Most Attractive FDI Destination in the World – OECD

Establishing a presence in India is key to overcoming cultural alienation, targeting specific emerging markets with huge potential within India, and leaping over bureaucratic hurdles. India still carries plenty of promise as one of the world’s largest economies and consumer markets. It is one of the rare countries that has continued to attract FDI investment even during the pandemic.

Non-resident businesses can benefit from setting up shop in India owing to its abundance of resources, skilled labor at low wages, and tax exemptions for certain categories of businesses. The government has made notable strides in liberalizing industries, easing bureaucratic red tape, and establishing arbitration fora to settle disputes amicably.

India has continued to receive FDI inflows in record numbers during the pandemic, showing strong and continued investor sentiment (Deloitte).

One of the largest number of businesses being registered every year signifying new opportunities in hitherto untapped markets (Ministry of Corporate Affairs statistics).

New startups in the IT and bleeding-edge technology space continue to appear and find success (Statista).

MarketPro predicts that India will provide the largest consumer class change in the coming decade.

India is widely recognized as a force to reckon with in Information Technology, Telecommunications, Engineering, Pharmaceuticals, & Textiles at par with any advanced economy.

Sustained business reforms have helped the country jump 14 places over their previous ‘Ease of Doing Business’ rankings according to the World Bank.

India scored 90 out of 100 under the head, ‘macroeconomic stability’ in the Global Competitive Index prepared by the World Economic Forum (WEF).

India remains one of the world’s top 6 economies by nominal GDP and 3rd by Purchasing Power Parity (Knoema).

Persistent red tape, long winding judicial processes, fragmented markets and distribution networks, and a lengthy list of compliances could pose significant hurdles against tapping an undeniably lucrative market.

In order to successfully navigate these challenges, you will need a helping hand. We can help you right from

• the stage of pre-company formation (market exploration, cost assessment, procedural requirements by law),
• to company incorporation,
• through to staffing,
• finding your office space,
• determining taxes,
• and managing accounts and audits.
• We can also help you understand how businesses operate in India,
• its unique work culture,
• and establish a completely local presence.

To begin with, you may want to learn how you can set up a business in India. We recommend setting goals and expectations for your India business. Once that is done, you can move on to finding the right kind of organizational structure that can help you meet those goals and expectations.

In general, a foreign business can begin operations in India with the following types of organizational structure:

Form an Indian Company:

You can do either of these through private or public limited companies. The following types of companies can be incorporated in India:

This option lets you limit your liability, in case the business winds up, to business assets only. A single person can start an OPC with minimum documentation requirements. There is also no need to conduct annual general meetings or file returns with the Registrar of Companies.

This may be a company limited by shares in capital or by an amount that each company member promises to contribute to the assets of the company. Shares or contributions need to be mentioned in the Memorandum of Association of the company. You also need to have a minimum of 2 members and 2 directors, one of whom (directors) must be an Indian resident.

A Public Limited Company allows you to obtain funding via shares from the public. You need to have a minimum of 7 members and 3 directors, one of whom must be a resident Indian.

You can choose the type of company that best suits your needs and register the organization under the Indian Companies Act 2013. Other than the types of companies mentioned above, Indians can also apply to set up a Hindu Undivided Family, Sole Proprietorship, or Partnership firm structures. However, not all of these fall under the Companies Act for registration. All these latter three types have different registration structures.

The Ministry of Corporate Affairs offers a wholly online process to help you register the type of companies mentioned above. However, documentation requirements can be complex. Your decision at this stage will also affect how much tax and what kinds of filings and audits you will need to legally perform each year.

Apart from registering your company in India, you also have the option of setting up:

To collect information, promote imports and exports, or facilitate technical or financial collaboration.

To provide professional or consultancy services, perform research, develop IT products and services for the parent company, act as buying/selling agent, etc.

To execute specific projects in India. A PO cannot undertake any other activity apart from activities that are related and incidental to the specific project.

This company form is relatively simpler to set up than a full-fledged company, requiring at least 2 partners and 2 designated partners, one of whom must be a resident Indian. However, your liability is limited by the number of shares in the LLP you own.

If you want to start a business single-handedly then you can go for a sole proprietorship or a One-Person Company (Indian residence mandatory). If more than one person is present, you should opt for a Limited Liability Partnership firm, a Private Limited Company, etc.

A One-Person Company and a Sole Proprietorship come with full risk assumptions by the founder, whereas in a company, there is no personal risk. In a partnership, the risk gets divided among the partners depending upon the mutual agreement.

In the case of a proprietorship, registration and maintenance are inexpensive and one-time costs. But companies have a high maintenance cost and need compliance requirements from time to time.

Companies are more credible in terms of registration and other similar procedures but their financial records are accessible to the public. In a sole proprietorship, maintaining a reputation is the sole responsibility of the owner.

Each type of business has a different set of tax slabs and structures. For a Company & LLP, these taxes are charged directly. A partnership, too, attracts different kinds of tax structures. All these structures are charged basic 30% and 25% tax rates, respectively, for small companies. For a Sole Proprietorship, the tax rate lies between 5% to 25% after all exemptions.

1. Check Company Name:Use the RUN service on the Ministry of Corporate Affairs website to check Name availability for your company.

2. Get a Digital Signature Certificate: A digital signature certificate is required for all the directors and subscribers of the Memorandum of Association. Since the Indian company registration process is fully online, one needs a digital signature to sign digital documents on the MCA portal.

3. Director Identification Number: At least one director of your company must have a DIN number. The DIN number of the proposed director and their address proof is a must to proceed with the Indian company registration.

4. Registration on the MCA portal: One must fill the SPICe+ INC 32 form for successful registration on the MCA portal. To get this done, the directors of the company have to register themselves on the MCA portal. Once that is done, log in to the MCA portal services and fill all the e-forms you can see for successful registration.

5. Fill up the e-Memorandum of Association (e-MoA) and the e-Articles of Association (e-AoA) form on the SPICe+ portal.

6. Complete Documentation:Upload all the above e-forms, pay the fees, and wait for a confirmation.

7. Certificate of Incorporation: Once the submission of all the required documents has been completed, the registrar will examine all the documents. After verification and successful completion, the registrar will issue the company’s incorporation certificate. If any changes are required, you will be notified of the suggestions.

8. Obtain your Company Identification Number: (CIN), Permanent Account Number (PAN), and Tax Deduction/Collection Account Number (TAN) at the time of Registration.

9. Companies limited by shares need to file a declaration: that they have received their subscription amount and have a verified office address within 182 days of being incorporated but before they commence their business.

It is not necessary to own a property for company registration in India. A rented place can also serve as your registered office address. But you do need to acquire an NOC (No Objection) from the owner of your rental to register successfully.

The company’s name should not match already registered companies and trademarks.

The company should have an authorized capital of INR 100,000 minimum for Indian company registration

A maximum of 15 and a minimum of 2 Directors are a must for an Indian Private Limited company registration. Also, one of the directors must be an Indian resident.

You would require a scanned copy of all the listed documents above. Also, for address registration, it is not necessary to own your own company office.

For the purposes of tax, companies are classified into domestic and foreign companies. While the former are liable to pay taxes on income they earn anywhere, the latter are liable to pay taxes only on income earned in India.

Income earned by a company incorporated and registered in India is further categorized as

Tax rates on companies as well as individuals keep changing every year and are announced in the Annual National Budget declaration in Parliament. For the Financial Year that ended on March 31, 2021, the rates were as follows.

According to Section 139 of the Income Tax Act, you, as a taxpayer, need to file your income tax returns every year within the notified period or face a penalty.

These high rates are one more reason why you should register your company under Indian law to commence business in the country.

It is mandatory for companies manufacturing or supplying goods and services in the Indian market to register themselves for the Goods & Services Tax (GST). This includes foreign companies without a place of business in the country.

The GST replaces the previous system of Value Added Taxes (VAT), Excise taxes, service taxes, etc.

The GST requires taxpayers to register on the GSTIN website, file monthly and annual returns, file for receiving Input Tax Credit, e-way bills for goods being transported, and so on. We recommend consulting a seasoned tax professional to manage the entire process so that you can concentrate on innovating and growing your business.

While procedures and papers needed might seem complex to an outsider, an expert can pull you through with tried-and-tested methods to get your company registered and become compliant with local regulations. We offer a cost-effective way for your Indian company registration. All your legal obligations are taken care of. Once you’re done with all the documentation and submissions, we will provide you with your company’s Incorporation letter along with all other identifiers such as CIN, DIN, PAN, and TAN numbers.

Now that you know how to register your company, where do you go from here?

You could be selling and earning profits off any of the myriad booming opportunities from your India business right now.