Business Articles

Export of Services from India - A Scheme (SEIS) under Foreign Trade Policy of India

Submitted by CA Shashi Mohan on Fri, 02/22/2019 - 9:23pm.

Introduction
Under the latest Foreign Trade Policy (FTP) 2015-2020 a new scheme called Service Exports from India Scheme (SEIS) is introduced to encourage export of services from India.
An incentive of (in the range of 3 to 5%) of the Net Foreign Earning is granted to eligible service providers. Such incentive under the scheme is given in the form of Duty Credit Scrip, which is freely transferable. The scrip so rewarded under this scheme shall be valid for a period of 18 months from the date of its issue.

Eligibility
The SEIS scheme can be availed by all type of Service Providers located in India (i.e. Companies, Partnership, Proprietorship etc.) in India which are exporting services in the form of cross border trade and Consumption abroad. Indian Subsidiaries of Foreign Companies will also be eligible.

Such Service providers need to have Import Export Code (IEC) and must take a membership at Service Export Promotion Council (SEPC). The companies should have minimum Net Free Foreign Exchange Earnings of USD 10,000 (Individual & Sole Proprietorship Firms), USD 15,000 (Others e.g. Companies, LLP) in preceding financial year. SEIS is also available for business units located at different Special Economic Zones (SEZ).

Timeline
Application to claim the benefit must be filed before 12 months from the end of relevant financial year of claim period. The SEIS scheme will remain effective until 31st of March, 2020.

About us
We are a boutique consulting firm, focusing on International Businesses in India. In order to avail maximum benefit under this scheme, Excelor India Consulting undertakes end to end activates:

Assess the eligibility and also the exact category to avail maximum benefit
Review of available information, documents and suggest
Assist in completing the documentation, prepare the application, file online
Follow up with Department to expedite the process of issuance of scrip.
Connecting with buyers of the Scrip, if the same cannot be utilized by the client.

Should you require any further information or any clarification etc, please write to Shashi Mohan at connect@exceorindia.com or call us at +91 9818 700482

Keyphrases: Doing business in India, Export of Services from India,

Union Budget_India_ 2019-20: Highlights

Submitted by CA Shashi Mohan on Fri, 02/01/2019 - 1:54pm.

General

Fiscal deficit targeted @ 3.4 % in 2019-20
Rs. 60,000 crore allocated for MNREGA
ESIC cover limit increased to Rs. 21,000
Mega Pension Scheme for unorganised labour, Rs. 3,000 p.m. after age of 60 Yrs.
Single window clearance for filmmakers
National Centre for ‘AI’ in 9 priority areas and a National Portal

Infrastructure

1 lakh digital villages in next 5 years
Capex for the Railways increased to Rs. 1.59 Lakh Cr.

Agriculture

Rs. 6,000 per head assured annual income support for farmers with <2 hectares of land
2% interest subvention for farmers affected by natural calamities, extra 3% on timely repayment
2% interest subvention for animal husbandry and fisheries through Kisaan Credit Cards

Health

22nd AIIMS in Haryana
Rs. 2 Cr. more LPG connections to rural households under Ujjwala Yojana
Rs. 4,227 crore additional funds for ICDS

Startups

25% of sourcing for government projects from SMEs, of which 3% from women entrepreneurs
GST registered MSMEs to get 2% interest subvention on Rs. 1 crore loan

Direct Tax

Processing of Income Tax returns within 24 hours, to be implemented within two years
Full Rebate for income up to Rs. 5,00,000 after all deductions
Standard Deduction increased to Rs. 50,000 for salaried individuals
No TDS on Bank interest & Post office savings up to Rs. 40,000
TDS threshold for home rent increased from Rs. 1.8 Lakh to Rs. 2.4 Lakh
Capital Gain tax exemption u/s 54 up to Rs. 2 crore available on 2 houses
Tax exemption on notional rent of 2 Self Occupied houses
Gratuity limit extended to Rs. 30 lakhs

Indirect Tax

Indian Customs to fully digitize Exim transactions and leverage RFID for logistic
Customs duty abolished on 36 capital goods

Source: Speech of Finance Minister at Indian Parliament on Feb 01, 2019

Write us at connect@rakchamps.com for further information or any clarification

Start Retail Venture in India with Ease in FDI Norms

Submitted by CA Shashi Mohan on Sun, 11/11/2018 - 6:57am.

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

Keyphrases: doing business in india, retail business in India, Investing in India

A SNAPSHOT of What it takes for Foreign Businesses to WIN in India

Submitted by Veer Pathak on Fri, 11/09/2018 - 9:43am.

To gain successful entry to a market in diverse country like India, any business would need to address issues of consumer preferences, locatization, price sensitivity, distribution network, sales and marketing practices, branding, protecting intellectual property, etc.

The best way to pierce through these issues in India is to have an 'Indian' on your side.

Depending on your goals and strategy for India, this 'Indian' could be an agent, representative, distributor, Joint Venture partner or a Strategic Partner.

Business Commitment: Create a solid business plan (supported by appropriate Investments) for next 5 years with goal of minimum 3x growth in India. Keep in mind that company's growth should at least match the sector's growth in India.
Hire local talent with necessary skill sets that are aligned with parent company's leadership team and that has connections in Indian market.
Parent Company's leaders should visit India a couple of times in a year at least
Localize your products/offering, business model and practices according to clients' segments/needs: give-&-take on functionality vs. pricing without compromising quality; sole distributorship vs. on contract with entrepreneurs to keep the cost down and increase market penetration
Find a Reliable local partner and Create startegic business Partnerships: Carefully weigh Wholly Owned Subsidiaries against Joint-Ventures.
Create personal relationships with Government, regulatory authorities and strategic partners.
Invest in R&D to better understand and incorporate what appeals to an Indian buyer.
Business Development team should have the zeal and commitment to hunt for new business opportunities for expansion
Give local talent opportunities to grow in both professional and personal life
Brand Creation: Position your products such that it carries premium value over others. Many companies use known-figures from Indian cinema as brand-ambassadors of their products.

Keypharses: Doing Business in India, Investing in India, finding partner in India, managing team in India, managing business in India, hiring people in India

What are BARE MINIMUM prerequisite for "Setting up a Business in India"??

Submitted by CA Shashi Mohan on Sat, 09/22/2018 - 6:33am.

1. Naming India Business

Get ready with minimum 2 options of Business Name
Name must be unique and defining the ‘main objective clearly’
Get ready with ‘No Objection’ if intend to use the name of Holding Company or any Trade Mark

2. Business Objective

Clear defined in appx. two Paragraphs (10-15 lines)
General & Multi Objective covering different business areas not allowed

3. Number of Shareholders/Owners

Minimum 2 shareholders for a Private Limited
Can be Foreigners, NRIs, OCIs or a Foreign Company (ies)

4. Foreign Ownership

100% Foreign Direct Investment, allowed in majority business segments
Do check if your business required prior approval from reserve bank of India

5. Initial Share Capital

No minimum requirement
Do plan for initial capital based on initial expenses, until the business reaches at Break Even Point (BEP)

6. Physical presence of Foreign owners

Not required for incorporation purpose
Will be required once in a year to present in AGM

7. Local representative

Not required for incorporation purpose
May be a business need to appoint an appropriate person

8. Resident Director

At least 1 Resident Director is a must
Any person who have stayed in India for 180 days in previous calendar year

9. Registered Office

An address in India (not necessarily a commercial place) required
Option will be there to arrange within 30 days of incorporation

10. Business Plan

Not required from legal side
Must prepare a business plan for minimum 3-5 years span (Break Even Point)
Local Human Resource and Working Capital must be planned well

11. Sales Staff

Core team must be hired based on Business Needs
Assistance of local HR Consultants would be helpful to find out right person

12. Administration Staff

Not required in beginning
Can be hired as a connect between Sales Team and Local Consultants

13. Local Consultant

Must be hired for undertaking all Non-Core/Operational Stuff
Attention to be given toward existing experience of similar nature assignments

14. Annual Compliance

Audit Report, Financial Statement etc need to be signed in paper before filing
All compliances required be done online / Local consultants help will be immense

15. Individual Owners Abroad

Personal appearance required in Annual General Meetings (AGM)
Failure would result in an invalid AGM, resulting into heavy penalties

KYC of Directors in All Indian Companies: Mandatory Annual Compliance on/before Aug 31, 2018

Submitted by CA Shashi Mohan on Mon, 07/23/2018 - 12:27pm.

‘Ease of Doing Business’ may be on most priority list of the Indian Government, the administration bodies, however keep inventing new tools to challenge the process. Mandatory Annual KYC of all Directors of all companies may be considered as one of such tool, which needs to be complied with on or before August 31, 2018. Non-compliance will result in de-activation of DIN and consequently such Directors will not be able to function as ‘Director’.

Every private limited company in India requires minimum 2 Directors and out of them at least 1 Directors must be a Resident in India (has stayed min. of 180 days in last Calendar year). As a general practice, where ever 2 Directors are Foreign Nationals or Non- Resident in India, a 3^rd Director, who is ‘Resident in India’ needs to be appointed. In a Public Limited Company, there are minimum 3 Directors.

MCA is validating data of all Directors in all companies identify inactive directors, ghost directors, directors who are in default and also update the ‘KYC’ of all Directors, with latest documents of Identification, address, email IDs, Phone Numbers etc

As every document at MCA need to be digitally signed and uploaded electronically, hence a check need to be carried out about readiness of these documents to meet the compliance due dates and avoid late fee & other consequences.

Who needs to comply?

Every Director (Resident or Non-Resident) in an Indian Company, who has been allotted DIN on or before 31st March, 2018

What’s required to be done?

Indian Nationals Directors will required Digital Signature, which is PAN based. In earlier days DSC used to be prepared even without PAN.
Foreign Nationals/Foreign Residents Directors’ will require that their name as mentioned in Digital Signature application form, is exactly matched with his/her name in DIR-3 KYC form. Getting a PAN is not necessary however Passport is a mandatory document.
Get the corrections done in the DSC as per above requirements, well in advance.
Be ready with Unique Personal Mobile Number and Personal Email ID. Any other persons/other employees/any representatives Mobile Number or Email ID are not allowed.

Can Directors do it themselves?

DIR-3 KYC form also need to be approved by any practicing professional (Chartered Accountant, Company Secretary etc before uploading/filing
DSC of the practicing professional (Chartered Accountant, Company Secretary etc to be arranged.

What about non-compliance?

MCA21 system of Ministry of Corporate Affairs, India will mark such DINs as ‘Deactivated’
Filing of the eForm DIR-3 KYC after August 31, 2018 or in respect of such deactivated DINs shall be allowed only upon payment a specified fee of INR 5,000.

How to get DSC?

DSC is a digital form of signature which are issued by Licensed Certifying Agencies under Ministry of Information Technology, India and it’s stored in a physical USB/Dongal. There are plenty of vendors who are authorised by the Licensed Certifying Authorities to prepare DSC.
A simple form, signed by the applicant is required to be submitted along with ‘Self Attested’ address & Identification proof to the DSC vendor
DSC is prepared for a validity of 1 or 2 years and once it gets expired, it needs to be prepared again. On availability of required documents, it may take 2-4 working days to prepare a new DSC. Hence one needs to keep a track on the expiry date of DSC.
In case of Foreign Nationals/Foreign residents, Notorised/Appostiled documents of Address Proof (bank Certificate, Utility Bills) and Identity Proof (Passport, Country Identification card, Bank Certificate etc) required. In case of several countries getting the required documents Translated in English, Notorisation, Apostilation and making them available in India may take 1-3 weeks time.

Starting July 2018, a short Video Clip of the applicant also needs to be captured & uploaded as a part of process to prepare a DSC.

Source

Please click on the link below for more information

http://www.mca.gov.in/Ministry/pdf/CompaniesAppointmentQualificationRules_06072018.pdf

Glossary

KYC: Know Your Customer

DIN: Director Identification Number

DSC: Digital Signature

PAN: Permanent Account Number

MCA: Ministry of Corporate Affairs

MCA21: e-Governance initiative of MCA

About the Author

With over 15 years of experience, Shashi Mohan has been instrumental in formulating strategy for Entry India, Business Set-up and Operational Management of over 150 overseas brands from USA, Europe, GCC and South East Asian countries in India. He is a member of our ‘Expert Panel’ at Entry India. Shashi can be reached at shashi.m@excelorindia.com or +91 9818 700 482

Mandatory Corporate Compliances that Small Companies in India must Follow

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:

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.
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
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.
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’
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.
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.
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.
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).
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.
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’
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

India this Week: Indian Technology, Business & Startup Ecosystem

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

eAsy Start of Business in India

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

India this Week: What all happened in Indian Technology, Business & Startup Ecosystem

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”.

India Calling: A look at Legal & Regulatory Regime relating to Investment in India

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

Setting a Company in India - By Foreign National, NRI and OCI

Submitted by CA 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:

Indian Partnership Firm should not be engaged in agricultural, plantation, real estate, media businesses (restricted sectors)
Amount can only be invested by way of inward remittance or out of NRE, FCNR or NRO accounts maintained with authorized Banks
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:

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