Post economic liberalization in 1991, India has gradually become the most sought-after destination for foreign entities which want to set up their businesses in India or want to do business in India. It is one of the top 10 FDI destinations in the world.
What is the reason for such an increase in FDI?
There are many factors associated with the same. A few of them are mentioned as below:
15 reasons why Foreign entities are setting up a business in India and investing in India
- World’s Largest Democracy
- Second highest population after China at 1.38 Billion People
- Huge market – Approx. 500 Million Middle-class consumer base with good purchasing power parity.
- 28 States and 8 Union Territories- 7th Largest country in terms of area and size
- Second largest telecommunication market in the world with a subscriber base of 1.18 Billion
- The fourth-largest automobile industry in the world and by 2026, it will be in no. 3 position
- Enjoys a 3% share in the global Biotechnology industry. By 2025, expected to achieve USD 100 Billion
- World’s largest offshoring destination for IT companies across the globe. Estimated revenue from ITES AND BPO was USD 135 Billion
- World’s 5th Largest global destination in RETAIL space
- Ecommerce- Estimated revenue by 2027 is USD 200 Billion.
- The majority of the Fortune 500 companies have R&D center and or assembly line in India
- Second largest English-speaking country in the world.
- THE current GDP is USD 2.8 Trillion. By 2025, it aspires 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.
Types of entities that can be set up by Foreign entities in India
A foreign entity can set up business operations 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 subsidiaries in India wherein 100% of shares can be held by a 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 a communication channel between the parent entity and the Indian consumer
- Branch Office and Project Office – They can do an only permissible business activity as prescribed by RBI. Project offices are opened for particular projects.
Rates of Taxes applicable to each type of entities
- Private Limited Company [Wholly Owned Subsidiary] – 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.
- Limited Liability Partnerships – LLPs are liable to tax on global income @30%. Further, LLPs are liable for alternate minimum tax @18.5% on its book profits.
- Branch Office and Project Office – Tax rate applicable on income earned in India @ 40% plus surcharge and education cess
- Liaison Office – Since they cannot do any business. No Taxes applicable
We, at Ezybiz India, provide the following services relating to setting up a business in India by a foreign entity.
- Designing strategy for entering into India
We assist foreign entities in making analyses of various options available for entity set up and what is best suited to them from their business, tax, legal and regulatory point of view.
- Obtaining necessary approval and registrations:
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
Assistance in opening a current account with Indian and foreign banks in India
- RBI/ROC Compliance
Post-registration intimation to RBI and ROC regarding receipt of FDI in India and allotment of shares
- Obtaining other registrations under various statutes/laws:
- 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)
Post Registration Compliance And Advisory Service
- Tax & Regulatory Advisory and Compliance
We provide the 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 the 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 a 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 the company, it makes sense to outsource the entire function of accounts and finance to the professional firm instead of doing in the house as it not only saves cost but also allows the company to attract a pool of expertise and experience of a professional firm. We outsource the 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 labor laws
- Facilitating the labor law inspector at the time of the visit to premises
- Advisory and compliance services relating to Labour laws