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Doing business in india

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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.

Published in: Economy & Finance
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Doing business in india

  1. 1. 1
  2. 2. INDIA Introduction to 2
  3. 3. 3 INDIA: A GLANCE
  4. 4. Background 4 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. 5. Then – Now- Future 5 GDP (INR)
  6. 6. Why India? 6 Fast economic growth Democracy + Political Stability Talented Workforce Tax and other Incentives Low Valuations Low Cost Intellectual property protection Increasing Domestic Consumption Export infrastructure
  7. 7. 7 Initiatives
  8. 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
  9. 9. 9 Key Sectors
  10. 10. 10 SETTING UP
  11. 11. 11 Setting up in India
  12. 12. Industrial Policy of Government of India Companies Act, 2013 Foreign Exchange Management Act, 1999 (FEMA) 12 Applicable Laws
  13. 13. 13 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
  14. 14. 14 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
  15. 15. 15 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. 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 16 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. 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. 17 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. 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 18 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. 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. 19 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
  20. 20. 20 APPLICABLE TAXES
  21. 21. 21 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
  22. 22. 22 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%
  23. 23. 23 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
  24. 24. 24 CULTURAL ASPECTS
  25. 25. 25 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
  26. 26. 26 ARKAY & ARKAY
  27. 27. 27 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
  28. 28. 28 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”
  29. 29. 29 New Locations : Soon
  30. 30. 30 Sample Credentials
  31. 31. 31 Suite 1101, KLJ Towers North, NSP New Delhi -110034 Tel : 91-11-2735-7350 | 91-11-2735-7030 info@arkayandarkay.com www.arkayandarkay.com
  32. 32. 32 THANK YOU

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