Foreign companies frequently enter India through a Branch Office (BO), Liaison Office(LO) or Project Office (PO) before committing to a full subsidiary. It’s a lighter structure —but “lighter” doesn’t mean “no compliance.” FEMA prescribes a specific, recurring reportingcycle for every BO/LO/PO operating in India, and missing it can jeopardise renewal of theoffice’s permission itself.
The Core Annual Filing: Annual Activity Certificate (AAC)
Every BO/LO/PO must submit an Annual Activity Certificate, certified by a Chartered Accountant, confirming that the office has only undertaken activities specifically permitted under its approval letter and has complied with the conditions attached to that approval.
For Project Offices, the AAC additionally certifies the project status and confirms that nointer-project fund transfers have taken place without RBI’s prior approval.
Due Date
30th September
On or before 30th September each year, for the period ending 31st March.If the office’s accounts are finalised with reference to a different date, the AAC is duewithin six months of that balance sheet date instead.
Where it goes
AD Category-I Bank
To the designated AD Category-I bank, along with a copy to theDirector General of Income Tax (International Taxation) in New Delhi.
Who Files
BO / LO Structure
A sole BO/LO files its own AAC; where there are multiple offices of thesame foreign entity, the nodal office files one combined AAC covering all of them.
Skipping this certificate, or filing it late, is one of the more common reasons BO/LO/POrenewal applications run into friction with the AD bank.
The Bank-Side Reporting You Should Be Aware Of
Separately, the AD Category-I bank is required to submit a consolidated list of all BOs/LOs/POs opened and closed during a month, by the 5th of the following month, through RBI’s Centralised Information Management System under a return code specifically created for this purpose.
As the entity being reported on, it’s worth confirming with your AD bank that this monthly reporting is happening correctly and in sync with your own filings — discrepancies here can surface later as unexplained queries from RBI.
An Additional Layer for Certain Jurisdictions
Foreign entities from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau,or Pakistan setting up a BO/LO/PO in India carry an extra obligation: registration with thestate police authorities, along with submission of an annual report to the Director Generalof Police of the relevant state within five working days of the office becoming functional.
Where the entity has offices in more than one state, a separate annual report goes to eachstate’s DGP. This is easy to overlook amid the RBI-side paperwork, but it is a distinct, non-negotiable requirement.
Why This Matters Beyond Ticking a Box
RBI’s approval for a BO/LO/PO is not a one-time grant — it is conditional and reviewed on an ongoing basis, and the AAC is effectively how RBI (through the AD bank) satisfies itself that the office is still operating within the scope of its permission. A pattern of late or missing AACs can complicate extension of the office’s tenure, and in more serious cases of activities exceeding the permitted scope, can attract compounding proceedings under FEMA.
The Practical Takeaway
If you’re managing a BO, LO or PO in India, mark two dates: 30th September for the AnnualActivity Certificate, and check with your AD bank on your monthly opening/closing status.If your entity is incorporated in one of the specified jurisdictions, add the five-working-daystate police reporting timeline as well. These aren’t discretionary filings — they underpinthe continued legal standing of your Indian office.
If you need help preparing your Annual Activity Certificate or managingBO/LO/PO compliance
Lal Ghai & Associates, Company Secretaries can assist — reach outthrough www.lgassociates.org.
Disclaimer: This article is for general awareness only and is not a substitute for professional advice onyour specific facts.