Quick answer: A project office is a temporary place of business a foreign company sets up in India to carry out one specific contract. Under RBI general permission it needs no prior approval if the company holds a contract from an Indian company, the clearances and approved funding. It lasts as long as the project.
- The office exists only for the contract it was set up for.
- It may open up to 2 non-interest-bearing foreign currency accounts with its AD bank.
- Surplus may be remitted during the project with an auditor’s certificate on Indian liabilities.
- An Annual Activity Certificate as at 31 March goes to the designated AD bank only.
What conditions must a project office meet?
Three, read together.
The RBI Master Direction on branch, liaison and project offices allows a foreign company to open a project office where:
- it has secured a contract from an Indian company to execute a project in India,
- the project has the necessary regulatory clearances, and
- the project is funded by inward remittance, a bilateral or multilateral financing agency, or an Indian bank’s term loan to the awarding company.
The funding test has alternatives. The contract and clearance tests do not.
Prior approval comes back in for applicants from Pakistan, and for listed countries seeking offices in Jammu and Kashmir, the North East or the Andaman and Nicobar Islands. Defence, telecom, private security and broadcasting also need it.
How does money move in and out of a project office?
Tightly, by design.
The AD bank may open two foreign currency accounts, usually one in US dollars and one in the home currency. Credits come from the project sanctioning authority and from the parent or financing agency. Debits must relate to the project. Both accounts close when the project ends.
Suppose a German engineering firm wins a three-year plant contract from a Pune manufacturer. It opens a project office and receives milestone payments into its foreign currency account. Each year it remits surplus once its auditor confirms that Indian taxes, wages and other liabilities are provided for. At the end, it closes the office with proof that its Annual Activity Certificates were filed and its employee gratuity and other dues are met. Its profits are taxed as income of a foreign company with an Indian permanent establishment.
Do you need a project office to staff an Indian contract?
Not always. It depends on who signs the contract.
If your company holds the contract and must execute it in India, the project office is the standard FEMA route. It carries corporate tax, AAC filings and its own payroll for local staff.
If you only need people in India to support a project run from abroad, an EOR is often simpler. The EOR employs them on its Indian entity, and no office opens in your name. For ongoing income, compare a branch office. For representation only, a liaison office. Our guide to business expansion in India lays out the formats, and FEMA sets the rules for each.
How does Remunance support project teams in India?
Remunance can employ the Indian engineers, coordinators and site staff your project needs, with onboarding in as little as 2 working days from a signed contract. We handle their PF, ESIC, gratuity and full and final settlement when the project ends. Our employer of record services page sets out the scope. Plan your India project staffing with us before the contract starts.
What else do people ask about project offices?
Does a project office need RBI approval?
Not normally. A general permission applies when the three conditions are met. Listed countries, regions and sectors still need prior approval.
How long can a project office stay open in India?
For the tenure of the project. It must close once the contract is complete and liabilities are settled.
Can a project office take on a second contract?
No. Each office is tied to the contract it was opened for. A new contract needs its own project office, or a different structure.