Rakesh Jain & Co.

Rakesh Jain & Co. May 2017

Chartered Accountants
New Delhi

Setting up
business in
India
Setting up business in India 1
Disclaimer
This document is issued by

Contents
Rakesh Jain Rakesh
& Co. Jain & Co. May 2017
Chartered Accountants. It
is not intended as an oer
or solicitation for business
to anyone in any
jurisdiction. It is not
intended for distribution to
Mode of operation 3
anyone located in or Registering a company 5
resident in jurisdictions
which restrict the Corporate Taxation 6
distribution of this
document. It shall not be Audit & Compliance 7
copied, reproduced, Contacts 8
transmitted or further
distributed by any

CONTENTS
recipient. The information
contained in this document
is of a general nature only.
It is not meant to be
comprehensive and does
not constitute financial,
legal, tax or other
professional advice. You
should not act upon the
information contained in
this publication without
obtaining specific
professional advice. Whilst
every care has been taken
in preparing this document,
Rakesh Jain & Co. does
not makes any guarantee,
representation or warranty
(express or implied) as to
its accuracy or
completeness, and under
Rakesh Jain & Co.
no circumstances will
Rakesh Jain & Co. be liable Chartered Accountants
for any loss caused by New Delhi
Setting up business in India 2
reliance on any opinion or
statement made in this
document.
Rakesh Jain & Co.
Mode of operation
Operating as an Indian
Company
A Wholly owned subsidiary
A foreign company can set
up a wholly-owned
subsidiary company in India
to carry out its activities. A
foreign company can own
100% shares in such Indian
company.
JV with an Indian partner
Foreign companies can also
form strategic alliances with
Indian partners. One can
choose a partner who is in
the same area of activity or
who brings synergy to the
foreign investors plans for
India.
Limited Liability
Partnership (LLP)
LLP form of entity combines
Setting up business in India
May 2017
the advantages of a
company, such as being a
separate legal entity having
perpetual succession, with
the benefits of organisational
flexibility in a partnership. At
least two partners are
required to form a LLP.
Foreign individual
investors
A foreign national looking to
invest in India can also
register a Company here.
However, Indian laws require
a minimum of 2 persons to
start a company in India, of
which atleast 1 person must
be a resident in India. So,
the foreign investor will need
atleast 1 Indian resident to
act as Director of the
company. The foreign
national can still own
majority shares in the Indian
company.
3
Rakesh Jain & Co. May 2017

Operating as a Foreign setting up temporary project Representing the parent

and site oces. company in India and acting
Company as a buying/selling agent in
These are allowed only when India.

Liaison oce specific projects / contracts

A foreign company can set have been awarded to the Rendering services in
up a liaison oce to collect foreign company from an information technology and
market information and/or India company or authorised development of software in
provide information about project sanctioning authority India.

the company and its in India.

products to prospective Rendering technical support
Indian customers. Branch oce for the products supplied by
Foreign companies can set parent/group companies.

Such an oce acts as a up branch oces in India for

Acting as a foreign airline/
communication channel the following purposes, with
shipping company.

between foreign company the prior approval of RBI:

and prospective Indian

customers / stakeholders. Export/import of goods.

A liaison oce is not allowed Rendering professional or
to undertake any business consultancy services.

activities other than liaison

Carrying out research
activities in India and
work in which the parent
cannot, therefore, earn any
company is engaged that
income in India.

promotes technical or
financial collaborations
Project oce
between Indian companies
Foreign companies planning
and a parent or overseas
to execute specific projects
group company.

in India have the option of

Setting up business in India 4

Rakesh Jain & Co.
Registering a Company
Registrations
Company Law - Certificate
of Incorporation (COI)
COI is issued by Registrar of
embassy -
Companies. This is the
primary document required
by a Company to start
by Bureau of Immigration
operations in India.
Any person who has lived in
Foreign Director (residing
Income Tax Law - PAN &
TAN
Permanent Account Number
(PAN) is a unique number
allotted by Income Tax
department in India. This is a
Company
primary requirement to open
a bank account.
documents -
Tax Deduction & Collection
Account Number (TAN) is
also required to be obtained
under Income Tax law when
specified payments are
made to vendors.
(example - utility bill)
Setting up business in India
Requirements
Directors
A minimum of 2 persons to
act as Directors of the
company are required.
Atleast one of the Directors
must be a resident in India.
India for 186 days or more is
considered resident in India.
Shareholders
A minimum of 2
shareholders are required. A
company (Indian or Foreign)
can also be a shareholder.
Company Address
An address in India is
required for use as
Company address. The
address may be rented or
owned or with NOC from the
Signature
legal owner.
May 2017
Documents Foreign Director (residing
in India)
Indian Director Following documents
attested by individuals
Identity proof (example -
Passport / Aadhaar)
Passport
Address proof (example -
Passport / bank Residence permit issued
statement / utility bills)
in India
Photograph
Visa
Photograph on Digital
in native country)
Signature form
Following documents
Signature
attested in the country of
issue - Registered address of
Passport
Address proof - Drivers Any one of the below
license / bank statement
Photograph on Digital Proof of ownership
Signature form, notarised / Rent agreement
apostiled in the country of
NOC from landlord along
residence.
with proof of ownership
5
Rakesh Jain & Co.
Corporate Taxation
Corporate Income Tax
Corporate tax
Corporate tax rates are as
mentioned in Table 1
Dividend distribution tax
(DDT)
Dividend income is exempt
in the hands of the
shareholders. However, a
DDT is levied on companies
declaring dividends @15%
plus surcharge & cess.
Double tax avoidance
Indian government has
signed Double tax
avoidance agreements with
most countries. These
agreements override the
Indian Income-tax Act
provisions to the extent that
they are more beneficial to
the taxpayers.
threshold limits under GST law
Setting up business in India
May 2017
Table 1 - Corporate Tax Rates in India
Domestic Foreign
company company
Where turnover < INR 500 million Where profit < INR 10 million 25.75% 41.20%
Where profit > INR 10 million & < INR 100 million 27.55% 42.02%
other cases 28.84% 43.26%
Where turnover > INR 500 million Where profit < INR 10 million 30.90% 41.20%
Where profit > INR 10 million & < INR 100 million 33.06% 42.02%
other cases 34.61% 43.26%
Indirect Tax (GST) and pay GST. Rates of GST
can vary from 5% - 28%
The sale of goods or rendering depending on the type of
of services in India is goods or services provided.
Many indirect taxes like, Sales
chargeable to tax. GST (Goods
tax, VAT, CST, Excise, Service
& Service Tax) is a new tax
Tax, Luxury tax, Custom duty
which will be levied on all
etc are being removed and a
taxable transactions. All
single GST is made applicable.
businesses meeting the
are required to get registered
6
Rakesh Jain & Co.
Audit & compliance
Audit
Businesses including both
private and public companies
and branches of foreign
companies are required to be
audited by independent
certified Chartered
Accountants.
Most companies have
voluntarily adopted 31st
March as the date for
preparing their financial
statements because a uniform
accounting year ending on
31st March is
required for tax purpose.
reflect tax withheld on
Setting up business in India
May 2017
Statutory filings (ROC) and maintain records
prescribed under Company
Law.
Corporate tax
Corporate Income Tax return
Employment laws
is to be filed annually on or
Companies must comply
before 30th September each
with various laws protecting
year.
workers interests like
Indirect tax (GST) Minimum Wages Act 1936,
Factories Act 1948, Payment
GST returns are required to
of Bonus Act 1965,
be filed monthly as per the
Employees Provident Fund &
dates being notified by the
Miscellaneous Provisions
Government.
Act 1952 & Employees State
Withholding tax (TDS) Insurance Act 1948.
TDS returns are required to
be filed quarterly. These
specified payments made to
vendors.
Company law
Companies are also required
to file annual returns with
Registrar of Companies
7
NikhilRakesh
JainJain
& Co. May 2017

Partner

Contact : +91 96544 50410

Email : nikhil@rakeshjainca.com

Rakesh Jain & Co.

Chartered Accountants
Phone: +91 (11) 4162 0582
2646 0082
2621 5174
Oce : D-136, East of Kailash
New Delhi 110065 India
Email : contact@rakeshjainca.com
Website: www.rakeshjainca.com

Setting up business in India 8