Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Subsidiary: separate, flexible
Full operations, Indian company tax rate, easier to run and expand.
Branch: limited, RBI-approved, higher tax
Restricted activities, RBI approval needed, and the higher foreign-company tax rate.
Tax, scope and setup compared
The differences cluster around three things. Scope: a subsidiary, being a separate Indian company, can carry on any permitted business and expand freely; a branch office is an extension of the foreign parent confined to RBI-permitted activities (such as export/import, consultancy or representing the parent) and generally can’t undertake manufacturing or retail trading on its own account in India. Tax: a subsidiary is taxed as a domestic company, with access to the concessional 22% (or 15% for new manufacturers) rates; a branch is taxed as a foreign company at a higher rate (around 35% plus surcharge and cess), and its India profits may also face repatriation considerations. Setup and control: a subsidiary is incorporated through the normal SPICe+ route and is relatively simple to run and later restructure or sell; a branch needs prior RBI approval and carries the parent’s liability directly, since it isn’t a separate legal person. For most investors building an ongoing India business, the subsidiary’s flexibility, lower tax and ring-fenced liability make it the default; a branch suits a foreign company that wants a limited, defined presence without a separate Indian entity. Confirm current rates and the permitted-activity list before deciding.