Foreign companies, including those engaged in manufacturing and trading activities, are able to establish branch offices to carry out business activities substantially the same as those carried out by their parent company. Branches are permitted to carry out trading activities, but may not engage in manufacturing activities on their own — these may be subcontracted to Indian manufacturers. Branch offices operating in SEZs, however, are permitted to undertake manufacturing and service activities in sectors with 100 percent FDI approval.

PERMISSIBLE ACTIVATES:

a). Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent/group companies and undertake the following activities in India:

  1. Export / Import of goods.

  2. Rendering professional or consultancy services.

  3. Carrying out research work, in areas 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 agent in India.

  6. Rendering services in information technology and development of software in India.

  7. Rendering technical support to the products supplied by parent/group companies.

  8. Foreign airline / shipping company.

Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.

NON- PERMISSIBLE ACTIVATES:

  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.

 

IMPORTANT POINTS:

  1. Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.

  2. Branch Office in Special Economic Zones (SEZs)

Reserve Bank has given general permission to foreign companies for establishing branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and service activities. The general permission is subject to the following conditions:

  1. such units are functioning in those sectors where 100 per cent FDI is permitted;

  2. such units comply with part XI of the Companies Act,1956 (Section 592 to 602);

  3. such units function on a stand-alone basis.

  1. Branches of Foreign Banks

Foreign banks do not require separate approval under FEMA, for opening branch office in India. Such banks are, however, required to obtain necessary approval under the provisions of the Banking Regulation Act, 1949, from Department of Banking Regulation, Reserve Bank.