India is currently the world's fastest growing economy, with a rising middle class fueling aspirations for growth it is no surprise that investors would be looking to invest in India. India offers a great opportunity with its labour pool, market size, low cost base. There are also challenges in the form of complex tax and regulatory structure and many fold compliances to be taken care of. This presentation aims to guide the investor looking at India and educate them on the options before them.

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2. INDIA
Introduction to
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INDIA:
A GLANCE

4. Background
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Population: 1,251,695,584 (July 2015 est.)
GDP (PPP): $7.376 trillion (2014 est.)
GDP (abs): $2.05 trillion (2014 est.)
GDP (growth): 7.2% (2014 est.)
Repo Rate : 6.75% (Sep 2015)
Coordinates : 20 00 N, 77 00 E
Area : 3,287,263 sq km

5. Then – Now- Future
5
GDP (INR)

6. Why India?
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Fast economic growth
Democracy +
Political Stability
Talented
Workforce
Tax and other
Incentives
Low Valuations
Low Cost
Intellectual
property protection
Increasing
Domestic
Consumption
Export
infrastructure

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Initiatives

8. 8
Push for Infrastructure Development
Easier Reporting Requirements
FDI caps raised
Greater ease of doing business
Most clearances moved online
Setting up faster, easier
Stable, taxpayer friendly tax regime

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Key Sectors

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SETTING
UP

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Setting up in India

12. Industrial Policy
of Government
of India
Companies
Act, 2013
Foreign
Exchange
Management
Act, 1999
(FEMA)
12
Applicable Laws

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Industrial Policy
Governed by Department of Industrial Policy & Promotion (DIPP) a part of the
Ministry of Commerce & Industry, Govt of India
DIPP Formulates Industrial policy and strategies for development
Also Responsible for attracting Foreign Investment , developing FDI policy and
even formulates policies relating to intellectual property
DIPP releases the annual FDI policy document prescribing sectors under
automatic route, approval route, sector limits etc.
The Secretariat of Industrial Approvals (SIA)/ Foreign Investment Promotion
Board (FIPB) also under the Ministry of Commerce & Industry is responsible for
cases not covered by Automatic Route

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Sectoral Caps (illustrative)
 Existing Airports 100%
 Titanium Minerals 100%
 Asset Reconstruction Cos 100%
 Single brand retailing 100%
(49% automatic)
 Multi brand retailing 51%
 Telecom - Carriers 100%
 Defence 49%
 Print Media 49%
 Broadcasting
 Agriculture
 Atomic energy
 Lottery, betting and gambling
 Chit fund
Negative ListPrior Approval
 Agri-sector services
 IT / ITeS
 Special Economic Zones
 Manufacturing sector
 Hotels and tourism
 Infrastructure
 Courier Services
 Shipping
 Real Estate (subject to
limitations)
 Insurance (49 % cap)
 Telecom – IP Category 1
 Financial services
 NBFC (minimum
capitalization norms)
Automatic Route

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Options for investors
Foreign Investor
Unincorporated
entities
Liaison Office
Branch Office
Project Office
Incorporated
entities
WOS
JV company
Partnership Firms
LLPs
Subject to eligibility
norms
Generally permitted Require Approval
before set up
Unlimited liability
Partnerships

16. Permitted Activities
Representing parent company/group companies in India, acting as communication channel
Promoting export/import from/to India, technical/financial collaborations between with India
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Liaison Office
Setting Up
Governed by FEMA and Companies Act
Requires approval of RBI under FEMA
and registration with RoC
Requirements
Profit making track record in the
preceding three financial years and net
worth not less than USD 50,000 in the
home country
Annual Compliances
Statutory Audit of Accounts of LO
Filing of annuaal returns with the RoC
Filing of Annual Activity Certificate with
the Reserve bank of India (RBI)
Since no incomes are earned by LO, no
taxes are applicable

17. Permitted Activities
Export/import of goods, professional or consultancy services, research with parent co, IT and
software development, technical support services. Foreign airline/shipping company
Technical/financial collaborations between parent co and India, acting as buying/selling agent
for parent co.
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Branch Office
Setting Up
Governed by FEMA and Companies Act
Requires approval of RBI under FEMA and
registration with RoC
Requirements
Profit making track record in the
preceding five financial years and net
worth not less than USD 100,000 in the
home country
Annual Compliances
Statutory Audit of Accounts of BO
Filing of annual returns with the RoC
Filing of Annual Activity Certificate with
the Reserve bank of India (RBI)
Liable to tax at 40% plus surcharge
Transfer Pricing provisions applicable

18. Permitted Activities
Execution of a contract which the parent company has won from an Indian counterpart,
provided the project is funded directly by inward remittance from abroad, or the project is
funded by a bilateral or multilateral International Financing Agency; or the project has been
cleared by an appropriate authority; or entity in India awarding the contract has been granted
Term Loan by a Public Financial Institution or a bank in India for the project
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Project office
Setting Up
Governed by FEMA and Companies Act
General permission is available provided
the parent co has secured a contract from
Indian co.
Requirements
None
Annual Compliances
Statutory Audit of Accounts of PO
Filing of annual returns with the RoC
Filing of Annual Activity Certificate with
the Reserve bank of India (RBI)
Liable to tax at 40% plus surcharge

19. Permitted Activities
All activities which are not on the exclusion list of the FDI policy as well activities on the
approval list, with FIPB approval.
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WOS/JV
Setting Up
Governed by Companies Act
Allowed only in sectors where 100% FDI is
allowed either under automatic route or
approval route
Requirements
Private companies require minimum of
two shareholders and directors.
Share capital
Annual Compliances
Statutory Audit of Accounts
Filing of annual returns with the RoC
Filing of Annual Activity Certificate with
the Reserve bank of India (RBI)
Liable to tax at local tax rate (30% plus
surcharge)
Minimum Alternative Tax (MAT) and
Dividend Distribution Tax (DDT) apply

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APPLICABLE
TAXES

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Tax Landscape
Taxes in India
Direct Taxes Indirect Taxes
Income Tax Customs Duty
Dividend
Distribution tax
Service Tax
Minimum
Alternative Tax
Excise Duty
VAT/ Octroi /
Entry Tax
Federal levy
Federal levy
State levy
Indian Tax year – 1st April to 31st March
Amendments to tax code carried out
annual as part of budget exercise
India has DTAA agreements with 89
countries
Treaties override domestic tax law to the
extent that treaty more beneficial to
taxpayer

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Direct Taxes
Scope of Taxation
For residents & domestic companies – worldwide income
For non-residents – income accruing, arising or received in India, or deemed to accrue or arise
or be received in India
Rates
Domestic Companies : 30% + surcharge
(effective 33.2175%)
Foreign Companies – 40%+ surcharge
(effective 44%)
DDT – 16.995%
MAT – 18%
Dividends are tax exempt in the hands of
shareholders
Capital Gain
Nature of Capital
asset transferred
Long Term
Capital Gain
Short Term
Capital Gain
Listed Securities Exempt 15%
Unlisted Securities (NR) 10% 40%
Other (R) 20% 30%
Other (NR) 20% 40%

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Indirect Taxes
Service Tax
Tax applicable on rendering of services, Flat Rate 14%, exemptions / abatements available
Customs Duty
Duty applicable on exports / imports, peak rate 28.85%,
VAT / CST
Tax on local and inter-state sale of goods, VAT rates vary state to state, CST rate specified by
central govt.
VAT/CST and Service Tax are soon to be subsumed into a new tax framework called the goods
and service tax (GST) expected in 2016

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CULTURAL
ASPECTS

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Cultural Aspects
Different corner – vastly different cultures
Last names with salutations ( Mr, Ji, saab) preferred by the older generations
Be prepared for delays in appointments, specially in government offices
You will not always receive direct answers
Indians are reluctant to offend, will rarely say no or contradict
Don’t be offended at personal questions, be prepared to make small talk before
getting to business
Confrontational, aggressive attitude rarely works.
Written agreements, always

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ARKAY &
ARKAY

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Integrated professional services firm offering services in the domains of
Direct and Indirect taxation,
Transfer Pricing
Audit and Assurance,
Risk Advisory and
Other allied services to domestic and global business of all sizes.
The firm focuses on value optimization for clients by offering practical yet innovative
solutions.
Who We Are

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20+ team
Partner led engagement
Better than Big-4 quality, at values that SMEs can afford
Hands on approach
Global service delivery experience
One stop for regulatory and compliance
Motto : “Client’s Problem is our problem”

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New Locations : Soon

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Sample Credentials

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Suite 1101,
KLJ Towers North, NSP
New Delhi -110034
Tel : 91-11-2735-7350 | 91-11-2735-7030
info@arkayandarkay.com
www.arkayandarkay.com

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THANK YOU