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Branch Office Setup in India

Branch Office Setup in India / Delhi

A Company incorporated outside India and engaged in a business of manufacturing or trading is permitted to open a branch office in India with specific approval from Reserve Bank of India (RBI).

The functionality of a Branch Office is wider as compared to that of a Liaison Office. In terms of permitted activities, A branch office can do the following listed activities in India:

  • Export and/ or Import of goods.
  • Rendering services of professional or consultancy nature.
  • Research work in the areas in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and the parent or the overseas group company.
  • Representing the parent company in India and acting as buying / selling agent in India.
  • Rendering technical support to the products supplied by parent/group companies.

Prohibited Activities

  • Retail trading activities of any nature.
  • Manufacturing or processing activities, directly or indirectly.

RBI has given general permission to foreign companies for establishing branch office in Special Economic Zones (SEZs) to undertake manufacturing and service activities.

There are 2 routes to establish the Branch Office in India:

RBI Route

If the industry the foreign entity is in, comes in the specified industries for 100% automatic route of investment as per Foreign Direct Investment Policy then the branch office will be approved by the Reserve Bank of India.

Government Route

If the industry the Foreign Entity is in, doesn’t come in 100% automatic route and Non Profit and Non-Government Organization, then the branch office will be approved by Reserve Bank of India in consultation of the Ministry of Finance, Government of India.

In addition, Reserve Bank of India has prescribed eligibility criteria for Foreign Entities to apply for branch office. The application of Foreign Entities satisfying the below criteria will be processed:

  • Profit making track record during immediate preceding 5 financial years.
  • Net worth as per latest audited Balance Sheet certified by CPA should not be less than US $100,000 or its equivalent amount in home country.

The Application has to be made to RBI through Authorized Dealer Category-1 Bank in India. RBI will allot a UIN (Unique Identification Number) on approval of the application. Once approved, the intimation has to be given to Registrar of Companies (ROC) and Director General of Police (DGP). An application has to be sent to the Income Tax Department to allot Permanent Account Number (PAN).

Annual Compliance

A branch office has to do minimal annual compliances as compared to Wholly Owned Subsidiary in India.

As an annual compliance, an annual activity certificate issued by a Practicing Chartered Accountant at the end of March 31, need to be submitted to the Authorized Dealer Category-1 Bank, Directorate General of Income Tax (International Taxation), concerned Registrar of Companies and Director General of Police, on or before 30th September of each financial year (In India the Financial Year is April to March) along with the audited accounts.

Additional Activities and Offices 

For establishing additional office, a fresh application duly signed by authorized signatory of the foreign entity, is filed to Reserve Bank of India with a justification to open additional office and identify one of the offices as nodal office to co-ordinate the activities of all offices.

Taxation rules applicable on Branch Office 

Branch office will be liable to pay 40% (plus surcharges as applicable) of profits as income tax in the status of Foreign Company in India.

As per the functioning of branch office in India, it shall be liable to different indirect taxes as well, for example, if the Branch is providing technical services it shall be liable to pay service tax @ 12% (plus surcharges) and if it is selling the goods in India then it shall be liable to pay Value added Tax (VAT) and/or Central Sales Tax (CST) at the rates prescribed for the dealt product. There is Local Body Tax (LBT) if the goods are entering the state of Maharashtra in India as few of these indirect taxes are levied by States. With the implementation of GST, the indirect tax regime in India will get simplified.

Profits earned by the branch offices are freely remittable from India, subject to payment of applicable taxes.

 

Compliance by Branch Offices


  • RBI Compliance Annual Activity Certificate

Branch offices and liaison offices should file an Annual Activity Certificate (AAC) at the end of each financial year, i.e. March 31. The AAC should be obtained from a qualified Chartered Accountant. A copy of the AAC along with the audited Balance Sheet should also be filed with the designated Category I Bank's AD on or before September 30 of that year. A copy of the same should also be sent to the Directorate General of Income Tax (International Taxation), New Delhi.

In case the annual accounts of the LO/BO are finalized on a date other than March 31, the AAC and audited Balance Sheet should be submitted within six months from the date of preparation of the balance sheet to the designated AD from a Category I Bank.

Registrar of Companies, Compliance

Compliance under Company Law

  1. Annual Filing

Foreign companies should prepare a Balance Sheet and Profit & Loss Account Statement and file a copy with the ROC. If such documents are not in English, a certified translation should also be annexed.

  1. Periodic Filing Foreign companies are required to file periodic returns with the ROC in the following events:
  • Changes in Charter documents/Memorandum and Articles or any other instrument that defines the foreign company's constitution.
  • Change of address for Registered/Principal offices of the foreign company.
  • Change of Directors or Secretary of foreign company.
  • Change of Authorized Representative(s) in India and changes in the name or address of such person.
  • Change of the principal place of business in India.

Tax laws

The tax treatment of a branch office is different from that of a company registered in India. The present tax rate applicable to a foreign company branch is 42%. Apart from direct tax, a branch of a foreign company should also comply with all prescribed regulatory requirements under Indian Income Tax laws.

On the other hand, a liaison office cannot generate any income in India and is hence not required to pay any taxes. A liaison office should fulfill compliance requirements, including filing Annual Activity Certificate form at the end of each year and any other compliance requirements as applicable from time to time.

 

 

 

 

 

 

Prepared by: BM Comptax Consultants Private Limited | www.bmcomptaxconsultants.com

 

Private Limited Company Registration

 

Private limited company is creation of law and can be registered / incorporated as per the

law and provisions contained in the companies act 2013 and the rules made thereunder.

Any two person can open private limited company with a limitation of maximum 200

Members in a company. The minimum capital required to form a Pvt Ltd Company is Rs.

1,00,000. This is the most common form of business in India and very popular. Most of

the companies in India starts there business in a private limited form and graduate to a

limited company after the success of business if there is requirement of money from public

 

Private Limited Minium Requirement:

 

1. Minimum two Person

2. Minimum Capital shall be Rs. 100,000

3. DIN for the two person

4. Digital Signature for all director

5. Consent From the subscriber or director

6. Proof of Registered Address

7. NOC from the owner of premises

 

Private Limited Document Required All Self Attested:

 

1. Two Colour Photo of the all the persons

2. Pan Card of the all the person Self Attested

3. Address Proof of all the person Self Attested

4. Signature on the DSC Form

5. Signature on Affidavit for DIN

6. Signature on Consent form

7. Signature on Subscriber Sheet

 

The process of private limited company registration is outlined in the tab above, explaining

the documentation and process of incorporation.

 

We adopt a transparent method of pricing which is fixed and certain and same to all our customers. We do not have any discount policy.

 

Our expertise in incorporation is well known in India and outside India. we have

helped 4000+ companies of all size and sector.

 

 

 

 

 

 

 

Private Limited Incorporation Process:

 

Step-I

 

As the private limited company require minimum two person become director and

Shareholder, we will require the requisite documents and signature on the statutory forms.

 

BM Comptax Consultants Private Limited | www.bmcomptaxconsultants.com

 

Our relationship manager helps you with the documentation. You may call on our customer

care number for any helps.

 

Step-II

 

Digital Signature Certificate:

 

DSC is an encrypted form of signature issued by certifying authority appointed under the Information Technology Act.

 

To obtain a DSC we require photograph, address proof, an PAN card apart from signature on the forms. DSC of the entire director is required.

 

Step-III

 

Director Identification Number (DIN):

 

DIN is obtain for the person who want to become director of the company.

 

The DIN application is online process which is filed in electronic format with digital signature of class 2.

 

Step-IV

 

Preparation of Main Object & Name Availability Search:

 

Every company is formed with a specific object to be pursued after incorporation of the company. The name of the company should reflect the object for which the company is formed.

This is most important aspect in process of incorporation of the company.

Six name in order of preference should be submitted to ROC for approval.

There is specific guideline for name approval.

 

 

 

 

 

 

 

Step-V

 

 

Filling of Forms for Incorporation:

Our team is highly experienced in statutory filling and liaising with the Registrar of the company.

 

Step-VI

 

Issuance of Certificate of Incorporation:

When the forms are filed to the ROC complete in all respect, and the objection raised by ROC is also satisfied then ROC issues the certificate of incorporation.

 

Step-VII

 

Certificate of Business Commencement:

A Company is formed with the minimum capital of 1 lacks to be paid by the subscriber / shareholder to the company.

After filling the proof of such money paid to the company, the respective ROC issues a certificate of commencement of business.

 

 

FREQUENTLY ASKED QUESTIONS:

 

Q 1. What is Private Limited Company ?

 

A type of company that offers limited liability, or legal protection for its shareholders but that places certain restrictions on its ownership. These restrictions are defined in the company's bylaws or regulations and are meant to prevent any hostile takeover attempt. A private limited company by definition restricts the number of members (maximum200), though only 2 persons are the minimum requirement to start a private limited company.

  company is considered as a separate legal entity, perpetual succession, with liability of

shareholders limited to the capital being contributed by them. Hence, a shareholder is not

personally liable for the debts of the company

 

Q 2. For small businesses, what are the benefits of Private Limited Companies ?

It provides creditability to business in financial institutions, suppliers and potential clients. As it makes easier for companies to get loans at favorable terms from banks or convincing potential clients while entering into deals as companies are trusted more than other forms of business. Limited liability of shareholders to the extent of their contributed capital only. Perpetual succession of a company

 Q 3. How to form a Private Limited Company ?

 Any two or more members/ Persons can form a private limited company. A minimum of two individual shall act as directors of the company. The shareholders (initial members/promoters) can themselves choose to become director. It is practically seen that generally shareholders are also directors of the same private limited company. Filing of required documents (Director Identification number, Application for name approval, Incorporation documents such as MOA/AOA/, registered address) with the Registrar of Companies. Minimum capital of Rs. one lakh (it can be used for business whenever required and does not necessarily have to be kept in bank/company deposit all the time).

 

Q 4. Is there any qualification to become a director or shareholder in a Private Limited Company ?

 Any individual can become a shareholder in a private limited company. For becoming a director in a company, no professional or educational qualification is required.

 

Q 5. What is Director Identification Number (DIN) ?

 Any person intending to become director in a company must apply for director identification number, issued by the Ministry of Corporate Affairs. Proof of identity and address is required to be submitted along with requisite fee while submitting the application for DIN.If the documents are in order, the DIN is approved within 3-4 days. The approved DIN is valid for life and the same DIN can be used by the director, even if he/she has directorship

in more than one company.

 

Q 6. What are the responsibilities of a director ?

 The director has been entrusted with the responsibility of managing the company in the best efficient manner. The responsibility of a director depends upon the kind of directorship he holds in the company. For instance, an executive director or a managing director has greater responsibility than a non-executive director who might hold the directorship as an expert or consultant. A director is liable for misconduct or fraud or if found guilty of default.

Q 7. What address to be given as registered office of the company ?

 A registered office is required to hold Annual general meetings, for keeping records and receiving correspondence from all the statutory/government authorities. The registered office does not have to be necessarily owned by the company, it can be on rented premises also. The registered office of the company determines its jurisdiction for registration, for instance, a company with registered office in Delhi will come under the jurisdiction of Registrar of Companies, Delhi. 

Q 8. Is it allowed to change registered office of the company after registration ?

 Yes, A company can change its registered office any time after following specified procedure. The changed address can be situated within the same state or in a different state from the state in which it was originally registered.

 Q 9. I am carrying business as a sole proprietor/partnership, can I register a

private limited company ?

 Yes, A private limited company can be set up following provisions of Companies Act, 1956

 Q 10. Is Private Limited Company structure suitable for my business?

 As said before, the biggest advantage of starting a business with private limited company form of organization is the outlook by all outside parties towards the business. A private limited company is perceived to be more trustworthy compared to other business structures. Though the decision of whether to set up the business as a private limited company or not, rests upon you, but it is advised that the entrepreneur closely evaluate all the merits and demerits. In businesses which are in expansion mode or trustworthiness is an important part of business transactions, Private limited company form of structure can prove to be a good option?