What is a Project Office?
A Project Office (PO) is a temporary place of business established by a foreign company in India to execute a specific project. Unlike a Branch Office, which has ongoing operations, a Project Office is tied to a particular contract and must close when the project is completed.
Key Characteristics
- Project-Specific: Established exclusively for executing a specific contract
- Temporary Duration: Valid only for the duration of the project
- Contract-Based: Requires award letter or contract from Indian company
- Self-Sustaining: Project must be financially self-sustaining
- No Profit Limit: Can earn and retain profits from the project
- Closure Mandatory: Must close after project completion
Ideal Use Cases
Infrastructure Projects
Roads, bridges, dams, power plants, and other construction projects awarded by Indian entities.
IT & Software Projects
Specific software development, implementation, or consulting projects with defined scope.
Consulting Assignments
Management, technical, or financial consulting projects with specific deliverables.
Turnkey Contracts
Design, engineering, procurement, and construction contracts with defined timelines.
Eligibility Criteria
Project Office approval is primarily based on having secured a contract from an Indian entity. Unlike LO or BO, there is no minimum profit track record requirement.
| Requirement | Details |
|---|---|
| Contract Award | Must have secured a specific project contract from Indian entity |
| Project Funding | Project must be fully funded (internal accruals or external funding) |
| Self-Sustaining | Must demonstrate project is financially viable and self-sustaining |
| Sector Eligibility | Project should not be in prohibited sectors |
| No Prior Default | No prior defaults or regulatory violations in India |
RBI Approval Process
Project Office approval is generally faster than Branch Office as it is tied to a specific contract.
Contract Documentation
Obtain award letter or executed contract from Indian project owner.
Prepare Application
Draft application with project details, financials, and parent company information.
Submit to AD Bank
Application submitted through AD Category-I bank to RBI.
RBI Approval
RBI issues approval letter with Unique Identification Number (4-6 weeks).
MCA Registration
File e-Form FC-1 with MCA within 30 days.
MCA Registration
After RBI approval, Project Office must be registered with MCA similar to LO and BO.
e-Form FC-1 Requirements
- RBI approval letter with UIN
- Certified copies of parent company incorporation documents
- Contract/award letter for the project
- Office address proof in India
- Details of authorized representative
Permitted Activities
Project Office can only undertake activities directly related to the execution of the specified project.
✓ Permitted Activities
- Execute the specific project awarded
- Sub-contract work to Indian entities
- Hire personnel for project execution
- Purchase/leasing equipment for project
- Open bank accounts for project operations
- Invoice and receive payments for project
✗ Prohibited Activities
- Undertake activities outside project scope
- Execute different projects without fresh approval
- Retail trading activities
- Lend money or accept deposits
- Continue operations after project completion
Taxation and Compliance
Project Offices are taxed similarly to Branch Offices on their Indian income.
| Tax/Compliance | Rate/Requirement |
|---|---|
| Income Tax | 40% + surcharge + cess (~41.6% - 42.4%) |
| GST | Applicable based on services/goods supplied |
| TDS | Deduct on payments to Indian residents |
| Annual Return | File with MCA (FC-3) |
| Activity Report | Half-yearly to RBI through AD Bank |
Closure Procedures
Project Office must be closed within 6 months of project completion. Proper closure is essential for compliance and remittance of surplus funds.
Closure Steps
Obtain completion certificate from project owner
Prepare final audited accounts and Activity Certificate
Obtain tax clearance certificate from Income Tax Department
Settle all dues and obtain no-dues certificates
Apply for RBI permission to remit winding-up proceeds
Remit surplus funds and close bank accounts
Frequently Asked Questions
Can one PO handle multiple projects?
No, each PO is approved for a specific project. For new projects, fresh approval is required. Consider BO route if multiple projects are expected.
What if the project timeline extends?
Apply for extension through AD Bank before the original expiry date with justification and revised project timeline.
Can PO funds be repatriated during the project?
Generally, surplus funds can only be repatriated after project completion and closure formalities. Working capital can be managed through parent remittances.