Business Setup in India
BUSINESS SETUP IN INDIA
Post economic liberalization in 1991, India has gradually become most sought after destination for foreign entities for business setup in India. It is one of top 10 FDI destinations in the world.
What are the reasons for more and more foreign companies opting for business set up in India and for such increase in FDI?
There are many factors associated with same. Few of them are mentioned as below:
BENEFITS OF BUSINESS SETUP IN INDIA
- It is the largest Democracy in the world.
- It has second highest population with around 1.4 Billion People, next only to China
- Huge market – Approx. 500 Million Middle class consumer base..
- 28 States and 8 Union Territories- 7thlargest country in terms of area and size.
- Second largest telecommunication market in world with subscriber base of 1.18 Billion.
- In automobile sector, its ranking is at no. 4 in the world and has potential to reach no. 3 position by 2026.
- Enjoys 3% share in global Biotechnology industry. By 2025, expected to achieve USD 100 Billion.
- World’s largest offshoring destination for IT companies. Estimated revenue is around USD 135 Billion.
- World’s 5thlargest global destination in RETAIL space.
- Ecommerce- Estimated revenue by 2027 is USD 200 Billion.
- Almost all the Fortune 500 companies are having Research and Development Centers in India.
- Second largest English speaking country in world.
- Current GDP is USD 2.8 Trillion. By 2025, it aspire to become USD 5 Trillion economy.
- Total FDI in FY 2018-19 was approx. USD 45 Billion. Major countries are Japan, Singapore, Mauritius, UK, Netherlands, USA, Cyprus, Germany, France and Switzerland.
- Low labor costs, attractive incentives for new manufacturing enterprises, skilled and talented human capital, and a reduced corporate tax rate are driving India towards becoming an alternative hub for the global manufacturing supply chain.
VARIOUS OPTIONS FOR BUSINESS SETUP IN INDIA
There are many options for business setup in India. Same are mentioned as under:
Foreign entities can opt for business setup in India in form of either incorporated entities or unincorporated entities.
- Incorporated Entities : Private Limited Companies, Limited liability partnerships, Joint Ventures.
- Unincorporated Entities : Liaison Office, Branch Office, Project Office.
- Private Limited Company [ Wholly Owned Subsidiary ] – Most Popular form of Entity is Private Limited Company. Foreign companies can open wholly owned subsidiary in India wherein 100% shares can be held by foreign company.
- Limited Liability Partnerships – Second most popular form of entity is Limited Liability Partnership.
- Liaison Office- This cannot do any business activity or earn profits. It can act only as communication channel between parent entity and Indian consumer.
- Branch Office and Project Office – They can do only permissible business activity as prescribed by RBI. Project offices are opened for particular project.
Rates of Taxes applicable to each type of entities
- Private Limited Company [Wholly Owned Subsidiary] – Depending upon nature of activities, Companies are liable to tax on its income at varied tax rates like 15%, 22%, 25% and 30% depending upon case to case. Also, Subject to MAT @ 15% of book profits.
- Limited Liability Partnerships – LLPs are liable to tax @30% on its Also alternate minimum tax of 18.5% is also applicable on LLPs on their book profits.
- Branch Office and Project Office – Tax rate applicable on income earned in India @ 40% plus surcharge and education cess.
- Liaison Office – They are not taxable since they cannot do any commercial activities in India.
Out of all aforesaid options, which is best option for business set up in India?
Well, it all depends upon intention and vision of foreign companies in setting up business in India. Normally, when foreign companies want to do only water testing of Indian business environment, they opt for liaison office registration. When they are pretty much sure that they want to enter India with long term perspective as well as when the intention is to use the brand name of foreign company, they may opt for subsidiary company registration.
Branch office and liaison office has higher tax rates as compare to Wholly owned subsidiary company.
Therefore, best option for business set up in India would depend upon the intention and purpose of setting up company in India by foreign enterprise.
Foreign Company Registration in India
How can we assist in Business set up in India?
We, provide following services relating to Setting up Business in India.
- Designing strategy for entering into India
We assist foreign entities in making analysis of various options available to setup business in India and what is best suited to them from their business, tax, legal and regulatory point of view. We become their trusted partners and advisors in foreign company incorporation in India.
- Obtaining necessary approval and registrations:
Foreign Company registration in India requires approvals from multiple government authorities. In this regard, we assist foreign companies in obtaining the necessary approvals and licenses as per the applicable laws/regulations like:
- Reserve Bank Of India (RBI).
- Ministry of Corporate Affairs (MCA).
- Foreign Investment Facilitation Portal.
- Bank Account opening
Post Foreign Company Incorporation in India, bank account need to be opened so that shareholders can contribute their share subscription money. In this regard, we provide assistance in opening current account with Indian and foreign banks in India.
- RBI/ROC Compliance
After company formation in India, intimation to RBI and ROC need to be given regarding receipt of FDI in India and allotment of shares. We provide complete assistance in regulatory compliance before ROC/RBI.
- Obtaining other registrations under various statutes/laws:
After Indian Company incorporation, some other registrations are required on need basis. We assist foreign companies in obtaining such other registrations like
- Goods & Services Tax (GST)
- Import Export Code (IEC Code)
- Provident Fund (PF)
- Employee State Insurance Act (ESI)
- Shops & Establishment Act
- Professional Tax
- Permanent Account Number (PAN)
- Tax Deduction Account Number (TAN)
What are the lists of services required after Business set up in India?
Normally, after Company formation in India, foreign entities required host of services from professionals like chartered accountants and lawyers. In this regard, we assist foreign enterprises in providing one window solution for their entire regulatory, legal and advisory service requirement.
POST REGISTRATION COMPLIANCE AND ADVISORY SERVICE
- Tax & Regulatory Advisory and Compliance
We provide following services:
- Corporate tax advisory and tax filing
- Personnel and Expatriates tax filing and advisory
- Withholding tax advisory and compliance
- GST advisory and tax filing
- GST Refund
- Customs and FTP Advisory and compliance
- Foreign Exchange Regulations compliance and advisory
- RBI compliance and advisory
- Assurance and Audit Service
We provide financial reporting, Management and Statutory Audit and Risk advisory service to clients.
Corporate Secretarial Compliance
We assist our clients in following:
- Holding of various meetings of Directors’ and Shareholders’ meetings as per secretarial standards and preparation of documents, resolutions relating to same
- Preparation & filing of Annual Return including Balance Sheet, Profit & Loss account & other documents.
- Statutory filings with MCA
- Event based compliance like change of directors, change of address etc
- Preparation and maintenance of Statutory registers as required by law
Accounts and Payroll Outsourcing
During the early stage of company, it makes sense to outsource entire function of accounts and finance to professional firm instead of doing in house as it not only saves cost but also allows company to attract pool of expertise and experience of professional firm. We outsource following services:
- Accounting & Book-keeping
- Payroll management
- Tax Returns
Labor law Compliance
- Maintaining day to day records and registers relating to labor law on behalf of clients
- Monthly computation of social contribution to be deposited with revenue authorities under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (‘PF’) and Employees’ State Insurance Act, 1948 (‘ESI’)
- Periodical filing of returns as per applicable labour laws
- Facilitating the labour law inspector at time of visit to premises
- Advisory and compliance services relating to Labour laws