🌐 Liaison, Branch & Project Offices in India: FEMA FAQs You Must Know (2025 Edition)

📌 Introduction: Understanding LOs, BOs & POs in India

Foreign companies often establish a Liaison Office (LO), Branch Office (BO), or Project Office (PO) to conduct limited operations in India. These setups are governed by FEMA and RBI regulations, and compliance is crucial to avoid regulatory scrutiny or penalties.

This FAQ blog provides a practical, updated 2025 guide to the rules, reporting, and operational requirements for foreign offices in India.

Foreign professionals collaborate in an Indian office, reviewing FEMA documents and business licenses, with the Indian flag symbolizing the global business environment.

🧾 Q1. What must an AD Bank do if an LO/BO doesn’t submit its Annual Activity Certificate (AAC)?

If the LO/BO:

• Fails to submit the AAC, or

• Submits one with adverse auditor remarks
  

➡️ The AD bank must immediately report to RBI.

🏦 Q2. Can a BO or LO have more than one bank account?

❌ No. Multiple accounts require prior RBI approval via the AD bank, with justification.

🚔 Q3. Are LO/BO/POs required to register with police?

✅ Yes — but only if the entity is from:

• Bangladesh, China, Pakistan, Afghanistan, Iran, Sri Lanka, Hong Kong, or Macau
  

Others are exempt. Approval letters must be sent to the Ministry of Home Affairs.

🏠 Q4. Can LO/BO/POs buy property in India?

• BOs and POs can buy property for operational use (not leasing/renting)

• LOs cannot acquire property

• Prior RBI approval needed for sensitive countries (e.g., Pakistan, China, etc.)

• All can lease property for up to 5 years under general permission
  

🔄 Q5. If an LO is upgraded to a BO, can it keep the same PAN and bank account?

✅ Yes — if the account is re-designated as a BO account.

💳 Q6. Can a Project Office get foreign currency credit facilities?

✅ Yes — per RBI’s banking guidelines.

📚 Q7. Can multiple projects be consolidated under one PO?

❌ No. Each PO must have:

• A separate bank account

• Independent books of accounts

• Separate AACs and closure process
  

🚢 Q8. If a BO is for an airline or shipping company, can its agent use a foreign currency account?

✅ Yes, the agent can have a forex account. But the BO must only use its INR account.

📄 Q9. Is there a prescribed format for police registration?

✅ Yes — available in the RBI Master Directions.

⏫ Q10. Can an LO be upgraded to BO under automatic route?

✅ Yes — if the LO qualifies under general permission. The AD bank must inform RBI.

🔚 Q11. What’s the process for closing additional offices?

Use the same process as closing a main LO/BO/PO.

🔢 Q12. Is a Unique Identification Number (UIN) needed for Project Offices?

❌ No — UIN is not required for POs.

🏙️ Q13. Can applicants from sensitive countries open offices in non-sensitive regions?

✅ Yes — AD banks can approve offices in cities outside Jammu & Kashmir, NE India, and Andaman & Nicobar Islands.

🏭 Q14. Can BO/LO/PO transfer assets to Indian residents?

✅ Yes — AD banks may approve such transfers.

🔁 Q15. Can a foreign subsidiary of an Indian company open a BO in India?

❌ No — not permitted under the automatic route.

💳 Q16. Can a financially weak foreign subsidiary submit a Letter of Comfort (LoC) from its Indian parent?

❌ No — the foreign applicant must be financially sound. LoC is not a substitute.

🕒 Q17. Can the PO’s account stay open beyond project completion?

✅ Yes — for genuine reasons like:

• Tax assessments

• Warranty periods

• Legal clearances
  

With AD bank approval, under intimation to RBI.

💱 Q18. Can BOs open foreign currency accounts?

❌ No — FCY accounts for routine business are not allowed.

🧾 Q19. Can BO/LO/PO open a second bank account for statutory payments?

✅ Yes — if their AD bank is not an agency bank for tax, they can open a separate statutory account with another AD bank.

💰 Q20. What transactions are allowed in a PO’s INR account?

Credits:

• Funds from the head office

• Project payments
  

Debits:

• Project-related expenses

• Remittances pending closure (if:

  • CA certifies liabilities covered

  • Undertaking provided by PO)
    

📑 Q21. Can BOs or POs open Letters of Credit (LCs)?

✅ Yes:

• BOs: for import/export

• POs: for local purchases tied to the project
  

💸 Q22. Can BO/PO make outward remittances through any AD bank?

✅ Yes — if:

• They get a No Objection Certificate from their designated AD bank

• Remittance is Cash/Tom/Spot basis
  

Two options:

Method 1:

• Designated AD sends INR to handler bank

• Handler bank does SWIFT transfer

• KYC & documentation must be shared
  

Method 2:

• INR credited to handler bank

• Handler credits designated AD’s NOSTRO account

• Final payment made from there
  

📌 Conclusion: Setting Up a Foreign Office in India? Follow FEMA and RBI Rules

Whether you’re entering India through a Liaison Office, Branch Office, or Project Office, it’s essential to stay aligned with RBI and FEMA guidelines — covering bank accounts, reporting, tax, remittances, and closure.

📩 Need help opening, managing, or closing your LO/BO/PO in India or GIFT City?Reach out to GIFT CFO — your trusted FEMA compliance and RBI advisory partner.