§ 1
When a project office is the right vehicle
Project offices suit engineering, construction, installation and turnkey contracts awarded by Indian companies. General permission applies where the project is funded by inward remittance from abroad, or by a bilateral or multilateral agency, or the project has been cleared by an Indian authority, or the Indian company awarding the contract has a term loan from an Indian bank or public financial institution for it.
The office can open bank accounts for the project, employ staff, procure locally and receive payments under the contract. Surplus can be remitted abroad during the project on the basis of an auditor's certificate, and in full when the project is completed and closed.
Because a project office is often a permanent establishment for tax, the commercial terms of the contract matter: how the offshore and onshore portions are split, who supplies what, and where title passes all change the Indian tax and GST position.
§ 2
The law that applies
| FEMA Regulations, 2016 on branch, liaison and project offices | Conditions for general permission, prior RBI approval cases, reporting to the AD bank. |
|---|---|
| Companies Act, 2013, sections 380 to 386 | FC-1 registration and annual filings of the foreign company. |
| Income-tax Act, 2025 and tax treaties | Permanent establishment, profit attribution and withholding on contract payments. |
| CGST and IGST Acts, 2017 | GST registration in the states where the project supplies are made, and the GST treatment of works contracts. |
§ 3
Issues and how we solve them
The problems that most often hold up or complicate this work, and how we deal with each.
Issue 1
The contract is split into offshore and onshore portions without considering tax.
Our approach
We review the contract structure with the commercial team before it is signed, so that offshore supplies are not unintentionally taxed in India and the onshore portion is priced to bear the Indian tax and GST correctly.
Issue 2
Payments from the Indian client are delayed because withholding certificates are not in place.
Our approach
We apply for a lower or nil withholding certificate where the project's income does not justify full deduction, and set up the PAN, TAN and invoicing so the client can deduct and deposit correctly from the first bill.
Issue 3
The project ends but the office is never formally closed.
Our approach
Closure needs an auditor's certificate on the project accounts, tax clearance and confirmation that liabilities are settled. We plan closure from the start, so the final repatriation is not held up for months.
§ 4
Process and timeline
- 1
Contract review
Week 1Check that the contract qualifies for general permission and review its tax structure.
- 2
Reporting
Weeks 1–3Report the project office to the AD bank with the contract and parent documents.
Filing: Form FNC
- 3
ROC registration
Weeks 3–4Register the project office as a place of business.
Filing: Form FC-1 within 30 days
- 4
Tax and bank
Weeks 3–5PAN, TAN, GST in the relevant states and project bank accounts.
§ 5
Ongoing obligations
| Obligation | Basis | When |
|---|---|---|
| Annual Activity Certificate | FEMA · AD bank | Annually |
| Project accounts and audit | Companies Act · Income-tax Act | Annually and at closure |
| GST returns | CGST Act, 2017 | Monthly |
| Income-tax return and TDS | Income-tax Act, 2025 | Annually · monthly |
§ 6
Our scope of work
Included
- General permission review
- AD bank reporting
- FC-1, PAN, TAN and GST
- Contract tax review
- Lower withholding certificate
- Project accounts set-up
- Closure planning
Not included (quoted separately)
- Prior RBI approval applications
- Government fees
§ 7
Questions
Does a project office need RBI approval?
Not if the contract meets one of the conditions for general permission. Otherwise, and for applicants from certain countries, prior RBI approval is needed through the AD bank.
Can a project office take up a second project?
Each project office is linked to its contract. A new contract usually means a new project office, unless the AD bank permits otherwise.
Can project surplus be sent abroad before completion?
Yes, intermittent remittances are permitted against an auditor's certificate that the surplus relates to the project and Indian liabilities are covered.
Prepared by CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375, SU and Company · Last reviewed 4 November 2026. General information only, based on the law as it stood on that date; it is not advice for any particular case.