A branch office, in relation to a company, means any establishment described as such by the company. These are those establishments which carry on the same activity or business that their head office or holding company undertakes.
Foreign companies are allowed to set up a branch office in India. But unlike the case of setting up a company, a branch office requires an approval from the Reserve Bank of India (RBI). Only upon getting the branch license from RBI, the foreign company is allowed to commence the operations.
1. The name of the Branch office shall be same as parent company.
2. The governing Body for the Branch office License is RBI.
3. Spreading its business to diverse locations and thus increasing the customer base.
4. All the expenses of the Branch office are met by the head office, if it does not have the revenue from Indian operations.
1. The applicant company must be a body corporate incorporated outside India;
2. The name of the Indian branch office must be the same as the parent company (if the branch office does not have revenue from India operations, its expenses must be met by the head office);
3. The net worth of the branch office must not be less than US $100,000; and
4. The parent company should have a profit making record in the immediately preceding five financial years in the home country.
a) Approval from RBI :
Permission for setting up branch offices is granted by the Foreign Exchange Department, Reserve Bank of India.
b) Track Record of the company :
Reserve Bank of India considers the track record of the applicant company, the activity of the company proposing to set up office in India as well as the financial position of the company while scrutinizing the application.
c) Reserve Bank Route :
Where principal business of the foreign entity falls under sectors where 100 % Foreign Direct Investment (FDI) is permissible under the automatic route.
d) Government Route :
Where principal business of the foreign entity falls under the sectors where 100% FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non–Government Organizations / Non–Profit Organizations / Government Bodies / Departments are considecoral by the Reserve Bank in consultation with the Ministry of Finance, Government of India.
Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India and undertake the following activities in India;
1. Foreign Airline/shipping Company.
2. Export/Import of goods
3. Representing the parent company in India and acting as buying/selling agent in India.
4. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
5. Rendering professional or consultancy services.
6. Carrying out research work, in which the parent company is engaged.
7. Rendering services in Information Technology and development of software in India.
8. Rendering technical support to the products supplied by parent/group companies.
Foreign companies are prohibited doing following activities through its branch office in India:
1. Retail trading activities of any nature is not allowed for a Branch Office in India.
2. A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly.
3. Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.