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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
Branch Office
A branch would mean an establishment carrying on substantially the same activity as its Head Office.
As per the guidelines laid down by the RBI, the Branch Office in India is allowed to carry on only the following activities:
- Export / Import of goods
- Rendering professional or consultancy services
- Carrying out research work, in which the parent company is engaged
- Promoting technical or financial collaboration between Indian companies and parent or overseas group companies.
- Representing the parent company in India and acting as buying / selling agent in India.
- Rendering services in Information Technology and development of software in India.
- Rendering technical support to the products supplied by parent / group companies.
100% Owned subsidiary.
- Form a Company and the parent Company will hold 100% of Shares in the Company.
- The Company can take up any business in India.
- NO RBI permission.
- Will be treated as Domestic Company
- Tax Rate Slab will be the same as that of Indian corporates.
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:
- Established distribution/ marketing set up of the Indian partner
- Available financial resource of the Indian partners
- Established contacts of the Indian partners which help smoothen the process of setting up of operations
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.
Procedure under automatic route
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.
Procedure under Government approval
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.
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