Connecting Businesses with Opportunities in India

Business Articles

Submitted by CA Shashi Mohan on Thu, 04/19/2018 - 4:08am.

Companies in India having paid up Share Capital less than INR 5 Million (Appx. USD 76,000) and Annual Turnover less than INR 20 Million (Appx. USD 300 Thousand) are categorized as a "Small Company". There are of-course relaxed compliance norms for ‘Small Companies’, however the following activities must be done:

  1. Board Meetings: Conduct at least two meeting of Board of Directors (BOD) in a financial year (April-March). Directors can participate in BOD in person or through video conferencing or other audio visual mode which can be recorded.
  2. Submission of MBP-1 & DIR-8 by directors: Take a letter of disclosure from every Director regarding their ‘interest in the company’ at the first meeting of BOD every year. In case of any change in Interest of director, get forms (MBP-1) in next BOD meeting
  3. Appointment of Auditors: Appoint an auditor in the BOD meeting within 30 days of Incorporation. Such appointment to be regularized in 1st Annual General Meeting (AGM) i.e. the  ‘Shareholders Meeting’ for next 5 (Five) years. File the mandatory form ADT-1 within 15 days of AGM.
  4. Appointment of Resident Director: At least one director must be ‘Resident in India’. A person who stays more than 180 days in a calendar year India is regarded as a ‘Resident’
  5. Audit of Accounts: Get the books of Accounts audited by the practicing Chartered Accountant annually. Apparently the Auditor as appointed in 1st BOD meeting will undertake the audit and issue an audit report.
  6. Annual General Meeting (AGM): Hold a general meeting (meeting of Shareholders) at the Registered Office each year as AGM. Check the due dates in advance to conduct the AGM.
  7. Declare Annual Corporate Tax Return: File the corporate tax return after making payment of due income tax. Its also compulsory in case there is any ‘Loss’, in order to carry forward the loss in subsequent years.
  8. File Tax Audit Report: Coordinate with your auditors to prepare and file the Tax Audit Report on the prescribed due dates. It’s a special & separate report required by Income Tax Act in case the Annual Turnover exceeds INR 10 Million (USD 150 Thousand).
  9. File Transfer Pricing Report: A Transfer Pricing Report also to be filed in case there are international transaction with associated parties. Get this report from your auditors and file before the prescribed due dates.
  10. Filling of Financial Statements: File the audited financial statements with Registrar of Companies (ROC) together with Form AOC-4 and the consolidated financial statements, if any, with Form AOC-4 CFS. No need to prepare ‘Cash Flow Statement’
  11. Filing of Annual Return: File an annual return within 60 days from the date on which the AGM is held. The Annual Return can be signed by any director.

We will discuss on applicability of operational compliances e.g. Goods & Services Tax, Employees Provident Fund, Employee State Insurance Act, Professional Tax and other administrative compliances such as Shops & Establishment Act, Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act etc  in our next article.

About the Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India. He is one of member of our ‘Expert Panel’ at Entry India. Shashi can be reached at shashi.m@excelorindia.com  or +91 9818700482

Submitted by iNFOTYKE on Tue, 04/17/2018 - 4:36am.

You have heard and perused a lot about the great and bad of outsourcing to India. You need to offer outsourcing to India a shot. Yet, before taking the last dive, you need to realize what outsourcing to India can improve the situation your business. Here is the thing that outsourcing can improve the situation your organization.
Meaning of Outsourcing

Outsourcing can be characterized as a procedure, work, activity, occupation or assignment that can be executed by your own particular representatives, however is rather outsourced or contracted to an outside outsider seller for a particular era. Offshoring is the vital utilization of outside assets to execute business works that were prior taken care of by inward assets.

Outsourcing can likewise be characterized as a business methodology where an organization outsources a piece of their business capacities to a specific specialist organization, who turns into an esteemed business accomplice. In outsourcing, the outsider merchant can execute your business capacities either on– site or off-site.
Why Choose to Outsource?

There are a few reasons why organizations over the world outsource to India. Most supervisors outsource to India due to the gigantic cost and time reserve funds that they can make. Here is a rundown of reasons why organizations outsource to India:

 

  •     Focus on center business works by outsourcing
  •     Save money on cost by outsourcing
  •     Appreciate more prominent adaptability by outsourcing
  •     Enhance organization center through outsourcing
  •     Outsource business works that are crazy or tedious
  •     Outsourcing can enable you to expand the absence of inward assets for a specific business work

 

What are the benefits of outsourcing to India?

Outsourcing to India can enable your organization to develop and make immense reserve funds. Here are seven points of interest of outsourcing to India that you can hope to find in your own organization:

Expert Manpower

India is one of those not very many places on the planet where individuals are qualified experts and specialists at the undertakings that they achieve. To the extent your errands are concerned you are hunting down somebody who can chip away at it with no bargain over the quality at bring down expenses. These organizations in India have a long haul involvement with serving organizations in abroad with high caliber and moderate administrations to enable them to deal with their business forms effortlessly.

Risk Management

If you are taking care of any new process, and you are unskilled in the field then you can cause Risk to your business. In such a situation, the better alternative is to outsource! In a situation, where you don't know about the new advances that are rising to manage your present procedures, at that point, you require somebody who can truly help you.

Smooth service

When you are outsourcing to your outsourcing accomplice situated in a nation like India, you get all day, every day support on your activities since it is in an alternate time zone. The outsourcing accomplice can take up the work and achieve the pending assignments while you are not at office. Everything is simple since they are taking a shot at your ventures that your staff has either untouched or left part of the way through.

Focus on Competition

You have your outsourcing accomplices chipping away at your task. Obviously, they help to achieve the assignments at bring down expenses with no bargain over quality. You are currently free and have sufficient energy to center around more imperative or core tasks where you can center around what your rivals are up to and chip away at improving yourself. Presently, you have no motivation to grumbling on why you missed out to your rivals since you didn't have sufficient time to inquire about on what your kin are doing and what they require.

The advantages of utilizing an outsider provider can run from cost investment funds to accommodation, and shaping a strong working association with a contracted provider frequently prompts rehash business and referrals.

While beginning an outsourcing organization may include a considerable amount of research and budgetary help in advance, the long haul prizes can be plentiful.

Lead statistical surveying to figure out which administrations are in most astounding interest from effectively settled organizations. For instance, verify whether most organizations outsource their HR capacities like finance or worker preparing, or on the off chance that they look for outside merchants to help with all the more assembling centered undertakings like item outline and improvement.

Decide whether you need to have practical experience in just a single specialty region or in the event that you need your organization to offer a more extensive assortment of administrations. For instance, in the event that you make a business that apportions worker abilities preparing you should choose on the off chance that you need to give preparing in both innovation based and administration centered aptitudes or just a single of those territories.

Compute how much cash you should begin your new business and secure the financing either from outside supporters or your very own venture. While figuring anticipated that costs recall would factor in what you should pay for business licenses you may require, office costs including leases, staff wages and gear.

Build up an advertising design so you can start to get the message out about how your outsourcing organization can enable customers to encourage their everyday tasks. The Small Business Administration suggests concocting an arrangement that incorporates "everything from understanding your objective market and your aggressive position in that market, to how you expect to achieve that market (your strategies) and separate yourself from your opposition so as to make a deal."

In the event that you have a great deal of assignments overhead and your business is endeavoring hard to handle and oversee everything at the same time, at that point obviously, you could improve an outsourcing accomplice. For what reason not outsource to the expert specialists in India?

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Submitted by Entry India, LLC on Thu, 03/15/2018 - 1:38am.

The following are the actions happened in Indian Technology, Business & Startup Ecosystem.

1. Walmart is in the final stage of negotiations to become the largest shareholder in Flipkart.
2. Online lending startup Avail Finance has raised $17.2 million in a Series A round from Ola's Ankit Bhati and Bhavish Aggarwal, Freecharge founder Kunal Shah & Others
3. N/Core, the incubator for non-profit startups, graduated its first cohort on Friday.
4. Online rummy gaming company www.Ace2Three.com, has acquired a majority stake and invested $1 million in fantasy gaming platform FanFight.
5. US-headquartered payments solution company Wibmo has acquired Gurgaon-based peer-to-peer (P2P) payments company Mypoolin in a cash-and-stock deal
6. Wistron, the Taiwanese contract manufacturer that makes iPhones for Apple in India, is set to invest Rs 682 crore to set up new manufacturing facility near Bengaluru.
7. Micromax India will take a global patent licence from Ericsson, under which it will pay royalties to the Swedish telecom gear maker on every phone it sells in India and overseas that uses 2G or 3G technology.
8. Online foodtech platform SmartQ has raised close to $1mn in funding from a consortium of Dubai based investors.
9. Wedeterna, an online platform for self-arranged marriages, has raised angel funding

Submitted by CA Shashi Mohan on Sun, 02/25/2018 - 11:19am.

Effective from January 26, 2018

Particulars

Description

Effect of Ease

RUN - Reserve Unique Name

Introduction of an application for Reserving Unique Name. Post approval valid for 20 days. In case the proposed name is unique, no need to apply it through RUN, mention the same directly in SPICe Form

Time Saving (2-4 days)

SPICe - Simplified Proforma for Incorporating Company Electronically

Single Integrated Form for
-Directors Identification Number (DIN)
-Company Name
-Incorporation Certificate
-Permanent Account Number (PAN)
-Tax Deduction Account Number (TAN)

Time Saving (7-10 days) due to single application

DIN - Director Identification Number- DIN

No separate application to get DIN. DIN can only be applied in connection with company incorporation or for getting added in an existing company

In case of incorporation, attach Identity & Address related documents directly in SPICe form

Time Saving (1-2 days)

CRC - Central Registration Centre

No more application with State Registrar of Companies- ROC. Single Window for incorporation process anywhere in India

Saving of processing time ( 4-5 days)

Registered Office

30 days time to arrange for the registered office

Saving of time & cost in pre-arrangement of registered office

Registration Fee

No fee for One Person Company (OPC), Private Limited Companies with nominal Share Capital up to INR 1Million (Appx. USD 15,600)
State Stamp Fee (INR 2,100/USD 30) need to be paid

Saving of Fee up to               INR 2,000 (Appx. USD 30)

 

 

About the Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India. He can be reached at shashi.m@excelorindia.com  or +91 9818700482

Submitted by Navin Pathak (Yahoo) on Mon, 01/22/2018 - 5:34pm.

Today's top news & stories of the Indian startup ecosystem.

▶ Nexus Venture Partners, is expected to raise its fifth fund targeting a corpus of $350Mn-$400 Mn.

▶ Paytm has launched the Paytm for Business app on Android Play Store today.

▶ Patiala Court restrains ecommerce behemoth Flipkart from using MarQ label.

▶ Income Tax department asks ecommerce giant Flipkart to Reclassify discounts as capital expenditure. 

▶ Inc42 Exclusive: Skillate has raised an undisclosed amount of funding from Incubate Fund India, and others.

▶ RailYatri has acqui-hired Kochi-based food delivery technology startup,YatraChef.

▶ Goomo has acquired a B2B vehicle rental marketplace WagonBee. 

▶ OptaCredit Fintech Private Limited secures $4 Mn credit line from DMI finance. 

▶ AEON Learning has raised $3.2 Mn in a Series B funding round from MEMG Family Office LLP.

▶ Stating that its 100% committed to India, Uber has dismissed report of its exit from the Indian market as “baseless speculation”. 

Submitted by Ashish Porwal on Sun, 01/21/2018 - 12:58am.

India, a land of opportunities, is one of the few countries in the world which has demonstrated a sustained economic growth despite a not-so-good global economic scenario. India is blessed with two of the most important factors for economic growth - abundance of natural resources and a deep consumption market.

India has a fairly liberalized foreign investment regime and a regular revamp of the foreign direct investment policy on a continuous basis has ensured that India stays on top of the development scenario. India offers multiple options and avenues for a foreign investor to invest into businesses in India and / or to set up business presence in India. Depending upon an investor’s preference and business objective, there are various options to have difference kinds of business presence viz. representative office, branch office, liaison office, project office, joint venture, wholly owned subsidiary or other forms of direct and indirect investments.

Certain forms of business presence like representative office, branch office, and project office require prior approval of the banking and foreign exchange regulator in India i.e., the Reserve Bank of India (“RBI”). The foreign investment in business entities is primarily regulated under the provisions of the Foreign Exchange Management Act, 1999 (“FEMA”) and the Foreign Direct Investment Policy (“FDI Policy”) issued by the Government of India, from time to time. The FDI Policy and the FEMA contemplate foreign investments in Indian companies under two routes viz., automatic route and approval route. Most of the investment attractive sectors like IT, ITES, software services, manufacturing, construction development, infrastructure etc., are under the automatic route. The sectors where the foreign investment is subject to approval route require prior approval of the Government of India. The foreign investment can also be made in form of debt in accordance with policy relating to the external commercial borrowing as contemplated under the FEMA.

Since the time the Indian economy was opened up for foreign investment in the year 1991, there has been a significant evolution in the FDI regime. Except for few strategic and core sectors, almost all the sectors have been opened up for foreign investment. In several sectors foreign investment upto to the extent of 100% is allowed, thereby making it possible to set up completely foreign owned ventures in India. Under the FDI Policy, foreign investors can invest into Indian business using various investment instruments like equity shares, convertible preference share, convertible equity shares etc. Subject to compliance with certain investment conditions, exit is also convenient and does not contemplate any lengthy and complicated process.

India offers an open investment regime with a stable legal and taxation system The financial and the capital market in India is also very deep and mature, offering investors and other entities a very effective and competent infrastructure. The Government of India is also constantly working towards rationalizing the process of setting up business in India and has undertaken several notable steps to improve the ease of setting up and doing business in India. The recent legal and taxation reforms like coming into effect of the Insolvency and Bankruptcy Code and the Goods & Services Tax clearly demonstrate India’s resolve to emerge as one of the most business friendly jurisdictions in the world. The flagship programs of the Government of India like ‘Make in India’ and ‘Digital India’ have only added to the impetus and have clearly demonstrated India’s resolve to make India as one of the most attractive investment destinations in the world.
Given the Government initiatives like Start-up India and Digital India, the start-up culture in India is also witnessing a tremendous boom. This offers immense investment opportunities for investors who wish to be part of this new phenomenon wherein young ventures, with disruptive business propositions, are changing the way businesses are run and are creating great value for all the stakeholders.
India is on the path of being an economic superpower and therefore it is imperative for global entrepreneurs and investors to have pie of the India’s growth story.

Keywords/Phrases: Doing Business in India, Investing in India, Indian Legal System, Starting a company in India

Author: Ashish Porwal

Ashish is the founder of Hreem Legal. Hreem Legal is a corporate law firm specializing in India entry strategies and aspects relating to investments in India and setting up business presence in India. The author can be reached out at ashish@hreemlegal.com

Submitted by Shashi Mohan on Thu, 01/11/2018 - 1:04pm.

Year 2018 being the last year when the existing government would bring its full fledged budget before the upcoming elections in 2019. In continuation of its efforts, the Union Cabinet further simplified the Foreign Direct Investment (FDI) Policy to provide an ease of Doing Business in India. With these amendments, government has removed entry barriers in single brand retail companies concerns regarding local sourcing and FDI in multi-brand retail still need to be looked upon. A brief of the recent decisions are summarized as follows:
 
1. Single Brand Retail Trading (SBRT)
Existing policy allows 49% FDI under Automatic Route. Beyond 49% and upto 100%, FDI was allowed under Government Approval Route.  Following changes have been approved:
  • Government approval no longer required for FDI in SBRT
  • Non-resident entity can be the brand owner or it can also operate otherwise 
  • Specific brands can be traded directly by the Brand Owner or through legally tenable agreement executed between any Indian entity & the Brand owner
  • Incremental sourcing of goods from India for global operations can be set off during initial 5 years
  • After completion of initial 5 year period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis.
2. Civil Aviation
Foreign Airlines were allowed to invest upto 49% in Indian companies operating scheduled and non-scheduled air transport services except in Air India. The following changes have been introduced:
  • Foreign airlines can invest up to 49% under approval route in Air India. Total FDI directly or indirectly  not to exceed 49% 
  • Substantial ownership and effective control of Air India shall continue to be vested in Indian National.
3. Other Important Changes
  • It’s clarified that the real-estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under automatic route.
  • It has now been decided that issue of shares against non-cash considerations like pre-incorporation expenses, import of machinery etc. shall be permitted under automatic route in case of sectors under automatic route.
  • Definition of ‘medical devices’ to be amended as contained in the current FDI Policy. Earlier a reference was sought from Drugs and Cosmetics Act which is not required now.
  • Wherever required FDI applications would be processed by Department of Industrial Policy & Promotion (DIPP) for Government approval
About Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India.
Contact: ca.shashi@rakchamps.com or +91 9818700482
Shashi is also a Co-Founder at Excelor India Cons. Pvt. Ltd, www.excelorindia.com
Keywords: Doing Business in India, Investing in India, India Civil Aviation Opportunities
 
Submitted by Shashi Mohan on Wed, 08/09/2017 - 2:40am.

NOTE: Structure of the company in context here is 'Private Limited'

1. I am a US Passport holder; can I own a company in India?

Yes, you can very well own a company in India (partly or even wholly) or set up your own company in India. Setting up or owning a company in India can broadly be achieved with the following options:

  • Buying shares in an existing business
  • Starting a new company (please see Point No. 3 below)

The above option to buying shares in an existing company or starting up a new one is same for Foreign National, Foreign Resident, Non Resident Indian`s (NRI), Person of Indian Origin (PIO), Overseas Citizen of India (OCI) [termed as ‘foreign investor’]

2. What are prerequisites to buy shares in an existing business?

In case of a closely held company (Private Limited, Limited Liability Partnership) procedures of valuation of shares, documentation of shares transfer and reporting to Reserve Bank of India need to be carried out.

Shares held by resident Indian can be purchased at a value not less than the value arrived based on guidelines issued by Reserve Bank of India (Please follow the link https://www.rbi.org.in/Scripts/FAQView.aspx?Id=26 to get more information). Resident shareholders need to comply with the requirement of ‘transfer of shares from resident to Non-Resident’, as prescribed by RBI.

3. What are different structures/formats to start my own company?

Legal Structure

Private Limited Company

(Wholly/Partially Owned or Joint venture)

Liaison Office (LO)

Project Office (PO)

 

Branch Office (BO)

Limited Liability Partnership

Permissible Business Activities

Wide range of activities permitted under automatic route/approval route

Please check the link http://dipp.nic.in/English/policy/changes/press2_00.htm for list of activities under automatic/approval route)

Marketing & branding. No commercial activities that involves revenue generation

Execution of any awarded project in India. Example is project of Installation of Machinery at Airport

All activities of parent company, except manufacturing activities

Wide range of activities permitted under approval route

Legal Composition

  • Entire Share Capital can be owned by foreign investor- Wholly Owned Subsidiary-WOS
  • 2 or more parties can jointly hold the share capital-Joint Venture -JV

Representative Office only

For executing a time bound project

Representative office of Head Office

Limited Liability Partnership Firm.

Minimum Number of Directors

2 Directors, 1 to be resident in India

1 Representative

1 Representative

1 Representative

2 Partners

Minimum Number of Investors

2

N.A.

N.A.

N.A.

2

Minimum Share Capital

Authorized Capital: Rs. 100,000

Paid-up Capital: No Minimum requirement

N.A.

N.A.

N.A.

NIL

Legal Permission

Automatic Route/Approval by individual Government Departments

Advance approval from RBI

Advance approval from RBI

Advance approval from RBI

Advance approval from RBI

Corporate Liability

Limited to the subscribed share capital

Full liability of parent

Full liability of parent

Full liability of parent

Partners liability up to agreed contribution

Tax Structure

Taxed as Domestic Company @30% plus surcharge

Not Applicable, as there is no revenue/profit

Taxed as Foreign Company @40% plus surcharge

Taxed as Foreign Company @40% plus surcharge

Tax based on highest marginal rate of partners

 

*Starting as a Proprietorship, local Partnership, One Person Company (OPC) is not permitted

*The above discussed business format does not apply in case the objective is ‘Not for Profit’. For Example Trusts, Societies, Educational Setups etc

4. What is the owner of company called in India?

Shareholders are owner of the company and enjoy rights based on their shareholding percentage. ‘Director is a legal position who takes care of operational activities and also represents to various legal authorities governing the business.

In order to become a Director it is not required ‘to become a Shareholder. A shareholder however can also be a Director. You can also be appointed as a Director in an Indian company wherein you are not a shareholder/owner.

Generally, owner/shareholders of business retain the position of Director as well to take important decision of the business. One can however also appoint any other person to work as a Director on their behalf.

5. Do I need an Accountant or Consultant to start my business (buying shares or starting own company) in India?

Yes, apparently, you cannot do it yourself. You must hire an accountant or consultant to take care of entire process of setting up of your business.

Complete process of registering a company in India is online and one need to prepare documents, fill form and upload everything at website of Registrar of Companies (http://www.mca.gov.in/mcafoportal/login.do). Such forms also need to be verified by a Chartered Accountant (CA)/Company Secretary (CS) before being uploaded online.

6. What are prerequisite to become Director in an Indian Company?

The process starts from getting a Director Identification Number (DIN) in India. In order to obtain DIN, the person must prepare his/her Digital Signature (DSC).

In order to prepare DSC and DIN, one needs to arrange Appostile or Legalised Identity Proof (Passport), Address Proof (Bank Statement, Countries Identity Card etc), DSC Form and few Photographs. 

7. What are prerequisite to become a Shareholder in an Indian Company?

None of typical registrations (Tax, DIN etc) are required to become a shareholder in an Indian company. You need to however prepare a DSC (New Process of Company Registration at MCA) and you need to arrange Appostile or Legalised Identity Proof (Passport), Address Proof (Bank Statement, Countries Identity Card etc), DSC Form etc and few Photographs. 

8. What exactly I need to do to arrange the documents for being a Director?

(a) Steps to arrange for DSC

  • Get an accountant/consultant (CA, CS, Lawyer, Business Consultant), who will help you in entire process in preparing government forms, uploading on portals and if required following it up.
  • Get your Identity Proof (Passport), Address Proof (Bank Statement, Countries Identity Card etc), DSC Form and few Photographs, Appostile/Legalised in your home country
  • Post the documents in Original to your Indian Consultant, who will arrange to get a DSC on your behalf, which is generally valid for a period of 2 years. Give a written authorization to the consultant to affix the DSC only on your approval

(b) Steps to arrange DIN

  • Your consultant can fill out form of DIN at Registrar of Companies (ROC) portal, get the same verified and approved from you and upload the same.
  • The DIN issued by ROC is a 8 digit number, which is valid for the life time. DIN is a permanent number for being appointed as a Director.

9. Are there any other formalities to be fulfilled to become a Director in Indian Company?

For Indian passport holder there is a formality to obtain a Permanent Account Number (PAN) from Income Tax Authorities. A Foreign National, Foreign

10. Do I need to be present in India in during the process of setting up my business?

It is not necessary to be present in India for being appointed as a director or a shareholder. Similarly, the entire process of business registration can be done online and there is no requirement to travel to India or be present physically at any stage.

In case you are travelling India on a business visa, you can sign all the documents during your India visit. Such documents would not be required to be appostile or legalised in your home country.

In other case, one can arrange to post the stated documents (duly signed, appostiled, legalised), to their hired accountant, consultant in India, who can handle the entire process of obtaining DIN, DSC and coordinate in filing the required form at Registrar of Companies.

11. Is there any local partner (Indian Resident) required by Indian Law?

Companies Act 2013 brought a new provision wherein there must be at least 1 Resident Director in Board of an Indian Company. Resident director is defined as a citizen of India which has resided at least 180 days in a calendar year.

Responsibilities of the resident director are primarily to coordinate with the local government authorities, as and when there is any requirement. He may or may not be involved business decisions or even operational matters. From legal side, there is no predefined remuneration for such director.

12. Can I own 100% equity in Indian business (existing or new)?

Companies Act 2013 allows a Foreign National, Foreign Resident, Non Resident Indian`s (NRI), Person of Indian Origin (PIO) or their business entities overseas to own 100% equity in their business set up in India.

13. Can I open a Single person/ One person company (OPC) in India?

NRI`, PIO`s, Foreign Nationals are not eligible to form a OPC in India. Companies Act 2013 allowed a new concept to form a single person company called ‘’One Person Company (OPC)’, however its only allowed for a Resident Indian.

14. Is there any minimum capital requirement to start a business in India?

There is no minimum required share capital. Recently, the Companies Act 2013 removed the minimum authorized share capital limit (INR 100K for a Private Limited Company, INR 500K for a Public Limited Company)

15. Is there any restriction in starting a Partnership Firm, Limited Liability Partnership (LLP) or buy shares therein?

You can do the same, if the following conditions are met:

  1. Indian Partnership Firm should not be engaged in agricultural, plantation, real estate, media businesses (restricted sectors)
  2. Amount can only be invested  by way of inward remittance or out of NRE,  FCNR or  NRO accounts maintained with authorized Banks
  3. Repatriation of invested fund outside India, not permitted unless permitted by Reserve Bank of India (RBI)

16. What are sources to fund my newly acquired/setup business in India?

In an event where revenue of Indian entity is below Break Even Point (BEP), the initial Capex (Capital Expenses) & Opex (Operational Expenses) requirement can be met through Share Capital (Investment) funded from the shareholders.

External Commercial Borrowings (ECB) is allowed for Capital Expenditures. In current scenario, ECBs are also allowed for Working Capital Expenditure; however certain conditions are imposed by Reserve bank of India (RBI) need to be followed. Please click on the link for more information https://rbi.org.in/SCRIPTs/BS_ViewMasCirculardetails.aspx?id=9840

17. What are further formalities for making the business operational?

Once the legal structure of business (Private Limited Company, Limited Liability Company, Limited Liability Partnership etc) is registered, following activities need to be completed:

  1. Registration with Income Tax Authorities: Obtain Permanent Account Number (PAN), Tax Account Number (TAN)
  2. Open a Bank Account in desired local or MNC Bank
  3. Registration under Value Added Tax: State laws require a registration for trading in Goods
  4. Registration of Service Tax: Register for doing trade in Services
  5. Register under Shops & Establishment: Location based registration in few states
  6. Registration under Professional Tax:  Location based registration in few states

 

​Appendix:

  • Foreign National: A person who is not a naturalized citizen of the country in which he is residing or citizen of a country other than India.
  • Foreign Resident: Resident of a foreign country. Generally the term is used for a foreign national.
  • Non Resident Indian: Citizens of India, holding Indian Passport, immigrated to any other country for six months or more.
  • Person of Indian Origin (PIO): Not a citizen of India but a person of Indian origin or ancestry. As per Gazette of India (Part-I, Section-I) published on 09.01.2015, all the existing Persons of Indian Origin (PIO) card holder registered as such under new PIO Card scheme 2002, shall be deemed to be Overseas Citizens of India Cardholder (http://boi.gov.in/content/person-indian-origin-pio)
  • Overseas Citizen of India: Person of Indian Origin (PIO), who was citizen of India on Jan 26, 1950 or thereafter, residing overseas, can register them as Overseas Citizen of India (OCI). OCI`s are entitled to general 'parity with Non-Resident Indians.

 

Note: Definition of above terms need to be checked from respective section of Foreign Exchange Management Act (FEMA) in specific cases such as acquisition of shares, acquisition of immovable properties, purchasing of Jewelry & bullions etc. This document only covers, these terms with respect to buying shares in an existing business or starting a new company in India.

 

About Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India.
Contact: ca.shashi@rakchamps.com or +91 9818700482
Shashi is also a Co-Founder at Excelor India Cons. Pvt. Ltd, www.excelorindia.com
Keywords: Doing Business in India, Investing in India, India Civil Aviation Opportunities
Submitted by Shashi Mohan on Mon, 08/07/2017 - 3:51am.

Business Structure in India

About Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India.
Contact: ca.shashi@rakchamps.com or +91 9818700482
Shashi is also a Co-Founder at Excelor India Cons. Pvt. Ltd, www.excelorindia.com
Keywords: Doing Business in India, Investing in India, India Civil Aviation Opportunities
Submitted by Shashi Mohan on Wed, 02/10/2016 - 5:07am.

1) For doing business in India, what are the various business structures in India?

Foreign RepresentationIncorporated EntityDistribution Only
Liaison Office ('LO')Wholly Owned Subsidiary ('WOS')Distributor/Importer
Branch Office ('BO')Joint Venture ('JV')Franchisee/ Agent
Project Office ('PO')Limited Liability Partnership ('LLP')* 

* Foreign Direct Investment (FDI) in LLP is only under Approval Route & Conditional

2) What form of Business is most appropriate?

Business ‘Form’ purely depends on the business need. Such need could be to execute one time project in India, promote the product, understand the market, appoint a distributor, just have a place of business or hire an employee in India etc.

3) Can I do business in India without incorporating there?

Till the time investment decisions are not firm, business in India can be done by appointing an agent, distributor in India or directly providing services from abroad.

Such arrangements are subject to applicable tax withholding rules in India. The payment from India is governed by rules of Foreign Exchange Management Act (FEMA) and controlled by Reserve bank of India (RBI)

4) Can a Liaison Office (LO)/Representative Office (Rep Office) operate in India for an unforeseeable time period?

Initial approval of a LO is granted by Reserve Bank of India for 3 years. Subsequent request for an extension is generally approved for next 3 years. Further extensions can again be applied, however approval by Reserve Bank of India (RBI), is granted on a case to case basis.

5) Who can be appointed as an Authorized Representative of LO?

There is a requirement to appoint an Authorized Representative of an LO. He/She can be a resident of India or US. An Authorized Representative can be changed at the will of the Board of Parent Company. The person however must have an Indian Permanent Account Number (PAN). PAN is a unique number, obtained by registering at Indian Income Tax.

6) Can I open a Branch Office (BO) of my US company?

BO can be opened with a prior approval from RBI and it’s regarded as Foreign Company in India. As it’s not a separate entity from its parent company, all business risk and liabilities are directly assumed by the Parent company. It can conduct full fledged business activities in India, except Manufacturing. It can however subtract such activities to Indian vendors. BO, being a foreign company taxed at a higher rate (presently 40%).

7) Do I need to incorporate in India for executing a Time Bound Project?

You don't need to incorporate. In case you have awarded a specific contract in India, you can set up a PO without prior approval of Reserve Bank of India. After completion for the project the net of tax, proceeds can be repatriated to the Parent Company.

8) Is there any restriction in Foreign Direct Investment (FDI) in India?

Most of the business sectors don't require a prior approval and 100% FDI is permissible. In all such cases, only reporting is required to RBI, within 30 days of receipt of equity/allotment of shares. Where ever automatic route is not available i.e. sectors which has a cap on FDI, prior approval from Foreign Investment Promotion Board (FIPB) is required e.g Whole Sale Trading.

9) Is there any threshold on Capital, Shareholders, Directors etc.?

Recently the requirement of Minimum Share capital (Private Limited- INR100K, Public Limited- INR500K) is being lifted by Indian Government. There is however requirement of minimum 2 Shareholders & 2 Directors (at least 1 to be resident director). There is also a provision of One Person Company (OPC), however it is allowed only to a resident Indian.

10) Do I need a physical business address to register in India?

An address to be termed as a “Registered Office’ is required. Commercial or business address can be at a different location. There is no requirement of any minimum area, location etc. A business incorporated at any place in India, can do business throughout India. State Government however may require some local registrations.

11) How can I fund my Wholly Owned Subsidiary (WOS), until it breaks even?

Initial funding can be done though injecting share capital i.e. FDI. A loan from parent company (External Commercial Borrowing- ECB) is permissible only for Capex. ECB for working capital is permitted subject to certain conditions and a lock in period of seven years for capital repatriation. Local financing is always available subject to required collaterals.

12) Can a US citizen become a Director in Indian PLC?

There is no restriction of any foreign citizen for becoming a Director in Indian PLC. The person is not necessarily be a Shareholder as well. He/She should however require obtaining a Directors Identification Number (DIN) in India. In case, the Director from US also requires signing on behalf Board of Indian PLC, He/She also needs to get a Digital Signature (DSC).

13) Is there any taxability issue, in India due to my Directorship in Indian Private Limited Company (PLC)?

No, taxability in India arises based on residential status in India and incomes accrue or arise in India. A Director is however is liable for any negligence or any wrong doing on behalf of the PLC, as he/she is termed as a Key Managerial Person (KMP).

14) Can both the Directors of a PLC, be a resident of US?

It is permissible. Board meetings can even be held outside India. Recently a board meeting via video conferencing is also permitted subject to certain conditions. As per a recent amendment in 2014, at least one resident director is required in every PLC.

15) Can I transfer my shares in a PLC?

There is a restriction in transferring shares in a Private Limited Company. It can however be transferred to another shareholder or a related person, subject to certain conditions. A Non-Resident (NR) can transfer its shares to another NR without any permission from RBI. A NRI however need to get prior permission from RBI to transfer his/her shares in an India PLC to another NR.

16) What legal registration required in order to start a Back Office in India?

Back Office operates as a fully fledged business unit, however for the captive consumption of output by the Parent Company. Indian entity is generally established as a WOS, however it can also be a JV or Associate. In case the activities are under 100% automatic route, no prior approval from RBI or FIPB is required.

Apart from registering a PLC, you also require to get domestic registrations such as PAN, Tax Account Number, Service Tax, Shops & Establishment etc. Other registrations are conditional. Import Export Code (IEC) only in case of specified services. Provident Fund, once your employee level reached at 20, Value Added Tax in case you also trade in goods.

17) Is there any Tax Benefit to US Companies in India?

There are no tax benefits now days to WOS from any country. In case the WOS is 100% exporting its services, it may prefer in establishing in a Special Economic Zone (SEZ), to avail benefit of tax exemption (Service tax, VAT etc) on input services.

18) What is the general tax structure of a back Office?

An incorporated entity in India becomes a tax resident, tax rate of a domestic company (presently 30.09%) applies on its Profit before Tax (PBT). In case the India entity work s for the parent company in a foreign territory, Transfer Pricing Regulations gets applied, which requires establishing that the financial transactions between related parties are done at a Arms Length Pricing.

19) Basic difference in Private Limited Company and Public Limited Company?

Both forms, allows a Limited Liability for the Shareholders. A recent amendment in 2015 has done away with requirement of a minimum share capital in both the formats. Minimum 2 Shareholder required in a Private Limited, however you need o have minimum 7 shareholders in a Public Limited setup. Maximum number of members /shareholders is restricted to 50 in case of a Private Limited, however it’s unlimited in case of a Limited Company. Transferability of shares in a Private Company is ‘Restricted’ however its permitted in a Limited Company (subject for Foreign Exchange Regulations)

Most foreign businesses, SMBs prefer to register as a ‘Private Limited’ also due to a minimum regulatory & compliance disclosure requirements.

20) What is a general tax structure in India?

India has a federal system of levying tax on businesses. Income Tax, Service Tax, Customs Duty etc. are levied & collected by Central Government, however Value Added Tax, Local Body Tax, Municipal Taxes, etc are state subjects.

 

About Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India.
Contact: ca.shashi@rakchamps.com or +91 9818700482
Shashi is also a Co-Founder at Excelor India Cons. Pvt. Ltd, www.excelorindia.com
Keywords: Doing Business in India, Investing in India, India Civil Aviation Opportunities
Submitted by Shashi Mohan on Tue, 02/09/2016 - 10:45am.

Currently the process to get a PAN in India is semi-automated. An online application can be made by using the link https://tin.tin.nsdl.com/pan/form49AA.html. Please be careful in mentioning particulars exactly same as per your identity proof, address proof etc.

Manual Form 49AA can also be downloaded from here.

Fee for processing PAN Application is Rs. 107 including taxes. In case the communication address is outside India, processing fee is Rs. 989 (including tax and dispatch charges) and in such case PAN cards will be dispatched outside India.

The requisite fee can be paid through a Demand Draft of an Indian Bank on through Credit Card, Debit Card. In case you provide ‘office address or residential address’ in India, the payment can also be done through Net Banking.

On confirmation of the application, an acknowledgement number (unique 15-digit number) will be generated. Take a print of the acknowledgement receipt, paste 2 recent, color photographs and sign exactly in the given box, just below. Photographs are required only in case of Individuals.

Non Resident Indians can use their OCI/PIO card or a NRI bank account as their address proof abroad. A person holding a foreign passport is required to get his/her documents attested by “Apostille” or Indian Embassy or High Commission or Consulate in that country

In case of any other entity, Foreign Organisation, their Certificate of Registration needs to be duly attested by “Apostille” or Indian Embassy or High Commission or Consulate in that country

Once you are through, please put the following documents in an envelope:
  • Acknowledgement receipt signed and affixed with photograph
  • Demand Draft (Original) or payment acknowledgement receipt
  • Proof of Identity and Proof of address

Subscribe the envelop with “APPLICATION FOR PAN…….ACKNOWLEDGEMENT NUMBER” and send through speed post addressed at “Income Tax PAN Services Unit, NSDL e-Governance Infrastructure Limited, 5th floor, Mantri Sterling, Plot No. 341, Survey No. 997/8, Model Colony, Near Deep Bungalow Chowk, Pune – 411016”

Please ensure that the above documents are received at the above within 15 days from the date of online application.

The process would complete in approx 2 weeks time. The acknowledgement number can be used to track the status of application at https://tin.tin.nsdl.com/pantan/StatusTrack.html.

For more details on PAN card for NRIs and foreign companies that want to do business in India, click here.

 

About Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India.
Contact: ca.shashi@rakchamps.com or +91 9818700482
Shashi is also a Co-Founder at Excelor India Cons. Pvt. Ltd, www.excelorindia.com
Submitted by Navin Pathak on Wed, 01/20/2016 - 12:50am.

Though I personally don't feel that Startup India Action Plan will bring any significant changes in India's entrepreneur eco-system, but here is a chart to see if your company is eligible to benefit from this action plan.

Click on image to see a full size version in a new tab

Details about the action plan can be downloaded from the site http://dipp.nic.in.

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