India has a rapidly growing economy in South East Asia and due to various benefits provided by the government, it has become a hot destination for investors. A foreigner or an NRI can easily start a business in India. Indian government welcomes FDI (foreign direct investment) with open hearts and has allowed up to 100% FDI in many sectors. The government has also relaxed the registration process for foreigners for setting up their business in India. Foreigners can easily start their business in India under following three ways-
- Incorporating a private limited company– You may either incorporate an entirely new private limited company or set up a wholly owned Subsidiary of your parent company in India. It is an easy setup; however setting up private limited company is advisable only, if the parent company wishes to operate in India for long term. Company has to make compliances of all the laws prevailing in India (more compliance as compared to branch & partnership/LLP), however, compliances are not very harsh.
Taxation-The benefit of incorporating this type of company will be that it will be taxed @ 25-30 percent approx. (current rate). The shareholders can withdraw their profits in the form of dividends which are taxed @ 10 percent (a few of them are charged @ 15 %) as per DTAA (Double tax avoidance agreements. So generally the company will be taxed between 32-36%. Management of company should be done from India only to avoid CFC rules ( In the case of the USA.) Please click here to know all about registering a private limited company in India.
- Setting up a branch office-It is very easy to setup a branch office in India. Although, few compliances of Reserve Bank Of India (RBI) & companies Act 2013 needs to be complied with. Once registered, your company will be registered in India as foreign company & all laws as applicable to foreign company will apply.
Taxation– Approximately a branch office will be taxed @ 40 %. However, concerning the nature and purpose of business this can be a good option, if the parent company wishes to operate for lesser span of time in India.
- Partnership or LLP– It is also an easy setup, all compliances applicable to partnership/LLP in India needs to be done (more compliances as compared to branch but less a compared to company),
Taxation-There are high uncertainties with regard to taxation under this setup, different countries have different ways of taxing partnership & in that case some time it becomes difficult to avail DTAA benefits. Generally this type of setup is not advisable.
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