Written By: Dezan Shira & Associates
1. What are my options for investment?
Foreign investment into India can come in a variety of different legal entities. Your choice of entity depends on the kind of work you plan to do during your time in the country.
2. How do I establish a company?
Establishing a company in India can be a lengthy administrative process that requires communication with many different authorities.
Amongst these are an initial clarification as to whether the business activities requires Reserve Bank of India approval or not. Seeking professional help will ensure that you get it right first time and do not have to make costly changes later on
3. What are the key positions in an Indian company?
Incorporating a private limited company requires a minimum of two directors, and between two and fifty shareholders. Shareholder(s) are the highest authority of the company. The director or board of directors sets the agenda of the company’s operations according to shareholder decisions.
Directors can be managing directors, executive directors or non‐executive directors. As part of annual compliance requirements, companies must appoint an auditor to undertake a full audit of company accounts prior to the Annual General Meeting (AGM).
The auditor must be a chartered accountant appointed by the board of directors.
For companies with paid‐up capital of more than INR1 million, a company secretary must be appointed to sign an annual compliance certificate; for those with paid‐up capital of more than INR50 million, a full‐time company secretary must be appointed to act as a compliance officer.
4. What kind of IPR considerations should be taken into account?
An important issue that needs to be taken care of when investing in India is registration of your trademark. Registration involves several filing procedures, takes about 12 months from commencement to issuance of the certificate, and can be carried out by licensed Indian trademark lawyers at Trademark Registry Offices in Ahmadabad, Chennai, Kolkata, Mumbai or New Delhi.
A trademark can be placed upon a brand, heading, label, ticket, name, sign letter, text, word, numeral, slogan, base line, shape, color or any combination of any of these. The object of the mark must be distinctive, must not be identical or similar to a mark already registered or pending application for registration, must not be prohibited by law, and must be owned by the applicant
5. What are India’s major taxes?
Tax Reform has been on the political agenda for some time, with decreases to expected in both Corporate and Individual Income Taxes. However, political wrangling between different regional governments and the central government over the control of VAT and GST rates have consistently interrupted the intended reforms
6. How is accounting and bookkeeping done?
In India, accounting is done according to the Accounting Standards issued by the Institute of Chartered Accountants of India and approved by the Parliament of India.
There are more than 30 accounting standards, each governing different aspects of accounting statements. These accounting standards have legal recognition through the Companies Act.
The RBI regulates the country’s foreign exchange markets and prescribes exchange control norms. The Indian rupee is fully convertible on the current account, which means that foreign exchange is freely available for making and receiving trade‐related payments.
7. What are the annual compliance requirements?
Annual compliance requirements differ for entities depending on whether they are foreign representative offices or companies. All incorporated companies, whether public or private, are required to undertake an annual audit of accounts.
Audited financial reports along with the auditor’s report must be sent to the shareholders well before the Annual General Meeting (AGM) is held. Company accounts must be submitted to the office of the concerned Registrar of Companies (ROC) annually, following an AGM.
8. How is transfer pricing conducted?
Transfer pricing concerns the prices charged between associated enterprises (those linked through management, control or capital) established in different tax jurisdictions for their intercompany transactions.
Transfer pricing documents need to be submitted by October 31 following the close of the relevant year. Records also need to be maintained for at least 8 years from the end of the relevant fiscal year. A transfer pricing audit is required if the related party transaction exceeds INR150 million.
Even if a related party transaction is lower than INR150 million, an audit is still possible. Therefore, documents on transfer pricing should be maintained by all firms.
9. What visas are needed for my foreign staff?
All foreigners visiting India (excluding overseas citizens of India, persons holding a “Person of Indian Origin” card and Nepalese or Bhutanese nationals) need a visa.
India issues tourist visas, generally for 180 days with multiple entries. A tourist visa on arrival (TVOA) scheme has been set up by the Indian Immigration Department for up to 30 days for nationals of Cambodia, Finland, Indonesia, Japan, Laos, Luxembourg, Myanmar, New Zealand, Philippines, Singapore, and Vietnam.
For business activities, two other types of visa are important to note: business visa (for which the period of stay in India per visit is limited to six months) and employment visa.
For the latter, there are additional requirements for employees of the IT and journalism sectors, and a less restrictive regime for the power and steel sectors.
For all foreigners intending to stay in India for longer than 180 days (on any type of long‐term visa), there is a requirement to register with the local Foreigners’ Regional Registration Office (FRRO). In most cases, this registration needs to be done within 14 days of arrival in India.
10. What should I look out for when signing labor contracts?
Indian labor laws provide a minimum of guarantees and benefits to all employees and these laws supersede the provisions of labor contracts. There are three types of contracts in India:
• Permanent (direct) contract
• Fixed contract
• Temporary contract
Besides company rules and regulations, clauses related to the following points can be incorporated into contracts:
• Employee poaching
• Unfair competition
• Trademarks, patents and trade secrets