|
|
| A foreign enterprise wishing to do business in India has following options: |
| Ø Agency |
| This provides an indirect presence in India to the foreign entity. An Indian entity can be appointed as agent of the foreign business. Depending upon the scope of the agency agreement, the agent can buy or sell or provide any other service. |
| Ø Liaison Office |
| These are owned and controlled by the foreign enterprises. However the liaison offices are not allowed to earn any income and are primarily opened by foreign companies to liaise with their customers in India and for promoting export & import. No manufacturing, trading or any other commercial activity is allowed in liaison offices. |
| Ø Branch Office |
| The branches are basically an extended arm of the foreign company and can undertake export/import of goods, consultancy, research, coordination with local buyers and sellers, provide technical support for products sold in India, development of software and airline/shipping business. However branches are not allowed to undertake manufacturing activities except research work in which parent company is engaged. These branches are treated as foreign company in India and are liable for higher Income tax (48% against 35.7% for companies set up in India). The foreign parent company is liable for all activities of the Indian branch. Due to restrictions in day-to-day operations and higher taxation, it is not a popular route. |
| Ø 100% subsidiary and Joint Venture |
| This is the most sought after route for foreign companies wishing to establish a base in India. For this an Indian company with limited liability is formed in India, whose liabilities are limited to Indian operations only. The Companies once approved are treated like other Indian companies and enjoy all the benefits of being Indian Company. Depending upon the business sector, the investments on repatriation basis are allowed under automatic route or through a prior approval by FIPB (Foreign Investment Promotion Board). |
| Ø Foreign Investment |
| Foreign Investment in India is subject to policy guidelines framed by the Government of India from time to time in accordance with its Industrial Policy. In terms of the Industrial Policy and Procedure announced by the Government of India foreign equity, with or without sectoral caps, is permitted by Reserve Bank under the Automatic Route in specified industries/services sector. Applications that do not conform to the parameters of the Automatic Route, are required to be made to the Secretariat for Industrial Assistance (SIA), Ministry of Commerce and Industry, Government of India, New Delhi. Foreign Institutional Investors are permitted to invest in securities in primary and secondary markets in India as per guidelines issued by Reserve Bank in this regard. |
| The information provided here is for general information and every user should take proper professional advice before taking any decision. The writer of this note or the website shall not be responsible for any costs, liability or damages arising out of any action taken by the readers of this note |