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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

Submitted by Sandeep Bhosle on Tue, 01/19/2016 - 5:53am.


India's Prime Minister Mr. Narendra Modi launched startup India Action Plan on 16th January 2016.

The following are the keypoints of the startup India action plan for growth of startups in India.

  1. Compliance Regime based on Self-certification
  2. Startup India Hub – A single point of contact for the entire startup ecosystem
  3. Rolling out of a Mobile App & Portal – Starting a Startup in 24 hours on a Mobile App
  4. Fast track mechanism of Startup patent applications
  5. Relaxed Norms of Public Procurement for Startups
  6. Faster Exit for Startups
  7. Rs 10,000 crore Fund of Funds for funding support
  8. Credit Guarantee Fund for Startups
  9. Tax Exemption on Capital Gains
  10. Tax Exemption to Startups for 3 Years (for startups registering after April 1, 2016)
  11. Tax Exemption on Investment above Fair Market Value
  12. Organising Startup Fests for Showcasing Innovation and Providing a Collaboration Platform
  13. Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilisation (SETU) Program
  14. Harnessing Private Sector Expertise for Incubator Setup
  15. Building Innovation Centres at National Institutes
  16. Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras
  17. Promoting Startups in the Biotechnology Sector
  18. Launching Innovation Focused Programs for Students
  19. Annual Incubator Grand Challenge


Submitted by Shashi Mohan on Tue, 11/17/2015 - 10:02pm.


PAN Card or Permanent Account Number is a MUST for both a Non-Resident Indian (NRI) and a Non-Resident organization in case they receive income and need to file income tax return in India. Indian Income Tax Authority keeps a track and consolidates financial transactions through PAN and it is regarded as a Tax Registration Number in India. Legislation has accordingly mandated to quote PAN at several financial transactions. As a practice, requirement of PAN is also considered mandatory in non-financial activities such as opening a Bank Account or becoming a “Director” (getting Director Identification Number) in a company registered in India.

Now days, it works as an Identity card in India. Similar to an EIN or Social Security Number in USA, a PAN in India is a 10 digit alphanumeric number issued by Income Tax Department.  It’s a unique number issued for lifetime. In certain cases, it can also be surrendered or cancelled under a valid reason. Having more than one PAN is not permitted and one can be penalized for having more than 1 PAN.

What makes PAN card a Mandatory requirement?

There are specific transactions which cannot be carried out unless valid Pan is presented. Relevant authorities simply deny such transactions in absence of a PAN. Below are a few examples:

  • Opening a Bank Account, getting a Credit Card, apply for a Loan
  • Getting a Digital Signature of obtaining a Director Identification Number (for being appointed as a Director in Indian Companies).
  • Insurance Payment, Other Financial transactions > INR 50,000
  • Transaction in Property, Vehicles >INR 500,000
  • Investment in Shares, Mutual  Fund
  • Utility connections (Telephone, Electricity, Gas etc)
  • Domestic registrations such as Service Tax, Value Added Tax, Import Export Code

NRIs and Foreign Companies that are doing business in India also need a PAN

Every recipient of income from India needs to furnish PAN. It is also required that in the absence of PAN, the tax withholding rate will be higher (20%) even if a lower rate is prescribed in Double Taxation Avoidance Agreement (DTAA) with that particular country. The following are the sample cases in which PAN is required by NRIs and foreign companies doing business in India.

  • Carry out financial or investment related transactions
  • Employment or rendering of professional services
  • Trading in Shares through a Depository or even a Broker
  • Invest in Mutual Funds
  • Purchase Land (not Trading) or some property in India
  • Being appointed as a Director in Indian Companies
  • Being appointed as a “Authorised Representative” in a Liaison Office, Branch Office, Project Office
Submitted by Reena Kaushik on Thu, 09/24/2015 - 8:18pm.

With the dollar surging against the Indian rupee, NRIs are taking advantage of the depreciating rupee by sending money to India. The surge in money sent to India increased to 48% in the first four months of this financial year –according to The Economic Times.

Non-Resident Indians are stashing away more to remit home in order to take advantage of the weakening rupee and the eight- to nine-percent interest rate on domestic deposit in India. Remittances are also fueling the real-estate market, as real-estate is viewed as long-term investment with a lifetime appreciation.

On the flip side, an appreciating U.S. currency is a worry to the manufacturing sector in India. Exports have become expensive eroding the margins of the sellers.

For the recipients of money sent by NRIs, remittances are a lifeline, and ‘dollars wrapped with care,’ according to Dilip Ratha, Head of KNOMAD (Global Knowledge Partnership on Migration and Development). Funds sent help pay for education, housing, care for the elderly and business investments. In some cases, remittances act as emergency funding for unforeseeable situations, when money is needed the most.  

According to World Bank data, India received remittances worth US $70 billion in 2014 way ahead of China, Philippines and Brazil, and continues to grow as one of the top recipients of remittances among developing nations.

Remittances into India constitute almost 4% of India’s GDP. Money transfer from USA to India constituted almost 12billion dollars and is expected to grow to 15 -20 billion dollars by 2016.

This market has seen the emergence of Fintech disruptors like Transfast, Xoom and Remitly instrumental in reshaping the FX market and helped in lowering the cost of global remittance fee. Established players like Western Union and Moneygram are already feeling the heat from the online disruptors.  With offerings like instant bank deposit, high exchange rates and zero fee transfers, these companies have significantly increased their share of remittance in the online market space.

As long as we see US dollar surge against the INR we will see a surge in money transfers to India, fueling businesses, changing lives and aiding in the growing economy.

Submitted by Vijay Dalmia, Vaish Associates on Fri, 01/23/2015 - 9:33am.

India has well defined substantive and procedural laws along with a well established system of judicial enforcement of rights. An elaborate mechanism is provided for grievance redressal under Indian statutes. A complete hierarchy of courts and tribunals has been set up []. India has three tier system of judiciary, which includes District Courts, at the first tier, comprising judges for adjudicating upon civil disputes and criminal cases at the lowest level. At the second tier, each state in India has a High Court which has the appellate and supervisory jurisdiction over all the courts and tribunals in such state. The Supreme Court of India [], which is at the third tier, is the highest court of justice in India having appellate and supervisory jurisdiction over High Courts of all the states. The Supreme Court of India and all the High Courts also act as the custodians of the constitution of India. Government of India has also formed special tribunals to deal with matters of specific nature, such as Intellectual Property Appellate Board (IPAB) [], Income Tax Appellate Tribunal (ITAT) [], Debt Recovery Tribunal(DRT) [], Central Administrative Tribunal(CAT) [], Board for Industrial and Financial Reconstruction (BIFR) [] and Central Excise Service Tax Appellate Tribunal(CESTAT) [].

Doing litigation in India may be an unending process, frustrating the entire purpose of litigation. Indian Judicial System is marred with exceptional judicial delays and slow process. The present sad scenario of Indian courts can be understood from the data derived from the website of the Supreme Court of India [], pertaining to the pendency of cases in various Indian Courts. A glimpse at the data given hereinafter of the pending cases in the Indian courts is grave enough to pose caution. As of May 2010, 55,797 cases are pending with the Supreme Court of India, over 3 million cases are pending in the 21 High Courts and over 26.3 Million civil and criminal cases are pending in the District Courts [].

The litigation in India should be initiated only after a well thought strategy about the entire process, time and cost involved. Litigation in India should not be initiated impulsively. Though it may not be possible to avoid litigation at all times but strategies can be formed to successfully end the litigation by achieving practical objects. It should also be kept in mind that Indian Courts are not very pro-active in granting heavy damages or compensation. Alternative Dispute Resolutions like arbitration is a well recognised method of avoiding litigation in India.

Time frame for Litigation

In view of the above data, it is very difficult to predict a time band within which litigation in India can be completed from the filing of the suit and till the appellate stages are over. However, a well thought strategy can definitely put an end to the unending and unpredictable litigation in India.

So, while doing business in India, the first endeavour should be to avoid litigation. However, there may be situations when a foreign entity may get embroiled in an unavoidable forced litigation in Indian Courts.

It has been observed that most of the litigation which takes place in India during the course of business by a foreign entity with an Indian, is a result of bad contracts, which could be avoided by  taking care of  and contemplating various contingencies which may arise during the course of business in India.

Cost of Litigation

Any peculiar civil action in the Court of law involves following components of costs i.e. Court Fee, Professional Fee and Miscellaneous Expenses and Disbursements.

In a Civil action, court fee is required to be paid at the time of the institution of the suit, which may be fixed or ad-valorem (a percentage of the amount claimed). Generally, the fixed court fee is negligible. However, any claim relating to recovery, damages, compensation or property etc. may attract a court fee which is based on a percentage of the claim amount or the valuation of the subject matter of the suit, e.g. for a suit for recovery of a sum of INR 60 Million (approx. US$ 1290000) in Delhi High Court, an amount equivalent to  1 % of the claim i.e. INR 0.6 Million (approx. US$ 12900) has to be paid as court fee at the time of the institution of the suit. In Criminal matters, only a trifling court fee is payable.

For any matter relating to litigation, the component of professional fee may include fee for advice, drafting of pleadings and appearances before the Court. In India, for professional fees, generally the system of lump-sum fee and fee on 'hourly rate' basis is followed. However, Indian law does not allow the payment of contingent fees or conditional fees, i.e., any fee for services provided where the fee is only payable if there is a favorable result.

The third component of litigation cost, is usually not very high since the same pertains to miscellaneous issues related to litigation including typing, photocopying, postage and courier charges etc.

Mechanism for Enforcement of Judgments

Indian judicial system is a creation of the Constitution of India. The distinguishing feature of the Indian Judiciary lies in its independence from the executive / government. The Central & State Governments and their functionaries are duty bound to obey and implement the orders of the Courts in India, and any non compliance on their part results in the initiation of contempt proceedings against them. Besides coded laws, India also follows the common law principles. The judgments of the High Courts and Supreme Court of India, as precedents, have the same force as that of the "law of the land".

The Indian Government Machinery including the police is under an obligation to follow and implement the orders of the court. There are special provisions for the enforcement of the orders of the court, including Contempt of Court proceedings, which provides for a fine as well as imprisonment, in case of disobedience. There are also other legal means for execution / compliance of the orders of the court i.e. by way of appointment of Local Commissioner / Receivers.

As already stated that the Indian Judiciary does not suffer from a nationalistic approach, which is itself good to build confidence in foreign entities.

DISCLAIMER: This article is for informational and educational purposes only.While every care has been taken in writing this article to ensure its accuracy at the time of publication, the Author or  Vaish Associates Advocates assumes no responsibility for any errors which despite all precautions, may be found therein. This article neither constitutes a contract nor will form the basis of a contract. The material contained in this document does not constitute/substitute professional advice that maybe required before acting on any matter. No claim is made by virtue of the use of any trademark or images used in this article. All trademarks and images belong to their respective owners. 

*COPYRIGHT NOTICE:  © 2014, India. All rights reserved with Vaish Associates Advocates, 1st & 11th Floors, Mohan Dev Building, 13, Tolstoy Marg, New Delhi-110001, India.

Submitted by Vijay Dalmia, Vaish Associates on Tue, 01/13/2015 - 6:17pm.

The history of Patent law in India starts from 1911 when the Indian Patents and Designs Act, 1911 was enacted. The present Patents Act, 1970 came into force in the year 1972, amending and consolidating the existing law relating to Patents in India. The Patents Act, 1970 was again amended by the Patents (Amendment) Act, 2005, wherein product patent was extended to all fields of technology including food, drugs, chemicals and micro organisms. After the amendment, the provisions relating to Exclusive Marketing Rights (EMRs) have been repealed, and a provision for enabling grant of compulsory license has been introduced. The provisions relating to pre-grant and post-grant opposition have been also introduced.

An invention relating to a product or a process that is new, involving inventive step and capable of industrial application can be patented in India. However, it must not fall into the category of inventions that are non-patentable as provided under Section 3 and 4 of the (Indian) Patents Act, 1970.  In India, a patent application can be filed, either alone or jointly, by true and first inventor or his assignee.

Procedure for Grant of a Patent in India

After filing the application for the grant of patent, a request for examination is required to be made for examination of the application by the Indian Patent Office. After the First Examination Report is issued, the Applicant is given an opportunity to meet the objections raised in the report. The Applicant has to comply with the requirements within 12 months from the issuance of the First Examination Report. If the requirements of the first examination report are not complied with within the prescribed period of 12 months, then the application is treated to have been abandoned by the applicant. After the removal of objections and compliance of requirements, the patent is granted and notified in the Patent Office Journal. The process of the grant of patent in India can also be understood from the following flow chart:




Filing of Application for Grant of Patent in India by Foreigners

India being a signatory to the Paris Convention for the Protection of Industrial Property, 1883 and the Patent Cooperation Treaty (PCT), 1970, a foreign entity can adopt any of the aforesaid routes for filing of application for grant of patent in India.


Where an application for grant of patent in respect of an invention in a Convention Country has been filed, then similar application can also be filed in India for grant of patent by such applicant or the legal representative or assignee of such person within twelve months from the date on which the basic application was made in the Convention Country i.e. the home country. The priority date in such a case is considered as the date of making of the basic application.


Pre-Grant Opposition

A representation for pre-grant opposition can be filed by any person under Section 11A of the Patents Act, 1970 within six months from the date of publication of the application, as amended (the "Patents Act") or before the grant of patent. The grounds on which the representation can be filed are provided under Section 25(1) of the Patents Act. There is no fee for filing representation for pre-grant opposition. Representation for pre-grant opposition can be filed even though no request for examination has been filed. However, the representation will be considered only when a request for examination is received within the prescribed period.


Post-Grant Opposition

Any interested person can file post-grant opposition within twelve months from the date of publication of the grant of patent in the official journal of the patent office.


Grounds for Opposition

Some of the grounds for filing pre-and post-grant opposition are as under:

(a)    Patent wrongfully obtained;

(b)   Prior publication;

(c)    The invention was publicly known or publicly used in India before the priority date of that claim;

(d)   The invention is obvious and does not involve any inventive step;

(e)    That the subject of any claim is not an invention within the meaning of this Act, or is not patentable under this Act;

(f)    Insufficient disclosure of the invention or the method by which it is to be performed;

(g)   That in the case of a patent granted on convention application, the application for patent was not made within twelve months from the date of the first application for protection for the invention made in a convention country or in India;

(h)   That the complete specification does not disclose or wrongly mentions the source and geographical origin of biological material used for the invention; and

(i)     That the invention was anticipated having regard to the knowledge, oral or otherwise, available within any local or indigenous community in India or elsewhere.


Term of Patent

The term of every patent in India is twenty years from the date of filing the patent application, irrespective of whether it is filed with provisional or complete specification. However, in case of applications filed under the Patent Cooperative Treaty (PCT), the term of twenty years begins from the priority date.


Payment of Renewal Fee

It is important to note that a patentee has to renew the patent every year by paying the renewal fee, which can be paid every year or in lump sum.


Restoration of Patent

A request for restoration of patent can be filed within eighteen months from the date of cessation of patent along with the prescribed fee. After the receipt of the request, the matter is notified in the official journal for further processing of the request.


Patent of Biological Material

If the invention uses a biological material which is new, it is essential to deposit the same in the International Depository Authority ("IDA") prior to the filing of the application in India in order to supplement the description. If such biological materials are already known, in such a case it is not essential to deposit the same. The IDA in India located at Chandigarh is known as Institute of Microbial Technology (IMTECH).


What are the Rights granted by Patent?

If the grant of the patent is for a product, then the patentee has a right to prevent others from making, using, offering for sale, selling or importing the patented product in India. If the patent is for a process, then the patentee has the right to prevent others from using the process, using the product directly obtained by the process, offering for sale, selling or importing the product in India directly obtained by the process.


Before filing an application for grant of patent in India, it is important to note "What is not Patentable in India?" Following i.e. an invention which is (a) frivolous,  (b) obvious, (c) contrary to well established natural laws, (d) contrary to law, (e) morality, (f) injurious to public health, (g) a mere discovery of a scientific principle, (h) the formulation of an abstract theory, (i) a mere discovery of any new property or new use for a known substance or process, machine or apparatus, (j) a substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof or a process for producing such substance, (k) a mere arrangement or rearrangement or duplication of known devices, (l) a method of agriculture or horticulture and (m) inventions relating to atomic energy, are not patentable in India.


Maintainability of Secrecy by the Indian Patent Office (IPO)

All patent applications are kept secret up to eighteen months from the date of filing or priority date, whichever is earlier, and thereafter they are published in the Official Journal of the Patent Office published every week. After such publication of the patent application, public can inspect the documents and may take the photocopy thereof on the payment of the prescribed fee.


Compulsory Licensing

One of the most important aspects of Indian Patents Act, 1970, is compulsory licensing of the patent subject to the fulfillment of certain conditions.  At any time after the expiration of three years from the date of the sealing of a patent, any person interested may make an application to the Controller of Patents for grant of compulsory license of the patent, subject to the fulfillment of following conditions, i.e.

  • the reasonable requirements of the public with respect to the patented invention have not been satisfied; or
  • that the patented invention is not available to the public at a reasonable price; or
  • that the patented invention is not worked in the territory of India.


It is further important to note that an application for compulsory licensing may be made by any person notwithstanding that he is already the holder of a license under the patent.


For the purpose of compulsory licensing, no person can be stopped from alleging that the reasonable requirements of the public with respect to the patented invention are not satisfied or that the patented invention is not available to the public at a reasonable price by reason of any admission made by him, whether in such a licence or by reason of his having accepted such a licence.


The Controller, if satisfied that the reasonable requirements of the public with respect to the patented invention have not been satisfied or that the patented invention is not available to the public at a reasonable price, may order the patentee to grant a licence upon such terms as he may deem fit. However, before the grant of a compulsory license, the Controller of Patents shall take into account following factors:

  • The nature of invention;
  • The time elapsed, since the sealing of the  patent;
  • The measures already taken by the patentee or the licensee to make full use of the invention;
  • The ability of the applicant to work the invention to the public advantage;
  • The capacity of the applicant to undertake the risk in providing capital and working the invention, if the application for compulsory license is granted;
  • As to the fact whether the applicant has made efforts to obtain a license from the patentee on reasonable terms and conditions;
  • National emergency or other circumstances of extreme urgency;
  • Public non commercial use;
  • Establishment of a ground of anti competitive practices adopted by the patentee.

The grant of compulsory license cannot be claimed as a matter of right, as the same is subject to the fulfilment of above conditions and discretion of the Controller of Patents. Further judicial recourse is available against any arbitrary or illegal order of the Controller of Patents for grant of compulsory license.


Infringement of Patent

Patent infringement proceedings can only be initiated after grant of patent in India but may include a claim retrospectively from the date of publication of the application for grant of the patent. Infringement of a patent consists of the unauthorized making, importing, using, offering for sale or selling any patented invention within the India. Under the (Indian) Patents Act, 1970 only a civil action can be initiated in a Court of Law. Further, a suit for infringement can be defended on various grounds including the grounds on which a patent cannot be granted in India and based on such defence, revocation of Patent can also be claimed.



Vijay Pal Dalmia
New Delhi, Mumbai, Gurgaon, Bengaluru
IPR & IT Laws Practice Division
Phone: +91 11 42492532 (Direct)
Mobile: +91 9810081079

DISCLAIMER: This article is for informational and educational purposes only.While every care has been taken in writing this article to ensure its accuracy at the time of publication, the Author or  Vaish Associates Advocates assumes no responsibility for any errors which despite all precautions, may be found therein. This article neither constitutes a contract nor will form the basis of a contract. The material contained in this document does not constitute/substitute professional advice that maybe required before acting on any matter. No claim is made by virtue of the use of any trademark or images used in this article. All trademarks and images belong to their respective owners.

*COPYRIGHT NOTICE:  © 2014, India. All rights reserved with Vaish Associates Advocates, 1st & 11th Floors, Mohan Dev Building, 13, Tolstoy Marg, New Delhi-110001, India.

Submitted by Ritambhara Agrawal on Sat, 10/05/2013 - 9:56am.

The new Companies Bill proposes seminal changes in the manner in which Companies are governed and regulated in India & brings easy and efficient way of doing business in India, better governance, improves levels of transparency while enhancing accountability, inculcating self compliance and making Corporate socially responsible. The bill could potentially trigger a spate of domestic and cross-border mergers and acquisitions, strategic alliances and make Indian firms more attractive to PE investors. We are briefly discussing the changes impacting Mergers & Acquisitions.

  • Global integration and cross-border mergers are now permitted by new Bill thereby allowing merger of an Indian company with a foreign company. Earlier, only foreign companies were allowed to merge with Indian companies. Exits will be easier, because the new law allows the consideration on a merger to be settled in the form of cash or depository receipts. 
  • Allows fast & quick merger between two or more “small companies”, “holding company and its wholly owned subsidiary” or such other class(es) of companies as may be prescribed by the central government, without the approval of the high court or National Company Law Tribunal (NCLT).
  • The Companies Bill specifically provides for provisions relating to a merger of a listed company with an unlisted company and gives power to the National Company law Tribunal to order exit of the dissenting shareholders (made easy) of the transferor listed company in case they opt out of the unlisted transferee company with payment of the value of shares held by them and other benefits in accordance with a pre-determined price formula or after a valuation has been made.
  • For good governance and investor protection, the new Bill advocates price determination by a registered valuer for any preferential allotment of equity. Such a measure is in sync with the principals set out under the exchange laws and the tax framework. This should prevent the dilution of existing investors' interests at an unfair price.
  • Prohibits the retaining of any treasury stock, arising on consolidation, pursuant to a merger and requires all such shares to be cancelled or extinguished, thereby restricting trust structure used by listed entities to retain control or future monitization.
  • Pooling of assets under a single company in any jurisdiction is achievable now by access to large capital without need to go public as number of member restriction under Private limited company increased to 200 from 50.
  • The bill provides that no civil court shall have jurisdiction over any suit or proceeding in respect of any matter that the NCLT is empowered to determine under the bill. And NCLT along with National Company Law Appellate Tribunal (NCLAT), will replace several existing forums, including the Company Law Board, the BIFR and the Appellate Authority for Industrial and Financial reconstruction.

By Ritambhara Agrawal, Managing Partner, Intelligere;

Submitted by Ritambhara Agrawal on Fri, 08/02/2013 - 12:37pm.

With the liberalization of FDI policy 2013, most restrictions on foreign investment have been removed and procedures have been simplified. Today, there are very few industries where foreign investment is prohibited. Moreover, investment ceilings, which are applicable in certain cases, are gradually being removed or phased out. Government of India on a yearly basis formulates a consolidated FDI Policy, with the intent and objective to promote FDI through a policy framework, which is transparent, predictable, simple and reduces regulatory burden.

A non-resident entity can invest in India, subject to the FDI Policy, except in those sectors/activities, which are prohibited. However, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. An entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other then defence, space and atomic energy and sector prohibited for foreign investment.

FDI is allowed either under the automatic route without prior approval of the Government or the RBI in all the sectors as specified in the FDI Policy. FDI in sectors not covered under the automatic route requires prior approval of the Government, which is considered by the Foreign Investment Promotion Board (FIPB).

Depending upon its business needs, a foreign company can choose between setting up a liaison office, a branch office or a project office or incorporating an Indian company, either its wholly owned subsidiary or joint venture with an Indian/overseas partner.


A foreign company can start its business operations in India by incorporating a company under the Companies Act, 1956 through either a Joint Venture (JV) or forming a Wholly Owned Subsidiary (WOS). Foreign equity in such Indian companies can be up to 100%, subject to sectoral equity caps under the FDI policy.

1.    Joint Venture with an Indian partner

Foreign companies can set up their operations in India by entering into strategic partnership with Indian entities and forming a Joint Venture (JV). JV can provide many advantages to the foreign investor, like access to established distribution/marketing set up of the Indian partner and established contacts of Indian partners to smoothly run the operations in India.

2.    Wholly Owned Subsidiaries

Foreign companies can also set up their operations in India by forming a Wholly Owned Subsidiary in sectors, where 100% foreign direct investment is permitted under the FDI policy. An application has to be filed with the registrar of Companies (ROC) for registration and incorporation of the Company in India. Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations, as applicable to other domestic Indian companies. Such a subsidiary is treated as an Indian resident and an Indian company for all Indian regulations (including Income Tax, Foreign Exchange Management Act, 1999 and the Companies Act), despite being 100% foreign owned. For detailed procedure and guidelines for incorporation of company in India, read here.

    Foreign companies can set up their operations in India through Liaison Office, Project Office or a Branch Office.


Foreign companies are allowed to open liaison offices in India, subject to obtaining specific approval from the RBI, to undertake liaison activities on their behalf. Liaison office acts as a channel of communication between the principal places of business and entities in India.

Scope of Activities

Under the current exchange control regulations, a liaison office is permitted to: 

•     Represent the parent/group companies in India; 
•     Promote exports and imports from/to India; 
•     Promote technical /financial collaborations between parent/group companies and companies in India; 
•     Act as a communication channel between parent/group companies and companies in India. 
Typically, a liaison office is not permitted to: 

•    Earn any income; 
•    Undertake any industrial, trading or commercial activity; 
•    Enter into any agreement on behalf of the head office; 
•    Borrow or lend money for any commercial activity; 
•    Charge any fee or commission or otherwise earn any income, in respect of liaison activities carried on in India. 

    For detailed procedure and guidelines for opening the liaison office in India, read here.


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

•    Undertake the export and import of goods; 
•    Render professional or consultancy services; 
•    Carry out research work in which the parent company is engaged; 
•    Promote technical and financial collaborations between Indian companies and parent/overseas group companies; 
•    Represent the parent company in India and act as buying and selling agents; 
•    Render services in information technology and development of software in India; 
•    Render technical support to the products supplied by the parent/group companies; 
•    Operate as a foreign airline/shipping company.     

    Apart from obtaining RBI approval for establishing a liaison office, project     office/branch office, the foreign company is also required to register with the     Registrar of Companies ("ROC"). An application has to be filed in the prescribed     form within 30 days of the establishment of the office in India with ROC, pursuant     to which ROC would issue a certificate of establishment of place of business in     India to the foreign company.


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

- By Ritambhara Agrawal, Managing Partner, Intelligere;

Submitted by on Fri, 03/22/2013 - 9:01pm.


Small businesses looking to increase sales and profit, reduce dependence on the domestic market and stabilize seasonal fluctuations should consider exporting.

Nearly 96 percent of consumers live outside the U.S.Two-thirds of the world’s purchasing power is in foreign countries.Go where the customers are.

There is significant opportunity for small businesses to profit through exporting.

Click here to register with and learn more about exporting.

Submitted by Biplab Saha on Mon, 08/01/2011 - 9:45am.

This article is of use to companies that plan to offshore work and also to offshore service providers (vendors) who can use the observations to improve their engagement with prospective clients.


Offshore outsourcing has transformed the way U.S. companies do business, and McKinsey predicts global offshore outsourcing spend to hit $110bn by 2010. The attraction to offshore outsourcing is primarily the cost savings that happen due to it. However, many companies fail to recognize that there are additional soft costs that need to be incurred over and above the direct contract cost of the offshore outsourcing engagement and these costs can undermine the success of the engagement, if not factored in at the start of the process.

These soft costs include time involved in vendor selection, process transition, training and monitoring operations in offshore locations, and in overcoming the challenges of working in a foreign country including communication challenges, low-skilled workforce, unfamiliar laws and regulations, and infrastructure constraints. These factors directly affect the outcome of the offshoring process, and along with the direct contract cost constitute what can be termed as TCO – Total Cost of Offshoring. Investment in these needs to be made upfront, even before the actual work gets underway.

This article analyzes the soft costs mentioned above and recommends that companies budget for these in advance to make their offshore outsourcing endeavor truly successful. It also tries to bring up some reasons for failure or mid-way abandonment of offshoring engagements and suggests ways to overcome them.

Cost of Vendor Evaluation & Selection
The first step in an offshoring endeavor is to determine which functions are best suited for offshoring. While some tasks can be performed efficiently even when done remotely, other tasks may necessarily need a face-to-face interaction. In their article “The Rise of Offshoring – It’s not wine for cloth anymore” Gene Grossman & Esteban Rossi-Hansberg of the Department Economics, Princeton University, share the paradigms set forth by various scholars to classify tasks on these lines. For example Edward Learner & Michael Storper distinguish between tasks that require codifiable information and those that require tacit information. The former can be done remotely because they can be expressed as a set of symbols, be they mathematical, linguistic or visual. The latter non-codifiable tasks require that both parties have a broad common background to “know” each other well enough; the doer needs to interact face-to-face with the receiver of the service to perform such tasks.

After determining whether the function in question is amenable to be offshored, the next step is to identify vendors that can match your needs by defining the relevant skills and experience needed for the function being offshored. After this a first cut analysis of the shortlisted vendors will need to be made. All these steps can cost anywhere from 0.2% to 2% of the Direct Contract Cost (DCC) because of the additional time incurred on the following activities:

  • Evaluation of the in-house functions to determine if they can be offshored
  • Documenting the specifications, skill-sets required and the scope of work in the RFP
  • Identifying potential vendors, sending out the RFP, and managing the responses
  • Bids evaluation and negotiation
  • Due diligence of the vendor capability
  • Travel expenses to the overseas location

The vendor evaluation and selection process may need an in-house resource working full time on this, in addition to other resources chipping in with time & domain expertise. Travel is recommended to get the actual feel of the vendor’s staff capabilities, rather than evaluating just the paper bids or basing it on your interactions with a limited set of people on the vendor side (usually the sales team and the operations head), and is an essential part of the due diligence process.

Cost of Transition & Training
The process of transition & training can take between 3 months to a year before work can be completely handed over to the offshore team. Typically this is the most expensive stage in the offshoring process and can cost an additional 2% to 3% of the DCC.

The costs here will typically be those incurred due to travel & temporary relocation of the vendor’s project team to the client’s office(s) in the home country, so that they can learn the intricacy of the functions from the in-house staff that has been doing them for years.
Also there will be a cost of reduced productivity of the in-house staff because of their time spent in training the vendor’s team. To offset the costs at this stage it can be negotiated that the cost of travel and relocation be borne completely by the vendor.

Cost due to lower productivity of the offshore workers
Once the project or function is completely offshored, you will realize that the offshore team lags behind due to a variety of reasons that range from work culture, lack of good understanding of the business of the company, bad ergonomics at the place of work, lesser work experience (staff of most offshore companies are typically graduates or post-graduates with 5-7 years experience as opposed to an average of 10-15 years in the US), long commute times to the place of work, underdeveloped civic amenities, unstable political environment, and many more. Therefore though you may paying say $10 per hour for an offshore worker as against say $40 per hour for an in-house employee, you can end up incurring twice the cost due to his reduced productivity. Hank Zupnik, CIO of GE Real Estate, who has overseen numerous projects outsourced offshore for over a decade, observes that because of these differences you cannot assume that one offshore worker can simply replace all the work done by one American worker.

Another reason for low productivity is the high turn over at offshore vendors. With attrition rate as high as 30% in some industries, companies spend time re-training everytime critical resources leave the vendor to join another offshoring outfit.
Thus it needs to be understood that lower productivity of offshore workers can offset the assumed savings by a factor of 3% to 10% of the Direct Contract Cost.

Cost of lay-offs & reduced output of in-house staff
Companies should also be ready to factor in productivity dips of the in-house staff after the offshoring transition has been completed. This is because of the low morale of the employees due to their colleagues suddenly losing their job, and extra workload on the existing in-house staff. The severance package of the laid-off employees also needs to be factored in the cost of the offshoring endeavor. Also some ex-employees may also initiate legal action against the company, thereby adding a legal expense to the cost of lay-offs.

Communicating with your current staff on the impact of outsourcing and planning ahead for redundancies that are necessitated after the outsourcing transition can avoid some of these costs.

Cost of managing the ongoing project
An offshore project needs to be managed differently than a in-house processes, and you may need to invest the time to develop a project plan; something that may not have been required all this while when it was an in-house processes. Once fully offshored, one of the key people you will interface with are the first level leaders of the team offshore; they may be called by various titles – team lead, tech lead or project manager. These people tend to be more technical or operational and less “project management” oriented – you cannot assume that they know “project management” the way you may envision it just because of their titles. Someone from your in-house staff, say the functional head or the department head will need to take on the additional responsibility of resource planning & allocation and management of the offshore team.

Over and above the direct project management cost, there’s a significant amount of time taken up in handling invoicing & auditing of the offshore work – e.g. ensuring that cost centers are charged correctly and manhours are appropriately recorded without inflating the hours. It is also observed that a 100% offshore model (all resources working from offshore) is very challenging for both the service provider and the client. Interactions and exchange opportunities are missing which often leads to functional, technical, and cultural misunderstandings. Frequent exchanges or a policy of maintaining 10-20% of the service providers team on your site is recommended.

Finally it will be realized that though vendors use certain standard baselines and assumptions when costing the project, there is a “scope creep” in most projects and the actual work varies from estimates initially provided to them. If the cost of the project is escalates due to this, the vendor will expect the client to bear the incremental cost.
Summarizing the above, the additional cost are those on account of (a) time invested in developing the project plan; (b) putting additional in-house manegerial resource to manage the offshore project; (c) accounting & auditing of the ongoing project; (d) having 10 – 20% vendor personnel onshore; (e) cost due to change (or addition) in scope of work during the project.

Cost due to upfront investment in infrastructure
Besides the manpower cost, there is a cost of infrastructure that may need to be installed or upgraded at both ends to facilitate seamless integration of the two work sites – the customers & the offshore vendor location. For example additional networking equipment may be needed to provide data connectivity between both sites. Or additional software tools or licenses may be needed the because, now there is an additional location (the vendor’s facility) and more often than not the same tools/licenses cannot be shared across two different locations. In some cases additional data communication costs may need to be incurred where companies have had to dedicate separate “communication pipes” in order to keep the offshore and local data bases synchronized. In addition, there is the cost of voice communication, video conferencing, e-mail and chat sessions. You need to measure the increase in communication cost to attribute the incremental additions to the total cost of offshoring (TCO).

While the vendor usually agrees to take care of the cost at their end, the company may need to absorb the cost of infrastructure at their end, unless the vendor agrees to invests in that too, and amortize its cost over the period of the contract.

Dean Davison; Top 10 Risks Of Offshore Outsourcing
Fleming Parker; Key Success Factors for Offshore Outsourcing to India;
Gene M. Grossman & Esteban Rossi-Hansberg (Dept of Economics, Princeton University);
The Rise Of Offshoring: It’s Not Wine For Cloth Anymore;
Dr. Joe Greco; The Hidden Costs in Offshore Outsourcing – a Case Study;
M.M.Sathyanarayan; How to Determine True Business Value of Offshore Outsourcing;

Stephanie Overby; The Hidden Costs of Offshore Outsourcing; Sep. 1, 2003 Issue of CIO Magazine

Submitted by Biplab Saha on Sun, 04/17/2011 - 1:09pm.

Article Summary:
Many offshore projects get off to a flying start, but fail to succeed over the long term or worse still are abandoned mid-way, even though a considerable time & effort is spent by companies before and during the course of the offshore engagement. This article looks at the impediments to success of an offshore outsourcing endeavor with suggestions to avoid or overcome them.

Many well intentioned offshore projects get off to a flying start, but fail to succeed over the long term or worse still are abandoned mid-way, even though a considerable time & effort is spent by companies before and during the initial stages of an offshore engagement on activities like documenting the project RFP, evaluating and shortlisting service providers, defining quality parameters, training the offshore team, and the like. This article looks at some factors that may impede the success of the offshore outsourcing endeavor with suggestions to avoid or overcome them.

Unrealistic Assumptions on Cost Savings:
You have to ensure that there are clearly defined goals and final expected outcomes from the project. Many companies that outsource work offshore, wrongly assume that labor arbitrage will yield savings on a person-to-person basis (i.e., Since a full-time equivalent employee in India cost 40% less, the savings will be in the same range!) without regard for the hidden costs and differences in operating model of the offshore vendor. In reality, most organizations save 15-25% during the first year; by the third year, cost savings often reach 35-40% as both the sides move up the learning-curve and the client modifies their internal operations to align to an offshore model.

Lack of Well-Documented In-House Processes:
Documentation is a time intensive and often neglegted activity. It is observed that most internal processes are only about 30% documented. However, before offshoring a process the documentation level should be at around 90% and should include mapping of the current process, putting down the transition strategy, evaluation for all risks of failure and a documented contingency plan. High risk or exposure might deter the company from outsourcing offshore; or it might shift the outsourcing strategy (e.g., from a single vendor to multiple vendors); or it might actually give a greater thrust to offshoring if the vendor(s) seem better equipped to reduce risks while keeping the costs low. Though the results of risk analysis vary between companies, documenting the risks & preparing the contingency plan are important.

Poor Expectation Management:
Outsourcing engagements have a supplier (vendor) and a recipient (client), and both will have different expectations from the relationship. That the service is delivered from offshore complicates it further, and expectations mismatch become problematic.
An expectation gap may arise when you are in doubt about the vendor’s capability and hesitant to offshore anything beyond a specific task, while the service provider expects greater chunk of “higher value” work and might feel unchallenged by dealing only with standard, unchallenging tasks. If this expectation gap continues, the vendor may over time, accord low importance to your project or may even want to get out of the relationship as soon as a higher value-add work comes their way.

Similarly, you may expect the vendor employees to come up to a level of understanding that matches that of your in-house staff, but they may not be able to think or perform beyond the task that has been outsourced, and may ask questions that may seem ‘silly’, resulting in frustration at your end and possibly an early termination of the contract.

You should chart out a growth plan for the outsourcing relationship so that the service provider have their eyes set on the next target in terms of new processes coming their way. Knowing this growth path, the vendor and their employees will try to gain deeper insights into your business, thus resulting in superior results during the initial ‘unchallenging’ stages of offshoring too, and a stronger sense of loyalty to their relationship with you.

Also ensuring continuous knowledge transfer to the vendor’s employees working on your project, make feel as a part of your extended organization and perform better.

Failure in Bridging the Cultural Gap:
Most of the offshore workers will not have an exposure to the Western way of life and to the Western work culture. Therefore besides the training related directly to work, your in-house staff may need to spend time in acquainting the vendor’s employees with the cultural nuances of the organization and that of the your company’s home base, be it Europe or US. For example although English is an official language in India, pronunciation and accents can vary tremendously. Though many service providers put their employees through accent & language training and have cultural education programs, inherent differences due to culture, religion, social activities, way of dressing, and even the way a junior interacts with a senior colleague will not be easy to overcome. Something that’s common sense to the Western worker may be a completely foreign concept to an overseas worker.

Similarly your senior management & your in-house staff directly involved in the transition process need to acquaint themselves with the culture of the country where the vendor is located to communicate effectively with them and be able to understand the soft aspects of doing business with them. This avoids issues that can arise due to misunderstanding the ‘language’ at either side. Mutual visits to the other country are very helpful for effective working relationships as they help in drastic improvement of each others understanding and in the quality of work.
Some companies may try to save the travel cost by communicating over the phone or using video conferences, but in the long run this proves to be more expensive because of the delay related to transitioning the process overseas and the longer time taken to get the expected quality or performance from the offshore team.

Disaffection of in-house staff:
Extensive knowledge transfer and training are required prior to and during the transition of work to the vendor, and this needs to be consistently supported by the in-house staff. However layoffs can cause major morale problems among the in-house “survivors,” leading to disaffection and work slowdowns. Internal people may refuse to transition to the offshore model because they have a certain comfort level, or they don’t want their co-worker to lose his job. Some of your staff may also start proclaiming, that offshore outsourcing is not saving money to the company after all and that it was a bad idea, which futher lowers morale of other employees. Sometimes your in-house project management team may need to work into the night and arrive at work in the early morning to manage the offshore team, and their perception about who is benefiting and who is hurting becomes personal.

You have to set aside management and employee time before, during and after the offshore transition to talk to your employees about the whole proposition of offshoring and how it will help the company to become more competitive in the long term. A consensus needs to be built among all employees favoring the company’s offshoring efforts. Without this kind of a mandate, offshore endeavors are doomed.

Backlash from customers as a result of poor quality control:
The cost savings resulting from offshoring is the primary motivation for businesses to engage in the same. It is often realized late in the process that quality is an important factor for a successful offshore engagement. Poor quality of service delivery will have a negative impact on the performance and the reputation of the company may suffer in the eyes of their customers. A lack of adherence to the quality norms by the vendor and lack of monitoring of their output can result in considerable rework, and associated follow-up costs.

KPIs (Key Performance Indicators) of the offshore engagement should be defined in the beginning itself, so that the performance can be measured objectively during the tenure project and mid-course corrections are done wherever needed. It is also advisable to institutionalize regular satisfaction surveys that measure the “perception” of the engagement across several stakeholder levels.

Offshore outsourcing is a phenomenon that’s here to stay. Companies that are adopting this are learning operate in a global business environment, and will benefit in the long run as they gain insights into other countries and their way of conducting business. However a failed or abandoned offshore outsourcing venture may set back the company by both the money spent and the willingness to take up such opportunities in the future. It is therefore important to study and analyze all factors that will affect the offshore endeavor and ensure that steps are taken to overcome the pitfalls well ahead of the offshore transition.

Fleming Parker; Key Success Factors for Offshore Outsourcing to India;
Gene M. Grossman & Esteban Rossi-Hansberg (Dept of Economics, Princeton University);
The Rise Of Offshoring: It’s Not Wine For Cloth Anymore;
Dr. Joe Greco; The Hidden Costs in Offshore Outsourcing – a Case Study;
M.M.Sathyanarayan; How to Determine True Business Value of Offshore Outsourcing;
Stephanie Overby; The Hidden Costs of Offshore Outsourcing; Sep. 1, 2003 Issue of CIO Magazine;

Submitted by Navin Pathak on Sat, 03/26/2011 - 7:37pm.

(Updated on March 4, 2018)

India is going through exciting times. Developing into an open-market economy, India is certainly on high growth trajectory, which averaged nearly 7% per year from 1997 to 2016. The Projected GDP growth of 7.2% in 2017-2018 will make India the fastest growing economy in the world. Further, India's economy, which crossed the trillion dollar mark in 2007 and expected to become a $5 Trillion economy by 2025, is currently in 3rd position (PPP) after US and China.

The prospects of India’s long term economic growth, which is very positive, can easily be assessed from the following factors:

  1. The numbers are on your side:  564 million below the age of 20, 600 million growing middle-class, saving rates have tripled in last 12 years, etc.
  2. Growth Mindset of Indians:  Adaptability, competitive, entrepreneurial, believes in learning, earning and spending.

Now you require ‘opportunities’ and ‘political will’ for things to happen.

India is certainly a ‘Land of Opportunities’. Why? Because 1) there are tremendous challenges in India (mainly in areas such as transport and agricultural infrastructure, medical, power generation & distribution, education, healthcare) and solving these challenges means business & economic growth, 2) Availability of skilled manpower, 3) Geographical proximity to markets in South East Asia & Middle East, 4) English is well understood and spoken in India.

And, finally, the ‘political will’ that is necessary to create success is boldly shown by the current Indian Government (GoI). Under the leadership of Prime Minister Mr. Narendra Modi, GoI is implementing initiatives that not only will facilitate investments into India but will also make India a better and easier place to do business in. Some of the initiatives that the current government has started are Make in India, Start-up India, Digital India, Skill India and Smart Cities.

So far only Multi-National Companies (MNCs) with their vast resources, know-how and the right connections have been the major beneficiaries of this phenomenal growth in India. Small and Medium Enterprises (SMEs) and Entrepreneurs are just becoming aware of the growth story of India.

A simple analysis, taking into account the increasing population (See side box), growing consumption and the shrinking agricultural land, shows that there is a very lucrative market for US companies with products or technologies in the following areas:

  • Food & Beverages: food processing, food packaging, food warehouse and transport, health drinks, etc. 
  • Home based: home decor products, kitchenware essentials, bed and bath, etc. 
  • Healthcare: diagnostics and testing, medical equipment, health supplements, clean air and water products, etc.
  • Education: medical/nursing, 'train the teacher' programs, automotive mechanics, medical technicians, advanced courses in the upcoming fields of genetics and nanotechnologies.
  • Consultancy Services: engineering, business development, product development, security analysis, etc. 
  • Infrastructure: waste management, solar and wind technologies, temperature controlled warehouses, air and noise pollution control technologies, towing trucks, and automated parking lot equipment.

Similar business prospects abound in other sectors such as home land security, media & entertainment, hotel/motel, financial investment services, etc.

One of the business formats that is rapidly gaining acceptance is "Franchising". While legal infrastructure and ecosystem are in place in India, one must do a thorough research, and due diligence of the potential Franchisee and create binding agreements covering all important aspects of the Franchising before making any investments. One must also understand business norms of India and seek professional help in navigating the paper trail, IP protection, and Tax implications etc. before undertaking partnership agreements with the Franchisee. Top sectors with franchising opportunities are Education and Healthcare due to a huge mismatch between supply and demand now and in the coming years. Another popular model is Public Private Partnership (PPP) with the Government of India through a 'tender' process. 

For Urban Development, for example, Government of India has initiated a program called ‘Smart Cities Mission’ in 2015. As of Jun 2017, 90 cities have been selected for upgrade as part of this mission. US $15 billion has been approved by the Indian Government for the development of the selected cities. Details about this mission are available here  

All of the above present a historic opportunity for the SMEs and Entrepreneurs in the US to expand beyond borders to India. US companies with the right know-how are most preferred by Indian companies mainly for the reason that Indians have a very favorable view of the US according to a Global Attitudes Survey. Indian Government officials make regular visits to the US to meet with the industry experts and to promote business and trade opportunities.

I am so confident that with the efforts that not only Indian Government, Indian business conglomerates and entrepreneurs are putting towards India's growth but also the investments that foreign MNCs like Apple, Microsoft, Samsung, etc. are making in India will entice more international businesses mainly SMEs to do business with/in India.