India is one of the fastest growing economies in the world. With the government encouraging foreign investment and there being no dearth of talent and inexpensive labour in India, setting up business here is an attractive option.
Even non-resident Indians (NRIs) are considering the option, especially after the last budget. But NRIs need to keep certain things in mind before setting up a business in India.
The Company Structure:
With effect from April 1, 2021, NRIs can incorporate one person companies (OPC) in India. “NRIs can also form partnership firms where the firm should have at least one resident Indian partner. They can also open a private limited company or a limited liability company,” said Suneel Dasari, founder and CEO, EZTax.in, an online income tax filing portal. A private limited company is the most viable in legal terms.
Directors And Shareholders:
A private limited company can be started with as less as two shareholders.
Also, it requires a minimum of two directors. A shareholder can also become a director. However, a director does not need to be a shareholder.
There are certain roles the resident director needs to perform. He or she needs to liaise with the local government bodies when required but may or may not be involved in running the business. “A private limited company must have at least two directors. At least one of the directors should be an Indian citizen and resident. Besides, profit repatriation from a company is subject to tax in India at 20 per cent which can be reduced by the tax treaty rate. Distribution from LLP on the other hand is tax free,” says Yeeshu Sehgal, international tax expert, AKM Global, a tax and consulting firm.
Documentation:
Director Identification Number (DIN) is a unique number allotted to directors. There are some processes which need to be followed for appointing a director. These are the same for an NRI and a resident director. To obtain a DIN, certain documents SUCH AS? are required to be attested. The Indian embassy of the country the NRI resides needs to attest the documents. A digital signature is also required.
Companies also need to have a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN). These are used for tax purposes. “NRIs are permitted to serve as directors of Indian companies under the Indian Companies Act, 2013 and they will have to apply for a digital signature certificate and then obtain a DIN before becoming a director in a company,” adds Sehgal.
Office Space:
An address proof is mandatory to start a business in India. NRIs live in other countries. Hence. they do not have address proof documents. So, getting an address proof is a challenge for them. To address this problem, NRIs can opt for virtual offices. A lot of incubation centres provide this service.
Investment Regulations: When an NRI invests in India, it is considered as FDI if it is made on repatriation basis. Hence, guidelines regarding FDI must be followed.
FDI investments can be made either through the automatic route or the government route. For the automatic route, permission is not needed from the Reserve Bank of India (RBI) or the Indian government. However, prior approval is required for the government route.
The kind of approval required depends on the sectors the business is investing in. There are also certain sector-wise caps on FDI investments. Most sectors are, however, eligible for FDI investment under the automatic route.
