Foreign company project office in India — eligibility and compliance

Introduction

Foreign companies that receive contracts for executing specific projects in India may establish a Project Office (PO) to represent their interests and carry out activities directly connected with the execution of that project.

A Project Office is different from an Indian subsidiary, branch office, or liaison office. It is intended primarily as a project-specific presence rather than a vehicle for conducting an independent, general business in India.

The establishment and operation of a Project Office are governed primarily by the Foreign Exchange Management Act, 1999 (FEMA) and the applicable RBI framework. Once established in India, the foreign company must also comply with the applicable provisions of the Companies Act, 2013, taxation laws, accounting requirements, and other sector-specific regulations.

The RBI framework provides general permission for eligible foreign companies to establish Project Offices where specified conditions are satisfied. Where those conditions are not met, prior RBI approval may be required.

This guide explains the eligibility requirements, registration process, permitted activities, documents, banking arrangements, tax implications, annual compliances, and closure procedure for a foreign company Project Office in India.

What is a Project Office in India?

A Project Office is a place of business established in India by a foreign company to represent its interests while executing a specific project in India.

The concept is fundamentally project-linked. The office is expected to undertake activities connected with the project for which it has been established rather than operate as a general commercial establishment.

Under the FEMA framework, a Project Office is distinct from a Liaison Office and Branch Office.

Typical situations where a Project Office may be used

A foreign company may consider a Project Office where it has obtained a contract for:

Construction projects

Engineering projects

Infrastructure projects

Installation projects

Turnkey projects

Technical implementation projects

Large-scale equipment or technology projects

Government or PSU projects

Who Can Establish a Project Office?

A foreign company can generally establish a Project Office in India where it has secured a contract from an Indian company to execute a project in India and the project satisfies at least one of the prescribed funding or approval conditions.

The RBI framework provides general permission where:

The project is funded directly by inward remittance from abroad; or

The project is funded by a bilateral or multilateral International Financing Agency; or

The project has been cleared by an appropriate authority; or

The Indian company or entity awarding the contract has been granted a term loan by a Public Financial Institution or a bank in India for the project.

If these conditions are not satisfied, the foreign company may need to approach the RBI for approval.

General Permission vs RBI Approval

One of the most important considerations before establishing a Project Office is determining whether the proposed setup qualifies under the general permission route.

General Permission

Where the prescribed conditions are satisfied, the Project Office can generally be established under the RBI’s general permission framework through the designated Authorised Dealer (AD) Category-I Bank.

RBI Approval

If the eligibility conditions are not satisfied, the foreign company may need prior approval from the RBI.

Certain applicants and country-specific situations may also attract additional regulatory scrutiny or approval requirements. Businesses should therefore assess the applicant’s country, project, funding structure, and sector before proceeding.

Project Office vs Subsidiary vs Branch Office

Choosing the correct structure is important.

Particular	Project Office	Branch Office	Indian Subsidiary
Separate Indian legal entity	No	No	Yes
Purpose	Specific project	Broader permitted business	General business operations
Project-specific	Yes	No	No
Can conduct general business	No	Subject to permitted activities	Yes
Indian company incorporation	No	No	Yes
RBI/FEMA framework	Applicable	Applicable	FDI framework
Suitable for temporary project	Yes	Generally not project-specific	Usually long-term
Can raise Indian equity	No	No	Yes

A Project Office is therefore generally appropriate when the foreign company has a clearly identified project rather than a long-term plan to conduct an independent business in India.

Permitted Activities of a Project Office

The activities of a Project Office should remain connected with the specific project for which it has been established.

These may include:

Project management

Engineering supervision

Procurement related to the project

Technical implementation

Installation

Construction supervision

Coordination with the Indian customer

Payment of project-related expenses

Employment of personnel for project execution

Other activities directly incidental to project execution

The RBI application framework itself requires details of the specific project or contract, including the nature of the project, payment terms, duration, and proposed location.

What a Project Office Cannot Do

A Project Office should not be used as a substitute for an Indian subsidiary or general-purpose commercial branch.

It should not ordinarily:

Undertake unrelated business activities

Conduct independent commercial operations outside the project

Expand into unrelated projects without appropriate regulatory compliance

Operate beyond the scope of its approved/project-linked activities

The RBI has specifically clarified that project-level banking, accounting, and closure requirements are linked to the specific project and cannot simply be treated as a general entity-level arrangement for unrelated projects.

Documents Required

The exact documentation depends on the project and the route of establishment.

Common documents may include:

Foreign Parent Documents

Certificate of Incorporation

Memorandum and Articles of Association or equivalent constitutional documents

Details of directors

Registered office details

Board Resolution approving establishment of the Project Office

Audited financial statements

Details of the foreign company’s business

Project Documents

Project award letter

Contract with Indian customer

Detailed project description

Project value

Project duration

Payment terms

Funding details

Project location

Details of the Indian project-awarding entity

Indian Office Documents

Proposed office address

Lease/rent agreement

No-objection certificate from property owner, where applicable

Identity and address documents of authorised representatives

Foreign documents may need to be notarised, apostilled, or otherwise authenticated depending on the country of origin and applicable filing requirements.

Step-by-Step Project Office Registration Process

Step 1 — Evaluate Eligibility

Before filing anything, determine:

Whether there is a valid Indian project contract

Whether the project satisfies the funding/approval conditions

Whether the applicant’s country creates additional approval requirements

Whether sector-specific approvals are required

Step 2 — Appoint an AD Category-I Bank

The foreign company generally works with an Authorised Dealer Category-I Bank for the FEMA-related establishment and banking process.

The AD Bank plays an important role in reviewing documentation and facilitating permitted foreign exchange transactions.

Step 3 — Submit the Application

Where required, the prescribed application and supporting documents are submitted through the AD Bank under the applicable RBI framework.

The application should clearly describe:

Foreign company

Indian project

Contract

Funding

Project duration

Location

Proposed activities

Step 4 — Establish the Indian Office

After the necessary approval/permission, the foreign company can establish the Project Office at the approved location.

The office should maintain appropriate records relating to its Indian activities.

Step 5 — Registration Under the Companies Act

A Project Office constitutes a place of business of the foreign company in India and therefore falls within the foreign-company provisions of the Companies Act, 2013.

The foreign company is required to file prescribed particulars with the Registrar of Companies.

Under Section 380 and the Companies (Registration of Foreign Companies) Rules, the particulars of the place of business are required to be filed with the Registrar. The MCA’s current FC-1 instructions state that the particulars of the principal place of business must be filed within 30 days of establishment of the place of business in India.

Form FC-1

Form FC-1 is used for filing information relating to a foreign company establishing a place of business in India.

The filing generally contains information about:

Foreign company

Parent company’s registered office

Indian place of business

Principal business activities

Authorised representatives

Other prescribed particulars

The current MCA form framework expressly includes Project Office as a type of place of business in India.

Opening a Bank Account

A Project Office needs an appropriate bank account for project-related transactions.

The account is used for permitted receipts and expenses connected with the project.

According to RBI guidance, credits to the Project Office’s INR account may represent:

Funds received from the head office through normal banking channels for office expenses; and

Rupee amounts receivable under the project contract.

Debits are generally for local project expenses and permitted remittances pending completion or winding up of the project.

Foreign Currency Bank Account

In appropriate cases, a Project Office may maintain a non-interest-bearing foreign currency account with an AD Category-I Bank, subject to the applicable RBI conditions.

These conditions include requirements relating to:

RBI/general or specific permission

Project sanction

Contractual provision for foreign currency payments

Project-related credits and debits

Closure of the account after project completion

The RBI framework provides specific rules for foreign currency accounts maintained by Project Offices.

Taxation of a Project Office

A Project Office can create Indian tax exposure because it represents a foreign enterprise carrying on project-related activities in India.

Depending on the facts, the Project Office may have implications under:

Income-tax Act

GST law

TDS provisions

Transfer pricing provisions

Double Taxation Avoidance Agreement (DTAA)

The tax treatment depends on the nature of the project, activities performed, contractual structure, duration, and applicable treaty provisions.

Permanent Establishment Considerations

Foreign companies should carefully evaluate whether the Project Office constitutes a Permanent Establishment (PE) in India under the applicable DTAA.

The existence of a fixed place of business and project activities in India can be relevant to PE analysis.

Where a PE exists, India may have taxing rights over profits attributable to the Indian operations, subject to domestic law and the applicable treaty.

Therefore, the Project Office structure should be reviewed from both a FEMA and international tax perspective.

GST Compliance

GST applicability depends on the activities performed by the Project Office.

Where taxable supplies are made in India, the Project Office may need to consider:

GST registration

Tax invoices

GSTR-1

GSTR-3B

Input Tax Credit

E-invoicing, where applicable

Other applicable GST compliances

The exact treatment depends on the contractual arrangement and whether the Project Office is making taxable supplies.

Accounting & Books of Account

A foreign company carrying on business in India through a Project Office must maintain appropriate books and records relating to its Indian operations.

Under the Companies Act framework, provisions relating to maintenance of books of account apply to foreign companies to the extent prescribed. The MCA’s FC-4 guidance specifically refers to maintenance of books at the principal place of business in India in relation to monies received and spent, sales and purchases, and assets and liabilities connected with the Indian business.

Annual ROC Compliance

Foreign companies with a place of business in India are subject to prescribed annual filings.

Important filings may include:

Form FC-3

Annual accounts and related information, including details of places of business in India.

Form FC-4

Annual Return of the Foreign Company.

The MCA identifies FC-3 as the form for annual accounts and FC-4 as the annual return for a foreign company.

Additional filings may apply depending on changes in:

Registered office

Directors

Authorised representatives

Constitutional documents

Other particulars filed with the ROC

Other Important Compliance Areas

A Project Office may also need to consider:

PAN

TAN

Income Tax Return

TDS

GST

Professional Tax, where applicable

Shops & Establishments requirements

Labour law registrations

Employee payroll compliance

Local municipal requirements

Sector-specific licences

FEMA reporting

Transfer pricing documentation, where applicable

The actual requirements depend on the nature and scale of the project.

Police Registration Requirements

Additional police registration requirements can apply to applicants from certain specified countries.

RBI’s published FAQ states that applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong and Macau establishing a BO/LO/PO or other place of business are required to register with the concerned State Police Authorities under the specified framework.

Businesses should verify the current applicable requirements before commencement.

Remittance of Funds from Project Office

A Project Office may need to remit funds to its foreign parent during or after execution of the project.

Such remittances are subject to FEMA, tax, banking, and documentation requirements.

The RBI states that intermittent remittances pending completion or winding up may be permitted by the AD Bank subject to satisfaction regarding the bona fides of the transaction and supporting documentation, including confirmation that Indian liabilities such as taxes have been adequately provided for.

Can a Project Office Execute Multiple Projects?

A foreign company should not assume that establishing one Project Office automatically permits unrestricted execution of multiple unrelated projects.

The RBI has specifically addressed situations where a foreign entity receives another project after establishing a Project Office and has clarified that the project-level requirements cannot simply be treated as a single unrestricted entity-level arrangement.

Therefore, additional projects should be evaluated separately for FEMA, banking, accounting, tax, and ROC requirements.

Closure of Project Office

A Project Office is generally expected to close after completion of the project, subject to applicable regulatory and contractual requirements.

Before closure, the foreign company should generally address:

Completion of project obligations

Settlement of Indian liabilities

Income-tax matters

GST matters, where applicable

Employee dues

Bank account closure

Disposal/transfer of assets

Remittance of eligible surplus

ROC closure filings

FEMA/AD Bank requirements

The RBI framework specifically provides for closure-related procedures and documentation for Project Offices.

Common Mistakes Foreign Companies Should Avoid

Treating a Project Office Like a Subsidiary

A Project Office is not a separate Indian company.

Conducting Unrelated Business

Activities should remain connected with the project for which the office was established.

Ignoring ROC Registration

Obtaining the RBI/AD Bank permission does not eliminate the company’s obligations under the Companies Act.

Delaying FC-1 Filing

The MCA framework requires the prescribed information to be filed within the applicable timeline after establishment of the Indian place of business.

Ignoring Tax Registration

PAN, TAN, GST and other registrations should be evaluated before commencing taxable activities.

Mixing Project Funds

Project-related receipts and expenses should be properly documented and routed through the appropriate banking arrangements.

Continuing After Project Completion Without Review

Once the project is completed, the foreign company should evaluate closure or the appropriate structure for any continuing Indian operations.

Project Office Compliance Checklist

Compliance	Requirement
Project Contract	Required
FEMA/RBI Eligibility	Must be assessed
AD Category-I Bank	Required
RBI Approval	Where general permission conditions are not met
Indian Office	Required
ROC Registration	Required
Form FC-1	Within prescribed timeline
PAN/TAN	As applicable
Bank Account	Required for operations
Books of Account	Required
Income Tax	As applicable
GST	As applicable
TDS	As applicable
FC-3	Annual filing
FC-4	Annual filing
FEMA/Banking Compliance	Ongoing
Project Closure	On completion

Advantages of a Project Office

A Project Office can be useful for foreign companies because it:

Provides a formal Indian presence.

Allows execution of a specific Indian project.

Enables project-related banking operations.

Facilitates local hiring and project administration.

Provides a suitable structure for temporary project execution.

Avoids incorporating a separate Indian subsidiary where a project-specific presence is sufficient.

Conclusion

A Project Office in India can be an effective structure for a foreign company that has secured a specific project in India and needs a local presence to execute that contract.

However, establishing the office is not simply a matter of opening a local bank account. The foreign company must first assess its eligibility under the FEMA/RBI framework, determine whether it qualifies for general permission or requires RBI approval, establish appropriate banking arrangements, and complete registration with the Registrar of Companies under the foreign-company provisions of the Companies Act, 2013.

After establishment, the Project Office must also manage Indian tax, GST, accounting, employment, ROC, FEMA, and banking compliances. The office should remain focused on the project for which it was established, and the foreign company should plan its closure and repatriation of eligible funds once the project is completed.

For foreign companies entering India for a defined contract or infrastructure assignment, proper structuring at the beginning can prevent significant regulatory and tax complications later. A coordinated FEMA, ROC, tax, GST and accounting compliance framework is therefore essential throughout the project’s lifecycle.