India has rapidly emerged as one of the world’s most attractive destinations for international expansion. With its fast-growing economy, skilled workforce, and strong domestic demand, many foreign companies are exploring setting up a branch office in India as their first step toward entering the market. For businesses based in the UK and Europe, a branch office offers a practical and structured route to establish a direct presence while maintaining full control from the parent company.

This guide explains how foreign companies can open a branch office in India, its benefits, regulatory requirements, and the practical steps involved.

Why Consider Setting Up a Branch Office in India?

For UK and European companies looking to expand internationally, India provides both scale and opportunity. A branch office allows foreign entities to operate in India without incorporating a completely separate company. Instead, the branch functions as an extension of the parent business.

Many global companies choose this route because it allows them to explore the Indian market while maintaining brand identity and operational consistency. A branch office can help businesses build customer relationships, conduct market research, provide services, and manage business operations directly from India.

Additionally, India offers cost advantages, access to a highly qualified workforce, and improving ease of doing business, making it a strategic destination for expansion.

What is a Branch Office in India?

A branch office is a representative business presence established by a foreign company in India. It is not considered a separate legal entity from the parent company. Instead, it operates under the name and control of the foreign organisation.

When setting up a branch office in India, the parent company remains fully liable for the branch’s operations and financial commitments. The branch can conduct specific permitted activities but cannot engage in manufacturing or direct retail trading unless special approvals are obtained.

Permitted Activities for Branch Offices

Foreign companies can carry out several commercial activities through their Indian branch office. These typically include:

• Export and import of goods
• Providing professional or consultancy services
• Conducting research aligned with the parent company’s activities
• Promoting technical or financial collaborations
• Acting as a buying or selling agent in India
• Providing IT services and technical support

However, regulatory authorities place restrictions on manufacturing activities. Such operations must be outsourced to Indian manufacturers or handled through separate business structures.

Eligibility Criteria for Setting Up a Branch Office in India

Not every foreign company automatically qualifies for establishing a branch office. The Reserve Bank of India (RBI) sets specific financial and operational criteria.

Generally, the parent company must:

• Have a proven track record of business operations for at least five years
• Maintain a strong financial position
• Meet minimum net worth requirements (typically around USD 100,000 or equivalent)

These requirements ensure that only stable and credible businesses establish branch operations in India.

Approval Process and Regulatory Framework

Setting up a branch office in India involves approval from Indian regulatory authorities. The RBI governs foreign exchange and foreign business presence, while authorised banks facilitate the application process.

Foreign companies usually submit their application through an Authorised Dealer (AD) Bank in India. The application includes financial documents, incorporation certificates, board resolutions, and business activity details.

In most cases, approval is granted under the automatic route if the company operates in sectors that allow foreign investment. However, certain industries may require additional government clearance.

Once RBI approval is received, the branch office must register with the Registrar of Companies (ROC) under the Ministry of Corporate Affairs.

Key Steps in Setting Up a Branch Office in India

1. Assess Business Strategy

Companies must evaluate whether a branch office is the most suitable entry structure. For service-oriented and liaison-based operations, a branch office is often ideal.

2. Prepare Documentation

Businesses need to submit certified financial statements, constitutional documents, and board authorisations. These documents must usually be notarised and apostilled in the parent company’s country.

3. Submit RBI Application

The application is filed through an authorised Indian bank along with required supporting documents.

4. Obtain Registration with ROC

After RBI approval, companies must register their branch office under Indian corporate law.

5. Open Indian Bank Account

The branch office must open a bank account in India to conduct transactions and manage operational expenses.

6. Comply with Tax and Regulatory Requirements

Branch offices must obtain Permanent Account Number (PAN), Tax Deduction Account Number (TAN), and Goods and Services Tax (GST) registration where applicable.

Taxation of Branch Offices in India

Tax compliance is an essential consideration when setting up a branch office in India. Since a branch office is treated as an extension of the foreign company, its income generated in India is taxed as foreign company income.

Currently, branch office profits are subject to corporate tax applicable to foreign companies. Additionally, companies must comply with transfer pricing regulations if transactions occur between the parent company and the Indian branch.

UK and European businesses can benefit from Double Taxation Avoidance Agreements (DTAA) that India has signed with many countries. These agreements help avoid paying taxes on the same income in multiple jurisdictions.

Advantages of Branch Office Setup

Setting up a branch office in India offers several strategic benefits for foreign companies:

• Enables direct market presence without forming a separate company
• Simplifies control and management from the parent company
• Builds customer trust through local representation
• Supports long-term expansion and brand visibility
• Facilitates collaboration with Indian partners and suppliers

For many European and UK organisations, branch offices act as an effective testing ground before committing to larger investments.

Compliance and Reporting Requirements

Foreign branch offices must follow strict compliance regulations in India. These include:

• Filing annual activity certificates with RBI
• Submitting financial statements to the Registrar of Companies
• Maintaining proper accounting records
• Meeting taxation and audit obligations

Non-compliance can lead to penalties or cancellation of approvals, making professional guidance essential.

Challenges to Consider

While the Indian market offers significant opportunities, foreign companies should be aware of regulatory complexity, documentation requirements, and taxation obligations. Cultural differences and local market understanding also play a major role in successful expansion.

Working with experienced business consultants can help foreign companies navigate regulatory procedures, reduce compliance risks, and accelerate market entry.

How Stratrich Supports Foreign Companies

Stratrich specialises in assisting UK and European businesses with setting up a branch office in India. The company provides end-to-end advisory support, including regulatory approvals, compliance management, tax planning, and strategic market entry guidance.

With deep knowledge of Indian corporate regulations and international business requirements, Stratrich helps foreign companies establish their presence smoothly and efficiently.

Conclusion

India continues to attract global businesses due to its economic growth, skilled workforce, and expanding consumer base. For UK and European companies, setting up a branch office in India offers a structured and controlled entry into one of the world’s most promising markets.

By understanding regulatory requirements, tax obligations, and operational considerations, foreign businesses can leverage India’s potential for long-term growth. With the right professional support, establishing a branch office can become a powerful step toward global expansion and sustainable success.