What is Foreign Branch Office in India A Foreign Branch Office is a full functional branch of the parent company in India. It can undertake any business activities in India, except manufacture of goods, as many be permitted by Reserve Bank of India (RBI). It can generate income from India and is liable to pay Income Tax in India. Activities Permitted:

  1. Export/Import of goods
  2. Rendering professional or consultancy services
  3. Carrying out research work, in which the parent company is engaged.
  4. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  5. Representing the parent company in India and acting as buying/selling agents in India.
  6. Rendering services in Information Technology and development of software in India.
  7. Rendering technical support to the products supplied by the parent/group companies.
  8. 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 Reserve Bank of India (RBI). Other Conditions

The branch office cannot expand its activities or undertake any new trading, commercial or industrial activity other than those which are expressly approved by the RBI
The entire expense of the branch office in India will be met either out of the funds received by it from abroad through normal banking channels or through income generated by it in India
The branch office cannot accept any deposits in India
The commission earned by the branch office from parties abroad for any agency business will be repatriated to India through normal banking channels.

Procedure for Setting up Branch Office in India
For setting up Foreign Branch Office in India and application is required to be made to the RBI in Form FNC-1. The application must include the following details:-

Operating history of the company worldwide
Proposed interests and activities in India
Reasons for wanting to open a branch office and
Any foreign exchange implications for such matters.

Branch Office on Stand Alone Basis

Such Branch Offices would be isolated and restricted to the Special Economic zone (SEZ) alone and no business activity/transaction will be allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.

No approval shall be necessary from RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities subject to specified conditions.

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