Chartered Accountant Delhi

One can enter the Indian market in  more ways than one. These are:

Liaison office
Branch Office
100% Owned subsidiary
Project Office

Joint venture with an Indian partner Foreign Direct Investment (FDI) Public Holding of Part Share Appointing Agent or Distributor Maintenance and support arrangement

Liaison Office
A Liaison Office is in the nature of a representative office set up primarily to explore and understand the business and investment climate. A liaison Office is not permitted to undertake any commercial / trading/ industrial activity, directly or indirectly, and is required to maintain itself out of inward remittances received from abroad through normal banking channels.
Activities Permitted:

Representing in India the parent Company / group Companies Promoting export/ import from/ to India Promoting technical / financial collaborations between the parent / group companies and companies in India Acting as a communication channel between the parent company and Indian companies


Approval / Incorporation
Any foreign company intending to open a liaison Office in India is required to obtain prior approval from the RBI, the apex foreign exchange management authority in India. Approval is usually granted for three years and can be renewed on expiry thereof.
In addition to above, the foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC).

Suitability of a Liaison Office

The liaison office generally acts as a communication channel between the parent company overseas and its present or prospective customers in India. The liaison office can also be set up to establish business contacts or gather market intelligence to promote the products or services of the overseas parent company.

 I n   s h o r t
Liaison Office procure order & send the same to parent company, parent company to supply the ordered goods and payment can pursued by liaison office. However payment too be directly remitted to the parent company. No Income Tax in India, only liability of Fringe Benefit Tax (FBT) will arise.

Branch Office
A branch would mean an establishment carrying on substantially the same activity as its Head Office.

Activities Permitted:
As per the guidelines laid down by the RBI, the Branch Office in India is allowed to carry on only the following activities:

Approval / Incorporation
Foreign companies intending to open a Branch Office in India need to obtain prior permission of RBI which would encompass even approval to the scope of activities that are intended to be carried out in India.         
In addition to above, the foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC).

Typical Points about  Branch Office

Repatriation of Profits
A Branch Office can remit the profits (net of any withholding tax) generated out of its operations in India on production of the prescribed documents, and on establishing that it has earned a net profit by undertaking the permitted activities. The Branch Office need not retain any profits as reserves in India

 I n   s h o r tt 
Branch Office can do only business activities similar to that to its parent company. No new activity permitted. In the highest tax slab of Indian Income Tax Lab(40%).    The profit so earned net of taxes can be remitted to parent company.

100% Owned subsidiary

Approval / Incorporation
The Company is required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC).

Typical Points about  100% Subsidiary

In   s h o r tt

100% Subsidiary can take up any business in India. In the tax slab of domestic Indian company Tax Lab(30%).  The profit so earned after payment of 30% + 15% can be remitted to parent company in the form of dividend.

Project Office
Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in 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 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.

Joint Venture With An Indian Partner
Foreign Companies can set up their operations in India by forging strategic alliances with Indian partners.
Joint Venture may entail the following advantages for a foreign investor:

Foreign Direct Investment (FDI)
India's foreign trade policy has been formulated with a view to invite and encourage Foreign Direct Investment in India (FDI). The process of regulation and approval has been substantially liberalized. The Reserve Bank of India has prescribed the administrative and compliance aspects of FDI.
FDI can be divided into two broad categories: investment under automatic route and investment through prior approval of Government.

FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.

FDI in activities not covered under the automatic route, requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB). Approvals of composite proposals involving foreign investment/foreign technical collaboration are also granted on the recommendations of the FIPB.

Investment by way of Share Acquisition
A foreign investing company is entitled to acquire the shares of an Indian company without obtaining any prior permission of the FIPB subject to prescribed parameters/ guidelines. If the acquisition of shares directly or indirectly results in the acquisition of a company listed on the stock exchange, it would require the approval of the Security Exchange Board of India.