Set Up a Project Office in India Eligibility Documents & Process

A Project Office in India is a temporary office set up by a foreign company in India to carry out a specific project. It allows the company to have a local presence so it can manage and complete the project smoothly.

The Project Office can only perform activities that are related to that particular project. Once the project is completed, the office is typically closed.

What is referred to as the project here: In the context of a Project Office, a project refers to a specific contract or assignment that a foreign company receives from:

  • An Indian company
  • A government authority
  • A public sector organization
  • An international development agency

These projects are usually large, specialized, and time-bound assignments where the foreign company needs a local presence in India to manage operations effectively.

In simple terms, it is a defined piece of work that needs to be completed within a certain scope and time period.

A foreign engineering company wins a ₹500-crore metro contract in India → opens a Project Office → completes the project → closes the office.

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Why do foreign companies want to set up a Project Office in India?

Are you also a business or company from outside India, such as the US, that wants to set up a company in India? – then this article is for you-

Many foreign businesses outside India are eager to enter the Indian market due to favorable conditions such as low operational costs, ease of manufacturing, availability of skilled manpower, and a large consumer base.

Before moving forward, let’s understand the definition of a foreign company in India:

A foreign company is a company that is registered outside India but has a business presence in India. So, even if the company is incorporated abroad, once it operates or does business in India, it is treated as a foreign company under Indian law.

u/s 2(42) of the Companies Act, 2013.

In this article, we are going to cover one of the types through which a foreign company can set up its presence — a Project Office in India.

Foreign companies often choose to set up a Project Office in India when they have secured a specific project or contract in the country and need a local presence to execute it. A Project Office allows the foreign company to operate in India only for the duration of that particular project, without establishing a full-fledged subsidiary or permanent business entity.

Let’s understand the key reasons:

1. To Execute a Simple Contract or Project: Many foreign companies win contracts in India in sectors like construction, engineering, infrastructure, oil & gas, and IT services. A Project Office allows them to carry out that particular project legally in India.

2. Temporary Business Presence: A Project Office is suitable when the company does not want to set up a permanent entity, such as a subsidiary or joint venture. It exists only for the duration of the project.

3. Easier Regulatory Structure: Compared to forming a full company, setting up a Project Office usually involves fewer compliance requirements, making it easier for foreign companies to start operations quickly.

4. Direct Management by the Parent Company: The Project Office operates as an extension of the foreign parent company, allowing the parent company to retain full control over the project and operations.

5. Funding Through the Project: In most cases, the project is funded directly by the foreign parent company or through project financing from Indian banks or financial institutions, making it financially structured for that specific contract.

6. Common in Government or Large Infrastructure Projects: Foreign companies often establish Project Offices when working on large government tenders, infrastructure projects, or international collaborations in India.

Example of a foreign company that has set up a Project Office in India: ILJIN Electric Company Limited – Delhi Metro Project

  • The South Korean power equipment company established a Project Office in Delhi in 2007
  • The office was set up to execute a contract awarded by Delhi Metro Rail Corporation (DMRC) for electrical infrastructure related to the metro project

What are the eligibility criteria to establish a project office in India?

As per general permission from RBI, a foreign company may open a project office in India, provided it has a project contract with an Indian company and any one of the following conditions is satisfied:

  • The project is funded directly either through inward remittance from abroad, or
  • The project is supported by a bilateral/ multilateral International Financing Agency (IMF/World Bank/Similar Body), or
  • The project got cleared by an appropriate authority; or
  • The company in India, which has been awarded the contract, has been permitted a term loan by a public financial institution or bank in India for the project.

When is RBI approval required?

If none of the above conditions are fulfilled, the foreign company must apply to the RBI Central Office for permission before opening the Project Office in India.

How can foreigners set up a project office in India?

Here is the step-by-step process for project office registration in India:

Step 1: Secure a project contract
The foreign company must first obtain a project contract from an Indian company. The project should also meet at least one of the conditions, such as foreign funding, international funding, government approval, or financing from an Indian bank or financial institution.

Step 2: Check Whether RBI Approval is Required
If the project meets the automatic approval conditions set by the Reserve Bank of India, the foreign company can establish a Project Office without prior RBI approval.
If the conditions are not fulfilled, the company must apply for approval from the RBI before opening the Project Office.

Step 3: Submit Form FNC to an Authorized Bank
The foreign company must submit Form FNC along with all required documents to an Authorized Dealer Category-I Bank (AD Category-I bank).
These banks act as intermediaries between the company and the RBI and handle foreign exchange-related approvals.

Step 4: Verification and approval process
The bank will review the application and supporting documents. If everything is in order, the bank will either grant approval under the automatic route or forward the application to the RBI for further approval.

Step 5: Project office registration with ROC
Once approval is received, the RBI issues a UIN (Unique Identification Number) to the foreign company, and then, the foreign company must register the Project Office with the Registrar of Companies (ROC) by filing the Form FC-1 under the Ministry of Corporate Affairs within 30 days of establishment. This can easily be done online on the MCA portal.

Step 6: Open a Bank Account and Start Operations
After registration, the Project Office can open a bank account in India, receive project funds, hire staff, and begin activities related only to the approved project.

Step 7: Follow Ongoing Compliance Requirements
The Project Office must comply with tax regulations, annual filings, and RBI reporting requirements during the entire duration of the project.

Step 8: Close the Project Office After Completion
Once the project is completed, the foreign company must close the bank accounts, settle liabilities, and formally close the Project Office in India according to RBI and corporate regulations.

Checklist to set up a Project Office in India

Key requirements include:

  • Project contract with an Indian entity
  • Form FNC application
  • KYC documents of a foreign company
  • Board resolution
  • Financial statements of the parent company
  • Approval from the authorized bank/RBI

Post Incorporation Compliances

Once your Project Office is registered in India and you have started operations, you must complete the required post-establishment compliances first.

1. Initial Reporting to RBI
Within 2 months of establishing the Project Office, the company must submit a report (through the AD bank) to the relevant regional office of the Reserve Bank of India.

2. Annual Reporting Requirement
Every year, the Project Office must also submit a certificate called AAC (Annual Activity Certificate) from a Chartered Accountant to its bank confirming that:

  • The accounts of the Project Office have been audited, and
  • The activities carried out are in line with the permission granted by the RBI.

Remittance of Funds by a Project Office

Do you know that your Project Office can send its money back to your home country? Yes, it is allowed. let’s understand how you can do this-

An Authorized Dealer Category-I Bank (AD Category-I bank) can allow a Project Office in India to send money abroad occasionally while the project is still ongoing or before it is officially closed.

However, the bank will allow this only if the transaction is genuine and certain conditions are met.

Conditions for sending money abroad

1. Certificate from an Auditor or Chartered Accountant
The Project Office must submit a certificate from a Chartered Accountant confirming that enough funds have been kept in India to pay all liabilities, including taxes such as income tax.

2. Undertaking from the Project Office
The Project Office must provide a written declaration stating that:

  1. The money being sent abroad will not affect the completion of the project in India, and
  2. If any shortage of funds arises to pay liabilities in India, the foreign parent company will send additional money from abroad.

3. Transfer of funds between projects: If a foreign company has multiple Project Offices in India, transferring money from one project to another is not allowed automatically.
For this, the company must first obtain permission from the regional office of the Reserve Bank of India that supervises the Project Office.

Closing of Project Office in India

A Project Office in India is temporary and must be closed once the project is completed.

Steps to close a Project Office in India:

  1. Complete the project work and ensure there are no pending obligations.
  2. Settle all liabilities in India, including vendor payments, employee dues, and taxes.
  3. Obtain a Chartered Accountant certificate confirming that all liabilities and taxes have been cleared.
  4. Remit the remaining funds abroad through an Authorized Dealer Category-I bank.
  5. File closure documents with the Registrar of Companies (ROC) and close the Project Office bank accounts.

In simple terms, after the project ends, the company must clear dues, transfer remaining funds, complete regulatory filings, and officially close the Project Office in India.

Governing Authorities for Project Offices in India

Project Offices in India are primarily regulated by:

  • Reserve Bank of India
  • Ministry of Corporate Affairs
  • Indian Income Tax Department

Setting up a Project Office in India is a practical option for foreign companies executing specific contracts or infrastructure projects in the country.

With the simplified framework introduced by the Reserve Bank of India, the process has become more transparent and efficient, allowing foreign businesses to establish a temporary presence and complete projects smoothly.

How Mercurius Can Help Set Up a Project Office in India

At Mercurius, we are among the top project office setup consultants in India. We assist foreign companies with complete Project Office setup and compliance services in India.

Our services include:

If you are planning to set up a Project Office in India, our experts can guide you through the entire process efficiently.

Feel free to contact us.

FAQ

1. Is any approval required for establishing a project office in India?
Yes, RBI prior approval is required to open a project office in any of the following cases:

  • If the applicant’s principal business falls in defence, telecom, private security, information, or broadcasting.
  • If the applicant is an entity registered/incorporated in Pakistan or a citizen of Pakistan.

Authorized Dealer Category-I banks are empowered to approve in all other cases.

2. Is there any time limit within which the project office should be established after receiving approval?
Yes, the project office should be established within six months of the date of the approval letter. A six-month extension may be granted by an AD Category-I bank for reasons beyond the control of the person outside India. Further, an extension may be given by the RBI only, and it may generally take 15 days to register a project office.

3. What is the application process?
For establishing a PO in India, the non-resident entity may apply Form FNC to a designated AD Category – I bank along with the prescribed documents. The AD Category-I bank, after exercising due diligence regarding the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria and compliance with the extant KYC norms, shall grant approval to the foreign entity for establishing a project office in India and may frame a suitable policy for trading with these applications in conformity with the FEMA regulations and directions.

4. What are the post-establishment compliances for the project office?
Filing of Form FC-1 within thirty days of establishing its place of business in India (u/s 380 of CA 2013 r/w companies (Registration of Foreign Companies) rules 2014.

5. Is there any annual compliance that needs to be undertaken?
The following annual compliances need to be undertaken:

6. Under FEMA and its relevant regulations
The establishment needs to submit an Annual Activity Certificate (“AAC”) and audited financial statements to the RBI.

7. Under the Companies Act, 2013
Filing of financial statements and annual returns.

8. What is the validity period of the project office?
The validity time of the project office is for the entire tenure of the project (till the project is completed or wound up).