How to Set Up a Liaison (Representative Office in India: RBI Rules, Permitted Activities, and Renewal)

For foreign companies that are still evaluating India as a market, a liaison (representative) office in India provides a low-commitment entry option. It provides a local presence and a team on the ground for market research and relationship building, without requiring the incorporation of a separate Indian entity or creating commercial income tax exposure.

The trade-off is strict. A representative office in India cannot earn a single rupee of revenue from Indian operations. Every expense must be funded by inward remittances from the foreign parent. The moment it crosses into commercial activity, it violates its RBI approval conditions and becomes an unauthorised business operation under FEMA.

This guide covers who qualifies, how to apply, what activities are permitted, and what the October 2025 draft RBI regulations propose to change.

What Is a Liaison (Representative) Office in India and How Does It Differ from a Branch Office?

A representative office in India, also called a Liaison Office under FEMA, is a non-commercial presence established by a foreign company under the Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other Place of Business) Regulations, 2016 (Notification No. FEMA 22(R)/2016-RB)to act as a communication channel between the foreign parent and Indian entities. Unlike a Branch Office, it cannot generate revenue, sign commercial contracts, or conduct any trading or manufacturing activity. All operating expenses must be funded by inward remittances from the foreign parent.

The terminology creates confusion. Indian law does not use the term “Representative Office” as a formal category. What most countries call a representative office is what India calls a Liaison Office under FEMA. Both refer to the same structure: a foreign company’s presence in India that exists purely for representational, communication, and market research purposes.

The key differences:

Who Is Eligible to Open a Representative Office in India for a Foreign Company?

To open a representative office in India for a foreign company, the applicant must have a profit-making track record for the immediately preceding three financial years in its home country, a net worth of not less than USD 50,000 or equivalent as per the latest audited balance sheet, and must be engaged in activities in its home country that are permitted under the automatic route for FDI in India.

The  three-year profit record is the eligibility condition that eliminates many early-stage foreign companies. A venture-funded startup that has been loss-making for two of the past three years does not qualify. The Representative Office in India route is designed for established foreign companies testing the Indian market, not for startups building their first India presence.

Applicants falling within categories specified by RBI, including entities from certain neighbouring countries or jurisdictions  such as Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, and Macau subject to additional regulatory scrutiny, require prior approval from the RBI before establishing a Liaison Office. For companies incorporated in or with citizens from these countries, the application goes directly to RBI rather than through the AD bank route. The review is more detailed and the timeline is longer.

For all other countries, the AD Category-I bank has the authority to approve the application where the proposed activities fall within FDI-permitted sectors, subject to standard KYC and due diligence.

What Is the RBI Approval Process for a Representative Office in India?

RBI approval for representative office in India is processed through an Authorised Dealer Category-I bank, not submitted directly to RBI. The foreign company submits Form FNC along with KYC documents and financial statements to the AD bank. The AD bank conducts due diligence, obtains a Unique Identification Number from RBI, and issues the approval letter. Post-approval, the representative office must register with the ROC through Form FC-1 within 30 days.

Step-by-step process:

Step 1: Select an AD Category-I bank

Choose a bank in India that will act as the primary compliance interface for the representative office. Most major Indian banks and foreign banks with Indian operations have AD Category-I status.

Step 2: Prepare Form FNC and documentation

Core documents required:

• Form FNC duly completed
• Certified copy of Certificate of Incorporation of the foreign  entity
• Memorandum and Articles of Association of the foreign  entity
• Audited balance sheets for the preceding  three financial years
• Banker’s report from the foreign parent’s home country bank
• Board Resolution authorising establishment of the representative office in India and naming the authorised representative
• KYC documents for the foreign parent and its directors or UBOs
• Details of the proposed representative office address in India

All documents originating outside India must be certified, notarised, and apostilled or consularised as applicable.

Step 3: AD bank due diligence and UIN

The AD bank reviews the application, conducts KYC and AML screening, and verifies that the proposed activities are permitted for a Liaison/Representative Office. For applications where the AD bank is satisfied, it obtains a Unique Identification Number from RBI before issuing the approval letter. The UIN is the reference number used for all subsequent FEMA reporting.

Step 4: Approval letter

The approval letter specifies the validity period granted by the RBI/AD Bank and the conditions applicable to the approval.

Step 5: Post-approval registrations

• Form FC-1 with ROC: The representative office must register with the Registrar of Companies within 30 days of receiving RBI approval. This is done by filing Form FC-1 along with certified copies of the foreign parent’s incorporation documents.
• PAN: Obtain a Permanent Account Number from the Income Tax Department
• TAN: Obtain a TAN where the Liaison Office is required to deduct tax at source under the Income-tax Act, 2025.
• Bank account: Open a bank account in the name of the representative office to receive inward remittances from the  head office

Total timeline from document preparation to operational readiness: four to eight weeks when documents are in order.

What Activities Can a Representative Office in India Perform?

A Representative Office in India can only perform certain prescribed functions, such as market research, relationship building, trade promotion, and facilitating collaborations on behalf of the head office . Any commercial activity, including trading or earning income in India, falls outside its permitted scope.

This is the line that gets crossed most often. A representative office whose staff start closing sales, issuing invoices, or negotiating commercial contracts on behalf of the parent has stepped outside its permitted scope. The violation is not theoretical. During regulatory reviews and periodic compliance monitoring, the AD Category-I bank may examine whether the Liaison Office has remained within the activities permitted under its approval. 

Permitted activities in plain terms:

• Meeting with potential Indian clients, partners, or distributors on behalf of the parent
• Collecting market information and competitive intelligence
• Attending trade fairs, exhibitions, and industry events
• Coordinating between the parent’s overseas teams and Indian business contacts
• Facilitating technical discussions between the parent’s engineers and potential Indian partners

Not permitted:

• Signing commercial contracts on behalf of the parent (these must be signed by the parent abroad)
• Accepting payments or issuing invoices in India
• Purchasing or selling goods in India
• Providing paid services to Indian clients

Practising law or providing legal services in India except to the extent permitted under applicable law and the Bar Council of India regulatory framework.

What Are the Annual Compliance Requirements for a Representative Office in India?

A Representative Office in India is required to submit an Annual Activity Certificate, certified by a Chartered Accountant, to both the AD bank and the income tax authorities by September 30 each year. It must also file Form FC-3 with the ROC annually. Persistent failure to submit the AAC may result in regulatory action by the AD Category-I bank or the RBI, including questioning the continued operation of the Liaison Office and possible action for non-compliance under FEMA. The AAC is the compliance anchor for how to open a representative office in India for a foreign company and keep it in good standing. It is not just a form. It is the Chartered Accountant’s certification that the office has conducted only the activities approved by RBI and has not engaged in any commercial activity. The CA must be satisfied, based on the office’s financial records and activity documentation, that the AAC is accurate.

Annual compliance obligations:

The income tax return obligation applies even though the representative office has no taxable income. A representative office with zero Indian income still files a return. Non-filing creates a tax compliance gap that surfaces during renewal applications and eventual closure proceedings.

What Is the Renewal Process and What Do the October 2025 Draft Regulations Change?

The validity of a Liaison Office approval is governed by the terms and conditions specified in the approval issued under the RBI framework. Where the approval is granted for a fixed period, an application for renewal must be submitted through the AD Category-I bank before the approval expires..

The renewal application must demonstrate:

• The representative office has conducted only permitted activities during the preceding period
• All AAC filings are current and certified
• The foreign parent continues to meet the eligibility conditions (profitability, net worth)
• No FEMA violations are pending

The October 2025 draft regulations, if finalised, represent the most significant reform to the representative office framework since 2016. The draft proposes:

• Removing the three-year tenure limit and moving to open-ended approval subject to compliance
• Removing the cap of four offices across four zones (north, south, east, west), which previously required RBI justification for any additional office
• Expanding delegated powers of AD banks to approve a wider range of applications without RBI referral

Introducing a mechanism under which prolonged failure to submit the Annual Activity Certificate (AAC) may result in closure proceedings by the AD Category-I bank. Until the draft is formally notified, the existing 2016 FEMA framework governs. Companies should monitor the RBI notification timeline and plan renewal applications under current rules while noting that the upcoming reform may simplify the process significantly.

Conclusion

For established foreign companies that want to explore the Indian market without setting up a full operating entity, a Representative Office in India offers a practical starting point. It provides a local presence and the ability to build relationships and gather market intelligence with a lighter compliance burden.

The eligibility criteria are specific, the permitted activities are narrow, and the annual AAC filing is non-negotiable. The October 2025 draft reforms signal a lighter long-term framework, but until notified, the existing 2016 rules apply in full.

Corporate Legit Consulting LLP assists foreign companies with RBI approval for representative office in India, Form FNC preparation, AD bank coordination, post-approval ROC registration, AAC filing, renewal applications, and conversion of representative offices to subsidiary structures when commercial operations are ready to begin. Reach out to Corporate Legit before submitting the Form FNC application.