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How can a Foreign Company set up its business operations in India?

Foreign Companies can set up their business operations in India through:

  • Liaison Office: Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office can not undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India.  Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers.  It can promote export/import from/to India and also facilitate technical/financial collaboration between the parent company and companies in India.
  • Project Office: Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. Reserve Bank of India (RBI) has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices cannot undertake or carry on any activity other than the activity relating and incidental to the execution of the project.  Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.
  • Branch Office:  Foreign    companies    engaged   in 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 a 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.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer.  Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the RBI.

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