Liaison Office Setup in India: Essential Guidelines and Benefits

India’s economic landscape is nothing short of dynamic. For companies in Singapore, the US, Japan, Australia, and the UK aiming to establish a presence, rushing in with a full-blown entity can be both expensive and premature. A smarter path? Set up a liaison office.

It’s like opening a window before building the house—you get to feel the climate, understand the neighbourhood, and decide when and how to move in fully.

What Exactly Is a Liaison Office?

At its core, a liaison office is a representative arm of a foreign company, planted gently in Indian soil. It doesn’t engage in direct business or make profits—it’s not supposed to. Instead, it builds connections, gathers insight, and acts as a face for the foreign parent company.

Think of it like a scout—quietly observing, occasionally signalling, and always preparing for something bigger.

Core Functions: What It Can (and Cannot) Do

If you’re wondering whether this setup can close deals, let’s be clear—it’s limited, but intentionally so.

Permitted activities include:

•  Representing the parent company in India
•  Promoting technical or financial collaboration with Indian firms
•  Acting as a channel for communication between the head office and local entities
•  Facilitating import/export interactions
   

What it cannot do:

•  Sign contracts or conduct commercial transactions
•  Earn revenue locally
•  Offer services or trade in goods directly
   

In short, it's a presence without pressure—a way to learn, observe, and prepare.
 

Why Set Up a Liaison Office?

Now, why not just launch a full-scale subsidiary from day one? You know what—it’s like trying to run before you’ve figured out the ground you’re walking on.

Here’s why companies often start with a liaison office:

•  Minimal Regulatory Burden – Lower filing and tax obligations
•  No Capital Requirement – You’re not required to bring in large investments up front
•  Low Operational Cost – Limited scope means leaner teams and reduced overheads
•  Market Familiarity – Gain real-world insights before committing full resources
   

The Legal Side: What's Involved?

The Reserve Bank of India (RBI) governs liaison offices. Approval isn’t automatic, but it’s straightforward if your business is financially stable and compliant.
 

Eligibility:

 The foreign company must be profit-making for at least 3 years.
 A net worth of at least USD 50,000 is generally required.

Application Process:

1.  Form FNC must be submitted via an authorized dealer bank (a local Indian bank handling foreign exchange).
2.  Documents such as:

•  Certificate of Incorporation
•  Memorandum and Articles of Association
•  Last 3 years’ audited financials
•  A banker’s report from the overseas bank
•  Board resolution approving the establishment
   

1.  Once RBI approval is obtained, the office must be registered with:

1.  Registrar of Companies (RoC)
2. I ncome Tax Department for PAN and TAN
3.  Relevant state and local authorities depending on business activities
    

And yes, even though you’re not doing business directly, staying compliant is non-negotiable.

Common Misconceptions to Watch Out For

Many overseas businesses believe that a liaison office gives them access to Indian customers right away. That’s a misconception. The moment you start billing or entering into contracts, you step into a different legal category.

Important Note: Liaison offices cannot:

• Invoice clients
• Hire staff for commercial work
• Sign off on business transactions
   

So, this structure is ideal only if your goal is market study, relationship building, or managing internal communication.
 

Strategic Benefits for Foreign Entrepreneurs

Setting up a liaison office doesn’t just tick boxes. It lays down real, strategic groundwork for growth.
 

Here’s how it helps:
 

 Soft Entry – Understand local consumer behaviour, supply chains, and business etiquette
 Brand Trust – A physical presence reassures potential partners and investors
 Regulatory Familiarity – Get hands-on with India’s business climate without the pressure of compliance-heavy operations
 

It’s often said that in business, patience pays. A liaison office is proof of that.
 

Company Bio: PKP Consult specialises in helping global entrepreneurs establish a Liaison Office in India, ensuring full regulatory compliance and seamless market entry. With deep expertise in Indian financial laws, we support businesses from Singapore, the USA, Japan, Australia, and the UK in confidently navigating their startup journey in the Indian business landscape.