An overseas company can look at India through several legal forms, but the labels are not interchangeable. A subsidiary is a separate Indian company. The branch office remains an extension of the overseas entity for permitted activities. Liaison offices have a representative role and face tighter limits on commercial activity. Current RBI rules, foreign investment policy, sector conditions, tax treatment, funding mechanics, and local operating needs all affect the comparison. Start with the activity and money flow, not a preference for the quickest route. If the India team will invoice customers, employ a growing workforce, hold assets, or build a long-term local business, that picture must sit beside any perceived setup convenience. Obtain current corporate, foreign exchange, tax, and sector advice before choosing or applying.
Describe the India mandate in verbs
Write down what the India presence will do each week. Will it identify prospects, sign contracts, receive revenue, provide services, import goods, buy locally, hire employees, hold equipment, or report to an overseas head office? Local activity depends on the route. Liaison offices are not blank vehicles for local trading. Branch offices operate within a permitted-activity framework and remain connected to the foreign company. Under the subsidiary route, the Indian company may carry on the activities allowed to it, subject to foreign investment, sector, and other laws. The comparison should mark each proposed verb as permitted, restricted, uncertain, or irrelevant under the route being assessed. Do the same for later activities, but keep them in a separate column. A broad future ambition should not disguise a narrow launch plan. Independent professionals should confirm the current position against the exact sector, customer contract, and proposed fund flow.
- Customer-facing activity
- Local contracting and invoicing
- Employment and asset ownership
- Imports, procurement, and project work
- Representative or promotional activity
See where obligations land
Separate incorporation gives a subsidiary its own corporate identity, governance, books, filings, and contracts. The branch remains part of the overseas company, which can bring the foreign enterprise closer to Indian operating exposure. Despite its limited role, the liaison office also belongs to the overseas entity. This difference affects customer onboarding, parent approvals, insurance, disputes, accounting, audit, tax analysis, and internal risk reporting. Ask which entity will sign, employ, own intellectual property, hold data, pay vendors, and receive claims. Then trace how responsibility travels back to the parent. A separate entity does not erase group risk or director duties, and an office route is not automatically unsuitable. The board needs a clear statement of what the structure isolates, what it does not, and which obligations sit with the foreign company under current law and contract.
- Contracting party and payment recipient
- Employer and payroll responsibility
- Asset, data, and intellectual property holder
- Parent exposure and internal approvals
Compare permission, funding, and duration
Office routes sit within an RBI framework that addresses establishment, permitted activities, funding, reporting, and closure. Subsidiaries instead sit within company law and the current foreign investment framework, with sector-specific conditions where relevant. The investor's country, beneficial ownership, proposed activity, and funding instrument may change the route or approval analysis. Duration matters too. A representative test of the market, a single qualifying project, and a permanent operating business are different briefs. Put expected life, funding source, local expenses, revenue, remittance, and closure assumptions in the comparison. Then ask what evidence the authority, bank, tax team, and auditor will need. Do not rely on an old approval checklist. RBI directions, FDI policy, forms, and portal processes can move. Recheck the official material and have the proposed structure reviewed before commitments are signed.
- Expected duration and exit event
- Source of local operating funds
- Revenue and remittance path
- Approval and reporting questions
- Sector and investor-specific conditions
Write the choice memo before filing
A one-page choice memo keeps the decision honest. State the business objective, proposed activities, preferred route, rejected routes, material assumptions, current professional input, and conditions that would trigger a rethink. Attach the activity matrix and a simple diagram of contracts and money. This memo helps the overseas board understand that the filing is the consequence of an operating decision. It also gives banks and advisers a consistent account of the plan. If management later adds local sales, a larger team, a new sector, or a different funding path, return to the memo. The original route may need a fresh review or a planned transition. A structure chosen for a six-month representative presence should not quietly become the vehicle for a full operating business. Check current RBI, DPIIT, company, tax, labour, and sector rules before each material change.
- Preferred route and commercial reason
- Activities expressly included and excluded
- Assumptions confirmed by specialists
- Events that require a new review
Primary sources and further reading
- RBI: Master Direction on branch, liaison, and project offices
- DPIIT: current foreign direct investment policy materials
- India Code: Companies Act, 2013
Rules and procedures change. Check the current official source and obtain advice for the facts of your matter.