US to India · Business structure
Branch Office vs Subsidiary in India: What US Companies Should Compare
Prepared by AU Corporate's CA-led advisory team · Published 14 October 2026 · General information; confirm the current rules and facts for your situation.
A US company considering a formal presence in India should not treat a branch office and an Indian subsidiary as interchangeable. A subsidiary is an Indian incorporated company with its own legal identity. A branch office is an extension of the foreign company and is subject to specific eligibility, approval and permitted-activity conditions. The appropriate route depends on the planned business, sector, risk allocation and current regulatory requirements.
Quick answer
Branch Office vs Subsidiary in India?
A subsidiary is often evaluated when a business needs a locally incorporated operating company, local contracts, hiring or a long-term growth platform. A branch office may be considered for certain permitted activities of the foreign parent, subject to eligibility and approval requirements. Confirm the current RBI, FEMA, tax and sector rules before selecting a route.
1. Understand the legal difference
An Indian subsidiary is incorporated under Indian company law and has its own corporate identity. The US parent owns shares in the subsidiary, subject to foreign-investment rules. A branch office is an extension of the overseas company, so the foreign company remains the entity carrying on the branch’s permitted activities.
2. Compare the operating purpose
| Question | Indian subsidiary | Branch office |
|---|---|---|
| Legal identity | Separate Indian-incorporated company | Extension of the foreign company |
| Activities | Subject to company objects, sector and other applicable rules | Restricted to permitted activities and applicable approvals |
| Liability | Generally distinct corporate liabilities, subject to law and guarantees | The foreign company operates through its branch |
| Investment | Share capital and foreign-investment reporting may apply | Funding and remittances follow the branch framework and approvals |
| Ongoing duties | Company-law, tax, accounting and other applicable filings | Branch-specific regulatory, tax and reporting duties |
3. Check whether the proposed activity is permitted
Before choosing a branch office, define the actual revenue model and activities: sales, service delivery, consulting, research, technical support, procurement, project execution or other work. Branch-office eligibility and permitted activities are governed by the applicable framework and conditions; do not assume a branch can be used as a general substitute for a subsidiary.
For a subsidiary, verify the sector’s foreign direct investment entry route, cap and conditions. The Reserve Bank of India publishes the relevant foreign-exchange framework, and sector-specific rules may also be relevant.
4. Consider contracts, customers and hiring
Ask which entity should sign Indian customer contracts, employ staff, hold inventory, lease premises, provide warranties and bear commercial risks. A subsidiary can be a practical platform for a continuing local business, but it also creates a separate company with its own governance and compliance. A branch may suit only the activities it is permitted to carry out.
5. Compare tax and remittance consequences
Tax treatment depends on the legal structure, the income and activities, applicable domestic law and any available treaty relief. A subsidiary may have corporate tax, dividend and transfer-pricing considerations; a branch may have different tax and profit-remittance treatment. Model the expected flows with a tax adviser instead of assuming one route is always more tax-efficient.
6. Estimate the full compliance burden
Build a cost and responsibility list covering setup and approval work, accounting, statutory audit where applicable, tax returns, employee obligations, foreign-exchange reporting, documentation and closure. Compare expected obligations over several years and include the cost of restructuring if the initial choice no longer fits.
Decision checklist
- Describe exactly what the India presence will do and where revenue will arise.
- Confirm branch eligibility and permitted activities under current rules.
- Check FDI entry route, sectoral cap and conditions for a subsidiary.
- Choose the entity that should sign contracts, hire staff and hold assets.
- Compare tax, reporting, funding, remittance and closure implications.
- Document the rationale and review it as the business grows.
For a broader starting point, see our India market-entry decision guide and our guide to project offices in India.
Frequently asked questions
Is a branch office a separate Indian company?
No. A branch office is an Indian presence of the foreign company, rather than a separate Indian-incorporated subsidiary. The legal and liability implications differ.
Can a branch office conduct any activity in India?
No. Branch-office activities are subject to the applicable regulatory framework and permissions. The proposed activity must be checked against current rules and any approval conditions.
Can a US company own 100% of an Indian subsidiary?
In many sectors, foreign investment may be permitted up to 100% under the automatic route, but this is not universal. Sectoral caps, entry routes, conditions and prohibited activities must be checked for the exact business.
Which structure is better for hiring employees and selling locally?
It depends on the proposed activities and applicable rules. A subsidiary can provide a local company for contracts and operations, while a branch can perform only permitted activities. Compare the real operating requirements rather than choosing by name alone.
Is a branch office always cheaper than a subsidiary?
Not necessarily. Setup, approval, tax, repatriation, accounting, audit and ongoing compliance costs depend on the case. A comparison should include the full expected operating period, not just initial formation costs.
This guide provides general information, not legal or tax advice for a specific transaction. Applicable rules, treaty wording and compliance requirements can change. Obtain professional advice based on the actual facts before implementing a structure or payment.