Under the Government Route, prior approval of Government of India, Ministry of Finance, Foreign Investment Promotion Board (FIPB) is required.

Transcription

1 DOING BUSINESS IN INDIA COUNTRY INTRODUCTION Strategically located in Southern Asia and is the seventh largest country in the World with a total land area of 3,287,263 square kilometres. India has a parliamentary system of government and the Preamble of the Constitution of India states that the type of government adopted by India is sovereign, socialist, secular, democratic, republic. Legal system is based on the English Common Law and Statutory law. The judiciary consists of the Supreme Court of India, High Courts at the state level and District and Session Courts at the district level Religious composition of the country consists of Hinduism, Islam, Christianity, Sikhism, Buddhism, and Jainism. Hindi is the principal official language of the Republic of India while English is the secondary official language. English is widely written and spoken especially in urban areas and for business. Currency: Indian Rupees (INR) Investment growth areas include infrastructure, automobiles, ports, chemicals, food processing, oil & natural gas, civil aviation, petrochemicals, power, services, biotechnology, and telecommunications manufacturing related services and agriculture. BUSINESS PRESENCE Main types of business models in India: locally incorporated companies (may be limited by shares or by guarantee), sole proprietorships, partnerships and limited liability partnerships. Foreign Companies may incorporate a company under the Companies Act either as a joint venture company or as a wholly owned subsidiary subject to foreign investment restrictions. Foreign Company may also open branch office, project office or liaison office in India in accordance with the provisions of Foreign Exchange Management Act of FOREIGN INVESTMENT RESTRICTIONS AND CONDITIONS Restrictions in Equity Participation Foreign collaboration and equity participation in India is regulated by the Foreign Direct Investment (FDI) policy announced by the Government of India and the Foreign Exchange Management Act of FDI can be made by non residents in the shares/convertible debentures/preference shares of an Indian Company through two routes Automatic Route and the Government Route. Under the Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank of India or Government of India for the investment. Under the Government Route, prior approval of Government of India, Ministry of Finance, Foreign Investment Promotion Board () is required. Foreign Direct Investment ( FDI ) is prohibited in India in the following sectors: Retail Trading (except single brand retailing); Atomic Energy; Lottery Business including government/private lottery, online lotteries etc; Gambling and Betting including casinos etc; Business of Chit Fund; Nidhi Company; Trading in Transferable Development Rights (TDRs);

2 Real estate business or construction of farm houses Activity/sector not opened to private sector investment. Besides foreign investment in any form, foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also completely prohibited for Lottery Business and Gambling and Betting activities. In the following sectors/activities, FDI is allowed upto the limits indicated below subject to other conditions as indicated S.No Sector/Activity FDI Cap/Equity Entry Other Conditions Route I. Agriculture 1. Floriculture, Horticulture, 100% Automatic Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture and Cultivation of Vegetables & Mushrooms under controlled conditions and services related to agro and allied sectors. Note: Besides the above, FDI is not allowed in any other agricultural sector/activity 2. Tea Sector, including tea 100% Subject to divestment of 26% equity in favour of plantation Indian partner/indian public within 5 years and Note: Besides the prior approval of State above, FDI is not Government concerned allowed in any other in case of any change in plantation future land use. sector/activity II. INDUSTRY II A MINING 3. Mining covering Mining and exploration of metal and non metal ores including diamonds & precious stones; gold, silver and minerals but excluding titanium bearing minerals and its ores. 4. Coal & Lignite mining for captive consumption by power projects, and iron & steel, 100% Automatic Subject to Mines & Minerals (Development & Regulation) Act, % Automatic Subject to provisions of Coal Mines (Nationalization) Act, Doing Business in India Page 2

3 cement production and other eligible activities permitted under the Coal Mines (Nationalisation) Act, 4A Setting up coal processing plants like washeries 5. Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities. Note : FDI will not be allowed in mining of prescribed substances listed in Government of India notification No. S.O. 61(E) dt issued by the Department of Atomic Energy under the Atomic Energy Act, IIB MANUFACTURING 6. Alcohol- Distillation & Brewing 7. Cigars & Cigarettes- Manufacture 8. Coffee& Rubber processing & warehousing 9. Defence production 100% Automatic Subject to the company not doing coal mining and not selling washed coal or sized coal from its coal processing plants in the open market and shall supply washed or sized coal to parties who are supplying raw coal to coal processing plants for washing or sizing 100% Subject to sectoral regulations and the Mines and Minerals (Development & Regulation) Act, 1957 and the following conditionsi. value addition facilities are set up within India along with transfer of technology; ii. disposal of tailing during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such Atomic Energy (Radiation Protection) Rules 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules % Automatic Subject to license by appropriate authority 100% Subject to industrial license under the Industries (Development & Regulation) Act, % Automatic 26% Subject to licensing under Industries (Development Doing Business in India Page 3

4 10. Hazardous chemicals, viz., hydrocyanic acid and its derivatives; phosgene and its derivatives; and isocyanates and diisocyantes of hydrocarbon. 11. Industrial explosives - Manufacture 12. Drugs & Pharmaceuticals including those involving use of recombinant DNA technology 13. Industrial undertaking which is not a Micro or Small Enterprises, but manufactures items reserved for MSE sector IIC POWER 13. Generation and transmission of electric energy produced in hydro electric, coal/lignite based thermal and gas based power plants (except Atomic Power plant/atomic energy); Non conventional Energy Generation and Distribution (except Atomic Power plant/atomic energy), Distribution of electric energy to households, industrial, commercial and other users and III Power Trading. SERVICES & Regulation) Act, 1951 and guidelines on FDI in production of arms & ammunition. 100% Automatic Subject to industrial license under the Industries (Development & Regulation) Act, 1951 and other sectoral regulations. 100% Automatic Subject to industrial license under Industries (Development & Regulation) Act, 1951 and regulations under Explosives Act, % Automatic 100% beyond 24% Subject to Industrial License under under Industries (Development & Regulation) Act, 1951 and the conditions for issuance of Industrial license for such manufacture 100% Automatic Subject to provisions of the Electricity Act, Advertising and Film 100% Automatic Doing Business in India Page 4

5 Industry including film financing, production, distribution, exhibition and associated activities related to film industry 14A. Civil Aviation Sector (i) Airports a. Greenfield projects 100% Automatic Subject to sectoral regulations notified by Ministry of Civil Aviation www b. Existing projects 100% beyond 74% (ii) Air Transport Services including Domestic Scheduled Passenger Airlines; Non- Schedules Airlines; Chartered Airlines; Cargo Airlines; Helicopter and Seaplane Services c. Scheduled Air Transport Services/ Domestic Scheduled Passenger Airline d. Non-Scheduled Air Transport Service/ Non-Scheduled airlines, Chartered airlines, and Cargo airlines e. Helicopter Services/Seaplane services requiring DGCA approval (iii) Other services under Civil Aviation Sector f. Ground Handling Services 49%- FDI; 100%- for NRI investment 74%- FDI 100%- for NRIs investment Automatic Automatic civilaviation.nic. in Subject to sectoral regulations notified by Ministry of Civil Aviation in Subject to no direct or indirect participation by foreign airlines and sectoral regulations. Subject to no direct or indirect participation by foreign airlines in Non- Scheduled and Chartered airlines. Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines. Also subject to sectoral regulations 100% Automatic Foreign airlines are allowed to participate in the equity of 74%- FDI 100%- for NRIs investment companies operating Helicopter and seaplane airlines. Also subject to sectoral regulations. Automatic Subject to sectoral regulations and security clearance. Doing Business in India Page 5

6 g. Maintenance and Repair organizations; flying training institutes; and technical training institutions 15. Asset Reconstruction Companies 100% Automatic 49% (only FDI) Where any individual investment exceeds 10% of the equity, provisions of Section 3(3)(f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 should be complied with Banking - Private sector 74% (FDI+FII) Automatic Subject to guidelines for setting up branches / subsidiaries of foreign banks issued by RBI. 16A. Banking Public Sector 20% (FDI + Portfolio Investment) 17. Broadcasting a. FM Radio FDI +FII investment up to 20% b. Cable network 49% (FDI+NRI + PIO investment + Portfolio Investments) c. Direct-To-Home 49% (FDI+NRI + PIO investment + Portfolio Investment). Within this limit, FDI component not to exceed 20% d. Setting up hardware facilities such as up-linking, HUB, etc 49% (FDI+FII) Subject to Section 3(2D) of the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970/80 Subject to Guidelines notified by Ministry of Information & Broadcasting. Subject to Cable Television Network Rules (1994) Notified by Ministry of Information & Broadcasting. Subject to guidelines issued by Ministry of Information & Broadcasting. Subject to Up-linking Policy notified by Ministry of Information & Broadcasting. Doing Business in India Page 6

7 e. Up-linking a News & Current Affairs TV Channel 26% FDI+FII Subject to guidelines issued by Ministry of Information & Broadcasting. f. Up-linking a Nonnews & Current Affairs TV Channel g. Headend In the Sky (HITS) Broadcasting Service 18. Commodity Exchanges 19. Construction Development projects, including housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships. Note:: FDI is not allowed in Real Estate Business 100% Subject to guidelines issued by Ministry of Information & 74% (FDI + portfolio investment) 49% (FDI+FII) Investment by Registered FII under PIS will be limited to 23% and FDI upto 49% on automatic route anf beyond that on reoute Broadcasting. Subject to guidelines issued by Ministry of Information & Broadcasting. FII purchases shall be restricted to secondary market only. No foreign investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies. 100% Automatic Subject to conditions including: a. minimum capitalization of US$ 10 million for wholly owned subsidiaries and US$ 5 million for joint venture with Indian Partner. The funds would have to be brought within six months of commencement of business of the Company. Original investment cannot be repatriated before a period of three years from completion of minimum capialisation. Original investor may be permitted to exit earlier with prior approval of the Government through b. Minimum area to be developed under each project- 10 hectares in case of development of serviced housing Doing Business in India Page 7

8 plots; and built-up area of 50,000 sq. mts. in case of construction development project; and any of the above in case of a combination project. c. Atleast 50% of the project to be developed within a period of 5 years from the date of obtaining the statutory clearances undeveloped plots cannot be sold by the investor/investee company. d. the project to comply with applicable rules and regulations e. the investor/investee company to obtain all necessary approvals. 19A Development of Special Economic Zones (SEZ) 19B a. maintenance ofroads, rail-beds, bridges, tunnels, pipelines, ropeways, runways, waterways & water reservoirs, hydroelectric projects, power plants and industrial plants. 100% Automatic Subject to Special Economic Zones Act 2005 and SEZ Policy of the Department of Commerce. 100% Automatic b. construction and maintenance of Roads and highways offered on BOT basis including collection of toll. c. construction and maintenance of Rural Drinking Water Supply Projects, Package Water Treatment Doing Business in India Page 8

9 Plants, Rain and Rain Water Harvesting Structures, Waste- Water Recycling And Re-Use Techniques And Facilities, Rain- Water Re- Charging And Re-Use Techniques Of Ground Water. 19C (a) Leasing of existing Ports, (b)construction/creation and maintenance of assets such ascontainer terminals bulk/break bulk/multipurpose and specialized cargo berths, warehousing, container freight stations, storage facilities and tank farms, cranage/ handling equipment, setting up of captive power plants, dry docking and ship repair facilities. (c) Leasing of equipment for port handling and leasing of floating crafts. (d) Captive facilities for port based industries. 100% Automatic Route 19D Mass Rapid Transport Systems in Metropolitan Cities including associated development of real estate 20. Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, Credit Information Companies 100% Automatic 100% Subject to existing laws and exclusion of activity relating to distribution of letters, which is exclusively reserved for the State. 49 % (FDI+FII) Investment by Registered FII under PIS will be limited to 24% only in the CICs listed at the Stock Foreign Investment in CIC will be subject to Credit Information Companies (Regulation) Act, FII investment will be subject to the conditions Doing Business in India Page 9

10 22. Industrial Parks both setting up and in established Industrial Parks Exchanges within the overall limit of 49% foreign investment. that: (a) No single entity should directly or indirectly hold more than 10% equity (b) Any acquisition in excess of 1% will have to be reported to RBI as a reporting requirement; and (c) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding. 100% Automatic Conditions applicable for construction development projects would not apply provided the Industrial Parks meet with the under-mentioned conditions- i. it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area; ii. the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area. 23 Insurance 26% Automatic Subject to licensing by the Insurance Regulatory & Development Authority Infrastructure Company in the Securities Market 25. Non Banking Finance Companies i) Merchant Banking ii) iii) Underwriting Portfolio 49% (FDI 26% and FII 23%) Subject to SEBI regulations. FII can invest only through purchases in the secondary market 100% Automatic Subject to: a. minimum capitalization norms for fund based NBFCs - US$ 0.5 million to be brought Doing Business in India Page 10

11 iv) v) vi) vii) viii) ix) x) xi) xii) xiii) xiv) xv) xvi) xvii) xviii) Management Services Investment Advisory Services Financial Consultancy Stock Broking Asset Management Venture Capital Custodial Services Factoring Credit Rating Agencies Leasing & Finance Housing Finance Forex Broking Credit card Business Money changing Micro Credit Rural Credit upfront for FDI up to 51%; US$ 5 million to be brought upfront for FDI above 51% and up to 75%; and US$ 50 million out of which US$ 7.5 million to be brought upfront and the balance in 24 months for FDI beyond 75% and up to 100%. b. minimum capitalization norms for non-fund based NBFC activities- US$ 0.5 million. c. foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of 25% of its equity to Indian entities subject to bringing in US$ 50 million without any restriction on number of operating subsidiaries without bringing additional capital. d. joint venture operating NBFC s that have 75% or less than 75% foreign investment will also be allowed to set up subsidiaries for undertaking other NBFC activities subject to the subsidiaries also complying with the applicable minimum capital inflow. e. compliance with the guidelines of the RBI. f. The minimum capitalization norms would apply would be applicable where the foreign holding in a NBFC(both direct and foreign holding in a NBFC(both Doing Business in India Page 11

12 26. Petroleum and Natural Gas Sector a. Refining 49% in case of PSUs 100% in case of Private b. Other than Refining and including market study and formulation; investment/ financing; setting up infrastructure for marketing in Petroleum & Natural Gas sector. 27. Print Media a. Publishing of newspaper and periodicals dealing with news and current affairs b. Publishing of scientific magazines/ specialty journals/ periodicals 28. Telecommunications a. Basic and cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile direct and indirect) exceeds the limits indicated at (a) above g. The capital for the purpose of minimum capitalization norms shall consist of ordinary shares only. (in case of PSUs) Subject to Sectoral policy and no divestment or Automatic dilution of domestic (in case of private equity in the existing PSUs. companies companies) 100% Automatic Subject to sectoral regulations issued by Ministry of Petroleum & Natural Gas 26% Subject to Guidelines notified by Ministry of Information & Broadcasting % Subject to guidelines issued by Ministry of Information & 74% (Including FDI, FII, NRI, FCCBs, ADRs, GDRs, convertible preference shares, and proportionate Automatic up to 49%. beyond 49%. Broadcasting. Subject to guidelines notified in the PN 3(2007) Doing Business in India Page 12

13 Personal Communications Services (GMPCS) and other value added telecom services b. ISP with gateways, radiopaging, end-toend bandwidth. foreign equity in Indian promoters/investi ng Company 74% Automatic up to 49%. beyond 49%. Subject to licensing and security requirements notified by the Dept. of Telecommunications. c. (a) ISP without gateway, (b) infrastructure provider providing dark fibre, right of way,duct space,tower (Category I); (c) electronic mail and voice mail d. Manufacture of telecom equipments 100% Automatic up to 49%. beyond 49%. Subject to the condition that such companies shall divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. Also subject to licensing and security requirements, where required % Automatic Subject to sectoral requirements Trading a. Wholesale/cash & carry trading 100% Automatic b. Trading for exports 100% Automatic c. Trading of items sourced from small scale sector 100% d. e. Test marketing of such items for which a company has approval for manufacture Single Brand product retailing 100% 51% Subject to the condition that the test marketing approval will be for a period of two years and investment in setting up manufacturing facilities commences simultaneously with test marketing. Subject to guidelines for FDI in trading issued by Department of Industrial Policy & Promotion. Doing Business in India Page 13

14 30. Satellites - Establishment and operation 31. Health and Medical Services 32 Hotels and Tourism related industry 74% Subject to Sectoral guidelines issued by Department of 100% Automatic 100% Automatic Space/ISRO In Sectors/Activities not listed above, FDI is permitted up to 100% on the automatic route subject to sectoral rules/ regulations applicable. The issue price of shares issued to persons resident outside India under the FDI scheme, shall be on the basis of Securities Exchange Board of India guidelines in case of listed companies. In case of unlisted companies, valuation of shares has to be done by a chartered accountant in accordance with the guidelines issued by the erstwhile Controller of Capital Issues. Restrictions in Real Estate Acquisition Non Resident Indian (NRI) (being a citizen of India but resident outside India) or a Person of Indian Origin (PIO) (being an individual not being citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan who at any time held Indian Passport or whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act 1955) is allowed to acquire immovable property in India other than agricultural land or plantation property or farm house. For acquisition if agricultural land, plantation property or farm house by NRI or PIO, specific approval of Reserve Bank of India is required. Foreign companies permitted to open branch office are allowed to acquire any immovable property in India which is necessary for or incidental to carrying on such activity. Declaration in prescribed form (Form IPI) is required to be filed with the Reserve Bank of India within 90 (ninety) days of the acquisition of such immovable property. Foreign Companies permitted to open liaison office are not allowed to acquire any immovable property in India, however, such liaison offices may take the property by way of lease not exceeding 5 (five) years. Payment for such acquisition of immovable property can be made by NRI/PIO only out of Funds remitted to India through normal banking channel; or Funds held in NRE/FCNR/NRO account maintained in India Approvals and Licensing Appropriate approvals and licences are required for the operation of any business activity. These may be obtained from the relevant ministry, government agencies etc. Application process and prescribed fee payable vary depending on the prescribed condition for the application. EXCHANGE CONTROL Governed by the Exchange Control Department of the Reserve Bank of India Authorisations in the form of licences to deal in foreign exchange are granted to banks, established firms, hotels etc permitting them to deal in foreign currency notes, coins and travellers cheques. All foreign investments are on repatriation basis except for the cases where NRIs / OCBs choose to invest specifically under non-repatriable schemes. Interests, dividends declared on foreign Doing Business in India Page 14

15 investments, rent, business income, revenue incomes, can be remitted freely through an Authorised Dealer (AD). Capital Gains cannot be repatriated. TAXATION [For the Financial Year ] Corporate Tax For Domestic Companies Domestic Companies are taxed at a rate of 30% on its income. Special method for computation of total income of insurance companies. The rate of tax on profits from life insurance business is 12.5 percent. Surcharge is 7.5 percent if total income is in excess of INR 10,000,000. Marginal relief may be available education cess is 3 percent on income-tax (inclusive of surcharge, if any). For Foreign Companies Foreign companies are taxable at the rate of 40% on income derived from India. Surcharge is 2.5 percent if total income is in excess of INR 10,000,000. Marginal relief may be available Education cess is 3 percent on income-tax (inclusive of surcharge, if any). Minimum Alternate Tax Minimum Alternate Tax (MAT) is 18 percent of the adjusted book profits in the case of those companies where income-tax payable on the taxable income according to the normal provisions of the Income-tax Act, 1961 (the Act), is less than 18 percent of the adjusted book profits. MAT credit is available for 10 years Surcharge is 7.5 percent in the case of domestic companies if the adjusted book profits are in excess of INR 10,000,000. Marginal relief may be available Education cess is 3 percent on income-tax (inclusive of surcharge, if any). Personal Income Tax For Individuals, Hindu Undivided Families, Association of Persons and Body of Individuals: Total Income Tax Rates Upto INR 1,60,,000 Nil INR 1,60,001 to INR 5,00,000 10% INR 5,00,001 to INR 8,00,000 20% INR 8,00,001 and above 30% (a) In the case of a resident woman below the age of 65 years, the basic exemption limit is INR 190,000 (b) In the case of a resident individual of the age of 65 years or above, the basic exemption limit is INR 240,000 (c) Surcharge is not applicable (d) Education cess is 3 percent on income-tax For Firms [(including Limited Liability Partnership (LLP)] Firms (including LLP) are 30 percent. Surcharge is not applicable. Education cess is 3 percent on income-tax. Doing Business in India Page 15

16 Securities Transaction Tax Securities Transaction Tax (STT) is levied on the value of taxable securities transactions as under: Transaction Rates Payable by Purchase/Sale of equity shares, units of equity 0.125% Purchaser/Seller oriented mutual fund (delivery based) Sale of equity shares, units of equity oriented mutual fund (non delivery based) Sale of an option in securities Sale of an option in securities, where option is exercised Sale of a futures in securities Sale of unit of an equity oriented fund to the Mutual Fund 0.025% Seller 0.017% Seller 0.125% Purchaser 0.017% Seller 0.25% Seller Wealth Tax Wealth tax is 1 percent on the value of specified assets held by the taxpayer on the valuation date (31 March) in excess of the basic exemption of INR 3,000,000. Dividend Distribution Tax Dividend distributed by an Indian Company is exempt from income-tax in the hands of its shareholders. The Indian Company is liable to pay Dividend Distribution Tax percent (i.e. inclusive of surcharge and education cess) on such dividends Special Rates for Non residents The following incomes in the case of non resident are taxed at special rates on gross basis: Nature of Income Dividend (other than dividends on which Dividend Distribution Tax has been paid) Interest received on loans given in foreign currency to Indian concern or Government of India Income received in respect of units purchased in foreign currency of specified Mutual Funds / UTI Royalty of fees for technical services Rate 20% 20% 20% For Agreements entered into: - After 31 May 1997 but before 1 June 20% Doing Business in India Page 16

17 - After 1 June 10% Interest on FCCB, FCEB / Dividend on GDRs (other than dividends on which Dividends Distribution Tax has been paid) 10% In case the non-resident has a Permanent Establishment (PE) in India and the royalty/fees for technical services paid is effectively connected with such PE, the same could be 40 percent (plus surcharge and education cess) on net basis. Tax on non-resident sportsmen or sports association on specified 10 percent plus applicable surcharge and education cess. Tax on capital gains Particulars Sale transactions of equity shares / unit of an equity oriented fund which attract STT Short Term Capital gains tax Long Term Capital Gain tax rates Rates 15% Nil Sale transaction other than mentioned above: Individuals (resident and non-residents) Progressive slab rates Firms including LLP (resident and non-resident) Resident Companies 30% Overseas financial organisations specified in section 115AB 30% 20% with indexation / 10% without indexation for units/zero coupon bonds 40% (corporate) 30% (non corporate) FIIs 30% 10% Other Foreign Companies 40% 20% with indexation / 10% without indexation for units/zero coupon bonds Local Authority 30% Cooperative Society Progressive slab rates 20% with indexation / 10% without indexation for units/zero coupon bonds Withholding Tax Withholding tax on certain types of payments made to a non-resident is imposed. Interest earned in India, royalties and fees for technical services attracts withholding tax of 10% Other taxes Value added tax imposed by respective state government on sale of goods at various rates as listed in the Value Added Tax Act of the respective state. Service tax on various services as identified by Finance Act: 10%. Custom duty: ad valorem duty at various rates for imported items as per the Customs Tariff Act, Selected products manufactured in India: excise duty at various rates as per the Central Excise Tariff Act, Stamp duty on certain documents executed within India: nominal or ad valorem stamp duty on the basis of provisions of Indian Stamp Act % Doing Business in India Page 17

18 Scope of Total Income chargeable to tax In respect of person ordinarily resident in India, the total income of any previous year shall include all income from whatever source derived which Is received or deemed to be received in India in such year by or on behalf of such person Accrues or arises or is deemed to accrue or arise to him in India during such year; Accrues or arises to him outside India during such year. In respect of a person not ordinarily resident in India, the total income of any previous year shall include all income from whatever source derived which Is received or deemed to be received in India in such year by or on behalf of such person Accrues or arises or is deemed to accrue or arise to him in India during such year; Accrues or arises to him outside India during such year from a business controlled in or a profession set up in India. In respect of person being a non resident, the total income of any previous year shall include all income from whatever source derived which Is received or deemed to be received in India in such year by or on behalf of such person Accrues or arises or is deemed to accrue or arise to him in India during such year; An individual is ordinarily resident in India in any previous year, if he is in India for at least 182 days; or has stayed for at least 365 days in the immediately preceding 4 (four) years and has stayed for at least 60 days in that year. A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is wholly outside India. A Company is said to be resident in India in any previous year, if: It is an Indian company; or During that year the control and management of its affairs is situated wholly in India An individual is not Ordinarily Resident in India if he or she fulfils either of these two conditions: Has been a Non-Resident in India for 9 out of 10 preceding years, OR During the 7 preceding years been in India for a total of 729 days or less. A HUF shall be not Ordinarily Resident in India if the manager of the HUF fulfils either of these two conditions Has been a Non-Resident in India for 9 out of 10 preceding years, OR During the 7 preceding years been in India for a total of 729 days or less. TAX AND INVESTMENT INCENTIVES The Government of India has been extending a host of incentives and concessions to eligible corporations in certain specific industries. Broadly the tax incentives include tax holidays for corporate profits, accelerated depreciation allowances and deductibility of certain expenses subject to fulfillment of prescribed conditions. The profits of specified new industrial undertakings qualify for tax exemption. New undertakings are defined as undertakings that are formed by means other than the division or reconstruction of a business already in existence, or the transfer to a new business of machinery or plant previously used in India for another purpose Double Taxation Relief and Tax Treaties Taxpayers have the option to choose between the provisions of the tax treaty or the Income Tax Act, whichever is beneficial to them If the foreign income source of a resident is taxed in a country with which no double taxation avoidance agreement exists and such income is also taxed in India, then resident taxpayers may Doing Business in India Page 18

19 claim a tax credit in respect of such doubly taxed incomes to the extent of the taxes paid in the source country or the rate of tax in India, whichever is lower. EMPLOYMENT LAW Under the Constitution of India, labour is a subject in the Concurrent List where both the Central & State Governments are competent to enact legislation subject to certain matters being reserved for the Centre. There are various Acts that regulate labour and employment in India. Some of the Acts are Apprentices Act, 1961, Child Labour (Prohibition and Regulation) Act, 1986, Maternity Benefit Act, 1961, Minimum Wages Act, 1948, Payment of Bonus Act, 1965, Payment of Gratuity Act, 1972, Payment of Wages Act, 1936, Employer s Liability Act, 1938, Industrial Disputes Act, 1947, Factories Act, 1948, Workmen compensation Act, Different labour laws have different eligibility criteria for establishments as well as to the workmen. India is a member of the International Labor Organization (ILO) and adheres to around 37 ILO conventions protecting worker rights. Industrial relations are governed by the Industrial Disputes Act of The Act curbs unfair labor practices by employers, workers or trade unions through imposition of fines and imprisonment. Workers may form or join unions of their choice. India has the world s third-largest pool of scientific and technical personnel, which serves as an important attraction for foreign investors The Industrial Disputes Act established freedom of association and collective bargaining rights. The Factories Act regulates working conditions in mechanized factories employing more than 10 employees or non-mechanized factories employing more than twenty, prescribing standards for working conditions, working hours, handling and storage of materials, etc. Payment of wages is governed by the Payment of Wages Act, 1936 and Minimum Wages Act, 1948 Retrenchment, closure and layoffs are governed by the Industrial Disputes Act, which requires prior government permission to carry out layoffs or closure of businesses employing 100 or more workers The Workmen's Compensation Act, 1923 provides for compensation to workers for industrial accidents and occupational diseases resulting in disability and death. The Maternity Benefit Act, 1961 covers mandatory maternity benefits. The Payment of Gratuity Act, 1972 requires employers to pay a gratuity to workers earning less than a certain limit upon termination of service. The Equal Remuneration Act, 1976 prohibits job and wage discrimination based on sex, except for prohibiting or restricting the employment of women in certain categories of work. The Child Labour (Prohibition and Regulation) Act, 1986 prohibits child labour in hazardous occupations and regulates it in non-hazardous occupations. The Trade Unions Act, 1926 provides for registration of trade unions Other laws regulate employment of women and children and prohibit bonded labor. No specific permission of the Government of India or the RBI is required for a foreign national to take up employment in India INTELLECTUAL PROPERTY Intellectual Property protection in India comprises patents, trademarks, industrial design, copyright and geographical indications. Trademarks is governed by the Trademarks Act of 1999, Copyrights are governed by Copyrights Act, Geographical Indications are governed by the Geographical Indications of Goods (Registration and the Protection) Act, 1999, industrial designs by Designs Act 2000 and patents by Patents Act Registered patents, trademarks / service marks, industrial design and geographical marks enjoy monopoly rights/protection. Unregistered trademarks protected by the Indian courts under the tort of passing off. Copyright protection for literary, dramatic, musical or artistic works, sound recordings, broadcasts, cinematography films and computer program. Doing Business in India Page 19

20 India is a member of the World Intellectual Property Organization (WIPO) and a signatory to the Paris Convention, Berne Convention and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). India s intellectual property laws conform to international standards and provide adequate protection to both local and foreign investors. DISPUTE RESOLUTION The dispute resolution process in India mainly involves the following: Litigation Arbitration Conciliation Mediation Supreme Court of India in New Delhi is the highest court of appeal. Each state has a High Court along with subsidiary District Courts. Civil disputes at first instance may be heard at the District Court or High Court, depending on complexity and value. Cases may go on appeal to the High Court and then to the Supreme Court. A civil, criminal or commercial dispute may be filed in the court having territorial jurisdiction and depending upon level of crime or pecuniary jurisdiction. The place of cause of action and the place of residence of the defendant are the necessary determinants of territorial jurisdiction. Every judgment delivered by the Supreme Court becomes the Law of the Land to be followed by all the other lower courts. A number of special courts and tribunals have been constituted in India to deal with specific disputes: Various Tax Tribunals Consumer Dispute Redressal Forums Insurance Regulatory Authority of India Industrial Tribunals Debts Recovery Tribunals Company Law Board Motor Accidents Claims Tribunals Alternative dispute resolution (ADR) is available and include arbitration, conciliation and mediation. IMMIGRATION PROCEDURES Passport and Visa Requirements Foreign Nationals desirous of coming into India are required to possess a valid passport of their country and a valid Indian Visa. Foreign passengers should ensure that they are in possession of valid Indian Visa before they start their journey to India except nationals of Nepal and Bhutan who do not require visa to enter India and nationals of Maldives who do not require visa for entry in India for a period up to 90 days (a separate Visa regime exists for diplomatic/official passport holders). The Consular Passport and Visa (CPV) Division of the Ministry of External Affairs is responsible for issuance of Indian visas to the foreign nationals for their visit for various purposes. This facility is granted through various Indian missions abroad. The Bureau of Immigration handles the immigration procedures at the major international airports. Types of Visa issued Tourist visas valid for six-month and one year (six months stay each time) are available. Entry Visa valid for six months to one year stay with multiple entries for legitimate purposes. Business Visa valid for six months and one year with multiple entries. A letter from sponsoring organisation indicating the nature of applicant s business, probable duration of stay, places and organisations to be visited needs to be accompanied with the application. Doing Business in India Page 20

21 Student visa - Depending upon the duration of the course, multiple entry student visas for bonafide students to pursue regular studies at recognized institution in India are available. Visa is valid for up to five years or the duration of the course, whichever is less. A letter confirming admission from such an institution along with evidence of financial arrangements for stay in India should accompany the application. Transit Visa valid for single/double entry for short stop over for travelling to a third country is available. Journalist visas are given to professional journalists and photographers for three months stay in India. Employment visas are initially issued for one-year stay. A copy of the contract with the employer is required to be enclosed. Employment Visa is given only for jobs that require very high level of skills and expertise. The period can be extended by Foreigners Regional Registration Office in India, if the job contract continues. Spouses and children are granted co-terminus entry visas on request. Conference Visa may be issued if application is accompanied with a letter of invitation from the organizer of the conference and approvals of Indian authorities are to be submitted along with the visa application. Foreigners holding a visa for more than 180 days must get themselves registered, within two weeks of their arrival, at the Foreigners Regional Registration Office (FRRO) at Delhi / Mumbai/ Calcutta / Chennai Doing Business in India Page 21