Key takeaways
- A liaison office needs 3 years of profits and USD 50,000 net worth; a branch 5 years and USD 100,000.
- A liaison office cannot earn income; it is generally valid for 3 years.
- From tax year 2026-27 the liaison office statement is Form 162 (formerly Form 49C).
At a glance
| Liaison office | Branch office | Project office | |
|---|---|---|---|
| Purpose | Communication channel only | Permitted commercial activities | One specific project in India |
| Can earn income? | No | Yes | Yes, from the project |
| Track record | Profits in the last 3 years; net worth USD 50,000+ | Profits in the last 5 years; net worth USD 100,000+ | A contract from an Indian company |
| Validity | Usually 3 years, extendable | No fixed term | Life of the project |
| Taxed? | No income, but annual statement | As a foreign company (35% + surcharge, cess) | As a foreign company on project profit |
A company that doesn’t meet the track record can apply with a letter of comfort from its parent.
What a liaison office can — and can’t — do
- Can: represent the parent, promote exports and imports, promote technical or financial collaboration, and act as a communication channel.
- Can’t: trade, sign contracts as a business, earn any income or borrow. Its costs are met from the head office’s remittances.
- Validity is generally three years (two for NBFCs and construction companies); the bank can extend it if annual activity certificates are up to date.
When you need prior RBI approval
- Applicants from Pakistan — always.
- Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau — for offices in Jammu & Kashmir, the North-East or Andaman & Nicobar.
- Defence, telecom, private security and information & broadcasting businesses; NGOs and foreign government bodies.
- Sectors not open to 100% FDI under the automatic route go through the government.
- Everything else is processed by your authorised dealer bank.
Annual compliance
- Annual activity certificate for the year to 31 March, certified by a CA, to the bank and the income-tax department (International Taxation).
- Liaison offices: the annual statement to the income-tax department — Form 162 under the Income-tax Rules, 2026 (formerly Form 49C), due within eight months of the year end.
- Branch and project offices: audited accounts, income-tax return, transfer pricing and GST as applicable.
A change on the way
RBI published draft regulations in October 2025 that would drop the profit and net-worth tests in favour of a list of prohibited activities. Until they are notified, the rules above apply.
Office or subsidiary?
Most foreign companies that plan to sell in India choose a subsidiary — it’s taxed at a lower rate and limits liability. Compare options in the structure chooser.
Sources
- RBI Master Direction — branch, liaison and project offices
- Income Tax Department — Form 162 FAQs
- Vinod Kothari — RBI draft branch/office regulations (Oct 2025)
Frequently asked questions
What is the difference between a liaison office and a branch office in India?
A liaison office is only a communication channel and cannot earn income; a branch office can carry on permitted commercial activities and is taxed as a foreign company. A branch needs five years of profits and USD 100,000 net worth; a liaison office three years and USD 50,000.
How long is a liaison office valid in India?
Generally three years (two years for NBFCs and construction/development companies). The authorised dealer bank can extend it, provided annual activity certificates have been filed.
What replaced Form 49C?
From tax year 2026-27, a liaison office files its annual statement in Form 162 under the Income-tax Rules, 2026, within eight months of the end of the year.
Does a liaison office pay tax in India?
It should have no income, so normally no tax — but it must file annual statements with the income-tax department and an annual activity certificate with its bank.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.