Can a project office hire employees in India?

Yes, it can hire engineers, project managers, and other staff required for project execution.

Can a project office earn revenue?

Yes, it can invoice and receive payments for the approved project.

Is GST registration required?

Yes, GST registration is required if the project involves taxable supplies.

How long does a project office remain active?

It remains active only until the project it was set up for is completed.

Can NRIs open a project office through their foreign company?

Yes, provided eligibility conditions under FEMA are met.

What is the tax rate on project office income?

Income is taxed as per Indian corporate tax laws, subject to DTAA benefits if applicable.

Can a project office be treated as a liaison office?

No, a project office is operational and can execute contracts, unlike a liaison office.

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Introduction

A Project Office is one of the most practical and reliable ways for foreign EPC, engineering, and infrastructure companies to begin operations in India. Many international companies choose this route because it allows them to work on a specific contract, hire employees, manage day-to-day project activities, and operate legally without going through the lengthy process of forming a full Indian subsidiary.

This setup works especially well for EPC, construction, oil and gas, renewable energy, and government-related infrastructure projects where an on-ground presence is necessary. At TaxLegit, we support Foreign Companies and NRIs with a complete Project Office setup in India. From RBI approval to MCA filings, GST registration, PAN and TAN allotment, accounting, and all post-registration compliance, our team manages everything so you can stay focused on delivering your project.Read moreRead less

What Is a Project Office?

Before choosing the right structure, it is important to clearly understand what is a project office and why it is used globally.

A Project Office is a temporary establishment set up by a foreign company in India to execute a specific contract awarded by an Indian company or government authority. Under FEMA, a project office in India is permitted only when there is a valid project, an approved funding source, and a clear project lifecycle. A project office is widely preferred because:

It operates only for that particular contract
It allows full on-ground execution
It carries taxation benefits
It does not require a full subsidiary formation

It is also commonly referred to in global practice as a temporary representative office, but with the special purpose of executing a contract rather than general liaison functions.

What is a project office under FEMA?

It is simply a project-specific presence for foreign entities to run operations legally, receive payments, hire teams, and execute the contract professionally.

Why Foreign Companies & NRI Investors Open a Project Office in India?

Understanding why global businesses use this structure helps investors choose the right legal path. Foreign companies and NRI-owned overseas firms prefer a project office in India because it provides a legitimate, fully compliant presence for executing EPC and infrastructure projects. Whether it is a smart-city project, metro development, a renewable energy plant, or an oil & gas construction contract, this model allows real operational execution.

Advantages

Mandatory for many government/EPC projects
Fully legal under FEMA & RBI guidelines
Allows hiring staff, engineers, and project teams
Permits import of machinery or specialized equipment
Can issue invoices and receive payments from Indian clients
Ideal for short-term or single projects
NRIs invested in foreign engineering or EPC companies can use this model easily

For many foreign groups, this structure acts as a project-driven representative office that allows them to comply with local taxation, banking, and regulatory norms.

Eligibility Criteria for Foreign Companies / NRI-Owned Companies

Before beginning the Project Office Registration process, a foreign company or an NRI-owned overseas company must meet FEMA norms. A project office in India can be established only when:

1. The foreign company has a valid project contract in India:

This is the core condition. The contract can be from:

A government department
A PSU
A private Indian company
A multilateral funding agency
A bilateral international agency

2. Funding criteria are satisfied:

Any one of the following must apply:

The project is funded through inward remittance from abroad
A multilateral/bilateral financing agency funds the project
The project has been approved by a government authority
The Indian company awarding the project has arranged financing

3. Financial soundness of the parent company:

The foreign parent must show:

Satisfactory net worth
Audited financial statements
Clean banking records
International project execution capability

4. NRIs with foreign companies can also open a project office:

If an NRI owns or partly owns an overseas company, that company can apply for Project Office Registration, provided other FEMA conditions are met. This structure, although not exactly a representative office, allows limited-purpose operation dedicated to one contract.Read moreRead less

Activities Allowed for a Project Office in India

Foreign companies often treat this model like a functional project-based representative office, but with complete operational freedom within the contract scope. Before applying for Project Office Registration, businesses must know what operations are permitted under FEMA. A project office in India can: Read moreRead less

Execute the specific project mentioned in the contract
Manage day-to-day project supervision & execution
Hire local engineers, labour, vendors, and contractors
Import machinery and equipment needed for the project
Open multiple bank accounts (vendor, payroll, project-dedicated)
Raise invoices to Indian clients
Receive payments in India
Make project-related expenses
Conduct site management, reporting, and review

Activities NOT Allowed

Once the project is finished, the office must be closed following RBI’s prescribed exit rules. Knowing the limitations helps businesses avoid compliance issues or penalties. A project office in India cannot:Read moreRead less

Execute any activity outside the approved project
Take up new contracts without fresh approval
Conduct trading or commercial business unrelated to the project
Expand the scope without permission
Continue operations after project completion
Carry on general activities similar to a liaison or representative office

Common RBI Rejection Reasons for Project Office in India

Many Project Office applications get rejected simply because companies aren’t aware of RBI’s exact requirements and documentation expectations.

Incomplete or Incorrect Documentation:
Missing agreements, unsigned forms, incomplete KYC, or inconsistencies in the application.
Insufficient Financial Credentials of the Foreign Company:
Low net worth, weak audited financials, or inability to meet RBI’s financial strength criteria.
No Valid Project Contract in India:
RBI only approves POs when there is a specific, funded Indian project. Lack of a clear contract or work order leads to rejection.
Project Not Funded by an Indian Entity or International Financing Agency:
Projects must be financed by an Indian company, bilateral/multilateral agency, or international funding. Self-financed projects often face rejection.
Mismatch Between Project Scope and Company Profile:
When the foreign company’s background or experience does not align with the proposed Indian project.
Regulatory / FEMA Non-Compliance:
Any FEMA-related inconsistencies, prior non-compliances, or incorrect category selection in the RBI application.
Red Flags in Parent Company’s Global Operations:
Pending legal disputes, financial instability, or compliance issues in other countries.
Non-Resident/Third-Party Project Funding Issues:
If the source of funds or payment terms are not clearly stated or appear non-compliant with RBI norms.
Incorrectly Filled FNC Form or AD Bank Queries Not Resolved:
Errors in the FNC form, missing annexures, or delayed responses to AD Bank’s queries.
High-Risk Country or Restricted Sector:
Applications from jurisdictions flagged for compliance risks or projects in sensitive sectors face higher scrutiny and possible rejection.

Post-Registration Compliance

Once Project Office Registration is completed, ongoing compliance is mandatory:

Filing Annual Activity Certificate (AAC) with RBI
ROC annual filings
Income Tax Return
GST filings
FLA reporting
Project audit
FEMA reporting
Closure application after project completion

Taxlegit offers a monthly/quarterly compliance management system for foreign businesses.

Timeline & Deliverables Table for Project Office Registration

Stage	Timeline	Deliverables
Document Collection & Verification	2–4 days	KYC, corporate documents, project contract, FEMA checklist
AD Bank Review & Submission of FNC Form	3–7 days	Filed FNC Form, clarifications, supporting annexures
RBI / AD Bank Approval	15–30 days	Approval letter for setting up Project Office in India
MCA / ROC Registration	5–7 days	Certificate of Establishment, digital filings
PAN, TAN & Tax Registrations	3–5 days	PAN, TAN, TDS/GST (if applicable)
Bank Account Setup	3–5 days	Operational bank account for Project Office
Post-Setup Compliance Support	Ongoing	FEMA reporting, accounting, tax filings, payroll & regulatory compliance

Documents Required for Foreign Companies & NRI Investors

A project office in India is set up only after verifying financial credibility and contract authenticity. Before beginning the Project Office Registration process, the following documents are required:

From Foreign Parent Company

Certificate of Incorporation
Charter documents (MOA/AOA)
Audited financial statements
Net worth certificate
Banker's report
Board resolution authorizing the project office
Power of Attorney
Detailed project contract
Identity proof of authorized personnel

From NRI Investors

Passport copy
Overseas address proof
KYC
Shareholding declaration in foreign company

Best Industries for Foreigners & NRIs to Open a Project Office in India

Foreign EPC firms often treat this as a project-based representative office for compliance and execution. This model is ideal for:

Engineering, Procurement & Construction (EPC)

Oil & Gas

Infrastructure

Renewable Energy

Telecom

Metro/Roadways/Smart Cities

Taxation Rules for Foreign Companies / NRIs Operating a Project Office

This structure, although temporary, functions much more than a normal representative office and receives full taxation impact. Before executing activities, companies must understand the tax impact of a project office in India.

Considered a Permanent Establishment (PE)

Income arising from the project is fully taxable.

TDS Applicability

Indian clients will deduct TDS on project payments

GST Impact

Applicable to EPC, engineering, procurement, and construction services, depending on contract structure

Annual Audit Mandatory

All books of accounts must be maintained and audited.

DTAA Benefits

Foreign companies may avail DTAA relief to reduce tax burden.

Why Choose Taxlegit for Project Office Registration in India

TaxLegit is trusted by foreign companies, global EPC players, international consultants, and NRI-owned firms because we deliver a seamless, controlled, and fully compliant experience for setting up a Project Office in India.

Our Expert Support Includes:

FEMA & RBI advisory for Project Office compliance
Complete Project Office Registration & approval management
ROC & MCA filings
TDS, GST, PAN & TAN registrations
Accounting, audit & taxation advisory
Dedicated international desk
Support for foreign management & reporting
Real-time compliance dashboard
24×7 global assistance for urgent project needs

At TaxLegit, we handle everything, from documentation to RBI liaison, so foreign companies and NRI investors can focus 100% on project execution while we take care of compliance and regulatory formalities.

Frequently Asked Questions

A project office in India is a temporary establishment opened by a foreign company to execute a specific contract. Any overseas company or NRI-owned foreign entity with a valid project can open one.

Yes, Approval is obtained through an AD Category-I bank and is mandatory for all foreign companies.

Yes, It can hire engineers, labourers, project managers, and contractors.

Yes, It can raise invoices and receive payments for the approved project.

If project activities fall under GST-eligible services, GST registration will be required.

It stays active until the project is completed. After that, it must be closed.

No, It cannot take new contracts unless fresh approval is obtained.

Yes, If they operate or own a foreign company, they are eligible under FEMA rules.

Foreign companies are taxable as per Indian corporate tax norms, with DTAA benefits available.

No, but functionally it behaves like a project-focused version of a representative office with added operational powers.

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