Today India being an ideal investment destination is indeed based on the fact that the country is a large growing economy, with an abundance of natural resources, world-class scientific, technical and managerial manpower, highly skilled labour that is cost-effective and an independent judiciary. Indian market opportunities most definitely occupy a prominent position on the investment maps of foreign investors. As the inflow of foreign investment promotes faster growth and impetus in rapidly mounting economies, India has been a major recipient of FDI inflows in the majority of its sectors. The work ethics that India follows, coupled with its other merits in the areas such as capabilities, quality of work, and qualifications, have all attracted foreign investments making a beeline for doing business in India.

As an Indian Company:
Under the provisions of the Company Act, a foreign company can commence operations in India through incorporation of a company, anywhere in the country. Foreign equity in such Indian companies can be up to 100 percent depending upon the business plan of the foreign investor, prevailing foreign investment policies of the Government and receipt of requisite approvals.

100% subsidiaries in India are permitted for foreign companies. In the trading sector, foreign investment is allowed under the automatic route permitting up to 51% foreign equity.


Indian Investment opportunities and growth attracts many established foreign entities to set up branch office in India. Reserve Bank of India (RBI –Apex Bank of India) grants permission for the setting up of foreign branch offices in India. Following the approval, it must be registered under the Indian Companies Act, 2013, after which it can carry on its business activities in the same way as a domestic company. It can remit profit of the branch, net of applicable Indian taxes outside India, subject to RBI guidelines. However, a branch office is not allowed to carry out manufacturing activities on its own. It can subcontract these to an Indian manufacturer.

Foreign companies dealing with manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:
• Export/Import of goods.
• Rendering professional or consultancy services.
• Carrying out research work, in which the parent company is engaged.
• Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
• Representing the parent company in India and acting as buying/selling agents in India.
• Rendering services in Information Technology and development of software in India.
• Rendering technical support to the products supplied by the parent/ group companies.
• Foreign airline/shipping Company.
• Foreign Banks.

However, a general permission is required to carry out all the above activities. On the other hand, if the branch office needs to carry out activities other than the above, it is required to obtain the specific permission from the RBI.

Procedural aspects for establishing Branch Office in India-

• It is governed mainly by the Department of Industrial Policy and Promotion in addition to the other procedural aspects in FEMA, 1999.
• Under the regulation of Foreign Exchange Management Act, 1999, applications from foreign countries for establishing branch offices in India are considered by the Reserve Bank under two routes-

a. Reserve Bank Route – principal business of the foreign entity under sectors where 100% foreign direct investment (FDI) is permissible under the automatic route.
b. Government Route – principal business of the foreign entity under sectors where 100% foreign direct investment (FDI) is not permissible under the automatic route. Application entities falling under this category - non-government organisations, non-profit organisations, government bodies are considered by the Reserve Bank in consultation with the Government of India, Ministry of Finance.

Eligibility for opening of the Branch Office in India by a Foreign Company, documentation etc.

• The application shall be in the prescribed form FNC, duly completed in all respects and signed by the authorised signatory of the foreign entity in the home country. It should be submitted along with the Letter of Comfort to the Designated Category-1 bank for onward transmission to the Reserve Bank along with their comments and recommendations.
• Documents to be submitted are:-

a. Copies of last three years audited Balance Sheet, Profit & Loss Account of the Parent Company.
b. Undertaking that the BO will not carry out any trading and commercial activity in India.
c. Translated English version of the Company’s Certificate of Incorporation/ Registration, Memorandum & Articles of Association
d. English version of the Copy of the Board resolution for opening branch office in India.
e. Reasons for opening branch office in India like business transacted, details of customers, vendors etc.
f. Company’s profile with brief history, product details, group companies etc.
g. Special Power of Attorney in favor of a local representative duly notarized.

• There should be a profit making track record during the immediately preceding five financial years in the home country.
• The net worth shall not be less than USD 100,000 or its equivalent.

Applications for additional offices or undertaking additional activities:

• Requests for establishing additional branch office may be submitted to Reserve Bank of India.
• Fresh FNC form duly signed by the authorised signatory of the foreign entity should be submitted.
• The applicant may identify one of its offices in India as the Nodal Office, which will co-ordinate the activities of all of its offices in India.
• Requests for undertaking additional activities may be submitted through the designated AD category – 1 bank to the Chief Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division - justifying the needs.

To wind up a Branch Office, the request may be submitted to the designated AD category – 1 bank or the Nodal office, as the case may be.

The application may be submitted along with the following documents –

• Copy of the Reserve Bank’s approval from sectoral regulators for establishing the Branch office.
• Auditor’s certificate-

a. Indicating the manner in which remittable amount has been arrived and supported by the statement of assets and liabilities of the applicant and the manner of its disposal;
b. Confirming that all liabilities in India including arrears of gratuity and other benefits to employees have been either fully met or adequately provided for;
c. Confirming that no income accruing from sources outside India has remained un-repatriated to India

• No-objection or Tax Clearance Certificate from the Income Tax authority for the remittance.
• Confirmation from the applicant or the parent company that no legal proceedings in any court in India are pending against the Branch office.
• A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act.


Foreign investments are approved through two routes as under:

• Automatic Route: Approvals for foreign equity up to 26 percent, 50 percent, 51 percent, 74 percent and 100 percent are given on an automatic basis subject to fulfillment of prescribed parameters in certain industries as specified by the Government. RBI accords automatic approval to all such cases.
• Government Approval: Approval in all other cases where the proposed foreign equity exceeds 26 percent, 50 percent, 51 percent or 74 percent in the specified industries or if the industry is not in the specified list, it requires prior specific approval from Foreign Investment Promotion Board (“FIPB”).

Joint Venture with an Indian Entity
Foreign Companies can function in India by forming a strategic association with one or more Indian partners. There are no separate laws with regard to joint ventures in India. Even with up to 100% foreign equity, the companies incorporated in India are treated in the same way as domestic companies. In a typical joint venture:
1 Two parties incorporate a company in India and subscribe to the shares of the joint venture company in agreed proportion, in cash, and set up business in India.
2 A new company is formed and business of one party is transferred to the new company and as consideration for such transfer, shares are issued by the company and subscribed by that party. The other party subscribes for the shares in cash.
3 Promoter shareholder of an existing Indian company and a third party, who/which may be individual/company, collaborate to jointly carry on the business of that company and its shares are taken by the said third party through payment in cash.

Advantages of Joint Venture
A Joint venture company is one of the most preferred forms of entry model for foreign companies interested in doing business in India. It entails the following advantages for a foreign investor:
1 Accessible financial resource of the Indian partners.
2 Established contacts of the Indian partners which help in smoothening the process of setting up of operations.
3 Established distribution/ marketing set up of the Indian partner.

Procedure for setting up a Joint Venture:
The broad steps involved in setting up a joint venture company in India are outlined as under:

Step 1 Locate an Indian partner
Step 2 Form a Joint Venture Agreement setting out the rights and responsibilities of the Parties
Step 3 In case the Joint Venture Company is a new company, incorporate a new company (public or private) and invest in the agreed ratio. However, in case the investment is being made in an existing company by acquisition of shares by the foreign company, complete the share acquisition procedure.
Step 4 Commence Joint Venture Business


Foreign companies interested in embarking on particular projects in India can set up temporary project offices in India. Earlier provisions of FEMA required specific approvals from RBI for the establishment of a Project Office. Recently, the RBI has accorded general permission to foreign companies for establishing Project Offices in India subject to the following conditions:

Foreign companies dealing with manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:
• It has secured from an Indian company a contract to execute a project in India
• The project is funded by inward remittance from abroad or bilateral / multilateral International Finance Agency or the project has been cleared by an appropriate authority or the contracting entity has been granted term loan by a Public Financial Institution or a bank in India for the project.
• Intimation is required to be filed with the regional office of RBI in the prescribed manner. Further, until recently an approval from the RBI was required for:
• opening of foreign currency accounts by Project Offices in India; and/ or
• Intermittent remittances to be made by such Project Offices.

As an added relaxation procedure, the Authorized Dealers (bankers) have been empowered to open foreign currency accounts for the Project Offices as well as permit intermittent remittances by Project Offices without approval from the RBI, subject to fulfillment of certain conditions.


For the convenience of business operations in India, foreign companies can set up Liaison offices in the country. The Liaison office acts as a communication channel between the principal place of business or the head office abroad, and the entities in India. A Liaison office which is mainly set up for exploring the investment climate is different from the branch office. Liaison offices gather market intelligence materials and establish business contacts in India. It does not undertake commercial or industrial activities or any trading activities that a branch office is authorized to take up. Liaison office maintains itself out of the inward remittances arising from abroad through the normal banking channels. Any foreign company intending to open a liaison office is required to obtain RBI’s approval which is granted for one to three years and renewed on its expiry. After getting the approval of RBI, it has to register itself with the Registrar of Companies, New Delhi.

Liaison office is permitted to undertake the following activities-

1 Representing the parent company/group companies in India.
2 Promoting export/import, from/to India.
3 Promoting technical/financial collaborations between parent/group companies and companies in India.
4 Acting as a communication channel between the parent company and Indian companies.

To set up a business, an application has to be made in the prescribed form FNC-1 and should be submitted to the Chief General Manager, Exchange Control Department of RBI, and the following documents enclosed-

1 Letter from the Principal Officer of the Parent Company to RBI.
2 Letter of Authority from the Parent Company in favor of a local representative in India.
3 The latest audited balance sheet of the Parent Company and / or last three years’ copies of the audited balance sheet and profit and loss account.
4 The copies of the translated English version of the Certificate of Incorporation or the Registration Certificate issued by the Registrar of Companies attained during the company registration in Bangalore, India.
5 Copies of the English version of the Memorandum and Articles of Association (Charter Documents) of the Parent Company attested by Indian Embassy/Notary Public in the country of registration.
6 Reasons for opening the liaison office.
7 Company’s profile with brief history like product details etc.
8 Special power of attorney.

To be eligible for opening a liaison office, it has to comply with the following criteria:

1 RBI’s approval, where Principal business of the foreign entity falls under sectors where 100 % foreign direct investment (FDI) is permissible under the automatic route.
2 There should be a profit making track record during the immediately preceding three financial years in the home country.
3 The net worth should not be less than USD 50,000 or its equivalent.

Liaison office is subject to the following restrictions:

1 It cannot carry out any commercial operations in India.
2 It must maintain a QA22C account with the bank. This is a special account that only allows inflows from abroad.
3 It can neither borrow, nor lend money.
4 All expenses of the office must be met through inward remittances to the office from abroad (parent company) through the bank. It is not subject to taxation in India.
5 The office must file regular returns to the RBI. Such returns must include audited annual accounts and an activity report for the year.

The following are exempted - for which no approval is required from RBI-

1 For banking companies established under the Banking Regulation Act, 1949.
2 For companies to establish branch in SEZ to undertake manufacturing and services activities.
3 Insurance companies which has obtained approval from Insurance Regulation and Development Authority.

On closure of liaison office RBI grants permission to the liaison office to repatriate the balance in the Indian Bank Account to the parent company.