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Why India ?

Business set up in India

India is one of the fastest growing economies in the world with most liberal FDI policies among the emerging economies. India is also the second most populous country in the world and has more than 50% of its population below the age of 25 and more than 65% hovers below the age of 35. Its growing consumption needs have attracted business community from all over the world. To attract desired FDI, the Government has put in place a policy framework on Foreign Direct Investment, which is transparent, predictable and easily comprehensible. 100% FDI has been allowed under automatic route for most of the activities/ sectors. Setting-up business in India has been made easy and continuous endeavors are being made to remove bureaucracy obstacle to the maximum extent possible. A resident or a non-resident may adopt any of the following routes for setting-up business in India:-

• India is a Union of States with parliamentary system of Government

Land area: 3.29 million square kilometers

• Coastline: 7,516.6 km encompassing the mainland, Lakshadweep Islands, and the Adaman & Nicobar Islands

Capital: New Delhi

Population: 1.210 billion (March 31, 2011 (provisional))

Climate: mainly tropical with temperature ranging from 10o – 40o C in most parts

Time zone: GMT + 5 1/2 hours

Literacy: the literacy rate in the Country stands at 74.04%, 82.14% for males and 65.46% for females (March 31, 2011)

Environment – Current Issues: Air pollution control, energy conservation, solid waste management, oil and gas conservation, forest conservation, etc.

Environment – International Agreements: Rio Declaration on environment and development, Cartagena Protocol on biosafety, Kyoto Protocol to the United Nations Framework Convention on climatic change, World Trade Agreement, Helsinki Protocol to LRTAP on the reduction of sulphur emissions of nitrogen oxides or their transboundary fluxes (Nox Protocol), and Geneva Protocol to LRTAP concerning the control of emissions of volatile organic compounds or their transboundary fluxes (VOCs Protocol).

International airports: India is home to over 20 international airports and over 335 civilian airports. Major airports in India include New Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahemdabad, Amritsar, Thiruvananthapuram, Guwahati, Goa, Cochin

Ports of entry: India has a long coastline, spanning 7516.6 kilometres, forming one of the biggest peninsulas in the world. It is serviced by 13 major ports and 187 notified minor and intermediate ports. Major ports in India include Chennai, Ennore, Jawaharlal Nehru, Kolkata, Kandla, Mormugao, Mumbai, New Mangalore, Paradip, Vizag (Vishakhapatanam), Cochin, Tuticorin and Port Blair.

Tax rates for Year 2012-13

Nature of Assessee Taxable Income General Senior Citizens
(65 years or above)
Super Senior Citizens
(80 years or above)
Individuals
0 – 200000 NIL NIL NIL
200000 – 250000 10% NIL NIL
250000 – 500000 10% 10% NIL
500000 – 1000000 20% 20% 20%
> 1000000 30% 30% 30%
LLP / Partnership Firm Any Income 30%
Company Any Income
Domestic Company*
Foreign Company#
30% 35%

* Surcharge @ 10% is applicable where Net Taxable Income exceeds Rs. 1 Crore.

# Surcharge @ 2.50% is applicable where Net Taxable Income exceeds Rs. 1 Crore.

FDI POLICY


  Consolidated FDI Policy

INVESTMENT ROUTES

An Indian investor planning to set up business in India can do business either in the form of sole proprietorship, partnership LLP/ company (public limited or private limited).

Proprietorship is the simplest way of doing business involving least of the formalities and compliances. A bird’s eye view of compliances under various formats of business is as follows:

Activity Proprietorship Partnership LLP/ Company
Registration Authority No Registration Required Registrar of Partnership Registrar of Companies
Main applicable laws (This is indicative list of laws, there could be other laws applicable to a peculiar business activity / entity)
Income Tax Act, 1961

VAT (for trading & Manufacturing concerns)

Excise and Customs Act (for manufacturing and / or importers /exporters)

IEC (for import / export)

Service Tax ( for Service providing concerns)

Income Tax Act, 1961

VAT (for trading & Manufacturing concerns)

Excise and Customs Act (for manufacturing and / or importers /exporters)

IEC (for import / export)

Service Tax ( for Service providing concerns)

Income Tax Act, 1961

VAT (for trading & Manufacturing concerns)

Excise and Customs Act (for manufacturing and / or importers / exporters)

IEC (for import / export)

Service Tax ( for Service providing concerns)
  Labor Laws like ESIC, PF, Bonus, gratuity Labor Laws like ESIC, PF, Bonus, gratuity Labor Laws like ESIC, PF, Bonus, gratuity

Limited Liability partnership Act, 2009 /

Companies Act, 1956
Periodical Returns under various laws including
Income Tax/ TDS/VAT/ Excise/ Custom/ Service Tax/ ESIC/ PF/Bonus etc.

Income Tax/ TDS/VAT/ Excise/ Custom/ Service Tax/ ESIC/ PF/Bonus etc.

Income Tax/ TDS/VAT/ RoC/LLP Excise/ Custom/ Service Tax/ ESIC/ PF/Bonus/ RoC
Time required for starting business Instantly Instantly Instantly after incorporation, however in case of Public Limited Company it can be done after securing Certificate of Commencement of Business
What MNRS Offers
MNRS offers complete business set up in India like
  • Formation of LLP or Company and drafting of Partnership deed.
  • Registrations with various authorities like VAT/ Income tax/ Service Tax/ Excise/ Custom/ labor law departments/ IEC code etc.
  • MNRS also offers virtual office facility (Space for meetings, Fax, Internet, reception, file storage etc.) in various cities of India.
  • Bank Account opening, Bank financing etc.
  • We also help in takeover and sale of existing business. (Liaison, due diligence, business valuation etc.)

A foreign company planning to set up business in India can opt for any of the following options:

1) As an Indian Company

A foreign company can commence business operations in India by incorporating a company under the Companies Act, 1956. Necessary documents and forms need to be filed for incorporation of the Company with jurisdictional Registrar of Companies (ROC) working under Ministry of Corporate Affairs, Government of India ( http://mca.gov.in ). Once a company has been duly incorporated and registered as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies. An Indian company can be incorporated in the form of:-

  • Joint Venture (with an India Partner); or
  • Wholly Owned Subsidiary (WOS)

Foreign equity in such Indian companies can be up to 100%, subject to requirements of the investor and prescribed sectoral equity caps in respective area of activities under the Foreign Direct Investment (FDI) policy. Department of Industrial Policy & Promotion, Government of India (http://www.dipp.nic.in) comes out with updated consolidated FDI policy on 1st April and 1st October every year prescribing permissible activities, equity caps, entry routes, exit routes etc.

Joint Venture with an Indian Partner

Foreign Companies can also set up their business operations in India by forging strategic alliances with Indian partners.

Joint Venture structure may entail the following major advantages for a foreign investor:

  • Availability of established marketing / distribution set up of the Indian partner
  • Availability of established financial resource and credentials of the Indian partners
  • Established liaisoning channels of the Indian partners which help smoothen the process of setting up of business operations

Wholly Owned Subsidiary Company (WOS)

A foreign company also has the option of setting-up a wholly owned subsidiary in sectors where FDI policy permits 100% foreign direct investment.

2) As a Foreign Company

Foreign Companies can set up their business operations in India through:-

  • Liaison Office/Representative Office
  • Project Office
  • Branch Office

Such offices can undertake any of the permitted activities. Once set-up place of business in India, Companies have to register themselves with Registrar of Companies (ROC) within 30 days of setting up.

Liaison office/ Representative office

Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.

Prior approval of Reserve Bank of India (RBI) is required for establishing a liaison office in India.

Project Office

Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. General permission to establish Project Offices has now been granted by RBI to foreign entities subject to specified conditions. Such offices cannot undertake or carry on any activity other than the activity relating and incidental to execution of the specified project. As per general permission granted by the RBI, now Project Offices may remit outside India the surplus of the project on its completion.

Branch Office

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

  • Export/Import of goods
  • Rendering professional or consultancy services
  • Carrying out research work, in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  • Representing the parent company in India and acting as buying/selling agents in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by the parent/ group companies.
  • Foreign Airline/shipping Company.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of Reserve Bank of India (RBI), may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines granting permission for setting up branch offices in India (RBI).

Branch Office on "Stand Alone Basis

Such Branch Offices would be isolated and restricted to the Special Economic zone (SEZ) alone and no business activity/transaction will be allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India. No approval shall be necessary from RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities subject to specified conditions.

Note: Application for setting up Liaison Office/ Project Office/ Branch Office may be submitted in form FNC 1 (available at RBI website at www.rbi.org.in)

 
Contact for this Service
CA Neeraj Kumar Agarwal
Partner
e-mail: Neeraj@mnrsindia.com
CS Shreyansh Jain
e-mail: Services@mnrsindia.com
Tel: +91 (11) 46502975
Telefax: +91(11) 29812975
Mob: 9313010417





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