Guide · Company setup
Liaison office vs branch office vs subsidiary in India
A subsidiary suits most foreign companies that want to sell, hire or produce in India. A branch office lets the parent act directly, within a limited list of activities. A liaison office only represents you and cannot earn income. This comparison sits within the wider guide to setting up a company in India.
In short
- Subsidiary: separate Indian company, almost any activity your sector allows, no prior approval in most sectors.
- Branch office: part of the parent, listed activities only, approval needed, higher tax on profits.
- Liaison office: representation and market research only, no revenue, approval needed, limited duration.
- If you plan to invoice Indian clients within two years, start with a subsidiary.
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Contents
The three structures side by side
| Liaison office | Branch office | Subsidiary | |
|---|---|---|---|
| Legal status | Part of the parent | Part of the parent | Separate Indian company |
| Can earn income | No | Yes, listed activities | Yes |
| Manufacturing | No | Generally not | Yes, if the sector allows |
| Approval | Needed, through a bank | Needed, through a bank | Not in most sectors |
| Liability | Parent | Parent | Limited to the subsidiary |
| Tax on profits | No profits in India | Foreign company rate | Domestic company rate |
Liaison office: test the market without trading
A liaison office is a listening post. It can promote your products, meet prospects and partners, and report back. It cannot sign sales, invoice or earn income in India.
- Approval is granted for a limited period and can be renewed.
- The parent must meet track record and financial conditions.
- All costs are funded by money sent from the parent.
- Annual activity certificates and filings are still required.
Branch office: act in India as the parent
A branch office can earn income, but only from a list of permitted activities, such as import and export, consultancy, research, technical collaboration or after-sales support for the parent's products. Retail trading and manufacturing are generally excluded.
The parent stays fully liable, and branch profits are taxed at the rate applied to foreign companies, which is usually higher than the rate an Indian subsidiary can opt for.
Subsidiary: the default for most foreign companies
A private limited company owned by your parent can do almost anything your sector allows: hire, invoice, import, manufacture and raise local finance. In most sectors it needs no prior approval.
The trade-off is ongoing compliance: two directors with one resident in India, annual audit and filings, and reporting of the foreign investment. The steps are in the guide to setting up a company in India from abroad.
Which one fits your plan?
Will you sell, hire or produce in India within two years?
YesSubsidiary
Nonext question
Is your activity on the permitted list, run directly by the parent?
YesBranch office
OtherwiseLiaison office, to explore before committing
- Exploring, no sales yet: liaison office, or no entity at all while you test through a distributor.
- Services from the parent, short horizon: branch office can work if your activity is on the permitted list.
- Selling, hiring or producing: subsidiary.
- Producing without your own team: no entity, through contract manufacturing in India.
- Capped sector or local assets needed: a joint venture in India.
Questions about liaison offices, branches and subsidiaries
Can a liaison office in India earn money?
No. A liaison office can only represent the parent company, explore the market and act as a communication channel. Its expenses are paid by money sent from the parent. Any sale or invoice in India needs another structure.
Is a branch office a separate company?
No. A branch office is an extension of the foreign parent. The parent is directly liable for its obligations, and its profits are taxed in India as those of a foreign company.
Which structure is fastest to set up?
A private limited subsidiary under the automatic route is often the most predictable, because it needs no prior approval. Liaison and branch offices depend on an approval through an authorised bank and the central bank, which can take longer.
Can I convert a liaison office into a subsidiary later?
Not directly. The usual route is to set up the subsidiary, transfer the activity, then close the liaison office with the required filings and clearances.
Which structure pays less tax in India?
In most cases a subsidiary, because Indian companies can opt for a lower corporate tax regime than the rate applied to foreign companies on branch profits. A liaison office earns no income in India. Confirm with a tax adviser for your case and your home country treaty.
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General information, updated 2026. Not legal, tax or investment advice: rules change and every case is confirmed by qualified professionals in India. Expand into India introduces you to partners in India.