US to India · Structure comparison
US Subsidiary vs. Branch Office in India: How to Choose
Compare an Indian subsidiary and a branch office for a US company, including legal presence, permitted activities, investment rules, tax and compliance considerations.
A US company considering India may compare incorporating an Indian subsidiary with establishing a branch office. These options are not interchangeable: they have different legal characteristics, permitted activities, approval requirements, tax implications and compliance responsibilities.
The right choice should follow the business plan and regulatory analysis, rather than being based on incorporation cost alone.
Quick answer
An Indian subsidiary is a separate Indian legal entity and may be suitable for a company planning local operations, employees, contracts or long-term growth, subject to applicable rules. A branch office is an extension of the foreign company and can undertake only activities permitted under the applicable framework and approvals. The right route depends on the proposed activities, sector, liability preferences, funding, tax position and future plans.
1. What is an Indian subsidiary?
A subsidiary is incorporated in India as a company under Indian company law. The foreign parent holds shares in the Indian entity, subject to applicable foreign-investment rules. A subsidiary has its own legal identity and generally contracts and operates in its own name.
This structure can be considered where a business plans to hire staff, develop products, serve customers, enter contracts or build a continuing India operation. Sector restrictions, tax, transfer pricing and corporate compliance still need to be assessed.
2. What is a branch office?
A branch office is an Indian presence of the foreign company, rather than a separate company incorporated in India. Establishment and permitted activities are governed by the applicable foreign-exchange framework and approval or registration requirements.
A branch cannot automatically carry on every activity that an Indian subsidiary could. Eligibility, permitted scope, remittance of profits and ongoing reporting should be checked before choosing this route.
3. Compare the main considerations
The comparison below is a starting point, not a substitute for advice on a specific business. Eligibility and treatment can change with sector, ownership, activity and the current regulatory position. A subsidiary is not automatically the best option, and a branch is not available for every proposed activity.
| Consideration | Indian subsidiary | Branch office |
|---|---|---|
| Legal identity | A separate Indian company with its own legal identity. | An extension of the foreign company, not a separate Indian company. |
| Activities | Can carry out activities permitted by law and its constitutional documents, subject to applicable approvals. | Limited to activities permitted under the applicable framework and approvals. |
| Establishment route | Incorporation through the Ministry of Corporate Affairs; foreign-investment rules also need checking. | Eligibility and the relevant RBI / authorised-dealer-bank process must be confirmed before proceeding. |
| Liability | The Indian company generally bears its own obligations, subject to applicable law, guarantees and the facts. | The foreign company remains the legal entity behind the branch and may bear its obligations. |
| Tax | Indian corporate tax and other obligations depend on its activities and circumstances. | Tax and profit attribution depend on the branch activities, domestic law and any applicable treaty. |
| Likely fit to assess | May suit a continuing local operation, employees, local contracts or future growth. | May suit a narrower permitted activity where the foreign company prefers a branch presence and is eligible. |
4. Questions to answer before deciding
Describe the intended business model and how revenue will be earned in India. Identify whether the entity will provide services, sell goods, conduct research, employ a team, hold assets or enter into local customer contracts.
Also consider the planned period of operations, expected capital flows, intercompany charges, intellectual property, parent-company risk appetite and exit or expansion plans. These details help determine which options are legally available and commercially workable.
5. Consider other routes where relevant
Depending on the objective, a joint venture, limited liability partnership, liaison office or project office may also merit review. Each has distinct eligibility and activity limitations. A liaison office, for example, is not a general route for carrying on revenue-generating business in India.
The choice should be made after checking the current rules for the particular activity and investor, including any sector-specific conditions.
6. How AU Corporate can help
Our team can help map your proposed activities, compare available structures and coordinate India incorporation, foreign-investment considerations, tax, accounting, payroll and ongoing compliance planning. Any recommendation should follow a review of your facts and the applicable regulations.
Common questions
Frequently asked questions
Is a subsidiary always better than a branch office?＋
No. The appropriate route depends on the proposed activities, eligibility, commercial objectives, tax position, regulatory requirements and future plans.
Can a branch office carry out sales in India?＋
Permitted activities are restricted by the applicable framework and approvals. Confirm whether the intended activity is allowed before establishing a branch.
Is a branch office a separate legal entity?＋
No. A branch office is an extension of the foreign company, unlike an Indian subsidiary, which is incorporated as a separate legal entity.
Which option is more tax efficient?＋
There is no universal answer. Tax treatment depends on the business activities, profit attribution, applicable tax law, treaty provisions and the actual operating arrangements.
Can we change the structure later?＋
A change may be possible, but it can involve legal, tax, regulatory, contractual and operational consequences. It is worth considering likely future needs before starting.
Primary sources
Official sources to verify current requirements
Regulatory requirements can change and depend on the facts. Check the current version and applicability before taking action.
Next step
Planning an India operation from the United States?
Share your proposed activities and timeline with our team. We can help identify the questions to resolve before you commit to a structure or filing plan.
Discuss your plansFor an overview of our services for US businesses, visit the company registration in India from the USA page.
Related guides
Understand the steps if a subsidiary is the right route.
Plan establishment costs and timing.