By Naraway
In this article
India has about 2.01 million active companies. In the twelve months to March 2026, only 101 new ones were foreign companies in the legal sense: overseas businesses registering a branch, liaison or project office in India.
That was a nine-year high, up from 57 the year before. It is still a small number for a country that took in US$94.53 billion of foreign direct investment in the same year. The gap says something about how foreign businesses actually choose to enter, and the reason sits in the rules for each option.
Sources: MCA via IBEF and Angel One; RBI compounding orders; Income Tax Department.
Four Ways In
Liaison office
A representative presence. Cannot earn income in India. Parent needs three years of profits and US$50,000 net worth. Approved for three years at a time.
Branch office
Part of the foreign company, limited to activities RBI lists. Parent needs five years of profits and US$100,000 net worth. Taxed as a foreign company: 35% base rate.
Project office
Opened for one Indian contract and earns only from that project. Needs the signed contract and approved funding for it.
Subsidiary
A separate Indian company with a foreign owner. No parent profit test, trades within FDI rules, and can opt for the 22% domestic base rate.
Sources: RBI, FEMA 22(R)/2016-RB, Regulation 4; Income Tax Department; India Briefing. Tax rates exclude surcharge and cess.
The first three are offices of the foreign company. They need approval under foreign exchange rules, they can only do what those rules allow, and the profit tests shut out most young businesses. A subsidiary has none of those tests. It is an Indian company that happens to have a foreign owner.
Who Still Opens an Office
Offices suit businesses that want a presence before they want revenue, or that already sell into India from abroad and need a local base. The countries leading FY26 registrations reflect that:
The calendar-year data shows the same picture: 92 foreign companies registered in 2025, 87% of them in services, mostly in Maharashtra, Karnataka, Delhi and Gujarat. Manufacturing registrations rose from two in 2024 to ten.
The stock is less flattering. India had 5,302 registered foreign companies in December 2025, but only 3,285 of them, 62%, were active. Many offices are opened, used for a few years and left dormant.
Where Offices Go Wrong
RBI's published compounding orders, the settlements companies pay for breaching foreign exchange rules, include 73 orders against branch, liaison and project offices since March 2020. They total ₹4.6 crore.
The most common breach is the simplest: a late Annual Activity Certificate, which every branch and liaison office must file with its audited accounts by 30 September. The larger amounts come from offices that drifted beyond what they were allowed to do:
| Office | Order date | Rule breached | Amount |
|---|---|---|---|
| Kuwait Airways Company | 17 May 2021 | Office without approval; branch conditions | ₹2.82 crore |
| PVH (India) Limited, branch office | 21 Sep 2022 | Activities beyond those permitted | ₹43.2 lakh |
| The Population Council, liaison office | 25 Nov 2022 | Liaison office approval period | ₹26.9 lakh |
Source: RBI compounding order summaries, FEMA 22(R)/2016-RB.
Why Most Operating Businesses Pick a Subsidiary
For a business that plans to sell, hire and invoice in India, the subsidiary removes three problems at once. There is no parent profit test. The activities are not limited to an RBI list. And the tax base rate can be 22% instead of 35%.
It brings its own obligations: at least one director who has lived in India for 182 days in the financial year, an Indian auditor, company law filings, and the foreign investment reports RBI tracks after every share issue. Those obligations are routine. Getting the structure wrong at the start is not, because converting an office into a company later means closing one and opening the other.
Why the Choice Matters More Now
The registration numbers are rising because the market is. India drew a record US$94.53 billion of gross FDI in FY26, its free trade agreement with the UK came into force on 15 July 2026, and the IMF expects 7% growth this year. Germany's registrations went from one to eight in a single year.
Which structure fits depends on what the India operation will actually do in its first three years: only represent, sell, build, or hire at scale. Each answer points to a different entity, a different tax position and a different set of approvals, and the cheapest one on day one is often the most expensive to undo.
Part of Naraway's research series India Market Entry in 2026.
In short
A foreign business can enter India through a liaison office, a branch office, a project office or an Indian subsidiary. Offices need RBI approval through a bank and, for a branch, a five-year profit record and US$100,000 net worth (three years and US$50,000 for a liaison office). Only 101 foreign companies registered such an office in FY 2025-26, a nine-year high. A wholly owned subsidiary is an Indian company, taxed at domestic rates and free to trade, which is why most operating businesses choose it.
- 101 foreign companies registered a branch, liaison or project office in India in FY26, up from 57 in FY25 and a nine-year high.
- Of 5,302 registered foreign companies in India, only 3,285 (62%) were active in December 2025.
- A branch needs a five-year profit record and US$100,000 net worth; a liaison office three years and US$50,000.
- A liaison office cannot earn income in India, and its approval runs for three years at a time.
- Branches are taxed as foreign companies at a 35% base rate; an Indian subsidiary can opt for 22%.
Sources
- Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 (FEMA 22(R)/2016-RB), Reserve Bank of India
- Foreign company registrations in India hit nine-year high in FY26, IBEF
- Foreign Company Registrations in India Reach 5-Year Peak in 2025, Angel One
- Summary information on compounding orders issued on or after March 1, 2020, Reserve Bank of India
- Tax rates for foreign companies, Income Tax Department
- India's corporate taxation framework, India Briefing
Frequently Asked Questions
What is the difference between a branch office and a subsidiary in India?
A branch is part of the foreign company, needs RBI approval through a bank, can only do activities RBI permits, and is taxed as a foreign company. A subsidiary is a separate Indian company owned by the foreign parent, can trade freely within FDI rules, and is taxed as a domestic company.
Who can open a liaison office in India?
A foreign entity with a profit-making record in each of the three preceding financial years and net worth of at least US$50,000, or a subsidiary backed by a letter of comfort from a parent that meets those tests. The approval is for three years and can be extended.
Can a liaison office earn money in India?
No. A liaison office may only carry out the activities RBI lists for it, such as representing the parent and promoting collaboration. It cannot undertake commercial activity or earn income in India.
How many foreign companies register in India each year?
101 foreign companies registered a branch, liaison or project office in FY 2025-26, according to MCA data, up from 57 in FY25. Singapore, the US and the UK led.
Which tax rate applies to a branch office in India?
A branch is taxed as a foreign company, at a 35% base rate plus surcharge and cess. A domestic company, including a foreign-owned subsidiary, can opt for the 22% concessional base rate.
