Routesarrow_forward
- Reporting Formsarrow_forward
- Compounding & Penaltiesarrow_forward
- FEMA & Trade Finance Conceptsarrow_forward
100 questions across all six modules, timed and scored.