Project Office in India
A complete guide for foreign companies to establish a Project Office in India, including benefits, requirements, compliance, and closure procedures.
About Project Office
A Project Office is a temporary establishment set up by a foreign company in India to execute a specific project. It allows foreign entities to have a presence without incorporating a subsidiary or branch office.
Authorized Representative
Instead of directors, a Project Office requires an authorized representative in India to oversee operations.
No Board of Directors
Since it is not a separate legal entity, there is no concept of a board or minimum directors.
Parent Company Control
All strategic decisions and overall management remain under the parent company's control.
Benefits of Forming a Project Office
Simplified Establishment
No separate incorporation required; approvals obtained via RBI.
Project-Specific Focus
Operates exclusively for the project, avoiding unnecessary overheads.
Tax Efficiency
Income is taxed only on project-related earnings in India.
Enhanced Local Presence
Facilitates coordination with local vendors, government, and stakeholders.
No Minimum Capital
Operates with funding specific to the approved project.
Basic Requirements
- Managed by an Authorized Representative of the parent company in India.
- Applicant must be a body corporate incorporated outside India.
- Project must be funded directly by inward remittance or international funding.
- Project should be approved by an Indian entity or funding agency as per RBI guidelines.
- Parent company must submit proof of securing the contract and funding details.
- Operations are restricted to project-related activities only.
- Applicants from certain countries must register with police authorities.
Drawbacks of Project Office
Limited Scope
Operations restricted to the specific project only.
Temporary Presence
Exists only for the duration of the project.
Compliance Burden
Closure and RBI approvals are required for winding up.
Step-by-Step Process to Establish a Project Office
Application Submission
Submit Form FNC to AD Category-I Bank with prescribed documents and Letter of Comfort (LOC).
Letter of Comfort (LOC)
If financially unsound, submit LOC from parent/group company meeting net worth and profitability criteria.
Bank Approval
AD Bank scrutinizes application, ensures KYC compliance, and grants establishment permission.
Establishment Timeline
Project Office must be established within 6 months; extensions require AD Bank/RBI approval.
Documentation & Registration
Prepare incorporation, project, and financial documents; register with RoC; apply for PAN/TAN and bank account.
GST Registration (Optional)
Register for GST if project operations require it.
Checklist for Forming Project Office
Parent Company Documents
- Certificate of Incorporation
- Board Resolution authorizing Project Office
- Financial statements for past 3 years
Project Documents
- Contract specifying project scope
- Proof of funding or inward remittance
- Letter of award from Indian entity
Authorized Representative & Compliance
- Identification & contact details of authorized signatory
- Form FNC-1 (if RBI approval needed)
- Application for PAN and TAN
Post-Incorporation Compliance
RBI Compliance
- Annual Activity Certificate (AAC) within 6 months of FY-end
- Utilization report of funds from parent company
RoC Compliance
- Form FC-3 (Accounts & Place of Business)
- Form FC-4 (Annual Return)
- Maintain books of accounts per Companies Act
Income Tax Compliance
- PAN registration
- Annual tax returns & TDS filings
- Transfer Pricing compliance if applicable
GST Compliance
- Obtain GST registration if required
- File monthly/quarterly GST returns & annual GSTR-9
Financial & Labour Compliance
- Annual audit of accounts by Chartered Accountant
- Maintain records for repatriation of funds
- PF/ESI compliance for employees if applicable
Procedure for Closing a Project Office
GST Closure
Cancel GST registration & file final GSTR-10 with closing liabilities, credits, and stock.
RoC Filings
Submit Form FC-4 (Annual Return), Form FC-2 (Return of Closure), final financials, and auditor certificate.
Income Tax Closure
File final tax return, clear TDS & other liabilities, and obtain NOC if required.
RBI Approval
Obtain RBI/AD Bank approval for remitting closure proceeds; ensure all AAC filings are completed.
Employee & Vendor Settlements
Settle all employee dues, vendor payments, and legal confirmations before remittance.
Frequently Asked Questions (FAQ)
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