Foreign companies seeking to establish a presence in India have multiple options depending on their business objectives, duration of operations, and regulatory appetite. These include setting up a Liaison Office (LO), Branch Office (BO), Wholly Owned Subsidiary (WOS), or a Project Office (PO).
Each structure carries distinct advantages, limitations, regulatory approvals, and tax implications. This guide summarizes and compares the four key models under Indian law, particularly under the Companies Act, 2013, FEMA, Income Tax Act, and updated RBI Master Directions (2025).
Entry Structures for Foreign Companies in India (2025 Update)
| Aspect | Liaison Office (LO) | Branch Office (BO) | Wholly Owned Subsidiary (WOS) | Project Office (PO) |
|---|---|---|---|---|
| Legal Basis | FEMA Regulations, 2016; RBI Master Direction (Mar 2025) | Same as LO | Companies Act, 2013; FDI under FEMA/NDI Rules | Same as LO/BO under FEMA 2016 |
| Income Permitted | ❌ Not allowed | ✅ Yes (except retail/manufacturing/NBFC) | ✅ Full business operations | ✅ Limited to project scope only |
| Minimum Track Record & Net Worth | 3 years & USD 50,000 or LOC | 5 years & USD 100,000 or LOC | Sector-specific FDI policy applies | Project must be backed by inward remittance or loan from Indian FI/IFC |
| RBI Approval Route | UIN through AD bank | UIN through AD bank | FDI via AD Bank (auto or Govt route) | UIN through AD bank |
| Bank Accounts | One INR & one foreign currency account | Current & FCY allowed | Full FCY/INR access | FCY accounts allowed subject to contract |
| Borrowing | ❌ Not permitted | ✅ With AD/RBI permission | ✅ Full borrowing access (including ECB norms) | ❌ Generally not allowed |
| Audit & Filings | Annual audit, Form 49C, AAC with RBI | Statutory/tax audit, AAC, ROC & RBI filings | ROC + FC-GPR/FC-TRS + tax + TP audit if required | AAC & financials via AD + DGIT filings |
| Taxation | N/A | ~41.82% as foreign company | ~25% + surcharge as Indian co. | Same as BO (foreign entity) |
| Repatriation | Closure proceeds post-compliances | Profits repatriable post-tax | Dividends, fees, royalties allowed (TP compliant) | Closure-linked, post-tax permitted |
| Exit Protocol | File AAC, close via RBI & ROC | RBI + ROC filings | Strike off or winding-up via Co. Act | Close post-project with AD bank and ROC |
| 2025 Enhancements | Streamlined UIN + revised compounding rules (RBI Apr 2025) | Same + improved AD bank route for delays | Clarity on downstream investments & filings | Greater operational renewal flexibility |
Use Cases: What Works Best for Whom?
| Scenario | Recommended Structure |
|---|---|
| Testing waters, brand awareness | Liaison Office |
| Tech support, consulting, R&D | Branch Office |
| Full-fledged business ops, Indian branding | Wholly Owned Subsidiary |
| Construction or infra project (short-term) | Project Office |
Key Legal & Practical Takeaways for 2025
- The RBI Master Direction (2025) consolidates LO/BO/PO norms, improving digital compliance.
- FDI automatic vs government routes continue to apply to WOS depending on sector.
- Compounding of FEMA violations is now more transparent and time-bound.
- Banking and account operations are now more digitised and flexible across all structures.
Final Thoughts
India continues to welcome foreign investment across regulated structures, whether for short-term visibility, long-term scale, or sector-specific delivery. Understanding the compliance load, FDI strategy, tax implications, and closure mechanisms can help you choose the most efficient route to market.
Disclaimer: This blog is for informational purposes only and based on laws and circulars available as of July 2025. For customised guidance, structuring advice, or filings, please reach out to KTB Law Offices.
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