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Liason Office

Any Foreign Entity looking for an office in India as a sourcing division or to facilitate export or to test the Indian market with a prospective business venture to improve the relations with the authorities and business community or to have the presence in the country from worldwide business outlook, Liaison Office (LO) is the best option. A Liaison Office or a Representative Office can undertake only liaison activities, which means that it can act as a channel of communication between the Head Office (out of India) and parties in India. It is not allowed to undertake any commercial activity in India. As there is no income of Liaison Office of its own, its expenses are to be met entirely through inward remittances from the parent company outside India received in Convertible Foreign Exchange. In terms of permitted activities, a liaison office can do the following listed activities in India: Act as a channel between the Head office and parties in India. Collect market information and provide information about the products to Indian customers. Promote exports/Import from/to India Promote technical/financial collaboration between parent company and Indian customers. Open Non-Interest bearing INR current account with Category-1 Banks in India If the foreign entity’s perspective to enter India covers in the above listed permitted activities, then Liaison Office is the best option. Establishment of Liaison Office/Representative Office in India is governed by Reserve Bank of India (RBI) together with Ministry of Finance, Government of India. The rules and regulations in respect to Liaison Offices are framed under Foreign Exchange Management Act, 1999 and Circulars/Notifications issued by RBI from time to time. India market entry for global companies

There are 2 routes to establish a Liaison Office in India:

RBI Route

If the industry the Foreign Entity is in, comes in the specified industries for 100% automatic route of investment as per Foreign Direct Investment Policy then the Liaison Office will be approved by the Reserve Bank of India.

Government Route

If the industry the Foreign Entity is in, doesn’t come in 100% automatic route and Non Profit and Non-Government Organization, then the Liaison Office will be approved by Reserve Bank of India in consultation of the Ministry of Finance, Government of India.


In addition to above, Reserve Bank of India has prescribed eligibility criteria for Foreign Entities to apply for Liaison Office.
The application of Foreign Entities satisfying the below criteria will be processed:
1. Profit making track record during immediate preceding 3 financial years.
2. Net worth as per latest audited balance sheet certified by CPA should not be less than US $50,000 or its equivalent amount in home country.
The other prequisites of Liaison Office application are to have a designated manager of the proposed Liaison Office and a prospective office space of the proposed Liaison Office which can be provided by consultants who help the foreign entities in applying for LO as part of their services which is called Virtual Office or Service Office Services.

The Application has to be made to RBI through Authorized Dealer Category-1 Bank in India. RBI will allot a UIN (Unique Identification Number) on approval of application. Once approved the intimation has to be given to Registrar of Companies (ROC) and Director General of Police (DGP). An application has to be sen to the Income Tax Department to allot Permanent Account Number (PAN). Annual Compliance A Liaison office has to do minimal annual compliances as compared to other forms of business in India. As annual compliance, an annual activity certificate issued by a Practicing Chartered Accountant at the end of March 31, need to be submitted to the Authorized Dealer Category-1 Bank, Directorate General of Income Tax (International Taxation), concerned Registrar of Companies and Director General of Police, on or before 30th September of each financial year (In India the Financial Year is April to March) including audited receipts and payments account. Tenure Approval is generally given for a period of 3 years and extension is granted on the basis of Track record of annual activity certificates. Record of the account maintained with the designated bank as per the terms and conditions of original approval.

In case the designated AD Category I bank notices any adverse findings by the auditor in respect of LO/BO or the LO/BO is defaulting in submission of AACs, then the same should be immediately reported to the Reserve Bank.

No, if an LO/BO wants to open more than one account it has to obtain prior permission of the Reserve Bank through its AD Category I bank justifying the reason for additional account.

Only applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong, Kong, Macau and Pakistan shall have to register with the State Police authorities. Copy of approval letter for persons from these countries shall be marked by the AD Category I bank to the Ministry of Home Affairs, Internal Security Division – I, Government of India, New Delhi for necessary action and record. All other countries are exempted from registering with the State Police authorities.

The BO /PO of a foreign entity, excluding an LO, are permitted to acquire property for their own use and to carry out permitted/incidental activities but not for leasing or renting out the property. However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Nepal, Bhutan, China, Hong Kong and Macau require prior approval of the Reserve Bank to acquire immovable property in India for a BO/PO. BOs/LOs/POs have general permission to carry out permitted/ incidental activities from leased property subject to lease period not exceeding five years.

Yes provided the bank account is re-designated as a BO account.

Yes, the AD bank should ensure compliance to the extant instructions issued by the Department of Banking Regulation.

Yes, however, BO’s transactions should be restricted to its designated INR account and it should not put any transactions through the agent’s foreign currency account.

Yes, please refer to the Master Directions on Reporting (https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10202). The registration is required to be done once the AD bank’s approval for the establishment of office is issued.

The credits to the account should represent the funds received from head office through normal banking channels for meeting the expenses of the office and/or the rupee amounts receivable if any, under the contract and no other amount should be credited without prior permission of the Reserve Bank. Similarly debits to this account could be raised only for meeting the local expenses of the office and intermittent remittances pending winding up / completion of the project.

For the intermittent remittances, the AD bank should be satisfied with the bonafides of the transaction and ensure submission of the following documents:

a. An Auditors’ / Chartered Accountants’ Certificate to the effect that sufficient provisions have been made to meet the liabilities in India including Income Tax, etc.

b. An undertaking from the PO that the remittance will not, in any way, affect the completion of the project in India and that any shortfall of funds for meeting any liability in India will be met by inward remittance from abroad.

Wherever the BO or PO is required to remit funds outside India, within the applicable guidelines under FEMA, they may do so not necessarily through the designated AD Category I bank but through any AD Category I bank of its choice subject to obtaining no objection certificate (NOC) from the designated AD Category I bank. The remittances have to be for transactions settling on Cash / Tom / Spot basis only. The remittance has to be through banking channel in either of the two methods:

(1) The designated AD category I bank will transfer equivalent INR amount to the transaction handling bank. The transaction handling bank can remit the amount to the overseas parent office of BO / PO through SWIFT. However, the transaction handling bank will have to ensure KYC compliance and the necessary documentation. It will also be required to share the SWIFT message along with the details like UIN No, beneficiary and remittance details with the designated AD category I bank.

(2) The designated AD category I bank will transfer equivalent INR amount to the transaction handling bank. The transaction handling bank will then credit the NOSTRO account of the designated AD Category I bank which in turn will remit the amount to the final beneficiary.

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