Project Office in India for Foreign Companies: Eligibility and Compliance

Prepared by AU Corporate's CA-led advisory team · Published 12 October 2026 · General guidance; confirm the current requirements for the specific project.

A foreign company awarded a specific contract to carry out a project in India may need to consider whether a project office is an appropriate route. It is not simply a lower-cost substitute for an Indian subsidiary: its purpose, permitted activities, registration requirements and exit depend on the project and the applicable foreign-exchange framework.

1. Start with the project contract and scope

Prepare a clear description of the project before selecting a structure. Identify the contracting parties, location, scope of work, project duration, payment terms, milestones, local suppliers, staffing needs and the party responsible for delivery.

Review whether the foreign company has the contract or other basis required under the current rules. Where a project does not fit the general eligibility conditions, a different approval route may apply. Do not assume that a letter of intent, tender invitation or proposed contract automatically meets the test.

• Executed contract and description of the project awarded in India.
• Identity and status of the foreign company and Indian counterparty.
• Project location, start date, expected duration and completion conditions.
• Activities to be performed directly by the foreign company and by Indian subcontractors.
• Expected receipts, project costs, staffing and remittances.

2. Understand the regulatory route before making commitments

Project offices are governed by India's foreign-exchange framework for offices established in India by foreign entities. Applications and supporting documents are generally handled through an authorised dealer Category-I bank, which assesses the case under the applicable rules and refers matters for prior approval where required.

Review the current Reserve Bank of India Master Direction on Branch, Liaison and Project Offices and the relevant amendments. The detailed requirements can change, and the correct route depends on the company, project and circumstances. Obtain confirmation from the bank and advisers before treating the office as authorised to operate.

3. Compare a project office with other India structures

The right option depends on the real operating model, not only the anticipated project length. If the business expects to pursue new contracts, hire a permanent local team or serve customers beyond the initial project, review whether a project office will remain suitable.

For a broader comparison, see US subsidiary vs branch office in India and the India entry guide for US companies.

4. Plan banking, funds and project records

Discuss the account-opening process and documentation with the authorised dealer bank early. The bank may need corporate records, contract evidence, signatory authority, details of expected receipts and payments, and other documents relevant to its review.

Set up a project-level accounting process to track contract receipts, subcontractor invoices, payroll and other costs, taxes withheld, bank charges and transfers to the foreign head office. Keep supporting evidence for each transaction and reconcile bank records to the accounting ledger regularly.

5. Check tax and indirect-tax obligations

A project office can create Indian tax obligations for the foreign company. The result depends on the contract, functions, duration, treaty position and facts. Review corporate income tax, withholding tax, GST, invoicing, import-related taxes and the treatment of payments to the head office or other group entities with qualified tax advisers.

Do not assume that a project office is tax-neutral because it is temporary or tied to one contract. Assess the tax position before pricing the project and include filing, audit, recordkeeping and adviser costs in the budget.

6. Map company-law registrations and recurring reporting

Depending on the arrangement and applicable requirements, a foreign company's India office may need registrations or filings with the Registrar of Companies, local authorities and tax departments, as well as periodic reporting through its bank. Confirm the exact list and due dates for the particular office rather than relying on a generic checklist.

Assign responsibility for maintaining the office's registration details, authorised activities, signatories, financial records, tax filings, annual activity certification where applicable and updates to the bank. Notify the relevant parties before making material changes to the project or office arrangements.

7. Plan closure before the project ends

Closure should be treated as a workstream, not an afterthought. Review the contract's completion and warranty obligations, settle employees and suppliers, reconcile tax and other liabilities, collect receivables, document remaining assets and funds, and confirm the requirements for remitting surplus funds and closing accounts.

Check whether bank confirmation, tax clearances, statutory filings or other evidence is required for the closure route. Keep a record of final accounts, payments and approvals. The process may take time after physical project work has finished.

8. Prepare a decision file before proceeding

Before opening a project office, assemble the contract, scope, expected timeline, project budget, proposed staffing, cash-flow forecast, tax analysis and a written view on eligibility and approvals. Ask the bank and advisers to identify any conditions that must be satisfied before the office begins work or receives funds.

AU Corporate can help foreign businesses assess the India operating model and coordinate relevant incorporation or office-registration, accounting, tax and compliance work. The right scope depends on the contract and the responsibilities of the foreign company, bank and other advisers.

Official and practical references

• Reserve Bank of India: Master Direction for Branch, Liaison and Project Offices
• Ministry of Corporate Affairs for applicable company-law registrations and filings.
• Income Tax Department for tax information and filing services.
• Post-incorporation compliance checklist for a separate Indian subsidiary model.

Frequently asked questions