Project office registration- An introduction
Under the FEMA, a project office is defined as an office or business that carries out a particular activity of a specific project under the instructions and guidance of the foreign parent company. A project office does not include a liaison office. Hence a project office would include any office which is carrying out some form of project. Usually, the project would be mainly for carrying out construction based activities.
‘Project Office’ means a place of business to represent the interests of the foreign company executing a project in India but excludes a Liaison Office.
The project office is the ideal method for companies to establish a business presence in India, if the object is to have a presence for a limited period of time. It is essentially a branch office set up with the limited purpose for executing a specific project. Foreign companies engaged in turnkey construction or installation normally set up a project office for their operations in India.
Foreign Companies, who have been awarded a contract to execute a project in India, select the mode of execution of the project, through project offices duly registered with the Reserve Bank of India (RBI) and the Registrar of Companies (ROC). ‘Project Office’ also represents the interests of the foreign company executing a project in India as in the case of Liaison Office with the only difference, that Project Office can undertake commercial activities related to the particular project whereas the liaison office cannot.
Revised Regulations 2016 under FEMA has delegated all powers of approving applications to AD banks except few cases.
As per section 2(42) of Companies act 2013 “foreign company” means any company or body corporate incorporated outside India which-
(a). has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
(b). conducts any business activity in India in any other manner.
A Foreign company can set up its business operations in India through:
Foreign Company incorporating a Subsidiary Company / Private Limited Company in India for a particular small project may face many issues including:
- Wastage of time and resources
- Heavy compliance requirement
- Time consuming closure proceedings The RBI allows a parent company based in another country for project office registration in India to represent the parent company's interests when executing projects in India. However, the parent company must have a contractual relationship to execute a project in India. The project can be entitled to a foreign company by any Indian government sector or private sector enterprise.
Further, the project office can only engage in activities under the project's scope undertaken by the parent company in India. Incidental and related activities are also considered under the scope of the project.
The registration process for Project office registration is executed as per the guidelines mentioned under section 6(6) of the Foreign Exchange Management Act 1999.
The Reserve Bank of India has the authority to approve a foreign company's project office in India. However, before establishing a project office in India, the foreign company must first secure a contract with an Indian company.
RBI guidelines and Companies Act, 2013 has made it mandatory for a foreign company to acquire the registration certificate with the Registrar of Companies (ROC) if the foreign company wants to establish a project office in India. It has to adhere to all the procedural formalities during the project office registration process.
Taxation on Foreign Entities
Liaison Office
A Liaison Office (LO) is generally not subject to Income Tax in India, as it cannot conduct business activities and earn profits on account of Indian exchange control regulations.
It is required to obtain an Indian tax registration number (PAN) and a withholding tax registration number (TAN) .
It is required to file an annual statement of its financial affairs and an annual activity certificate (AAC).
As an LO cannot generally earn any profits, no repatriation taxes are applicable even if there are any unutilized funds available at the time of its closure, they can be repatriated without any exit taxes
Project Office/ Branch Office
Project Office (PO)/ Branch Office (BO) are treated as an Indian Permanent Establishment (PE) of its Foreign headquarters. Therefore, it is taxable in respect of its Indian profits @ 40%.
It is required to obtain a PAN and TAN, file an annual return of income and an AAC.
Repatriation of surplus or at the time of closure, PO/ BO is not subject to any additional taxes.
LLP
An LLP incorporated in India is treated as a tax resident of India and is taxed @ 30% of its global income.
It is required to obtain a PAN and TAN, and file an annual return of income.
When LLP distributes its profits to partners, they are not taxed in the hands of the LLP or its partners. Repatriation of capital contribution (say, upon dissolution) is permissible without any thresholds and is not subject to any additional taxes.
Company formed in India (Wholly-owned subsidiary/ Joint Venture)
A company incorporated in India is treated as a tax resident of India and is taxed @ 30% on its global income. However, if its turnover is up to ₹ 4,000 million in FY 2017-18, then the applicable rate of tax is 25%.
It is required to obtain a PAN and TAN, and file an annual return of income.
Profit repatriation by way of a dividend is subject to Dividend Distribution Tax (DDT) in the hands of the company @ 20.36% of dividend declared.
Key Tax Incentives in India
| Particulars | Applicability | Incentive | Validity |
| Export Promotion | SEZ units operational before 1st April 2020 | Deduction of 100% of profits and gains derived from export business for first 5 years of commencement, 50% of profits and gains derived from export business for next 5 years, 50% of ploughed-back profits and gains from export business for next 5 years. | |
| Research & Development | Companies in respect of any expenditure on R&D in an approved in-house facility | Weighted tax deduction of 200% granted to companies. | 31st March 2020 |
| Investment-linked | To incentivize investment in certain sectors, any capital expenditure incurred for specified businesses is allowed as a deduction in the year in which it is incurred. | ||
| Startup India Scheme | Tax incentives granted to eligible start-ups are the tax holiday for any consecutive 3 years (from initial 5 years) in respect to 100% of their profits, including fast-tracking of patent applications with 80% rebate. | ||
| International Financial Services Centre | Caters to customers outside the jurisdiction of the domestic economy. Such centers deal with flows of finance, financial products and services across borders. | Tax concessions on capital gains, Minimum Alternate Tax and Dividend Distribution Tax |
Difference between Branch Office and Project Office under FEMA
| S. No. | Information | Branch Office | Project Office |
| 1 | Definition | As per the foreign exchange management act, a branch office is an entity which is formed by a foreign parent company in India. As explained above, the meaning of branch office is also present under the definition of the Companies Act 2013. All types of Activities can be carried out by the branch office. | The definition of a branch office and project office is not similar. While an entity that is formed by a foreign parent company, to complete a specific project is considered as a project office. Even under the companies’ act 2013, the definition of a project office is included under the foreign office. |
| 2 | Permission | Prior Permission of the RBI is required for setting up a branch office in India. If a foreign bank wants to establish a branch office in India, then specific approval would be required from the Department of Banking and Supervision of the RBI. Foreign Insurance companies that have to set up branches in India would have to obtain specific permission from the Insurance Regulatory and Development Authority of India (IRDAI). | Both branch offices and foreign offices require prior permission from the requisite authorities. Even a project office would require permission from the RBI to set up an office in India. Apart from this permission, a project office would require permission from other authorities such as regulatory agencies and international institutions. Regulatory approval is required under domestic law as well as foreign law. |
| 3 | Routes for Foreign Investment | For a branch office, foreign investment can either come through the automatic route or the approval route. The automatic route does not require any prior approval from the Government of India. However, the government route will require prior approval from the government of India. Foreign companies that want to establish branch offices and project offices would have to comply with the required investment criteria and norms related to foreign investment. | Like branch offices, even project offices would have to comply with the routes which are prescribed by the government of India. The automatic route does not require any prior approval from the government of India. However, the government route requires prior approval from the government of India. For example, if the foreign office is setting up a project office for the purposes of coal mining activity, then this would be allowed under the automatic route. Previously, this was covered under the government route. |
| 4 | Comply with Rules | Setting up a branch office and project offices requires the entity to comply with specific rules. Apart from the rules set by the RBI, the branch office would have to comply with the specific requirement of other authorities. For example, Branch Offices are allowed to operate from SEZ (Special Economic Zones). Hence they would have to comply with the requirements of the SEZ rules as well as the rules which are established by the Companies Act, 2013. | Branch offices and project offices which are set by a foreign parent company has to follow specific prescribed rules. However, project offices are allowed to operate on any premises if they are compliant with the relevant regulations. |
| 5 | Eligibility Criteria for Branch Office and Liaison Office | The eligibility criteria for a branch office and project office would be different, as the main activities which are carried out by these offices are not similar. To set up a branch office, the following criteria have to be satisfied: Eligible Activities have to be carried out by the branch office.RBI will grant a specific license for carrying out the activities of a branch office. Documents have to comply with the conditions which are required. All the required criteria have to be fulfilled for applying for a branch office. | The eligibility criteria would be different for a project office. The foreign parent company has to ensure the following is satisfied while making an application for the establishment of a project office: A foreign company wanting to establish as a project office must ensure that the activities carried out by the project office will be for a specific project or a certain period of time. The Foreign parent company that is establishing a project office must receive remittance for carrying out the activities in India. The funding or remittance must be made by an international multilateral agency or a bilateral agency. There must be a specific agreement or a contract between the foreign parent company and the Indian Company planning to take part in the project office. An international institution such as the World Bank or the International Monetary Fund would be the appropriate institution that is funding the project. Specific clearances are required from domestic as well as international authorities. A loan must be required from a Public Financial Institution. This institution must take part in the contract. |
| 6 | Procedure for Establishing a Branch Office and Project Office | The procedure for establishing a branch office and the project office would be similar. However, the period of time for seeking consent from the respective authorities may vary according to the guidelines. The following procedure has to be considered for setting up a branch office in India: An application has to be made to the Foreign Exchange Division, RBI. This application will not be made directly by the applicant to the RBI. The application will go through the authorized dealer or the authorized agency. The applicant has to fulfill the above criteria for applying for a branch office in India. If this is carried out, then the applicant has to make the application in Form- FNC. With the application, requisite documentation must be submitted to the authorized dealer. | Like establishing a branch office, the procedure for establishing a project office would be the same. However, as the activities which are carried out by the project office are different, they may be some difference in the procedure for establishment. A similar procedure is followed by the applicant to establish a project office. The applicant has to make an application to the foreign exchange division of the RBI. The application must be made in Form FNC. With the application, specific documents must be submitted by the applicant. |
| 7 | Documentation for Branch Office and Project Office | The documents required to be submitted for establishing a branch office and a project office would not be the same. The following documents are required for establishing a branch office in India: Company Incorporation Documents such as the Certificate of Incorporation, Memorandum of Association of the Company, Articles of Association of the Company, Audited Statements of the Company, Audited Balance Sheets of the company, Letter of Comfort if required- This would only be necessary if the branch office does not satisfy the eligibility criteria for establishing an office in India. In such an instance, the LOC or letter of comfort must be submitted through the foreign parent company. All the above documents must be provided or translated in the English Language. |
Branch office and Project office have different documentation requirements. However, the documentation requirements for a project office would be more based on financial statements and loan agreements from the respective international agencies. However, the following documents have to be submitted to the authorized dealer: Contract or Agreement between the Indian company and foreign parent company. Term Loan Agreement Other respective documents required for sanctioning the project. |
| 8 | Other Reporting Requirements for Branch Office and Project Office | For setting up a branch office and project office in India, the applicant would also have to provide crucial information such as: Name and address of the registered foreign company, Cost of carrying out the activities by the company, Types of activities which will be carried out by the company. | Like the branch office, similar information has to be provided by the project office to the respective authorities. The following information is required to be provided: Address and name of the company, Tenure of project activities which are carried out by the company. Cost of the Project Activity. |
| 9 | Exempt from RBI –Branch Office and Project Office. | Branch Offices which are formed as Insurance companies and banking companies are exempted from seeking consent from the RBI to set up. Instead, they would require advice from the Department of Banking Supervision, RBI or the IRDAI as required. | Branch offices and project offices require compliance from respective authorities. However, a project office is not exempt from the RBI for securing a license to operate. |
| 10 | Permissible Activities – branch office and Project Office | There are different activities which are permitted for a branch office and project office. However, the activities which are permitted for a branch office will not be permitted for a project office. The following activities are carried out by a branch office. Export and Import of goods and services- Any form of consultancy business, Any form of Research and Development Activities for the parent company, Development of Software and Technology Services for the Parent Company, Transportation Company can also start this form of business. |
The activities carried out by project office include: Carrying out different types of projects, Project can include manufacturing projects, Other form of turnkey and construction contracts. |
General Permission to set up Project Office in India
A foreign company can establish a project office in India either on a temporary basis or a permanent project office, provided the foreign company has been awarded a project to be executed by them in India from the government or private sector. Registration of Project Office with RBI & ROC must be completed before it starts operating. There are certain conditions which need to be fulfilled before an application is moved for Project Office Registration.
To register a project office an application is made with the Category 1 AD Bank with a complete set of documents including the copy of the project agreement and an undertaking that the project shall be funded with inward remittance from abroad or through an arrangement with the bilateral or multilateral international finance agency. After approval of the application by the RBI, the project office needs to be registered with the ROC and local police within 30 days of such approval.
Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices can not undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.
General Permission
Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India, and
- The project is funded directly by inward remittance from abroad.
- The project is funded by a bilateral or multilateral International Financing Agency.
- The project has been cleared by an appropriate authority.
- A company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.
However, if the above criteria are not met, the foreign entity has to approach the Reserve Bank of India, Central Office, for approval.
The application shall be submitted by the foreign entity in Form FNC (Annex B) to a designated AD Category – I bank, along with the documents mentioned in Annexure-A for allotment of Unique Identification Number (UIN).
Applications from foreign companies for establishing Branch Office in India shall be forwarded by the AD Category-I bank to the General Manager, Reserve Bank of India.
The AD Category-I bank shall after exercising due diligence in respect of the applicant’s background, and satisfying itself will grant approval to the foreign entity for establishing Project Office in India.
ROC approval for setting up of Project Office: Application to Registrar of Companies shall be made in Form FC-1 along with required docs within 30 days from the date of RBI approval.
Compliances under Companies Act: MCA Compliance Filing
Every Foreign company is required to submit below documents to the Registrar of Companies for registration, within 30 days of the permission of RBI/AD Bank:
- Certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a certified translation thereof in the English language;
- Full address of the registered or principal office of the company
- List of the directors and secretary of the company containing such particulars as prescribed under Rule 3.
- Name and address or the names and addresses of one or more persons resident in India authorized to accept on behalf of the company service of process and any notices or other documents required to be served on the company
- Full address of the office of the company in India which is deemed to be its principal place of business in India
- Particulars of opening and closing of a place of business in India on earlier occasion or occasions
- Declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from formation of companies and management in India or abroad.
- Other Documents as may be prescribed.
Rule 3(3) of the Companies (Registration of Foreign Companies) Rules, 2014 requires application in e-Form FC-1 to be supported with an attested copy of approval from the Reserve Bank of India/AD Bank under Foreign Exchange Management Act and the rules and regulations thereunder or a declaration from the authorized representative of such Foreign Company that no such approval is required.
And Rule 3(4) provides that in case of any alteration in the aforesaid documents the Foreign Company is required to submit a return in e-Form FC-2 containing the particulars of alteration as per the prescribed format with the Registrar of Companies, within 30 days of any such alteration.
Eligibility for Project office registration
In order to curb such issues and to make entry and exit easy for the Foreign Company the Reserve Bank of India has granted general permission to foreign companies to establish Project Offices in India, Provided they have secured a contract from an Indian company to execute a project in India and
The project is funded directly by inward remittance from abroad or
he project is funded by a bilateral or multilateral international Financing Agency or
The Project has been cleared by an appropriate authority or
A Company or entity in India awarding the contract has been granted term Laon by a Public Financial Institution or a bank in India or the project.
Exceptions to these rules:
- RBI has given general permission for opening of Project Office in India if the above conditions are satisfied. However, if any entity resident in Pakistan, Bangladesh, Sri Lanka, Iran, Afghanistan, China, Macau and Hong-Kong desires to open project office in Jammu & Kashmir, North Eastern States and Andaman and Nicobar islands, approval is granted by RBI in consultation with Government of India. In all other cases, Authorized Dealer Category-I banks are empowered to grant approval.
- Principal business falls in defense/telecom/private security/ information and broadcasting sector. However, no separate reference or approval of the Government of India (GoI) will be required in respect of proposal for opening of a Project Office relating to the defense sector, if contract for which the Project Office is opened has been awarded by/entered into with the Ministry of Defense or Service Headquarters or Defense Public Sector Undertakings;
Time Limit for Opening Project office
Guidelines for Establishing Project Office (Po)
The foreign company who wants to execute e project in India and they will have a presence for limited period of time. Generally foreign companies engaged in turnkey construction or installation set up a project office in India. Foreign entities who have been rewarded a contract to execute a infrastructure or installation project in India, execute the project, through project offices duly registered with the Reserve Bank of India (RBI) and the Registrar of Companies (ROC). The difference between project office and liaison office is that project office can undertake commercial activities related to the project awarded whereas a liaison office cannot undertake any commercial activity Revised Regulations 2016 under FEMA has delegated all powers of approving applications to AD banks except few cases.
- The application for establishment of PO in India, to be submitted by the Non-Resident in Form FNC to a designated AD Category 1 Bank (AD Bank), along with the prescribed documents mentioned in the Form FNC and the LOC i.e. Letter of Comfort (An applicant that is not financially sound and is a subsidiary of another company may submit a Letter of Comfort from its parent/ group company, subject to the condition that the parent/ group company satisfies the prescribed criteria for net worth and profit).
- Copy of the Certificate of Incorporation / Registration attested by the Notary Public in the country of registration[If the original Certificate is in a language other than in English, the same may be translated into English and notarized as above and cross verified/attested by the Indian Embassy/ Consulate in the home country].
- Latest Audited Balance sheet of the applicant company.[If the applicants’ home country laws/regulations do not insist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted]
- Bankers’ Report from the applicant’s banker in the host country / country of registration showing the number of years the applicant has had banking relations with that bank.
- AD Bank after Scrutinizing the application and compliance with the extant KYC norms allow establishment of Project Office in India.
- The validity period of the project office is for the tenure of the project.
- On receipt of permission for setting up of project office in India, the applicant has to inform AD Bank, the date on which Project Office has been established. AD bank shall in turn inform RBI accordingly.
- In case the permission granted has been surrendered or expired and no project office has been setup the AD Bank shall inform RBI accordingly.
- The applicant is required to set up the project office within six months of receipt of approval letter. Failing this approval may lapse. For reason beyond control AD bank may grant extension for a further period of six months. Any further extension shall require prior approval of RBI.
Registration with police authorities: However, Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan desirous of opening Project Office(s) in India shall have to register with the state police authorities. Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi for necessary action and record.
Important points to be noted
- Proprietary concerns which are established abroad are not allowed to start a project office in India.
- A foreign entity’s project office is allowed for the acquisition of any property for carrying out activities which are permitted by Reserve Bank of India or for their own use.
- Only non-interest bearing current accounts can be maintained by a project office in India.
- Registrar of Companies needs to be intimated about opening of Project office in India in the prescribed form to with all important documents within the time specified.
Project Offices can open non-interest bearing foreign currency accounts with AD Category – I banks subject to the following:
- The Project Office has been established in India as per the applicable regulations.
- The contract governing the project specifically provides for payment in foreign currency.
- Each PO can open 2 foreign currency accounts, usually one denominated in USD and the other in home currency of the project awardee but both shall be maintained with the same AD Category–I bank.
- They can be used only for payment of project related expenses and receiving foreign currency from the Project Sanctioning Authority and remittances from parent/group company abroad or bilateral / multilateral international financing agencies.
- The responsibility of ensuring that only the approved debits and credits are allowed in the Foreign Currency Account shall rest solely with the branch concerned of the AD. Further, the Accounts shall be subjected to 100 per cent scrutiny by the Concurrent Auditor of the respective AD banks.
- The foreign currency accounts have to be closed at the completion of the project.
Checklist for Project Office Registration in India
Foreign companies who have been reinforced a contract to set up a project office or to execute an infrastructure in India, execute the business activities or project, through project offices which are duly registered with the Registrar of Companies (ROC) and the Reserve Bank of India (RBI).
The foreign entity can open a project office either on a permanent basis or temporary basis. It is compulsory to complete the registration procedure with RBI & ROC before setting out the business. Project office registration only can be done if the foreign company holds all the requisite conditions and documents.
To register a project office, an application has to be filed with the Category 1 AD Bank, the application is presented with all needed set of documents including the copy of the project or business agreement and an undertaking that explains about the project fund with inward remittance from overseas or through an arrangement with the multilateral or bilateral international finance agency. On getting the approval of application from RBI, the next step in the registration process is to apply for project office registration with the Register and the local police. If the project has zero foreign funding; it is completely Indian entity's responsibility to obtain the term loan from a bank in India or from any Public Financial Institution.
Requirement for Project Office Registration in India
Clearance Of Project
- Check properly whether the project has been approved by the concerned and recognized authorities in India i.e. the project has been cleared from appropriate and recognized authority or ministry and if applicable from the environment ministry.
Formal Contact Of The Project
- It is compulsory for the foreign entity to have a secured project office in India and have to come under a legal and formal agreement which will help the project in the financial statement.
Foreign Funding
- It is important for the project to be financially supported out of the inward remission from the foreign country; otherwise, an International Financing Agency should fund the project.
Indian Funding
- If the project has zero foreign funding, it is completely Indian entity's responsibility to obtain the term loan from a bank in India or from any Public Financial Institution.
Documents Required Attestation / Apostille
- FNC Form duly signed by AR
- Proof of Registered Office
- Note on Location / Proposed Activity
- NOC from the owner of the premises.
- Certificate of Incorporation & MOA
- Audited Financial of past 5 Years
- Board resolution to Open a Branch Office
- KYC of the Authorized Signatory
Points to remember
- All new entities setting up Project Offices shall submit a report containing information, as per format provided in Annex 3 within 5 working days of the PO becoming functional to the Director General of Police (DGP) of the state concerned in which PO has established its office; if there is more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India
- A copy of the report in Annex 4 shall be filed with the Director General of Police concerned on annual basis along with a copy of the annual certificate, and also with the AD concerned. [as amended vide AP (DIR) No.35 dated September 25, 2012 & as per Annexure provided]
- The Project Office shall also submit to the AD branch on an annual basis, a Certificate from a Chartered Accountant showing the Project Status and certifying that the accounts of the Project Office has been audited and the activities were undertaken in conformity with the General / Specific permission given by the Reserve Bank
- The foreign company establishing a Project Office in India is to furnish report through the concerned AD branch, to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the Project Office is set up within 2 months of the establishment of the Project Office.
- Private companies based outside of India are not permitted to open a project office in India.
- The acquisition of any property by a foreign entity's project office is permitted for the purpose of carrying out activities that are permitted by the Reserve Bank of India or for their own use.
- A project office in India can only keep non-interest-bearing current accounts.
- The Registrar of Companies must be notified in writing of the opening of a project office in India, along with all necessary documentation, within the time frame given.
- Funds must be transferred between projects with the consent of the Regional Office of the Reserve Bank under whose jurisdiction the Project Office is located
Documents needed for Project Office Registration in India
Project Office Registration Process
Project Office Registration Online India can be done by submitting an application with the Category 1 AD Bank. Along with an application, the prerequisite set of documents must be submitted that includes the copy of the project agreement and a document stating that the project shall be funded from abroad or through an arrangement with the multilateral or bilateral international finance agency.
All documents which are required to be filed with RBI of the foreign company like their certificate of incorporation, board resolutions, the MOA and articles of the foreign company and the documents of the authorized signatory of the foreign company need to be legalized either through Indian Embassy or to be apostilled as per Hague convention.
Preparing documents relevant to establishing Project office attested by India Embassy / Notary Public in the Country of Registration
The application for registration of a Project office of a foreign company is filed in Form - FNC to the reserve bank of India through AD Bank (Authorized Dealer). The AD Bank plays a crucial role as all the communication to the RBI has to be routed through them. We have an excellent relationship with many banks in India, which certainly help in applying to the RBI and Follow-up
After the FNC Form is filed with the AD Bank, a request for verification of documents is sent to the banker of the foreign company. This process is also known as swift based verification. After receipt of confirmation of the documents from the foreign banker, the application is submitted to the RBI for their approval. The RBI may seek clarification or any additional document which needs to be submitted.
After company incorporation, the Bank A/c has to be opened, wherein the foreign direct investment must reach within 180 days of incorporation of the company with advance intimation to Banker. Post investment the company is under strict liability to file adequate reporting with the RBI reporting of FDI received within 30 Days.
The Project Office hence, once approved by the RBI, will be allotted a Unique Identification Number (UIN)
Within 30 days of the permission of the RBI the foreign company should apply to the ROC for registration of the foreign company. In case the foreign company have Indian directors then a DIN number of such director is needed, and the digital signature of the authorized signatory is required to e-file statutory forms with the ROC for their approval.
After the establishment of Project Office in India foreign companies shall within 30 days the relevant e-form with MCA
A Project Office may approach any AD Category-I Bank in India to open an account for its operations in India. Income Tax Department allots a unique 10 Digit alphanumeric number as a permanent account number, also known as PAN Number. To comply with TDS provisions, every taxpayer needs to obtain a Tax Deduction Account Number. These identification numbers are essential to do compliance with the tax rules. The bank account of the branch office can be opened after allotment of Pan Number by the Income Tax Department.
After the Project office is operational, there are various other compliance related activities, which depends on the nature of the business and the state-specific laws, which apply to all entities doing commercial activities. For example registration under shops and establishment act, Goods and Services Tax (GST), Professional Tax Act, Provident Funds Act, Employee State Insurance Act (ESIC), etc
The application for establishing Project office in India may be submitted by the non-resident entity in Form FNC (Annex B) to a designated AD Category – I bank (i.e. an AD Category – I bank identified by the applicant with whom they intend to pursue banking relations) along with the prescribed documents mentioned in the Form . The AD Category-I bank shall after exercising due diligence in respect of the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria for establishing Project office, antecedents of the promoter, nature and location of activity of the applicant, sources of funds, etc., and compliance with the extant KYC norms grant approval to the foreign entity for establishing Project office in India. The AD Category-I banks may frame appropriate policy for dealing with these applications in conformity with the FEMA Regulations and Directions.
An applicant that has received permission for setting up of a Project office shall inform the designated AD Category I bank as to the date on which the Project office has been set up. The AD Category I bank in turn shall inform Reserve Bank accordingly. In case, an approval granted by the AD bank has either been surrendered by the applicant or has expired without any Project office being set up, the AD Category I bank shall inform RBI accordingly.
Validity of Project office
The Project office remains valid for the entire tenure of the project (till the project is completed or wound up).
- Proprietary concerns which are established abroad are not allowed to start a project office in India.
- A foreign entity’s project office is allowed for the acquisition of any property for carrying out activities which are permitted by Reserve Bank of India or for their own use.
- Only non-interest bearing current accounts can be maintained by a project office in India.
- Registrar of Companies needs to be intimated about opening of Project office in India in the prescribed form to with all important documents within the time specified.
- The Project office has been established in India as per the applicable regulations.
- The contract governing the project specifically provides for payment in foreign currency.
- Each Project office can open 2 foreign currency accounts, usually one denominated in USD and the other in home currency of the project awardees but both shall be maintained with the same AD Category–I bank.
- They can be used only for payment of project related expenses and receiving foreign currency from the Project Sanctioning Authority and remittances from parent/group company abroad or bilateral / multilateral international financing agencies.
- The responsibility of ensuring that only the approved debits and credits are allowed in the Foreign Currency Account shall rest solely with the branch concerned of the AD. Further, the Accounts shall be subjected to 100 per cent scrutiny by the Concurrent Auditor of the respective AD banks.
- The foreign currency accounts have to be closed at the completion of the project.
Post Establishment Compliances
(1). Compliances under Companies Act:
(A). Section 380: Documents to be Delivered to Registrar by Foreign Companies
Every foreign company shall, within thirty days of the establishment of its place of business in India, deliver to the Registrar for registration—
- a certified copy of the charter, statutes or memorandum and articles, if the instrument is not in the English language, a certified translation thereof in the English language;
- the full address of the registered or principal office of the company;
- a list of the directors and secretary of the company containing such particulars as may be prescribed;
- the name and address or the names and address of one or more persons resident in India authorized to accept on behalf of the company service of process and any notices or other documents required to be served on the company;
- the full address of the office of the company in India which is deemed to be its principal place of business in India;
- particulars of opening and closing of a place of business in India on earlier occasion or occasions;
- declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from formation of companies and management in India or abroad; and
- any other information as may be prescribed.
- Every foreign company shall, in every calendar year (a) make out a balance sheet and profit and loss account (b) deliver a copy of those documents to the Registrar:
- If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof in the English language.
- Every foreign company shall send to the Registrar along with the documents required a copy of all places of business established by the company in India as at the date with reference to which the balance sheet referred to in sub-section (1) is made out.
Besides the name and the country of Incorporation, the company is also required to mention the fact that the liability of the company is limited if it is so.
(E). Section 384: Debentures, Annual Return, Registration of Charges, Books of Accounts and their Inspection:
Debentures:
The provisions of Section 71 shall apply mutatis mutandis to a foreign company.
Annual Return:
Every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4 containing the particulars as they stood on the close of the financial year.
Books of Accounts:
The provisions of Section 128 shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India.
Registration of Charges:
The provisions of Chapter VI shall apply mutatis mutandis to charges on properties which are created or acquired by any foreign company.
Inspection:
The provisions of Chapter XIV shall apply mutatis mutandis to the Indian business of a foreign company as they apply to a company incorporated in India.
(2). Compliances under Foreign Exchange Management Act (FEMA) 1999
- Registration with Police authorities:
Entities from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong, Kong, Macau and Pakistan shall have to register with the State Police authorities. Copy of approval letter for persons from these countries shall be marked by the AD Bank to the Ministry of Home Affairs, Internal Security Division - I, Government of India, New Delhi for necessary action and record. All other countries are exempted from registering with the State Police authorities. - Reporting with Director General of Police ("DGP"):
The aforesaid entities are required to submit a report in the prescribed format within five working days of their office becoming functional to the DGP of the State concerned in which such branch, liaison or project office is established. - Project Office is required to submit Annual Activity Certificates (AAC) (Annex 4) from Chartered Accountants, at the end of March 31, along with the audited Balance Sheet on or before September 30 of respective year.
- Annual return on Foreign Liabilities and Assets (FLA returns) is required to be submitted by all the India resident companies which have received FDI and/ or made overseas investment in any of the previous year(s), including current year by July 15 every year.
There are some other compliances like Goods and service tax (GST), Income tax which are also applicable. Authorized Dealer/ Authorized Agency- under the Foreign Exchange Management Act, 1999 the RBI carries out all its functions by assigning it to authorized dealers. Authorized dealers are banks which are under the RBI to carry out activities on behalf of companies and entities. Foreign exchange transactions such as remittances and other forms of activities are performed through the authorized dealer.
Foreign currency accounts by Project Office
Project Offices can open non-interest bearing foreign currency accounts with AD Category – I banks subject to the following:
- The Project Office has been established in India as per these Regulations.
- The contract governing the project specifically provides for payment in foreign currency.
- Each Project Office can open two foreign currency accounts, usually one denominated in USD and the other in home currency of the project awardee, provided both are maintained with the same AD Category–I bank.
- The responsibility of ensuring that only the approved debits and credits are allowed in the foreign currency account shall rest solely with the AD Category–I bank.
- The foreign currency accounts have to be closed at the completion of the project.
The permissible debits to the account shall be payment of project related expenses and credits shall be foreign currency receipts from the Project Sanctioning Authority and remittances from parent/group Company abroad or bilateral / multilateral international financing agencies.
Note:
- An entity from Pakistan shall need prior approval of RBI to open a bank account for its PO in India.
- A person from country other than Pakistan who has been awarded a contract for a project by the Government authority/Public Sector Undertakings or are permitted by the AD to operate in India may open a bank account without any prior approval of the Reserve Bank.
Annual Compliances
Following annual compliances are to be undertaken under FEMA:
- Annual Activity Certificate ("AAC"): Submit AAC as at the end of March 31, along with the audited financial statements including receipt and payment account to AD Bank and a copy of the same to the Director General of Income Tax (International Taxation), Drum Shape Building, I.P. Estate, New Delhi 110002 on or before September 30 of every year. In case the annual accounts of the project office are finalized with reference to a date other than March 31, the AAC to be submitted along with the audited financial statements may be submitted within six months from the due date of the Balance Sheet.
- Annual Report to Director General of Police: Annual Report in the format prescribed under Master Directions - Reporting under FEMA to be sent to DGP of the State where project office is situated.
Following annual compliances are to be undertaken under Companies Act, 2013:
(a).Filing of Financial Statements: Every foreign company shall file with the Registrar of Companies the financial statement in e-Form FC 3, within a period of six months of the close of the financial year of the foreign company [u/s 381 of Companies Act, 2013 r/w Companies (Registration of Foreign Companies) Rules, 2014]. Along with this form, following documents are to be attached:
- Balance sheet and profit and loss account
- Latest consolidated financial statements of the parent foreign company
- The Scheme for Rural Industries Service Center (RISC) and
- Statement of related party transactions
- Statement of repatriation of profits
- Statement of transfer of funds
- List of all the places of business established by the foreign company in India as on the date of balance sheet
(b).Filing of Annual Return: Foreign Company shall prepare and file to the Registrar of Companies an annual return in e-Form FC 4, within a period of sixty days from the last day of its financial year [u/s 384 of CA 2013 r/w Companies (Registration of Foreign Companies) Rules, 2014].
Project office is permitted to remit outside India profit of the project net of applicable Indian taxes. Intermittent remittances are permitted regarding pending, winding up or completion of the project. However, authorized Dealer Category – I bank may permit intermittent remittances by project offices pending winding up / completion of the project subject to submission of certain prescribed documents as below:
- The Project Office submits an Auditors’ / Chartered Accountants’ Certificate to the effect that sufficient provisions have been made to meet the liabilities in India including Income Tax, etc.
- An undertaking from the Project Office that the remittance will not, in any way, affect the completion of the Project in India and that any shortfall of funds for meeting any liability in India will be met by inward remittance from abroad.
- A confirmation that no proceeds accruing from sources outside India have remained un-repatriated to India.
- (d).No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance confirmation from the parent entity that no legal proceedings in any Court in India are pending against the Project Office and there is no legal impediment to the remittance
- A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the project office in India.
- On receipt of approval from regional office of Reserve Bank of India, AD category bank 1 can allow the remittance of funds.
Inter-Project transfer of funds requires prior permission of the Regional Office concerned of the Reserve Bank under whose jurisdiction the Project Office is situated. An application is also filed with designated AD Catergory-1, along with application of closure of Project Office, for remittance of closure proceeds to the parent entity
Filing Annual Activity Certificate
Under Regulation 2016, a specific clause in respect of filing of AAC by Project office has been included. The Annual Activity Certificate (AAC) in Form FNC (Annex D) shall be submitted to the designated AD Category –I Bank by the following:
- In case of a sole Project office, by the Project office concerned.
- In case of multiple Project offices, a combined AAC in respect of all the offices in India by the nodal office of the Project offices.
This AAC is to be obtained from a Chartered Accountant showing the Project Status and certifying that the accounts of the Project Office have been audited and the activities undertaken are in conformity with the General / Specific permission given by the Reserve Bank.
Time Limit for Filing AAC
- Where financial year ends on 31stMarch: Within 30th September of that year
- Where financial year ends on some other date: Within 6 months from the end of the financial year
MCA Compliance Filing
Every Foreign company is required to submit below documents to the Registrar of Companies for registration, within 30 days of the permission of RBI/AD Bank:
- Certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a certified translation thereof in the English language;
- Full address of the registered or principal office of the company
- List of the directors and secretary of the company containing such particulars as prescribed under Rule 3.
- Name and address or the names and addresses of one or more persons resident in India authorized to accept on behalf of the company service of process and any notices or other documents required to be served on the company
- Full address of the office of the company in India which is deemed to be its principal place of business in India
6.Particulars of opening and closing of a place of business in India on earlier occasion or occasions
7.Declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from formation of companies and management in India or abroad.
8.Other Documents as may be prescribed.
Rule 3(3) of the Companies (Registration of Foreign Companies) Rules, 2014 requires application in e-Form FC-1 to be supported with an attested copy of approval from the Reserve Bank of India/AD Bank under Foreign Exchange Management Act and the rules and regulations there under or a declaration from the authorized representative of such Foreign Company that no such approval is required.
And Rule 3(4) provides that in case of any alteration in the aforesaid documents the Foreign Company is required to submit a return in e-Form FC-2 containing the particulars of alteration as per the prescribed format with the Registrar of Companies, within 30 days of any such alteration.
Process of closure of Project office
Once the objective of setting up of Project Office is fulfilled or the time limit for which approval was granted expires then foreign entity is required to close its Project Office through the legal procedure given. Any failure in closure of Indian office through prescribed procedure may result in levy of penalty on foreign entities and such foreign entities may face issues in further setting up of any Project Office in India in future.
Procedure of winding up of Project Office
1.Process of closure of Project Office in records of AD Category-1 Bank(1).Application for closure of Project Office and remittance of winding up proceeds shall be filed by the concerned office with AD Category-1 Bank alongwith all supported documents.
(2).Application of winding of Project Office shall be supported by following documents:
- Copy of the Reserve Bank’s/AD-1 Category Bank’s approval for establishing the Project Office.
- Auditor’s Certificate certifying following points:
- Manner of computation of winding proceeds supported with statement of assets or liabilities of the applicant and indicating the manner of disposal of assets;
- A confirmation that all liabilities in India including arrears of gratuity and other benefits to employees, etc. have been fully paid off;
- A confirmation that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.
- A Confirmation from the applicant/parent company that no legal proceedings are pending against the Project Office in any Court in India;
- In case of winding up of Project Office, A report from the Registrar of Companies (ROC) regarding compliance with the provisions of the Companies Act, 2013.
- The designated AD Category – I banks will confirm that the Project office had done their respective compliances.
- Any other document/s required by Reserve Bank of India/AD Category-I bank while granting approval.
(3).Drafting and preparation of application for closure of Project Office along with other relevant documents for closure of bank account in this regard and obtaining certificate from Chartered Accountant as per the prescribed format as given in master directions issued by RBI.
(4).Execution and signing of documents.
(5).All the documents executing and signing outside India needs to be notarized and apostilled.
(6).Upon receipt of the executed documents, submission of application and other documents along with certificate from Chartered Accountant and certificate of closure as issued by ROC with AD Bank.
(7).The designated AD Category – I, bank will report to the Reserve Bank (the Regional Office concerned for LOs and Central Office for BOs), along with a declaration stating that all the necessary documents submitted by the BO / LO have been scrutinized and found to be in order for closure of Branch Office.
(8).The AD Bank may forward the whole set of documents to RBI for their approval, if required and may ask for some additional documents in this respect.
(9).The AD Bank scrutinizes all the documents and if found in order, shall close the Project Office along with bank account in their records.
If any foreign company has its place of establishment in India via Project Office and such place of business is registered with RoC and the entity intends to close the same then first the application is required to be filed with ROC for such closure.
Before making such a request with ROC, a company must ensure that all the annual compliance is completed and updated in the records of ROC.
- Drafting of board resolutions passed by foreign companies and other relevant documents for closure of their business presence in India.
- Execution and signing of documents. Since the board resolution shall be executed by the foreign company in its native country, the same needs to be translated to English and also notarized.
- Upon receipt of the executed documents, respective e-form is to be filed with ROC for closure of Project Office in India.
- ROC scrutinizes the e-form and other documents annexed to it and if found in order, shall issue certificate for closure of Project Office.
Remittance of winding up proceeds after closure of Project Office
Proposal of remittance of winding up proceeds shall be considered of only those entities which have followed the operational guidelines such as submission of AACs (upto current financial year) at regular annual interval along with copies endorsed to DGIT (International Taxation), obtained PAN from Income Tax authorities and have got themselves registered with RoC under Companies Act, 2013, if required. Remittance of winding up proceeds shall be allowed subject to following conditions:
(1).Transfer of assets by way of sales shall be allowed only if foreign entity intends to close their Project Office operations in India. Transfer of assets upon closure is permitted, provided that all compliances under FEMA have been duly carried out. In case, the operation of a project office is being closed by the non-resident entity, the AD Bank can allow transfer of their assets by way of sale to a joint venture or wholly owned subsidiaries. In this regard, a certificate from the statutory auditory is required, furnishing the following details:
- Details of assets to be transferred - indicating their date of acquisition, original price, depreciation, present book value or written down value and sale consideration.
- (b)Confirmation that the assets have not been re-valued after their initial acquisition.It must be ensured that:
- the sale consideration should not be more than their book value.
- the assets should have been purchased from inward remittances and no intangible assets such as goodwill, pre-operative expenses to be included.
- no revenue expense such as lease hold improvements incurred can be capitalized and transferred to joint venture/ wholly owned subsidiaries.
(2).AD Banks must ensure that the payment of all applicable taxes in India while permitting transfer of such assets.
(3).A certificate has been obtained from statutory auditor wherein following information is given:
- Details of assets to be transferred along with date of acquisition
- Original Price
- Depreciation till date
- Present Book Value/ Written down value
- Sales consideration
Auditor shall also certify that assets are not re-valued after initial recognition and sales consideration is not more than book value.
(4).Assets should be acquired by Project Office from inward remittance and assets do not include any intangible assets such as Goodwill and pre-operative expenses. Further, no revenue expense can be capitalized and transferred under winding up proceeds.
(5).Payment of all applicable taxes has been made.
(6).Credit to Bank account on account of such transfer shall be considered as permitted receipts.
(7).Designated AD Category-I bank may allow remittance of winding up proceeds in respect of offices of banks and insurance companies, after obtaining copies of permission of closure of branch office from the sectorial regulators (like IRDA etc.) along with the documents mentioned above.
Project Office may also donate their assets such as old furniture, vehicle, computers and other office items etc. to any NGO and Non-profit organization only if AD Category-1 bank is satisfied about the bonafide intention.
Conclusion
India is one of the fastest growing economies in the world. The government is making all the efforts to make it one of the best places for doing business. The latest RBI guidelines regarding establishment of Project Office have been issued with the aim to facilitate ease in doing business in India and liberalizes the procedure for non-residents to set up a place of business in India by delegating several powers of the RBI to AD Bank. It, thereby, makes the entire process time efficient as well as more transparent.
Project Office means a place of business to represent the interests of the foreign company executing a project in India. Establishing project office is one of the ideal methods for foreign companies to set a business presence in India if the object is to have a presence for a limited period of time. It is essentially a branch office set up with the limited purpose of executing a specific project.
Project office is a place of business for foreign company to represent its interest in executing a project in India. A company having object of presence for a limited period of time is an ideal method to set up a business presence in India. It is essential that the company establishing project office here in India must do it with the purpose of executing a specific project.
In lieu of this decision, government has delegated some powers of the RBI to AD Bank in order to make the process of establishment of project office time efficient and transparent. Now, the establishment of project office can be achieved with ease as doing business in India can be done with ease and even the non-residents can set up a place without any hassle. A secure contact with an Indian company to start a project and compliance with ROC, as prescribed under the Companies Act, 2013 and RBI Guidelines.For the purpose of project office in India, a company must satisfy the above-mentioned conditions to the RBI. However, if any parent company is incorporated in Pakistan, Bangladesh, Sri Lanka, Iran, Afghanistan, Macau, China and Hong-Kong are desired to establish a project office in Andaman and Nicobar Islands, North Eastern States and Jammu & Kashmir, approval of RBI must be with the consultation with the Government of India. Otherwise, Authorized Dealer Category-1 bank’s approval is sufficient enough.If the principal business of the foreign company is in regard of telecom/ defense/ private security/ information and broadcasting sector, if contract has been awarded by/entered into with the Ministry of Defense or Service Headquarters or Defense Public Sector Undertakings, no separate reference or approval of the Government of India is required.
The RBI permits a parent business based in another nation to register a project office in India to represent the interests of the parent firm when executing projects in India. To execute a project in India, however, the parent business must have a contractual agreement. Any Indian government or private sector organization can award the project to a foreign company.
In addition, the project office can only participate in activities that are part of the project's scope and are carried out by the parent firm in India. The scope of the project also includes incidental and associated tasks.
The project office registration process is carried out in accordance with the criteria set forth in section 6(6) of the Foreign Exchange Management Act 1999. The Reserve Bank of India has the ability to authorize the establishment of a project office in India by a foreign corporation. However, a foreign business must first acquire a contract with an Indian corporation before establishing a project office in India.
If a foreign firm intends to set up a project office in India, RBI guidelines and the Companies Act of 2013 have made it mandatory for the foreign company to obtain a registration certificate from the Registrar of Companies (ROC). During the project office registration process, it must follow all procedural formalities.
Frequently Asked Questions
- 1. What is Project Office?
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A foreign company set up a project office in India if a project has been assigned to them by the government or a private sector when the project has to be executed in India. However, it is necessary to complete the registration process with RBI & ROC before commencing business operations. Therefore, project office registration cannot be done until all the requisite conditions are met.
- 2. What are the documents submitted to the RBI?
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- Certificate of Incorporation
- Memorandum of Association & Article of Association attested by Indian Embassy/Notary Public in the country of Registration.
- Current Audited Balance sheet of the applicant company.
- A resolution by the foreign company’s Board stating the intention behind establishing the project office in India.
- Documentary proof that the Project Office is financially backed by the bilateral or multilateral International Financing Agencies OR the Indian Company has obtained term loan for the Project Office by the Financing Institution or Bank in India.
- Banker’s report submitted by the company’s banker stating the company’s relationship with the bank.
- A letter of authority issued by the parent company in regard to the local representative
- Complete details of activities conducted in the project office in India
- Residence Proof of the authorized personnel
- Copy of passport of the authorized personnel
- A letter saying that the company will open a bank account in India
- 3. What are investment entry routes in India for project office registration?
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- Reserve Bank RouteThe primary business of a foreign company falls under the criteria where 100 percent Foreign Direct Investment (FDI) is allowed.
- Government Route The primary business of a foreign entity falls under the criteria where 100 percent Foreign Direct Investment is not allowed. The Reserve Bank of India reviews applications from companies that come under the category of Foreign Non-Government Organizations/Non-Profit Organizations/Government Bodies/Department and the Ministry of Finance, Government of India.
- 4. What is the procedure to register a project office in India?
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- Legalization of Documents
- Filing of Application with RBI through AD Bank
- Verification of KYC from the Banker of Parent Company
- Approval of RBI for Project Office Registration in India
- Registration of Project Office of Foreign Company With the ROC
- Other Registration and Licenses
- 5. What are the documents submitted to the ROC?
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- Permission from RBI to set up a project office in India
- MOA and AOA of the Foreign Company
- Notarized copy of COI
- A notarized copy of a power of attorney mentioning the name of the person residing in India and making him responsible for accepting any notice or document on behalf of the company
- A complete details of Directors of the Company
- Complete KYC of the shareholders holding more than 10% of Equity in the Applicant Company
- 6. What are the important points to consider before applying for Project Office registration?
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- Formal Contact of the Project
- Clearance of Project
- Foreign Funding
- Indian Funding
- 7.Can a Liaison Office upgraded into Branch Office continue to have the same PAN and bank account?
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Yes, provided the bank account is re-designated as a Branch Office account.
- 8. Are Liaison Office / Branch Office /Project Office required to register/report with Police authorities?
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Only candidates from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau, and Pakistan will need to enlist with the State Police authorities. Copy of endorsement letter for people from these nations will be set apart by the AD Category I bank to the Ministry of Home Affairs, Internal Security Division – I, Government of India, New Delhi for important activity and record. Every single other nation is absolved from enrolling with the State Police authorities.
- 9. Can Liaison Office / Branch Office maintain more than one account in India?
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No, if a LO/BO needs to open more than one account, it needs to acquire the earlier authorization of the Reserve Bank through its AD Category I bank, supporting the explanation behind the additional account.
- 10. What are the permissible credits and debits to the INR account of the Project Office?
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The credits to the account should represent the funds received from the head office through normal banking channels for meeting the expenses of the office and/or the rupee amounts receivable, if any, under the contract, and no other amount should be credited without prior permission of the Reserve Bank. Similarly, debits to this account could be raised only to meet the office's local expenses and intermittent remittances pending winding up / completing the project.
<For the intermittent remittances, the AD bank should be satisfied with the bonafide of the transaction and ensure submission of the following documents:
- An Auditors’ / Chartered Accountants’ Certificate to the effect that sufficient provisions have been made to meet the liabilities in India, including Income Tax, etc.
- An assurance from the PO that the remittance will not jeopardize the completion of the project in India and that any shortfall in funds for meeting any liability in India will be covered by inward remittance from abroad.