Liaison Office vs Branch Office vs Wholly Owned Subsidiary in India

What is a Liaison Office in India?

A Liaison Office acts as a communication channel between the foreign parent company and parties in India.

It generally cannot undertake commercial, trading or revenue-generating activities in India. Its role is typically limited to permitted liaison and representative activities, subject to the applicable FEMA framework.

A Liaison Office may therefore be suitable where a foreign company wants to understand the Indian market, coordinate with customers or suppliers, promote its business interests, or establish a non-commercial presence before making a larger investment.

What is a Branch Office in India?

A Branch Office is an extension of the foreign company in India rather than a separate Indian legal entity.

It may undertake specified business activities permitted under the applicable FEMA framework and approvals. The exact activities should be reviewed before establishing the Branch Office.

A Branch Office may be suitable where a foreign company wants to undertake approved operational activities in India without incorporating a separate subsidiary.

What is a Wholly Owned Subsidiary in India?

A Wholly Owned Subsidiary is an Indian incorporated company whose entire or substantially entire permitted shareholding is held by the foreign parent, subject to the applicable FDI policy and sectoral conditions.

Unlike a Liaison Office or Branch Office, the subsidiary has a separate legal identity from its foreign shareholder.

It can undertake business activities stated in its constitutional documents, subject to Indian law, licensing requirements and sector-specific restrictions.

A WOS is generally more suitable where the foreign company intends to establish a long-term commercial and operational presence in India.

Eligibility and Setup Requirements

Liaison Office

Eligibility for establishing a Liaison Office depends on the applicable RBI/FEMA framework, nature of the foreign entity, proposed activity, country of incorporation and other prescribed conditions.

Branch Office

A foreign company proposing to establish a Branch Office must satisfy the applicable eligibility requirements and ensure that the proposed activities fall within the activities permitted under the foreign exchange regulations.

Wholly Owned Subsidiary

A WOS is incorporated as an Indian company under the Companies Act, 2013. A private company generally requires at least two directors, and at least one director must satisfy the prescribed India-residency requirement.

Foreign shareholding is also subject to the applicable FDI entry route, sectoral caps and conditions.

Regulatory Approvals

Liaison Office and Branch Office

The establishment of a Liaison Office or Branch Office is governed primarily by the applicable FEMA/RBI framework and is generally processed through the authorised dealer banking channel, subject to the applicable approval route and conditions.

Wholly Owned Subsidiary

A WOS is incorporated with the Registrar of Companies under the Companies Act.

Foreign investment into the Indian company must then comply with the applicable FEMA/FDI provisions and reporting requirements.

Difference in Permitted Activities

Liaison Office

A Liaison Office cannot undertake commercial or income-generating activities in India and must restrict itself to the activities permitted under the applicable regulatory framework.

Branch Office

A Branch Office may undertake specified permitted activities in India. The scope is more extensive than a Liaison Office but remains linked to the activities permitted under the foreign exchange framework.

Wholly Owned Subsidiary

A WOS generally has substantially greater operating flexibility because it is an Indian company. It may undertake manufacturing, trading, services and other lawful business activities, subject to:

• its objects;
• applicable licences;
• FDI policy;
• sectoral restrictions; and
• other Indian laws.

Legal Status and Liability

Liaison Office

A Liaison Office does not have a legal personality separate from the overseas parent. Consequently, its activities and obligations are linked to the foreign company.

Branch Office

A Branch Office is also an extension of the foreign parent rather than a separate incorporated entity.

Wholly Owned Subsidiary

A WOS is a separate Indian legal entity. The foreign parent’s exposure as shareholder is generally limited in accordance with the corporate structure and applicable company law.

Tax Implications

Liaison Office

A Liaison Office is intended to perform only permitted liaison activities. However, its actual activities must be carefully monitored from an Indian tax and Permanent Establishment (PE) perspective.

Branch Office

A Branch Office generally constitutes a taxable presence of the foreign enterprise in India, and profits attributable to Indian operations may be subject to Indian taxation in accordance with domestic law and an applicable tax treaty.

Wholly Owned Subsidiary

A WOS is an Indian resident company and is taxed in India in accordance with the provisions applicable to Indian companies.

Transactions with the foreign parent or other associated enterprises may also attract transfer pricing, withholding tax and other cross-border tax requirements.

Funding and Repatriation of Profits

Liaison Office

A Liaison Office is generally funded through inward remittances from its overseas head office because it is not permitted to generate commercial income in India.

Branch Office

A Branch Office may remit eligible profits to its overseas head office subject to applicable tax, banking and FEMA requirements.

Wholly Owned Subsidiary

A WOS may receive foreign investment and may remit funds to its foreign shareholder through legally permitted mechanisms such as dividends or other genuine cross-border payments, subject to tax, transfer pricing and FEMA requirements.

Remove the current list suggesting that “Director remuneration”, “royalty” and “related party transaction” are simply modes of repatriating profit. That wording is potentially misleading.

Compliance Requirements

Liaison Office and Branch Office

LO/BO compliances may include RBI/FEMA reporting, ROC filings applicable to foreign companies, tax filings and other registrations depending on the nature of activities.

Wholly Owned Subsidiary

A WOS must comply with the Companies Act and other applicable laws, including:

• Board and shareholder compliances;
• statutory financial statements and audit;
• ROC annual filings;
• income-tax compliance;
• FEMA/FDI reporting;
• transfer pricing, where applicable;
• GST/TDS and payroll compliances, where applicable.

Which India Entry Structure is Better?

There is no single structure that is suitable for every foreign company.

Choose a Liaison Office when:
the objective is mainly representation, communication, market development or establishing a non-commercial presence.

Choose a Branch Office when:
the foreign company wants to conduct permitted operational activities in India while retaining the foreign company as the principal legal entity.

Choose a Wholly Owned Subsidiary when:
the objective is long-term commercial operations, greater operating flexibility, local hiring, contracts, scalable business activity and a separate Indian legal entity.

For many foreign companies planning substantive and long-term India operations, a WOS may provide greater flexibility. However, the appropriate India Entry structure should be selected after considering commercial objectives, sector-specific FDI rules, taxation, liability and compliance requirements.

Frequently Asked Questions

What is the main difference between a Liaison Office and Branch Office in India?

A Liaison Office is generally restricted to permitted liaison and representative activities and cannot undertake commercial business, whereas a Branch Office can undertake specified permitted business activities.

Is a Branch Office a separate legal entity in India?

No. A Branch Office is generally an extension of the overseas company rather than a separate Indian incorporated entity.

Is a Wholly Owned Subsidiary an Indian company?

Yes. A WOS incorporated in India is an Indian company and has a separate legal identity from its foreign shareholder.

Which structure is best for a foreign company planning long-term business in India?

A WOS is often considered for long-term commercial operations because it provides a separate legal entity and broader operating flexibility. The appropriate structure nevertheless depends on the sector, business activity, tax considerations and commercial objectives.

Can a Liaison Office earn income in India?

A Liaison Office is generally not permitted to undertake commercial or income-generating activities in India.

Does a foreign company need RBI approval for all India entry structures?

No. The regulatory route depends on the structure, sector, investor and applicable FEMA/FDI framework. A WOS is incorporated under the Companies Act, while LO/BO establishments are governed by the applicable foreign exchange framework.

Related Services

• Wholly Owned Subsidiary Registration in India
• Branch Office Registration in India
• Liaison Office Registration in India
• India Market Entry Consulting
• FEMA & FDI Advisory

Prepared By

EzyBiz India Consulting LLP – India Market Entry, FEMA & Cross-Border Advisory Team

Last Updated

22 August 2026

Disclaimer

The information contained in this article is for general informational purposes only and should not be considered legal, tax or regulatory advice. The eligibility, approval route, permitted activities and compliance requirements for Liaison Offices, Branch Offices and foreign-owned subsidiaries may vary depending on the investor, sector, proposed activities and applicable regulations. Professional advice should be obtained before selecting an India entry structure.