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DEFINITIONS:
"Branch Office" has the meaning assigned to it under the Companies Act, 1956.
"Liaison Office" refers to a place of business which acts as a channel of communication between the principal place of business or head office and entities in India but which does not undertake any commercial / trading / industrial activity, and maintains itself out of inward remittances received from abroad through normal banking channel.
"Project Office" refers to a place of business to represent the interests of the foreign company executing a project in India but excludes a Liaison Office.
PROCEDURE OF ESTABLISHMENT OF A BRANCH OR LIAISON OFFICE IN INDIA:
- A person resident outside India must make an application to the Reserve Bank of India in the prescribed form.
- A foreign company may open a ‘Project Office' in India if it has secured from an Indian company, a contract to execute a project in India.
- The foreign company will need to furnish a report to the concerned Regional Office of the Reserve Bank of India giving details of its name, address, contract amount, address and tenure of the place of business and nature of project undertaken.
PROHIBITIONS AND EXEMPTIONS:
Prohibitions:
- A person resident outside India shall not establish in India a branch or a liaison office or any other place of business without prior approval of the Reserve Bank of India;
- Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China shall not establish in India a branch or a liaison office or any other place of business without prior permission of the Reserve Bank of India.
Exemptions:
No approval of the Reserve Bank of India is required for the following:
- a banking company which has obtained necessary approval under the Banking Regulation Act, 1949;
- for a company to establish a branch / unit in Special Economic Zones to undertake manufacturing and service activities;
- an insurance company which has obtained approval from the Insurance Regulatory and Development Authority for establishing a Liaison Office in India.
ACTIVITIES PERMITTED TO BE UNDERTAKEN BY A PERSON RESIDENT OUTSIDE INDIA:
- For a Branch in India:
- Export / Import of goods;
- Professional / Consultancy services;
- Research work;
- Promoting technical / financial collaborations between Indian and overseas companies;
- Software development and Information Technology services;
- Technical support to products supplied by parent / group companies;
- Foreign airline / shipping company.
- For a Liaison Office in India:
- Representing the parent company in India;
- Promoting export / import from / to India;
- Promoting technical / financial collaborations between parent / group companies and companies in India;
- Acting as a communication channel between the parent and Indian companies.
REMITTANCE OF PROFIT OR SURPLUS:
A person resident outside India may remit outside India the profit of the branch or surplus of the Project on its completion, on production of certain documents, to the satisfaction of the authorized dealer through whom the remittance is effected.
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