EzyBiz India

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How Foreign Companies can enter the Indian Market?

In last decade or so, the Indian economy has witnessed significant growth specially in Information technology and Pharmaceutical sectors. Further, the government of India has introduced policies for stimulating growth in Indian economy like “Make in India” scheme, “Ease of Doing Businees”, Profit Linked Incentive Scheme” which has resulted in increase in FDI in India as well as resulting in more and more foreign company registration in India.

Over the years, India has become one of the most popular destinations for business setup owing to following factors:

1.      Skilled workforce

2.      Huge Consumer base with good purchasing power

3.      Relaxation in taxes

4.      Simplification of investment related procedures

5.      Cheaper labor costs

6.      Simplified procedures for Company Registration in India.

What are various routes of making investment in India?

Any foreign company/ investor can make investments in India in any of the below mentioned routes

1.      FDIs through Automatic Route

2.      FDIs through Government Approval Route

3.      FDIs through Partial Automatic and Partial Government Approval Route

What are the various options of entering Indian Market

Any foreign company intending to set up business in India have following options:

1.     Branch Office: A foreign company involved in any sort of trading and service business can open a branch office in India. For the same, prior permissions from the Reserve Bank of India is required to be taken. It is to be noted that a Branch Office is permitted to do only those activities that are undertaken by its parent holding.

Eligibility: The foreign company must have track records of good profit making in the last five immediate preceding financial years. It should have a net worth of about 100,000 USD to be eligible to open a branch office.

2.     Project Office: For the purpose of executing a project, a foreign company can open up a project office in India. It is usually established for shorter time period and is temporary until the project ends.

Eligibility: A project office can be set up in India only under the following conditions-

a.       The project secured by the foreign company must be from an Indian Company.

b.      The project should be funded by a financing agency i.e. either bilateral or multilateral.

3.      Liaison Office: It is established for the purpose of communicating and co-operating with the company’s head office. It is also called as a representative office. However, any activities related to commercial, industrial and trading are not permissible to be commenced by a Project Office.  

Eligibility: A good profit making record of the parent entity in its home country. Net worth of about 50,000 USD in a particular financial year of the entity makes it eligible to open a Liaison office in India. The permission to open it is to be taken from the Reserve Bank of India (RBI) for a period of 3 years that can be extended further if the entity fulfills the eligibility conditions.

4.      Limited Liability Partnership (LLP): Another option is to register a LLP. It is to be noted that 100% FDI under automatic route is allowed for investing in the LLP by the RBI.

Eligibility: To open an LLP in India, the following criteria are to be met:

a.       Minimum 2 partners are required who shall be individuals. Atleast one partner shall be Indian Resident and Indian citizen

b.      Any FDI in LLP shall be subject to government approval

5.      Wholly-Owned Subsidiary (WOS):  Wholly owned subsidiary is considered as one of the best possible format of business for foreign entities to enter the Indian market. RBI permits 100% FDI under automatic route. It should be registered with the competent Registrar of Companies (ROC). Also, the shares of the WOS must be held by the parent company entirely.

6.      Joint Venture (JV): A foreign entity can also commence business in India by entering into a joint venture with local businesses or individuals by forming an agreement or strategic association. It can also form a JV by investing directly in a company and subscribing its shares.

Source: https://business-setup-in-india.blogspot.com/2021/11/how-foreign-companies-can-enter-indian.html

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Annual Information Statement (AIS)

With the objective of providing complete detailed information about the financial transactions done by the taxpayer or assessee during a particular financial year, a new statement has been rolled out by the Income Tax Department on 1st November, 2021. The new statement is called Annual Information Statement or AIS.

This would become a very important source of information gathering for Income tax department and would be used to identify the assessee who does not disclose income or does not file its Income Tax Return inspite of having taxable income.

Form 26AS would continue to exists till the time AIS is fully operational and validated.

Therefore, at the time of Income Tax Return filing, it would be very essential to reconcile the figures of Income Tax Return with AIS; otherwise any difference would result in Income Tax notice from the Income Tax department and would lead to commencement of  Income Tax Assessment.

What is Annual Information Statement or AIS?

Previously, Form 26AS was used as a statement by the Income Tax Department. Likewise, AIS is a much more detailed version of the statement wherein followingdetails are required to be included which were earlier not included-

a.       Dividends received

b.      Interests on Savings Account

c.       Income or salary received

d.      Mutual Fund Transactions in a financial year

e.       Tax Deducted at Source (TDS)

f.       Tax Collected at Source (TCS)

g.       Transactions related to Credits Cards, Insurance, Purchase of Property and Stocks and many more items.

It will be really helpful for the taxpayers also since they would be able to incorporate the transactions which they have forgotten to include in their Income Tax Return.

How to assess the Annual Information Statement :

To access the AIS, the taxpayer is required to follow the step by step guide given as under-

1.      One needs to log in to their registered account on the income tax portal.

2.      Go to the Services Tab on the homepage.

3.      The AIS is the last option on the said tab. Click on the same. The AIS comes with a drop down menu with the following two options available to choose from-

a.       Left side –It consists of the Tax Information Summary (TIS)

b.      Right side – It consists of the Annual Information Statement (AIS).

Both TIS and AIS are the same but the TIS, is a summarized statement whereas the AIS is a detailed statement. Taxpayers can download both by clicking on them for any future references.

4.      When the taxpayer downloads the TIS or AIS, they get a PDF version of them. However, a JSON option is also provided on the taxation website. The PDF version is password protected for which the password is usually the PAN Number (in Capital letters) plus the Date of Birth of the taxpayer.

Need for Annual Information Statements:

The need for introducing the new AIS arose due to the lack of information provided by the taxpayers while filing the Income Tax Return regarding some transactions like mutual funds, dividends, interest earned and property purchase etc.

With this new facility, the taxpayers are obligated to provide any such details to the Income tax Department.

This will facilitate the Income tax authorities in having more detailed information about the tax payers and can keep an eye on defaulter or tax evader. Further, it will facilitate in sending Income Tax notice to defaulters and commencement of Income tax Assessment against them.

source: https://ezybizindiain.wordpress.com/2021/11/19/annual-information-statement-ais/

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Private Limited Company Registration in India- An Overview

Owning a business is a dream of many for achieving financial freedom and be their own boss. In the recent times, India has become one of the most preferred countries for starting or setting up a business across the globe. The business policies, Foreign Direct Investment (FDI) policies, startup culture and ease of doing business here, are helping people to incorporate their own entities. 

More and more entrepreneurs are quitting their lucrative 9 to 5 jobs and opting for company incorporation in India. 

There are lots of options for starting business in India like partnership firm, proprietorship, limited companies etc. However, one of the most popular forms of starting business in India is the Private Limited Company Registration.

Private limited company registration provides following benefits or advantages:

1.      It is considered as a separate legal entity compared to its shareholders.

2.      Shareholders have a limited liability

3.      One can easily register under the Startup India Scheme with this business model.

4.      It is easy to add and even remove the shareholders and directors.

5.      A Private Limited Company enjoys a brand reputation compared to other business models such as Partnership or proprietorship firms.

6.      It enjoys a lower taxation benefits compared to partnership firm or Limited Liability Partnership (LLP).

7.      To raise money from Angel Investors, Private Equity Funds or VC funds etc., a private company is most suitable. 

Requirements of Private Limited Company Registration in India: 

To incorporate a private limited company in India, the following essentials are must- 

1.      Minimum of Two directors are required.

2.      It can also have foreign directors as well.

3.      Minimum of two shareholders be there in the company. They can be either an individual or a company.

4.      A registered office address in the local area serving as place of business is required.

5.      Paid-up capital 

Process of Private Limited Company Registration in India 

Following steps are required to be completed for private limited company registration, namely, 

1.      Pre-Incorporation Steps: It includes- 

a.       Application for obtaining the Digital Signature Certificate (DSC) for all the directors.

b.      Application for Name approval of the company.

c.       Application for Director Identification Number (DIN) for all the directors.

d.      Application for PAN (Permanent Account Number) and TAN (Tax Account Number).

e.       Application for registration under the Provident Fund (PF) and Employee’s State Insurance (ESI).

f.       Preparing the company’s Memorandum of Association (MoA) and Articles of Association (AoA).

g.       Obtaining the Incorporation certificate or Private Limited Company Registration in India   

2.      Post-Incorporation Steps:It includes- 

a.       A current bank account opening

b.      Application for business commencement certificate.

c.       Application for Registration under Goods and Services Tax (GST).

d.      Appointing the Auditors (Qualified Chartered Accountants) within 30 days of Private Limited Company Registration in India.

e.       Organizing the First Board Meeting of the company within 30 days of incorporation. 

List of Annual Compliance for private limited company 

Post company incorporation in India, every company needs to complete following compliance: 

1.      Accounting: The private limited company registration in India is required to update its Books of Accounts on a day to day basis. 

2.      Conducting Audits: Each company is required to conduct Statutory as well as Tax audits in the company for true and fair operations. 

3.      Financial Statements: The companies are required to prepare its financial statements that include Profit and Loss Account, Cash Flow Statement and Balance Sheets for each financial year. 

4.      GST Returns: If the turnover of the company is more than Rs. 5 Crore, the company is required to file 24 GST Returns each year (2 in each month). If the turnover is less than that, then 16 GST Returns are to be filed every year (one for each quarter and one for each month). 

5.      Income Tax Returns: Income Tax Returns are to be filed by the Company annually. 

6.      ROC Compliance:A Private Limited Company Registration in India is required to hold four Board meetings and an Annual General Meeting (AGM) each year. 

7.      ROC Returns: The companies are required to file approx.6 returns with ROC every year. 

8.      TDS Returns: A total of 8 Tax Deducted at Source (TDS) Returns, are to be filed by the Private Limited Company Registration in India. 

9.      RBI compliance:In case of subsidiary company registration in India, post receipt of share subscription money from parent, Indian subsidiary needs to intimate RBI about such receipt of FDI. Also, Indian subsidiary need to file statement of liabilities and assets in Form FLA with RBI

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RBI Compliances to be done by companies in India

Over the years, India has liberalized its FDI policy and now, no prior approval of RBI or government is required for making investment in most of the sectors in India with exception to few sectors. This has resulted in more and more foreign company registration in India and huge increase in FDI in India in all the sectors.

In order to monitor these cross border transactions, RBI has prescribed proper compliance mechanism to be in place. Accordingly, whether any foreign company is setting up business in India or making investment in India or Indian companies making investment overseas India or Indian companies making borrowing from abroad in the form of external commercial borrowings, certain compliance need to be done before RBI.

Further, aforesaid RBI compliance need to be done by every Indian company whether it is wholly owned subsidiary company or normal Indian company.

1)    Filing of Annual Return on Foreign Liabilities and Assets [ FLA Return]

a)    FLA return needs to be filed by every companies in India which has either received FDI and/or made FDI abroad in any of the previous years including current year.

b)    This form needs to be filed even if no fresh FDI received in current year but the company has outstanding FDI/ODI

c)    Due date for filing form FLA is 15th June of every year.

d)    This return may be submitted on the basis of unaudited (provisional) financial statements and books of accounts in case books are not audited before the due date of its submission. Further, revised FLA can be filed before 30thSeptember on basis of audited books of account in case there is any revision.

e)    Non-filing of the return before due date will attract penalty of thrice the sum involved in the contravention. In case if the amount is not quantifiable, then a penalty of Rs. 2,00,000/- has to be paid and if the contravention is continuing then Rs. 5,000/- per day till the default continues.

In case of private limited company registration in the form of subsidiary company, post incorporation, parent company subscribes to shares of Indian subsidiary and brings share capital money into Indian company’s bank account. Accordingly, Indian subsidiary need to file form FLA intimating about amount of share capital money received and shares subscribed by parent company.

2)    Filing of Annual Performance Report [ APR Return]

a)    Any Individual Resident in India (RI) or an Indian Party (IP) which has made an Overseas Direct Investment (ODI) in any Joint Venture or wholly owned subsidiary outside India, has to submit an APR return in Form ODI Part III to the Reserve Bank in respect of each such investment.

b)    Form APR needs to be filed every year mandatorily.

c)    Due date for filing form APR is 30th December of every year.

3)    External Commercial Borrowings Return [ECB-2 Return]

a)    Every Borrowers of ECB needs to report details of external commercial borrowings by filing monthly returns to RBI in form ECB-2 through AD Category 1 Banker.

b)    Form ECB-2 returns are required to be filed within 7 days of end of the month.

c)    Noncompliance or delay may lead to penalty and late fees as given below:

§  Rs 5000 for delay up 30 days.

§  Rs 50,000 for delay upto 3 years- Rs. 50,000/- per year.

§  Delay beyond 3 years- Rs. 1,00,000/- per year.

4)    Filing of Single Master Form (SMF)

a)    For smooth reporting of FDI transactions, now RBI has merged multiple reporting forms like FC-GRP, FC-TRS, LLP-I, LLP-II, CN, ESOP, DI, DRR forms  into single master form (SMF)

b)    Accordingly, now instead of reporting in separate forms, reporting will be done through SMF.

c)    Various due dates of reporting of various forms are as under:

                     i.     Reporting of FDI in form FCGPR through SMF- within 30 days of date of issue.

                 ii.     Reporting of FDI in form FCTRS through SMF- within 60 days of date of transfer or date of remittance whichever is earlier.

                   iii.     Reporting of FDI in form LLP-I through SMF- within 30 days of date of remittance

                  iv.       Reporting of FDI in form LLP-II through SMF- within 60 days of date of remittance

                   v.        Reporting of CN through SMF- within 30 days of date of issue/transfer

                  vi.      Reporting of FDI in ESOP through SMF - within 30 days of date of issue of ESOPs

          vii.   Reporting of FDI in DI through SMF- within 30 days of date of allotment of equity instruments

               viii.        Reporting of FDI in DDR through SMF- within 30 days from the date close of issue.

5)    Filing of Form FC-GPR

a)    In case of subsidiary company registration in India, Indian subsidiary issues shares to parent company and receives foreign direct investment in the form of share subscription money. Such company needs to file form FC-GPR in Single Master Form.

b)    Similarly, when Indian company issues bonus shares or right shares or any shares on conversion of External Commercial Borrowings to a foreign investor, such Indian company needs to file form FC-GPR in Single Master Form.

c)    Due date of filing form FC-GPR is within 30 days of issue of shares.

6)    Filing of Form FC-TRS

a)    When shares of Non Resident are transferred to Resident, in such cases, Form FC-TRS needs to be filed in single master form.

b)    This form needs to be filed by the transferor/transferee resident in India, through authorized dealer bank (AD Category-1 Bank)

c)    This form needs to be submitted within 60 days from the date of transfer or date of remittance whichever is earlier.

7)    Filing of Form ODI

a)    This form needs to be filed by an Indian party and a Resident individual making an investment in Joint Venture or Wholly Owned subsidiary outside India.

b)    This form needs to be filed within 6 months of making investment in overseas Joint Venture or Wholly Owned Subsidiary.

Therefore, every company in India must keep in mind all the aforesaid compliances and its due dates in order to avoid legal hassles.

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Compliances to be done by BO, LO & PO in India

In case of foreign company registration in India in the form of unincorporated entities like branch office, liaison office and project office, post registration, certain compliance need to be completed under Income  Tax Act, GST, Companies Act and Foreign Exchange Management Act. 

In this write up, we have covered list of compliance to be completed by BO, LO, PO post company registration in India. 

These compliances are very important since any default in same may lead to huge penalty under various statutes. 

TAX COMPLIANCE 

1.      Annual Income Tax Return

 Every foreign company in India, except the Liaison Office, is required to file an annual Income Tax Return with the tax department. This is to be done within the provided time period which is either 31st October or 30th November of each year depending upon the company’s provisions on transfer pricing and its applicability. 

2.      Filing of Annual Activity Certificate with DGIT

 It is mandatory for all the branch office in India to obtain Annual Activity Certificate (AAC) from the company’s auditor for certifying its operations and activities to comply with the prescribed guidelines by Reserve Bank of India (RBI). This is to be filed with the Director General of Income Tax (DGIT) annually on or before 30th September of each financial year. 

3.      Filing of Form 49C 

Particulars are to be reported by every Liaison Office in India in Form 49C, to be filed with tax department annually, on or before 30th May. 

4.      Withholding Tax Return 

Every BO, PO and LO are required to withhold taxes on certain payments made to Residents and Non-Residents, as prescribed by the Act. These payments include- 

a.       Paid rent

b.      Salaries

c.       Professional fees

d.      Interest

e.       Dividend

f.       Contractual fees

g.       Brokerage

h.      Commissions

The taxpayer is required to pay the withheld taxes to the tax authorities within the provided time line. They are also required to file their Tax Deducted at Source (TDS) withholding tax return with the revenue department. 

5.      Goods & Services Tax Return 

Every Company in India is required to prepare their GST Return and file them either monthly or quarterly. The companies must compute their GST Liability and then deposit the amount with the authorities on a monthly basis. 

6.      Personal Income Tax Return 

An Income Tax Return is required to be filed by each and every employee, directors, local and expatriate staff of Branch, Project or Liaison Office in India for their taxable income on or before 31st July of every financial year. 

REGULATORY COMPLIANCE 

Compliances prescribed by the Companies Act, 2013:

The Companies Act, 2013 has prescribed the following compliances that a branch office established in India must comply

1.      Filing Form FC-1 

Every Branch Office setup in India is required to intimate the Registrar of Companies (ROC) through filing Form FC-1 and providing the details of principal place of business. This is to be done within 30 days from the date of establishing the business. 

2.      Filing of Annual Form FC-3 

Every Branch Office in India is required to file its annual accounts, consolidated financial statements of the parent holding company and the list of all the places of business in India through the Annual Form FC-3 with the ROC on or before 30th September of each fiscal year. 

3.      Filing of Annual Return Form FC-4 

The Branch Offices in India are required to file Annual Returns in Form FC-4 on or before the due date i.e. 30th May of each year. 

Compliances prescribed by the Foreign Exchange Management Act (FEMA):

As per the FEMA guidelines, the following compliances must be fulfilled by the Branch Office, Liaison Office in India-

1.      Filing of Annual Activity Certificate with RBI and DGIT

As per the RBI Guidelines every Branch Office established in India must obtain Annual Activity Certificate from the company’s auditor. This is to certify its business operations in India. The BOs must file this with the RBI through its Authorized Dealer Bank (ADR) annually, on or before 30th September.

2.      Intimation to Director General of Police (DGP)

It is mandatory for all the foreign companies or organizations setting up Branch Office or Liaison Office in India to submit a report to the DGP within 5 days of being functional about it operation commencement in the area.

Thus, it is evident from above that lot of compliance need to be completed by every BO,LO and PO post company registration in India under tax and regulatory laws and noncompliance may lead to monetary fine and penalty.

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FDI in India- An overview of various routes available

In the recent years, India has emerged as one of the most favorable destination for foreign investments. It is one of the fastest growing economies in the world providing great opportunities to investors across the world. With its easy Foreign Direct Investment (FDI) policies, India has made it much easier for foreign companies and investors to invest here.

This has resulted in huge surge in foreign company registration in India as well as FDI in India in recent years.

Foreign companies can bring FDI in India by investing in an incorporated entity or an unincorporated entity. Under Incorporated entity, following options are available:

a) Opening a wholly owned subsidiary company in India whether in form of private limited company registration or public limited company registration and making investment in such company by subscribing to 100% shares of such company.

b) Registering a Limited Liability partnership and making investment Under unincorporated entity, foreign companies can establish Branch office or Liaison office or project office and bring FDI in India.

In fact, subsidiary company registration in India is the most popular mode of entity registration for bringing FDI in India by foreign investors.

In this article we will be discussing the various sectors where investments can be made by a foreign company or investors in India and what are the various routes available for bringing FDI in India.

Mainly, FDIs in India are allowed under following three routes:

a. Automatic route

b. Government approval route

c. Partial automatic and partial government approval route

Sectors where 100% FDI is allowed under automatic route:

The statutes have provided with about 30 sectors and business operations where 100% Foreign Direct Investment is allowed under the automatic route. These sectors are as follows-

1. Plantation sector

2. Agriculture and Animal Husbandry

3. Petroleum and Natural Gas

4. Mining (excluding mining of titanium containing minerals and its ores)

5. Gems and Jewelry

6. Renewable energy

7. Textiles

8. Electronics

9. Automotive

10. Information Technology (IT) Sector including Information Technology Enabled Services (ITeS), Business Process Management (BPM) and Business Process Outsourcing (BPO)

11. Tourism and Hospitality

12. Capital Goods

13. Manufacturing (including Contract Manufacturing)

14. Construction Development-

a. Housing

b. Townships

c. Industrial Parks

d. Built-up Infrastructure

15. White Label ATM Operations

16. Cash and Carry Wholesale Trading

17. Credit Information Companies (CIC)

18. Non-Banking Finance Companies (NBFCs)

19. Asset Reconstruction Companies

20. Intermediaries or Insurance Intermediaries. It includes-

a. Insurance brokers

b. Re-insurance brokers

c. Insurance consultants

d. Corporate agents

e. Third Party administrators

f. Surveyors

g. Loss Assessors

21. Pharmaceuticals (Green Field)

22. Chemicals (except Hazardous Chemicals)

23. Single Brand Retail Trading (SBRT)

24. Broadcasting (Teleports, Cable Network, DTH, Mobile TV etc.)

25. 100% Up-linking of the Non-News & Current Affairs TV Channels and Down-linking of TV Channels

26. E-commerce activities (including the model based on ‘marketplace’ and excluding the model based on ‘inventory’ of e-commerce)

27. Civil Aviation Sector: Airports it includes Green Field Projects and Existing Projects

28. Civil Aviation: It includes-

a. Air Transport Services that are non-scheduled

b. Any Seaplane or Helicopter services that requires the approval of Director General Civil Aviation (DGCA)

c. Flying Training Institutes

d. Technical Training Institutes

e. Ground Handling Services (subject to sector related regulations)

f. Security clearance

g. Maintenance and Repair organizations

29. Duty Free Shops and establishments

30. Railway Infrastructure (excluding operations): It includes Construction, operation and maintenance of the following:

a. Mass Rapid Transport Systems

b. Signaling systems

c. Electrification of railways

d. Passenger terminals

e. Freight terminals

f. Dedicated freight lines

g. Projects related to High speed trains

h. Suburban corridor projects through the Public Private Partnership (PPP)

i. Industrial park infrastructure pertaining the railway lines and sidings. It also includes electrified railway lines and connectivity to the main railway line.

j. Rolling stock that includes train sets, manufacturing of locomotives or coaches and facility related to maintenance.

Sectors where FDI is allowed under Government Approval Route:

About 10 sectors have been provided where a prior Government Approval must be taken by the investors. In some of these sectors 100% FDI is allowed after approval, however some others might have limits or caps. These includes-

1. Food products manufactured or produced in India: Trading including through e-commerce. 100% FDI under this route is allowed in this sector.

2. Banking in Private Sector: Upto 20% FDI is allowed in this.

3. Multi Brand Retail Trading (MBRT)- Upto 51% FDI allowed through government approval route.

4. Mining of Titanium bearing minerals and its ores: 100% FDI is allowed prior to Government approval. It also includes-

a. Mineral separation

b. Value addition

c. Integrated activities.

5. Establishment and Operations of Satellites: As per the Indian Space Research Organization (ISRO) and Department of Space guidelines related to this sector, a foreign company or investor can put 100% FDI after taking the Government Approval.

6. Broadcasting Content Services: Up to 49% of FDI is allowed. It includes-

a. Terrestrial Broadcasting FM (FM Radio)

b. Up-linking of News and Current Affairs TV Channels

7. Uploading and Streaming of News and Current Affairs through Digital Media: Upto 26% FDI is allowed through government approval route.

8. Print Media: Up to 26% FDI is allowed through this route. It also includes-

a. Newspaper publishing

b. Publication of foreign magazines dealing with news and current affairs in its Indian edition.

c. Dealing with News and Current Affair periodicals

9. Publication or printing of the following:

a. Scientific and technical magazines

b. Specialty journals

c. Periodicals

These must be in compliance with the guidelines issued by the Ministry of Information and Broadcasting and the applicable legal framework. Up to 100% FDI through Government Approval is allowed in this sector.

10. Publication of facsimile edition of foreign newspapers: Upto 100% FDI is allowed under government approval route.

Sectors where FDI is allowed under Partial Automatic and Partial Government Approval Route:

Under the partial Automatic and partial Government Approval Route about 6 sectors have been recommended for receiving the FDIs. These includes-

1. Banking Sector: Up to 74% FDI in total is allowed in this sector. Out of this up to 49% is allowed through automatic route and above 49% till 74% is allowed through government approval.

2. Civil Aviation: It includes-

a. Regional Transport Service

b. Scheduled Air Transport Service

c. Domestic Scheduled Passenger Airline

A 100% FDI is allowed in this sector. Up to 49% investment from automatic route and above 49% under government approval route is allowed. Non-Resident Indians are allowed to invest 100% FDI through automatic route in this sector.

3. Defense Manufacturing: It includes the defense industry and small arms and ammunition manufacturing. A 100% FDI is allowed in this. Out of this upto 74% investment is allowed under automatic route and above 74% through government approval route.

4. Pharmaceuticals (Brown Field): 100% FDI is allowed. Upto 49% investment is allowed under automatic route and above that under government approval route.

5. Private Security Agencies: Up to 74% FDI is allowed. Up to 49% investment is allowed under automatic route and above 49% and up to 74% is allowed through government approval route.

6. Telecom Services: A 100% FDI is allowed in this sector. Upto 49% investment is allowed under automatic route and above that is allowed under government approval route.

Therefore, every foreign company shall take into consideration aforesaid factors before making decision about business set up in India and bringing FDI in India.

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Subsidiary Company Registration in India- 6 Factors to be considered

In recent years, India has emerged as one of the best destinations for setting up businesses and making foreign direct investments. Many foreign companies are now moving a significant portion of their business operations and Research and Development Centers to India. With its Ease of Doing Business Initiative, Foreign Direct Investment Policies, Startup culture, and other government plans, it has become more viable and easier for foreign companies and foreign investors to set up or incorporate a company in India. Let’s elaborate on how India is becoming one of the most preferred countries in the world for doing business.

Why Choose India for Company     Registration?

Some of the reasons why more and more foreign companies opt for subsidiary company registration in India and bringing foreign direct investments are as under:

India provides an advantage      owing to its democratic setup, vast consumer market base, and      English-speaking professional manpower.

The ease of doing business in      India initiative by the Government has reduced the subsequent amount of      rules and regulations for starting and operating a business in India and      the time associated with it. Hence, providing the foreign investors      multiple numbers of benefits.

With its large population,      India provides vast labor and human resource to foreign companies and      that too at cheaper prices.

Availability of resources in      the country made it much easier for foreign companies to invest here.

The subsidiary company      provides an advantage in terms of lower tax rates as well as the fact      that the Indian subsidiary can use the brand name of the parent company.      Further, venture capitalists, as well as private equity investors, can      make investments in Indian subsidiaries as shares of Indian subsidiary      companies are freely transferrable.

All these factors contribute to the fact that more and more foreign companies are setting up business in India.

There are multiple ways in which foreign companies can set up business in India and operate.

In form of subsidiary company      registration in India ( Private limited company registration or Public      Limited Company registration).

In the form of Liaison Office,      Project Office or Branch Office.

In the form of Joint Ventures      ( Private limited company registration or Public Limited Company      Registration).

In the form of Limited      Liability Partnership (LLP) registration in India.

All the aforesaid entities have their own advantages and disadvantages and the selection of a particular entity depends upon the long-term vision of the foreign company as well as its business operations in the home country.

2. Location for Subsidiary Company Registration in India

Choosing the right location for the commencement of business operations in India is very important. Such decision depends upon multiple factors as mentioned below:

For instance, in case the      foreign company wants to set up a business in India in the field of      Information Technology and Software Development, it may opt for Bangalore      in Karnataka state. Many software companies have established its      subsidiary company in this city because of its highly skilled human      resource, business-friendly culture, and its telecommunication      infrastructure.

In case, the foreign company      wants to venture into life science and health care activities in India,      Hyderabad has emerged as a favorable place to open a subsidiary company      for related business operations and companies.

Further, many foreign      companies have also considered establishing their company operations in      cities like Pune in Maharashtra, Chennai in Tamil Nadu, Gurugram in      Haryana state, Noida and Greater Noida in Uttar Pradesh and Ahmedabad in      Gujarat, and many more due to its lower cost efficiency, less mobile labor      force and less competition for employees.

Another key factor in deciding      the location of the subsidiary company is the location or city of      residence, where the potential local managing director is living in      India.

3. Amount of Capital with Which Indian Subsidiary shall be registered

Although there is no minimum share capital prescribed under the law, however, it is advisable to register an Indian subsidiary with sufficient share capital.

The reasons for the same is that post-registration of Indian subsidiary, share subscription money deposited by the parent company in the Indian bank account will be considered as FDI and RBI compliance need to be done for intimating such receipt of FDI by filing of form ARF, FCGPR, etc with RBI.

In case, Indian subsidiary has less capital, it has to issue shares again to the parent company for bringing share subscription money which will again involve RBI compliance and involve cost of professionals. Private Limited Company Registration

Therefore, in order to avoid time and cost of compliance, it is advisable to have sufficient share capital in the Indian company. Indian subsidiary must estimate their initial working capital and capital investment need in India for 4 to 6 months and with that amount of share capital, the Indian subsidiary company shall be registered. Normally, USD 20,000 is ideal to start.

4. Number of Directors and Shareholders

As per Indian regulations, minimum of 2 directors are required for subsidiary company registration in India and at least 1 director shall be an Indian citizen and Indian Resident. However, it is advisable to have at least 2 Resident Indian directors. This will facilitate the holding of board meetings, passing Board resolutions etc between Indian Directors, and no need to send documents for the signature of foreign directors again and again.

Also, all documents which come from the foreign director or foreign company need to be apostilled and notarized in a foreign country which will increase time and cost. Also, in India at least 4 board meetings are required to be held every year. In case, there are only 2 directors, the foreign director has to visit India for attending board meeting again and again whereas if there are 2 Indian Directors, they can hold and attend a board meeting and each time foreign director don’t have to visit India. Therefore, there should be at least 2 Indian Resident Directors. There can be any no. of foreign Directors.

5. Prior Approval of RBI/FIFP in some cases

Although foreign direct investment in India are allowed under automatic route for most of the sectors and no need to take any prior approval from RBI or FIFP, however, there are some sectors where FDI is permissible under the government approval route. For investment in those sectors, prior approval of RBI/FIFP would be required. Also, there are some prohibited sectors where investments are not permissible.

Also, in case FDI is coming to India from land-locked countries like China, Bangladesh, Nepal, Myanmar, Bhutan, Pakistan, Hong Kong, Afghanistan, prior approval of RBI/FIFP needs to be taken.

6. Hire a Professional Service Provider for Company formation in India 

Company formation in India is a comprehensive exercise and involves a lot of documentation and expertise of a professional chartered accountant or lawyer is required for smooth completion of the entire incorporation process as well as post incorporation process like:

Completing the required     administrative requirements.

Completing the legal     requirements of subsidiary company registration in India such as:  A.  Application for name      availability and approval. B. Tax registration procedures. C. Labor registration process. D. Preparation of Memorandum of      Associations (MOA) and Articles of Association (AOA).  

RBI Compliance for reporting of     FDI received from the parent company.

 Obtaining approval from     RBI/FIFP. 

 Payroll outsourcing services. 

 Human resource support and     services. 

 Tax and Regulatory Filing. 

 Accounting/ Bookkeeping. 

 Audit/Assurance service.

We at EzyBiz India provide complete handholding to foreign companies desirous of registration of a subsidiary company in India. We assist them in all pre-incorporation as well as post-incorporation compliance as mentioned above.

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FOREIGN COMPANY REGISTRATION IN INDIA - WHAT OPTIONS ARE AVAILABLE - Ezybiz India Consulting LLP

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How to incorporate subsidiary of foreign company in India

Indian Subsidiary: When another Indian company or foreign company holds 50% or more of the shares of an Indian company, an Indian company whose shares are so held becomes a subsidiary company. Indian subsidiary company has a separate legal identity as compared to the parent entity. Subsidiary company registration in India is one of the most popular forms of business set up in India.

​The following conditions must be fulfilled for subsidiary company registration in India.

A minimum of two directors is required. One of the directors in the company must be an Indian Citizen and an Indian resident having a permanent address in India, which is necessary for the incorporation of the company. A minimum of two shareholders is required. The shareholders can be an individual or an entity, or a combination of both. There is no minimum limit for authorized and paid-up capital. The foreign company must own more than 50% shares in an Indian subsidiary company and have significant control over it. A person must be appointed as an authorized representative on behalf of the foreign company in India who will hold shares on behalf of the parent company. If the parent company holds 99.99% shares, the Indian company becomes a wholly owned subsidiary of the parent company. In this case, at least one share must be held by the nominee shareholder. A registered office for the place of business of the company is required. All the directors in the company must have a Director Identification Number (DIN).   The procedure of Subsidiary Company Registration in India: Following steps are involved in subsidiary company registration- Apply for Digital Signature Certificate (DSC): The proposed subsidiary company in India is required to apply for the DSC of all the directors for online filing of documents with ROC/MCA. Name approval: Once the directors' DSC is prepared, the company must apply for a reservation of the proposed company's name. It has to choose a unique name for the subsidiary company and is to be filed through the RUN facility of the Ministry of Corporation (MCA) in due time. Drafting of MOA and AOA and applying for Director Identification Number (DIN): After name approval, charter documents must be drafted, i.e. MOA and AOA need to be drafted. Further, the DIN of all the appointed directors of the proposed subsidiary company is applied. Application for receiving PAN and TAN: Simultaneously, PAN and TAN, ESI, PF of the company is also applied. Also, the name of the proposed banker of the company needs to be provided. Finally, a certificate of incorporation would be granted, and a subsidiary company registered in India. Obtaining a Goods and Services Tax Identification Number (GSTIN): To business operations, a subsidiary company must have GST Registration in India. Commencement of the business operations: Lastly, within 180 days of incorporation of a subsidiary company in India, it must apply for a certificate of commencement of business.   Documents required for Subsidiary Company Registration in India: The following documents are required to be submitted by the foreign company while registering the subsidiary company in India- For the foreign director: These must be duly notarized or apostilled, or verified by the Indian embassy in their home country. Passport of the individual Identity proof of the country of their stay Address proof in the home country   For the representative of the foreign company: These must be duly notarized and apostilled or verified by the Indian consulate in their home country (in case the representative is a foreign national and not an Indian resident)  Passport of the person Identity proof of the country of their stay Driving license   For the Indian director AADHAAR Card. PAN Card. Any utility bill for address proof such as electricity bill, water bill, telephone bill etc.

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Setup Business in India Form of Wholly Owned Subsidiary Company

A foreign company looking to setup business in India can do so in several ways like the incorporation of an Indian entity or continue to work in India as a foreign entity. If the intent is to incorporate an Indian entity, they have the following options for company incorporation in India.

Private     Limited Company Registration.

Public Limited Company     Registration.

Registration of Limited     Liability Partnerships.

Registration of Joint Ventures     in India.

Another option for foreign company registration in India is in form of a foreign entity. Here, they have the following options, namely:

Liaison office Registration in     India.

Branch Office Registration in     India.

Project office Registration in     India.

Further, it may be noted that a foreign company can acquire 100% shares in an Indian Private Limited Company, in such a case, the Indian company will become a wholly-owned subsidiary of a foreign parent company. When instead of acquiring 100% shares in an Indian company, the foreign company acquires shares more than 50% in an Indian company, the Indian company will become a subsidiary of a foreign company.

Subsidiary company registration is the most preferable form of entity registration in India and is quite.

suitable for companies that want to do full-scale business activities in India to stay in India for a long period of time. Also, suitable for companies that want to use their global brands in India.

Permissible activities for the Wholly Owned Subsidiary company in India

The Wholly Owned Subsidiary company can do any business     activities which are prescribed under its memorandum of association     subject to FDI guidelines.

Indian Wholly owned subsidiary can be set up subject to FDI     guidelines. Foreign companies can invest in the majority of business     sectors in India under automatic routes. Only for investment in some     sectors and for investment over the specified limit, prior approval of     government is required which is called a government route.

There are some prohibited lists of business in FDI guidelines.     It means subsidiary companies in India cannot be engaged in prohibited     business activities.

Therefore, this is an important aspect to be kept in mind before the registration of a wholly-owned subsidiary in India.

Conditions required for registration of a wholly-owned subsidiary company

Wholly Owned Subsidiary can be registered in India either as     Public Limited Company or Private Limited Company.

For Wholly Owned Subsidiary as Private Limited Companies,     minimum 2 Directors and minimum 2 shareholders are required out of which     at least 1 Director shall be Indian Citizen and Indian Resident.

For Wholly Owned Subsidiary as Public Limited Companies,     minimum 3 Directors and minimum 7 shareholders are required out of which     at least 1 Director shall be Indian Citizen and Indian Resident.

Shareholders can be companies also (including the foreign     company), however, Directors has to be individuals. Companies can hold     shares in Indian WOS through authorized representatives.

100% shares in an Indian subsidiary company can be held by a     foreign parent company.

At least one of the Directors shall be an Indian Resident and     Indian Citizen.

There should be a local office address in India.

Legal Status

The legal status of the wholly-owned subsidiary is an Indian company. Therefore, it is independent of its parent entity. It has limited liability i.e liability is limited to the amount of capital invested in the company and has separate legal existence.

Approvals Required

For subsidiary company registration in India, prior approval of     ROC/MCA is required. Also, approval of RBI, AD Banker, and FIFP may be     required in case of a government approval route.

Further, if the activities of the Indian wholly-owned subsidiary     fall under the Government approval route, then approval from the     Government has to be obtained. Government approval can be taken by filing     an online application with Foreign Investment Facilitation Portal (FIFP)

Once a subsidiary company is registered in India and share     subscription money has been received in the Indian subsidiary’s bank     account, RBI needs to be intimated about such receipt of FDI in India by     login into the portal and filing prescribed forms online. Further,     allotment of shares needs to be done, Share certificates need to be issued     and ROC compliance needs to be done. Any excess money received in the     Indian subsidiary bank account needs to be refunded within 2 months of     such receipt. Failure to make aforesaid compliance will lead to a penalty     from RBI.

Besides above, the wholly-owned subsidiary company needs to     comply with all the laws, rules & regulations as applicable, including     but not limited to Companies Act, 2013, Foreign Exchange Management Act,     1999, Shops and Establishment Act, Income Tax Act, etc., failing which may     result in heavy interest and/or penal implications.

Accordingly, the cost of running and maintaining expenses of a wholly-owned subsidiary company is high and requires expert professional guidance all the time.

Tax Applicability

The wholly-owned subsidiary, being a company, is liable to tax on global income at different tax rates like 15%, 22%, 25%, and 30% depending upon case to case. Also, Subject to MAT @ 15% of book profits.

Repatriation of Profits

For the repatriation of profits out of India, there are no restrictions. No specific approvals are required. The profits can be repatriated outside India subject to proper payment of taxes in India, filing of forms 15CA and 15CB, and completion of other procedural compliance.

Exit out of India

Winding up procedure of wholly-owned subsidiary company is a complex procedure. Also, it is time-consuming. Further, it also depends upon the exit strategy adopted. Exit can be either by sale of shares or by liquidation. However, exit is possible only when all compliances under various statutes have been completed and there is no litigation pending before any authorities in India.

Thus, from above, it may be seen that wholly-owned subsidiary has many advantages due to which more and more foreign companies are opting for registration of the wholly-owned subsidiary company in India. It allows Indian subsidiary companies to use the brand name of the parent company. Further, it has less tax rates as compared to other entities in India like Limited Liability Partnerships. Although the compliance cost of a subsidiary company in India is slightly higher due to overall benefits, it is best suited for foreign companies.

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Checklist of ITR Filing in case of Individuals and HUF- AY 2021-22 - Ezybiz India Consulting LLP

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Liaison Office Registration in India

Liaison Office Registration in India - A liaison office or a representative office works as a communication channel between the parent company settled abroad and their parties in India. Liaison office is a boon for foreign companies in need of a temporary office in India to proceed with their business with Indian clients. Opening liaison office India.

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Extension of Various Due Dates for Tax Return Filing, Audit and other transactions in India for FY 2020-21

Income Tax Return filing in India - Since the outbreak of COVID-19 pandemic in India, there has been relief granted by Central Board of Direct Taxes (CBDT) in terms of relaxation of compliance, reduction in tax rates as well as extension of various due dates relating to Income Tax Return filing in India as well as uploading of various audit reports on the tax department portal.

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How a Company Can Be Formed in India?

Every upcoming businessman in India faces a crucial question of how to set up a business in India or how to form a company in India.

Further, when they use the word “company” they actually meant all the types of entities like a partnership, proprietorship, private limited company, and public limited company. This is because; they use “company” and “business” interchangeably.

In this write-up, we will try to understand company incorporation in India. The Company can be defined as a legal enterprise or entity that is permitted by the legislation to carry on activities for the purpose of earning profits and gains. It can make applications to the government for creating a separate and independent organization to pursue certain objectives of the company.

The procedure of company incorporation in India has become quite easy and the entire process is online. It is governed by the Companies Act, 2013. A company can be incorporated in the following ways-

    1. Private Limited Company Registration. 

    2. Public Limited Company Registration.

Private Limited Company Registration in India:

Minimum requirements for a Private Limited Company registration in India are as follows-

1. A minimum of two shareholders is required.

2. A minimum of two directors are required. The same person can be a shareholder as well as a director.

3. At least One Director shall be an Indian Resident and Indian Citizen. 

4. There should be a local office address in India for showing registered office.

5. There is no minimum prescribed authorized and paid-up capital for private limited company registration.

6. All the directors must have a Director Identification Number (DIN).

7. All the directors are required to have Digital Signature Certificate (DSC).

Public Limited Company Registration in India:

Minimum requirements of a Public Limited Company registration in India are as follows-

1. A minimum of seven shareholders is required.

2. A minimum of three directors is required. The same person can be a shareholder as well as a director.

3. At least one Director shall be an Indian Resident and Indian Citizen.

4. There should be a local office address in India for showing registered office.

5. The minimum authorized share capital for this company incorporation in India is Rs. 500,000.

6. All the directors must have a Director Identification Number (DIN).

7. All the directors are required to have Digital Signature Certificate (DSC).

The procedure of Company Incorporation in India: The following process is followed for registering a company in India as per the Companies Act, 2013-

1. Obtaining a Digital Signature Certificate (DSC) from an authorized DSC issuing authority.

2. Application for reserving a name for the company.

3. Obtaining the Director Identification Number (DIN) by making an application in Form DIR-3.

4. Drafting the Memorandum of Association (MOA).

5. Drafting the Articles of Association (AOA).

6. Filing of Form INC -7, Form DIR 12, and Form INC 22.

7. Commencement of business after the registration is done completely.

8. Providing the details of the registered office of the company to the Registrar of Companies (ROC).

Forms to be filed for Company Incorporation in India:

The following forms are to be filed online while undertaking the company registration process- 1. E-Form DIR 3: Application for Director Identification Number (DIN) allotment.

2. E-Form DIR 6: In case the details of the DIN are wrong, this form is to be filed with the  Income Tax Department for making corrections.

3. Form DIR 7: It is a verification form that is necessary to be attached with Form DIR 6. It  must be verified by a professional.

4. Form DIR 12: Providing details of all the directors.

5. Form INC 1: Application for name approval of the company incorporation in India.

6. E-form INC 7: Application for registration of the company along with all the necessary documents.

7. Form INC 9: An affidavit from each of the subscribers and first directors to the Memorandum of the company.

8. Form INC 10: For verifying the signature of subscribers of the company.

9. Form INC 21: As compliance form to the Registrar of Companies (ROC) along with necessary documents.

10. Form INC 22: For providing the details of the registered office or place of business.

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Doing Business in India - Options for foreign Companies - Ezybiz India Consulting LLP

Any multinational company desirous of company registration in India can do in form of incorporated entities or unincorporated entities.There are 2 options for foreign company registration in India namely

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Income Tax Return Filing - File Income Tax Returns online with Ezybiz India, registered e-return intermediary with the Income Tax Department. Ezybiz India is the fastest, safest and easiest income tax india efiling website. We handle all cases of Income from Salary, Interest Income, Capital Gains, House Property, Business and Profession.

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A Complete Guide for Branch Office Registration in India

A foreign company desirous of business set up in India has multiple options to enter India and operate its business activity. One such option is to set up a branch office.

This article will discuss branch office registration in India, the procedure involved, documentation required, and time is taken in the entire procedure.

What is a Branch Office?

A branch office can be defined as an extension of the head office of a corporate house. It is a business model for establishing a temporary office in India usually taken up by foreign companies that want to learn more about the Indian market without making long-term investments or commitments. The activities undertaken by a branch office is similar to those of its parent company.

Establishing a branch office in India by foreign entities is regulated in Section 6(6) of the Foreign Exchange Management Act, 1999, read with 1Notification No. FEMA 22(R)/2016-RB dated March 31, 2016.

Branch Office registration in India is subject to prior approval of the Reserve Bank of India and fulfillment of the following conditions by the parent company-

The applicant parent company must be incorporated outside the Indian Territory.

The company must be engaged in activities like trading or manufacturing etc.

The company’s net worth or business in its home country should not be less than US $100,000.

In case the financial criteria are not met by the parent company. It must issue a Letter of Comfort (LOC) from the ultimate parent company/Group company subject to the condition that the parent/ group company satisfies the prescribed criteria for net worth and profit.

The parent company should have a continuous track record of profit for five years in the home country.

Also, the name of the parent company and the branch office in India must be exact. The parent company is liable to meet the expenses of the branch office in case it does not generate apt revenue through its operations in India.

Permissible activities to be undertaken by Branch Office:

As per RBI guidelines, the branch office can do only the following prescribed activities:

Import and export of goods

Research and development work

Buying and selling agent representative of the parent company

Consultancy services

Rendering any professional services

Registration of branch office in India for carrying out manufacturing activities directly is not permissible unless the manufacturing work is carried on in a Special Economic Zone (SEZ). The purpose behind this is to export products outside India. However, the branch office can sub-contract an Indian manufacturer for manufacturing any products.

The procedure of registration of branch office in India

The following steps must be taken for registering a branch office in India by its parent company-

Non-Resident entities desirous of registering Branch Office in India may apply form FNC to designated AD category-1 bank along with prescribed documents in case the principal business of the foreign company falls under any sector where 100% Foreign Direct Investment (FDI) is permissible through automatic route. In other sectors, i.e. where the automatic approval route is unavailable, the application needs to be filed with the Ministry of Finance and relevant documents.

On receipt of such application and documents, the AD banker would exercise his due diligence and, in case all conditions are satisfied, grant approval for setting up a branch office in India.

For establishing more than one branch office across India, the parent company must seek approval from RBI for each location separately.

Approval from RBI for every additional business activity undertaken by the branch office is also required.

Once approval is granted, the Branch office need to be opened within six months. Otherwise, the approval will lapse.

For opening BO in the Special Economic Zones (SEZs) to undertake manufacturing and service activities, general permission has been given to non-resident companies, subject to fulfilment of prescribed conditions.

Registration with police authorities

In case, parent company desirous of opening BO in India is from certain prescribed countries, they have to register with the state police authorities.

Prescribed countries are as under:

Sri Lanka, Bangladesh, China, Iran, Pakistan, Afghanistan, Hong Kong, Macau.

Also, the AD banker must submit an approval letter for countries above to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi for necessary action and record. Company Registration in India

Documents required for Registration of Branch Office in India:

Form FNC duly signed by an Authorized Representative (AR).

Incorporation certificate, MOA, AOA of the parent company duly attested by a notary public or by the Indian Embassy in its registration country.

Information and details about the company duly attested by the notary public or the Indian Embassy in its home country.

Audited financial statements of the parent company for the last five years

Documents of incorporation of the Branch office

Proof of a registered office

Note on the proposed activity to be carried on by the branch office.

A board resolution for opening the branch office

KYC of authorized signatory

Information regarding the local representatives hired by the parent company.

Time Involved in the entire process

It takes upto 50 to 60 working days to get branch office registration approval from the date of submission of all the documents.