DOING BUSINESS IN INDIA
Emerging trends of ease of doing business in India along with ruling government “Make in India” campaign triggered the platform for Vibrant Gujarat, a biennial summit which is considered as one of the flagship international business summit our country witnessessince 2003. After a successful completion of seven editions of this summit which a brain child of the then CM of Gujarat and present PM of country Mr.Narendra Modi,this summit is corroboration of global luminaries consist of heads of states and governments, ministers, leaders from the corporate world, senior policy makers, heads of international institutions and academia from around the world to further the cause of development and to promote cooperation among the nations. Having successfully organized seven constructive summits held so far have been a great success in showing the growth prospects of the State, its strengths, progressive attitude and the plans and initiatives taken so far to provide effective governance, investor friendly atmosphere and strengthening of art and culture of ,the State Government of Gujarat, as part of its journey towards sustainable long-term growth and inclusive development is organizing the 8th edition of the Vibrant Gujarat Global Summit .The theme for the summit this year is “Sustainable Economic and Social Development” with additional objectives of Empowering India to compete with the best global economies and providing a platform for global business networking.
During the 7th edition of summit held in 2015 more than 21,000 memorandums of understanding (MoUs) were signed during this summit, out of which over 17,000 were related to micro, small and medium enterprise (MSME) sector.Around 4,000 MoUs were signed related to large sector industries and 10,119 for Gujarat Industrial Development Corporation and The Gujarat government has also entered into more than 1,200 strategic partnership agreements with focus on 36 sectors. This year also state government is anticipating more investment figures, and the focuses more on forging ties and knowledge sharing among stakeholders.
With so many MOUs and agreements being signed up by parties it is inevitable to know about mechanism of incorporation of MOUs and legal aspect of doing business in India. This article analysis the legal trend being followed bridging the gap between incorporating a MOUs and doing business in India which would help to foreign entities to prosper their business opportunities in India.
EASE OF DOING BUSINESS IN INDIA
The World Bank Report recently remarked “India has embarked on an ambitious path” in its annual report titled “World Bank Doing Business Report, 2017”. With its constant efforts and due developments by amending its policies and several legislative actions India is opening way for foreign entities who wanted to do business in India.This comprehensive article is a help to those who want to enter Indian markets and want the outlook upon key factors including policies of foreign investment, regulatory framework, entry procedures, taxation guidelines, international agreements and also recent additional regulatory updates.
The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20 major economies, a member of BRICS and a developing economy that is among the top 20 global traders according to the WTO. India was the 19th-largest merchandise and the 8th largest services exporter in the world in 2016.
India is a Quasi-federal with a parliamentary system governed under the Constitution of India, which serves as the supreme law of the country. The President of India is the head of state and is elected indirectly by a national electoral college for a five-year term. The Prime Minister of India is the head of government and exercises most executive power and elected among cabinet ministers.
Ruling government new policies including “make in India”, several initiatives to boost opportunities for startups, improved financial facilities for SME’s etc. are major turning point for investors and new business houses who wants to expand.Furthermore in a bid to boost GDP growth, ruling government first tasks has been to revisit projects that were approved by the previous administration but have yet to start.
Taxes in India are levied by the Central Government and the state governments keeping in mind the federal fabric of the country. Some minor taxes are also levied by the local authorities such as municipality, property taxes, etc. Corporate tax rates are chargedat 30%(including a flat rate of 25%levied on the income earned by a domestic corporate and a surcharge of 5% is levied in case the turnover of a company is more than Rs.1 Crore for a specific financial year) which is fair reasonable level kept by the government’s with the aim to widen the tax base and ensure greater compliance.
Distribution channel in the Indian market
The straight distribution channel employed in India is a pyramidal structure involving movement of goods from carrying and forwarding (C&F) agents to wholesalers and distributors down to retailers. The new supply chain systems include cutting down on intermediaries as in direct marketing or network marketing. New trend of E-commerce industry have begun several new market interaction schemes including B2B, B2C and C2C.
Judicial system in India
India has a well – defined hierarchy of courts with the Supreme Court at uppermost point of pyramid and different High courts at states and then various civil and criminal courts at districts level. Constitution of India defines the jurisdiction for all courts and further Supreme Court rules along with High Courts outlines the procedures of the court. Also there are national level tribunals formed to decide about the cases arising out of company disputes, tax disputes, service law matters etc. Additionally, there are distinct procedural laws governing the mechanism adopted in these courts.
Foreign investment policy
Historically, foreign investment was restricted in India after independence. The new economic reforms initiated in 1991, stimulated FDI into India when the new industrial policy provided, inter alia, automatic approval for projects with foreign equity participation up to 51 per cent in high priority areas along with policies of privatization a and globalization.
Moreover today there are basically three ways through which foreign investment can enrooted in India elucidate as follows-
|Automatic||100%||• Manufacturing (other than items reserved for MSEs)|
• Mining (other than of titanium bearing minerals and ores)
• Greenfield projects in Civil Aviation Sector
•Drugs and pharmaceuticals
• Wholesale / cash & carry trading
• B2B e-commerce
• NBFC (Conditional)
• Special Economic Zones
• Setting up of industrial parks
•Construction Development Projects (Conditional)
• Courier Services
• Petroleum & Natural Gas exploration
|74%||Credit Information Companies (CIC)|
• Private Sector Banks
• Cable Network
• Direct to Home broadcasting
• Mobile TV
• Commodity exchanges • Power exchanges
• Single Brand product retailing
• Air transport services
|FIPB Approval||100%||• Mining and separation of titanium bearing minerals and ores|
• Tea Sector including tea plantations
• Single Brand product retailing > 49%
•Telecommunication services > 49%
|74%||•Private Sector Bank > 49%|
• Cable Network> 49%
• Direct to Home broadcasting> 49%
• Mobile TV> 49%
• Non-scheduled air transport services > 49%
|51%||• Multi Brand Retail Trading|
|49%||• Security agencies in private sector • Defense production|
LEGAL ENTITY FORMATION AND OTHER ENTRY ROUTES
A foreign investor has several options to establish a business entity in India by virtue of operational extensions in India; by forming a joint venture with Indian counterpart etc. following are different kinds of routes a foreign entity can adopt to enter into Indian market mechanism-
A public limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. A company must have a minimum of seven members as per Companies Act, 2013 but there is no limit as regards the maximum number. The company collects its capital by the sale of its shares and those who buy the shares are called the members. The shares of a company are freely transferable and that too without the prior consent of other shareholders or without subsequent notice to the company. There is no cap on minimum capitalization requirement for public companies as it were removed by companies (amendment) act, 2015 as an initiative to improve the ease of doing business in India. Moreover, its formation, working and its winding up, in fact, all its activities are strictly governed by laws, rules and regulations.
A private limited company is a voluntary association of not less than two and maximum of two hundred, whose liability is limited, the transfer of whose shares is limited to its members and who is not allowed to invite the general public to subscribe to its shares or debentures . Further, a private company registered under companies act, 2013 is required to restrict transfer of its shares and restricts the number of its members. Moreover there is no cap on minimum requirement of capital for private companies by virtue of companies (amendment) act, 2015.
Sole proprietorship is one of the simple forms of business which is owned, managed and controlled by single person who is personally entitled for all profits and losses. Although the owner need no registration but require certain necessary licenses or approval from the local authorities related to its business.
A partnership is a kind of business entity involving two or more persons having definite shares in profit and loss having unlimited liability. In India it got governed by Indian Partnership Act, 1932. A person resident outside India cannot contribute to the capital of a partnership firm or sole proprietorship, except with the prior permission of RBI. The RBI may, subject prescribed conditions, permit a person resident outside India to contribute to the capital of a firm or proprietary concern.
Limited Liability Partnership, popularly known as LLP combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one partner is not responsible or liable for another partner’s misconduct or negligence; this is an important difference from that of a unlimited partnership. LLP is managed as per the LLP Agreement, however in the absence of such agreement the LLP would be governed by the framework provided in Schedule 1 of Limited Liability Partnership Act, 2008 which describes the matters relating to mutual rights and duties of partners of the LLP and of the limited liability partnership and its partner. There should be at least 2 persons (natural or artificial) are required to form a LLP. In case any Body Corporate is a partner, than he will be required to nominate any person (natural) as its nominee for the purpose of the LLP.
A liaison office can be opened after obtaining approval from the RBI. Liaison Office is allowed only to carry out promotional activity and no actual sale or other revenues can be generated from this liaison office. They are used to obtain data and statistics and product research work prior to launching of the company’s products. Further, all monies coming in the Liaison office account shall be in convertible currency and no local currency can be put in the same account except for any refunded deposit money at the expiry of a lease.
This is allowed to be opened for carrying out specific projects after prior approval of the RBI on submission of documentation showing the temporary nature of the project. This model has the least hassles and it is easy to windup the operations when the business ends. Taxation is about 12% higher than a normal tax on companies and is currently at about 45% of the profits generated by the variant of the Branch Office. Additionally, the Project Office which is permitted by the RBI for the execution of specific projects as undertaken in India by a Foreign Company.
This is a popular entry strategy for sectors not permitting 100% automatic route for investments or where the Foreign Company is testing the waters regarding the market for its product in India or India as a sourcing hub for its international operations. The prospective partner in a JV Company (JVC), should be chosen based upon business reasons/ strategy, financials and the long term goals of the Foreign Company in India. Due diligence is also required on the general market reputation, capability and penetration of the prospective JV partner and a personal credit rating is also recommended.
It is one of the easy entry options where under all the categories where 100% foreign investment is allowed, they fall in the automatic route, which means that there is no requirement of any prior permission and an Indian company can be opened without much trouble, only there is a requirement of intimation to the RBI after the investment is made. .The preferred modus operandi would be to instruct a lawyer or an accountant to use local Indians to open a shell company with two resident Indian as the shareholders as well as the first directors, and when that company is incorporated, a set of first board resolutions are prepared.
This is one of the facile options available to enter into market mechanism as the restrictions on franchise fee, royalty payments and brand license fees have been relaxed. Moreover, with the government significantly liberalizing the regulations governing single brand retail trading and multi-brand retail trading sectors, many foreign companies with franchise arrangements are considering buying out their franchise partner.
FPIs are regulated by SEBI, and have to comply with the SEBI (foreign portfolio investors) regulations,2014.SEBI acts as a nodal agency for registration of FPIs in India and got sanctioned for such registration by RBI.FIIs and QFIs under the regulations have been given time to transition to the FPI regime. Various different entities under prescribed different categories can obtain registration as FPI regulations.
Additional capital can be raised by any of the following modes subject to regulatory conditions i.e. Rights issue, Partly paid equity shares/warrants ,against import of capital goods and pre-incorporation expense , against legitimate dues of the investee company, issue price and moreover, transfer price of equity shares is subject to pricing guidelines based on internationally accepted methodologies.
Incorporation processes have become much easier under the amendment.
The 2013 law required minimum paid-up capital of up to INR 0.1 million (US$ 1,572) for private companies and INR 0.5 million (US$ 7,862) for public companies. These requirements have been removed completely; no initial capital will be required to incorporate a private or a public limited company.
Requirements for a common seal for all official authorizations and attestations have been made optional under the said amendment which made easier for new companies to start new business without technical jargons.The amendment accepts a company director’s signature as a substitute for a common seal.
Under the 2013 law, businesses needed to apply for a certificate to commence business in India after incorporation. This requirement has been removed.
Under the 2013 law, Board resolutions were public and could be accessed from the Registrar of Companies (ROC). The amendment removes this provision; no individual will be able to obtain copies of board resolutions passed by a company and filed with the ROC. This enables companies to work as per their industry requirements intact their working environment fabric.
The amendment clarifies that holding companies can lend to their wholly-owned-subsidiaries. They can provide guarantees on a loan made by a bank or financial institution to the subsidiary. However, holding companies can only lend to their wholly owned subsidiary under the condition that the funds will be utilized by the subsidiary for its principal business activities. This makes capital requirements for subsidiary company available without formalities.
The amendment adds an additional provision to Section 123(1) under which companies will not be allowed to declare dividends unless carried over past losses and depreciation in previous years are set off against profit of the company for the current year. There have been major cases of companies paying dividends despite making losses in order to satisfy shareholders and lenders so to adopt an accountable parameter and safeguards the interest of public at large this amendment ensures transparency and accountability.
Under amendments made to section 188, related party transactions above INR 10 million (US$ 158,000) can now be approved with a resolution instead of a special resolution. Additionally, no resolutions need to be passed for related party transactions between a holding company and its wholly owned subsidiaries if their accounts are consolidated and placed before shareholders in a general meeting for approval.
The amendments provide specific punishments to deal with failure to pay back depositors under Section 73 and Section 76 of the 2013 law. A company, in addition to paying the amount of deposit or interest due, will be punishable with a fine which shall not be less than INR 10 million (US$ 158,000) but which may extend to INR 100 million (US$1.6 million). Also, every officer of a company who is in default shall be punishable with imprisonment, which may extend to seven years, or with a fine which shall not be less than INR 250,000 (US$3,900) but which may extend to INR 20 million (US$315,000), or both.
The amendments to the Companies Act, 2013 demonstrates that the government is committed to making the law more responsive to the domestic business and foreign investment community. The amendments show that the government is willing to amend aspects of the law that are not working for businesses in India, and is encouraging development. Also government had set up an expert committee to suggest timely needful amendments and in near time we can witness a more comprehensive business favorable environment.
Apart from above other laws affecting business environment in India are-
-The Courts in recent times have adopted a pro-consumer approach. The Courts, in India, have now started awarding compensation and damages which are more punitive than compensatory in nature. Product liability in India is, essentially, governed by a) The Consumer Protection Act, 1986 b) The Competition Act, 2002 c) The Sales of Goods Act, 1930 and d) The law of Torts. While the Consumer Protection Act and the Sales of Goods Act cater to causes of action vis-a-vis consumers and buyers, the Competition Act, on the other hand, has been designed to prevent concentration of economic power to common detriment as well as to control monopolies.
(b) The Food Safety and Standards Act, 2006
(c) The Drug & Cosmetics Act, 1940
(d) The Indian Penal Code, 1860
(e) The Standards of Weights and Measure Act, 1976
– Each of the aforesaid Acts provides for imposition of fine and/or imprisonment in case of supply of defective products or adulterated consumables.
TAX SYSTEM IN INDIA
The Constitution of India under article 245 and 246 provides the power to Central and State read along with schedule VII to impose taxes under various subjects authorized under the union and state list respectively. The union government levies certain taxes as per the union list. They are: Income Tax, Customs duties, Central Excise, Sales Tax,Service Tax, Capital Gains Taxand Securities Transaction Tax.
The principal taxes levied by the State Governments as per the state list subjects are Sales Tax on intra-State sale of goods or Value Added Tax ,Stamp Duty on transfer of assets,State Excise duty on manufacture of alcohol, Duty on Entertainment ,Tax on Professions in some States and Utility taxes.
Moreover Indian tax system is bifurcated in two projections i.e. direct taxes and indirect taxes. Direct tax has a direct impact on the tax payer i.e. it is paid by the person on whom the actual burden lies whereas under indirect tax the burden of tax is shifted upon others by the tax payer.
Direct tax by way of Income tax is levied by the Central Government. Administration, supervision and control in the area of direct taxes lie with the CBDT; it is regulatory body which is responsible for regulating direct taxes in India.
The Indian tax year extends from 1 April of a year to 31 March of the subsequent year. The due date for filing ROI for corporations is 30th November Company required to submit a transfer pricing certificate in Form 3CEB (with respect to international transactions or specified domestic transactions) and 30th September for other companies.
Non-resident corporations are also required to file a ROI in India if they earn income in India or have a physical presence or economic nexus with India as per CBDT rules . Corporate tax liability needs to be estimated and discharged by way of advance tax on quarterly basis. Late filing of a ROI and delays in payment or shortfalls in taxes are liable to attract penal interest at prescribed rates.
For Indian income tax purposes, a corporation’s income comprises the following heads of income:
Corporations resident in India are taxed on their worldwide income arising from all sources. Whereas Non-resident corporations are taxed on the income earned through a business connection in India or any source in India or transfer of a capital asset, being any share or interest in a company incorporated outside India, deriving its value substantially from assets located in India.
Place of Effective Management (POEM) -A corporation is regarded as a resident in India if it is incorporated in India or if its POEM is in India. The concept of POEM has been introduced from 1 April 2015 for determining the tax incidence of foreign companies in India. POEM has been defined to mean a place where key management and commercial decisions i.e. head and brain of the business entity is taken. Draft guidelines have been issued by CBDT for determination of POEM in December 2015 for public consultation. Specific exception has been carved out from the general rules to determine the residential status and business connection for eligible overseas investment funds carrying on fund management activities through an eligible fund manager.
Double Taxation Avoidance Agreement (DTAA) – There are many DTAA Treaties signed between India and other countries and it will be beneficial if such agreement is there between India and the country of non-resident, in that case the provisions of the IT Act or the DTAA, whichever is more beneficial will apply and, accordingly, the taxability is likely to be restricted or modified. However, in order to be eligible for DTAA benefits, a non- resident is required to obtain valid TRC containing prescribed details and also file a self-declaration in Form 10F, where required.
General Anti-Avoidance Rule (GAAR) Implementation of GAAR is now deferred to 1 April 2017 and will be aligned with OECD BEPS recommendations. Rules are expected to be amended to provide that investments made up to 31 March 2017 will be protected from GAAR.
Normal rate of tax to be charged
Domestic and foreign corporations are subject to tax at a specified basic tax rate (25%) and, depending upon the total income, the basic rate is increased with a surcharge (5% with increase in capital every financial year. Furthermore, the tax payable by all corporations is enhanced by an education-cess at the rate of 3% of the tax payable, inclusive of surcharge.
An LLP is liable to pay tax at the base rate of 30%, which is to be further increased by surcharge at the rate of 12% and education cess at the rate 3%. There is no repatriation tax cost while profits are distributed by an LLP, as the share of such profits in the hands of the partner(s) is exempt.
Indian tax law requires MAT to be paid by corporations on the basis of profits disclosed in their financial statements. In cases where the tax payable according to regular tax provisions is less than 18.5% of their book profits, corporations must pay 18.5% (plus surcharges and cess as applicable) of their book profits as tax. Book profits (for this purpose) are computed by making the prescribed adjustments to the net profit disclosed by corporations in their financial statements.
A report from a chartered accountant, certifying the quantum of book profits, must be filed along with the ROI. The CBDT has clarified that with retrospective from 1 April 2001, the specified source of income of foreign companies (including FIIs/FPIs) not having PE in India under relevant DTAA, will be excluded from the purview of MAT where the income tax payable on such income under normal provisions of the IT Act is less than the tax payable under MAT provision. Such source of income includes capital gains (whether long term or short term) arising on transfer in securities, interest, royalty or fees for technical services chargeable to tax in India. Consequently, corresponding expenses are also excluded while computing MAT.
Other domestic corporations must pay DDT at the rate of 20.36% (After grossing up DDT and 12% surcharge and a 3% education cess) on dividends declared, distributed or paid by them. Such tax is a non-deductible expense. Where the recipient domestic corporation declares dividend, credit for dividend received from the domestic subsidiary and foreign subsidiary is available for computation of dividend on which DDT is to be paid by the recipient domestic corporation, subject to prescribed conditions.
An Indian unlisted company has to pay 23.072% (including surcharge and cess) tax on “distributed income”(differential between consideration paid by the unlisted Indian company for buy-back of the shares and the amount that was received by the unlisted Indian company) on buyback of shares. Whereas, the shareholder is exempt from tax on proceeds received from the buyback of shares. No deduction is allowed to the unlisted Indian company in respect of such tax.
There is plethora of taxes levied indirectly and has different implications on different stages for the business houses. These indirect taxes are governed by various pieces of legislations India such as customs act, service tax act, central excise act etc. Following are different indirect taxes along with specified applicable rates and incidence of such taxes-
Overview of GST framework in India
The Government of India has proposed to replace the indirect tax regime in India by a comprehensive dual GST. In keeping with the federal fabric of India, it is proposed that GST will be levied concurrently by the center (CGST) and the states (SGST). The base and other essential design features would be common between CGST and SGST for the individual states. The GST structure will follow the destination based taxation principle, i.e., imports will be included in the tax base, while exports will be zero rated. All inter-state supplies within India will attract an Integrated GST (IGST), which will be the aggregate of CGST and SGST. The revenue neutral rate proposed by the Chief Economic Advisor of the Empowered Committee is between 15% – 15.5%. The final rate would be decided by the GST council. The full input credit system will operate for CGST, SGST and IGST. It has been passed by parliament and in process of getting consonance from the states.
OVERVIEW OF INCENTIVES GRANTED TO DIFFERENT BUSINESS UNITS
Tax Incentives are available on par with any other Indian company specially in the SEZ (Special Economic Zones) that makes the company get exempted from several category of taxes such as service tax, custom duties, excise and in certain cases even the income tax if it is a 100% export oriented company. STPI (Software Technology Park of India) units are entitled to avail several tax exemptions.
Appropriate tax exemptions are given in case of export oriented companies and that is one of the areas that get the maximum benefits, however the domestic market also is very potential since it is a number game, the more you can sell the lower your production cost would get, do not forget it is a billion plus people in India.
IMMIGRATION LAWS OF INDIA
Immigration laws in India are simple and getting a work visa is not difficult. One can also get a long term business visa that would allow supervisory work off and on as required. One does not attract income tax unless he has stayed in India for 183 days in a financial year that is from April 1 to 31st March of the next year. Indian companies are free to employ foreign individuals and or directors on a need basis and do not require any special permissions for the same. Foreign employees can remit back upto 75% of their salaries, considering the fact that 33.5% is the tax deductible at source, they can send all of their salaries technically after payment of tax that is any way deducted at source in case of employees.
There is a plethora of labour laws like Minimum Wages Act, Industrial Disputes Act, Provident Fund, Maternity Benefit Act, Gratuity contribution laws and General Medical Insurance etc., which governs the working and wage conditions for employees under various sectors. The financial implications of the regulations are not huge as the limits provided therein are very low and do not create any drastic burden on the employer/industry.
The main pollution control statutes in India are the Water (Prevention and Control of Pollution) Act, 1974 the Air (Prevention and Control of Pollution) Act, 1981, and the Environment (Protection) Act, 1986, which is designed to act as an umbrella legislation for the environment, with the responsibility for administering the new legislation falling on the Central Pollution Control Board (CPCB) at the national level and the State Pollution Control Board (SPCB) at the State level. All industries (excepting acknowledged non-polluting industries e.g., Wind Power Generation) have to obtain clearance from the CPCB and/or SPCB for the establishment of the industry.
INTELLECTUAL PROPERTY RIGHTS PROTECTION
India does not have a single legislation for the purposes of Intellectual Property, but a whole set of statutes are available which together constitute a self-contained comprehensive code. Intellectual property in its various forms is protected by several different legislations in India. They are appending below:-
– The statutes define the intellectual property right protected under it. They also create a codified structure of the governing authorities and the rules regarding proceedings, offences & penalties.
The diverse modes of acquisition of IP are:
FEMA requires that royalties may not exceed 5% on local sales and 8% on exports from India and the lump-sum payment does not exceed USD 2 million. RBI regulates the remittance of royalties. RBI has delegated powers to Authorized Dealers (AD) to make payment of royalties under IP collaboration agreement.
– RBI allows payment of foreign technology collaboration fees by Indian companies under the automatic route which means no prior permission of the RBI is needed provided that the following conditions are fulfilled:
IP infringement by Local Business Partners:
KEY INTIATIVES TAKEN BY GOVERNMENT FOR EASE OF DOING BUSINESS IN INDIA
Following are the initiatives taken by central government in response to “make in India” campaign and targets to accelerate the growth of country in the present global trend-
START-UPS IN INDIA
This initiative aims at fostering entrepreneurship and promoting innovation by creating an environment that is fit for the growth of Start-ups. The objective is that India must become a nation of job creators instead of being a nation of job seekers. Keeping this in mind Government has decided to provide an enabling environment for nurturing talent, simplifying systems and processes, handholding and incubating new ventures by providing financial support through this new initiative A ‘Start-uphas been defined under the ‘Startup India’ action plan dated January 16, 2016 as
“An entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25 Crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.”
The entity will not meet the requirements of a Start-up if it is formed by splitting up, or reconstruction, of a business already in existence.
Government announced a range of edges in the 2016 Budget for startups, which included 100% tax exemption for three years and allocation of Rs 500 Crore for SC/ST and women entrepreneurs, aiming at facilitation of Business.
In order to promote innovation, a special patent regime has been proposed with a 10% rate of tax on income from worldwide exploitation of patents developed and registered in India under the ‘Start Up India Action Plan’. The proposal is also to launch a ‘Fund of Funds’ which intends to raise Rs 2,500 Crore annually for four years to finance the startups.
The Budget proposes to insert a new Section 54EE under IT act,1961 to provide exemption from capital gains tax if the proceeds are invested in units of such specified fund, subject to the condition that the amount remains invested for 3 years failing which the exemption shall be withdrawn.
To reduce costs in their crucial formative years, startups shall be provided an 80% rebate in filing patents with other companies.
RBI’S new regulations for startups to raise foreign funding.
RBI has underlined the steps taken by the Government’s to promote the ease of doing business and contribute to an ecosystem conducive for growth of entrepreneurship, particularly in respect of the startups. RBI has proposed following regulatory changes for easing the cross-border transactions, particularly relating to the operations of the start-up enterprises, in consultation with the Government of India:-
RBI creates guidelines for startups
The Reserve Bank of India has created helpline for start-ups in India in order to offer guidance for undertaking cross-border transactions within the ambit of the regulatory framework. In this process the enterprises are expected to provide complete information to the Reserve Bank and mention the specific issues on which they need guidance from the Reserve Bank in relation to the Foreign Exchange Management regulations. Start-up enterprises usually undertake a wide range of cross-border transactions relating to investments. Cross-border transactions of resident Indians are subjected to the regulatory regime provided by the Foreign Exchange Management Act, 1999.
Introduction of 19 plans by Prime Minister
Prime Minister Narendra Modi recently unveiled a 19-point action plan for start-up enterprises in India. He also announced a self-certification scheme related to nine labour and environment laws. He also said that there would be no inspection of the enterprises during the first three years of the launch.
A BETTER WAY AHEAD!!
There is ample of prospective for technical transfers and/or alliances and foreign companies could look at joint ventures as well as sub-contracting arrangements with Indian companies, especially in the small and medium enterprises (SMEs) or may bring innovations by bringing start – ups. In addition to the above , the countries could join hands by way for incorporation of MOUs many sectors like infrastructure – development of power, ports, telecommunications, roads, ship building & ship repair, petrochemicals, automobile ancillary, electrical & electronics, office equipment, banking & financial services, software as well as iron & steel. • Infrastructure development in India requires bulk investments which can be done by achieving best technical know-how, capital power which can actually help to accelerate growth in long-run. There is incredible scope for foreign entities to partake in Indian market mechanism. India has all the prospectiveto provide the investors better business environment for conducting their business operations and contribute towards growth & development in this Global world to both their host nation and home country.