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What are the forms in Which Business can be
Conducted by a Foreign Company in India?
-
What is the Foreign Direct Invest policy of India for
investment in Real Estate Sector ?
-
What is the Taxation Policy in India?
-
What are the Important Labour Rules/ Regulations
Applicable in India?
-
What is the Situation Regarding Intellectual Property
Rights Protection in India?
-
What is Automatic Route for Foreign Direct Investment in
India?
-
What are the circumstances when the Automatic Route is
not available?
-
What is the alternative if the Automatic Route is not
available?
-
Is Automatic Route available for purchase of existing
shares by the foreign investor?
-
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?
-
Can Preference shares be issued under the Automatic Route
?
-
Are all foreign investments repatriable? Whether the
dividend thereon be freely repatriated?
-
Is RBI permission necessary for foreigner/NRI/OCB to
subscribe to Memorandum and Articles of Association?
-
What is the procedure for disinvestment of capital
invested?
-
Under what regulations can NRIs/OCBs make investments in
shares and Convertible Debentures of Indian company on non-repatriation
basis?
-
In what securities other than shares/convertible
debentures can NRIs/OCBs make investment in India?
-
What are the regulations for Foreign Venture Capital
Investment?
-
What is the Policy of Conversion of Non-Repatriable
Shares into Repatriable Shares?
-
What is the Mechanism for Publicizing the Changes in the
FDI Policies?
-
What Mechanism is available Alternative Dispute
Resolution (ICADR)?
Question:
What are the forms in Which Business can be Conducted by a Foreign Company
in India?
Answer:
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.
Question:
What is the Foreign Direct Invest policy of India for investment in Real
Estate Sector?
Answer:
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-Iaws/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.
Question:
What is the Taxation Policy in India?
Answer:
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.
Question:
What are the Important Labour Rules/ Regulations Applicable in India?
Answer:
Some of the important Labour Acts, which are applicable for carrying out
business in India, are:
-
Employees’ Provident Fund
and Miscellaneous Provisions Act, 1952
-
Employees’ State
Insurance Act 1948
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Workmen’s Compensation
Act, 1923
-
Maternity Benefit Act,
1961
-
Payment of Gratuity Act,
1972
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Factories Act, 1948
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Dock Workers (Safety,
Health & Welfare) Act, 1986
-
Mines Act, 1972
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Minimum Wages Act, 1948
-
Payment of Bonus Act 1965
-
Contract Labour
[Regulation & Abolition] Act 1970
-
Payment of Wages Act,
1936
Question:
What is the Situation Regarding Intellectual Property Rights Protection in
India?
Answer:
India is a signatory to the agreement concluding the Uruguay Round of GATT
negotiations and establishing the World Trade Organisation (WTO) and its
laws today are WTO compliant. The important regulations dealing with
Intellectual Property Rights are:
Question:
What is Automatic Route for Foreign Direct Investment in India?
Answer:
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.
Question:
What are the circumstances when the Automatic Route is not available?
Answer:
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.
Question:
What is the alternative if the Automatic Route is not available?
Answer:
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.
Question:
Is Automatic Route available for purchase of existing shares by the foreign
investor?
Answer:
It is important to note that the Automatic Route is only for issue of fresh
shares by the Indian company. Transfer of existing shares from residents to
non-residents needs approval from Government of India followed by an
approval from Reserve Bank of India.
Question:
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?
Answer:
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.
Question:
Can Preference shares be issued under the Automatic Route ?
Answer:
Yes. However, the rate of dividend offered should not exceed SBI Prime
Lending Rate plus 300 basis points.
Question:
Are all foreign investments repatriable? Whether the dividend thereon be
freely repatriated?
Answer:
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).
Question:
Is RBI permission necessary for foreigner/NRI/OCB to subscribe to Memorandum
and Articles of Association?
Answer:
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.
Question:
What is the procedure for disinvestment of capital invested?
Answer:
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.
Question:
Under what regulations can NRIs/OCBs make investments in shares and
Convertible Debentures of Indian company on non-repatriation basis ?
Answer:
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.
Question:
In what securities other than shares/convertible debentures can NRIs/OCBs
make investment in India?
Answer:
NRIs/OCBs/FIIs can purchase, without limit, on repatriation basis Government
dated securities, Treasury Bills, Units of Mutual Funds, PSU Bonds etc. In
addition, they can also purchase on non-repatriation basis units of Money
Market Mutual Funds and National Plan/Savings Certificates.
Question:
What are the regulations for Foreign Venture Capital Investment?
Answer:
A Foreign Venture Capital Investor registered with SEBI may make investment
in a Venture Capital Fund for an Indian Venture Capital Undertaking, in the
manner and subject to the terms and conditions specified in Schedule 6 of
RBI Notification No.FEMA 20/2000-RB dated 3-5-2000.
-
Foreign Venture Capital
Investor is an investor incorporated and established outside India which
proposes to make investment in Venture Capital Fund(s) or Venture
Capital Undertaking(s) in India and is registered with SEBI under SEBI
(Foreign Venture Capital Investors) Regulations, 2000.
-
Indian Venture Capital
Undertaking is a company incorporated in India whose shares are not
listed on a recognized stock exchange in India and which is not engaged
in an activity under the negative list specified by SEBI.
-
Venture Capital Fund is a
fund established in the form of a trust, a company including a body
corporate and registered under the Securities and Exchange Board of
India (Venture Capital Fund) Regulations, 1996 which has a dedicated
pool of capital raised in a manner specified under the said Regulations
and which invests in Venture Capital Undertakings in accordance with the
said Regulations.
-
SEBI registered Venture
Capital Investors are allowed to invest or disinvest at a price that is
mutually acceptable to the buyer and the seller/issuer.
Question:
What is the Policy of Conversion of Non-Repatriable Shares into Repatriable
Shares?
Answer:
FIPB approval is required. Where original investment was made in foreign
exchange, the change is allowed without any conditions; if not, the sale
proceed will have to be repatriated to India by opening an NRO account.
Question:
What is the Mechanism for Publicizing the Changes in the FDI Policies?
Answer:
Changes in FDI policies are brought out in the form of Press Notes by
Department of Industrial Policy & Promotion (DIPP). Soon after releasing the
Press Notes to the media, it is also loaded on the Departmental website (http://dipp.nic.in).
Question:
What Mechanism is available Alternative Dispute Resolution (ICADR)?
Answer:
International Centre for Alternative Dispute Resolution (ICADR) has been
established as an autonomous organization under the aegis of Ministry of Law
& Justice to promote settlement of domestic and international disputes by
different modes of alternate disputeresolution. ICADR has its headquarters
in New Delhi.
NRI FAQ (Frequently Asked Question in case of investment in India)
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