What
are the forms in Which Business can be Conducted by a Foreign Company in India?
Foreign
companies can make investments or operate their business in a number of ways
such as Liaison/Representative office, Branch Office,?Project Office, 100%
Wholly owned Subsidiary?, and? Joint Venture company. The requisite approval
can be granted by Reserve Bank of India (RBI) or Foreign Investment Promotion
Board (FIPB). Any company set up with FDI has to be incorporated under the
Indian Companies Act with the Registrar of Companies, Ministry of Company
Affairs and all Indian operations would be conducted through this company.
What
is the Foreign Direct Invest policy of India for investment in Real Estate
Sector?
Development criteria
Development criteria
·
Minimum 10
hectares/ 25 acres area to be developed for serviced housing plots
·
For
construction-development projects, minimum built-up area of 50,000 sq mts
prescribed
·
In case of
a combination project, any one of above two conditions would suffice
Investment conditions
·
Minimum
capitalization of US$ 10 million for wholly owned subsidiaries & US$ 5
million for joint ventures with Indian partners
·
Funds to
be brought in within 6 months of commencement of business
·
Original
investment cannot be repatriated before a period of 3 years from completion of
minimum capitalization. Investor may be permitted to exit earlier with prior
Government approval
Other conditions
· At least
50% of project must be developed within of 5 years from date of obtaining all
statutory clearances
· Investor
not permitted to sell undeveloped plots
· Project to
conform to norms & standards laid down by respective State authorities
· Investor
responsible for obtaining all necessary approvals as prescribed under
applicable rules/bye-laws/regulations of the State
· Concerned
Authority to monitor compliance of prescribed conditions by developer
“Undeveloped”
plot means where roads, water supply, street lighting, drainage, sewerage &
other conveniences have not been made available. It will be necessary that
investor provides this infrastructure & obtains a completion certificate
prior to sale of serviced housing plot.
What
is the Taxation Policy in India?
Foreign
nationals working in India are generally taxed only on their Indian income.
Income received from sources outside India is not taxable unless it is received
in India. The Indian tax laws provide for exemption of tax on certain kinds of
income earned for services rendered in India. Further, foreign nationals have
the option of being taxed under the tax treaties that India may have signed
with their country of residence. Remuneration for work done in India is taxable
irrespective of the place of receipt. Remuneration includes salaries and wages,
pensions, fees, commissions, profits in lieu of or in addition to salary,
advance salary and perquisites. Taxable payments include all allowances and tax
equalisation payments unless specifically excluded. The stock options granted
by the employer are taxable as capital gains at the time of sale of shares
acquired due to exercise of options.
What
is Automatic Route for Foreign Direct Investment in India?
Automatic
Route allows Indian companies engaged in all industries except for certain
select industries/sectors to issue shares to foreign investors up to 100% of
their paid up capital in Indian companies.
What
are the circumstances when the Automatic Route is not available?
Foreign
investors have to, however, keep in mind that they may invest freely under the
Automatic Route described above but where such investment does not conform to
policies of Government of India, a specific approval from Government must be
sought. For example, there are Government guidelines on location of industrial
units, or there are certain items like explosives or liquor that need an
industrial licence. If the Indian company does not conform to the locational guidelines or needs an Industrial licence then it cannot issue shares under the
Automatic Route.
Automatic
Route is also not available to those foreign investors who already have a
financial or technical collaboration in the same or allied field or where more
than 24% foreign investment is made in a company which is engaged in
manufacture of an item reserved for small scale industry. Finally, Sri Lankan
nationals and investors from Pakistan & Bangladesh need to apply to
Government of India for investing in Indian companies.
What
is the alternative if the Automatic Route is not available?
If
for any of the reasons mentioned above, the Indian company cannot issue shares
to foreign investors under the Automatic Route, an application may be made to
Secretariat for Industrial Assistance (SIA), Ministry of Commerce &
Industry, Government of India, New Delhi.
Can
the surplus funds/refund of remittance received from a person resident outside
India for purchase of shares under the Automatic route or with specific
Government approval or purchase of shares offered on right basis be
repatriated?
YES,
the surplus funds/refund of remittance received from a person resident outside
India for purchase of shares under the Automatic route or with specific
Government approval or purchase of shares offered on right basis can be
repatriated through authorized dealers who have been delegated powers by way of
(A.P.DIR Series) circular No.45 dated November 12, 2002.
Are
all foreign investments repatriable? Whether the dividend thereon be freely
repatriated?
Yes.
All foreign investments are on repatriation basis except for the cases where
NRIs/OCBs choose to invest specifically under non-repatriable schemes.
Dividends declared on foreign investments can be remitted freely through an
Authorised Dealer (AD).
Is
RBI permission necessary for foreigner/NRI/OCB to subscribe to Memorandum and
Articles of Association?
Indian
companies are permitted to issue shares to non-resident investors in terms of
the Automatic Route as indicated in the Schedule I to the Foreign Exchange
Management (Transfer or Issue of Security by a person resident outside India)
Regulations 2000. It is clarified that non-resident investors can subscribe to
the Memorandum & Articles of Association of those companies which are
eligible to issue shares under the Automatic Route in terms of the Regulations
mentioned above.In respect of companies not covered by the Automatic Route,
foreign investors can subscribe to the Memorandum & Articles of Association
after necessary approval for investment is obtained from SIA/FIPB.
What
is the procedure for disinvestment of capital invested?
Non
residents can sell shares on Stock Exchange without prior approval of RBI. They
can approach a bank for repatriation of the sale proceeds if they hold the
shares on repatriation basis and if they have necessary NOC/Tax Clearance Certificate issued by Income Tax authorities.
Under
what regulations can NRIs/OCBs make investments in shares and Convertible
Debentures of Indian company on non-repatriation basis?
NRIs/OCBs
can make investments up to 100% of paid up capital of the companies in all
sectors on non-repatriation basis except Agriculture/Plantation, Real Estate
Business, Chit Funds & Nidhi companies and companies engaged in Print Media
sector.
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