NRI TAX SERVICES AND INVESTMENT IN KOCHI, ERNAKULAM KERALA

Among the trusted chartered accountants in Kochi, Ernakulam, Kerala providing an array of services in field of NRI Tax services, Investment and business consultancy services for Pravasi’s in Kerala.

There are different type returns filing applicable for Pravasi NRI solely dependent on the nature of income in India. Any tax deducted in India can be refunded provided your income is below the threshold limit and it would be prudent to file the income tax returns in Kerala in order to avoid unwarranted notices from income tax authorities.

How a Pravasi NRI / Foreign Nationals can establish business in India – An Overview

There are many foreign nationals or Non-resident Indians who may be eager to put in their investments and expertise in India to gain profit from and to contribute their efforts towards developing the country. With the regulatory environment changing in the last few years, it is necessary to know how to set up business the right way in India and get going.

The term ‘Foreign’ or ‘Indian’ at the outset does not necessarily mean ownership. It may rather denote place of registration. Hence, with the incorporation of a business in the country by a foreign national, it can be termed as an Indian company. However, if only branch office is planned to be set up here by a foreign company, then it is referred to as Foreign Company.

About FDI

The investment made by the NRI/Foreign National is classified as FDI (Foreign Direct Investment) in the country. Prior to economic liberalization in the 1990s, FDI had several restrictions. With time, the restrictions became less stringent and currently, in place for those who are engaged in activities which are found strategic to the country’s interests or politically sensitive issues like Real Estate, Telecom, Defence, Retails Trade, etc.

FDI presently is classified as:

  • Prior permission not necessary for the business.
  • Prior permission is necessary from the concerned ministry (government), called Approval Route.
  • Where FDI not permitted in some business sectors.

Once the Recipient Company receives & accepts the FDI, the RBI (Reserve Bank of India) is sent an intimation, in FC-GRPS Form within a month period of share allotting to foreign shareholders.

Therefore, FDI policy is the initial aspect to be checked out and also understand the prohibitions, restrictions present in proposed business activity. Only then company formation process should be initiated.

Approval Route

These days, it has been liberalized. However, if proposed FDI is found to not fall in auto route, the concerned ministry and RBI’s prior permission will be essential prior to investment entering India. FIPB (Foreign Investment & Promotion Board) no longer exists.

On understanding clearly applicable FDI rules to proposed transaction, type of business entity to be setup can be determined.

Entity types

This is obviously the next question to be asked. Partnership or proprietorship business is not allowed for FDI in India, except NRIs being allowed to carry out this on non-repatriable basis. But this route is not advised. NGOs and trusts cannot be done with FDI except Venture Capital Trusts. Few options are given below:

  • Liaison Office: It is quite suitable for those companies not having much or any presence in the country. It is restricted in its functions and set up mainly as communication medium between existing Indian customers and the foreign company. Business operations or customer solicitation is not allowed. They have the least compliance to be followed. The major advantage derived is income taxes, where Transfer Pricing and Permanent Establishment are not of much concern as there is no income here.
  • Branch Office: It is a step take towards initiating full-fledged business presence in the country. It can execute a good number of tasks like that of a Limited Company, but except manufacturing. It acts as foreign company’s branch and earn from business operations. Norms have been recently tightened by the RBI with regards to who can open up a branch office, with one criteria being the Foreign company requiring having minimum 5 years track record of making profit.
  • Project Office: It is established for a specific project and is a temporary branch-office.
  • Private Ltd. Co. / Ltd Co.: This type enjoys full presence in the country. The previous three entities technically are known as Foreign Companies, while the subsidiary company is referred to as Indian company. When compared to foreign company, there are more compliances to be followed.
  • LLP (Limited Liability Partnership): Since FDI norms have liberalized and most LLPs able to enjoy the auto route, it is among the preferred routs for FDI. It eliminates the need for compulsory presence of proxy directors, shareholders/directors. But at least a single partner needs to be resident Indian. There are no requirements like following of rigorous rules in case of deposits, to maintain accounts books and registers for audits, shareholder and management meeting, etc. Also is absent dividend distribution taxes, thereby providing the opportunity of the LLP becoming a favorite entity among MNCs and Foreign Individuals in future when making investments here.
    • LLPs with permission of 100% FDI via automatic route and no FDI linked performance associated conditions can enjoy FDI.
    • Real estate, print media or agricultural plantation activity business does not allow FDI.

Project Office or Branch Office setup in India: Know some practical procedures

  • Reserve Bank of India is to be approached to obtain permission for the same. The typical documents required are Certificating of Registration, last 3 years Annual Report of the Parent Company, Power of Attorney duly attested by home country Indian embassy, License, reason to set up establish office here and Board Resolution, etc.
  • If the above documents satisfies the RBI, then approval letter is provided, which may however, contain few conditions and need to be observed stringently. Permission provided might be for specific time period, usually for 3 years.
  • On obtaining of RBI permission, the next step is to get Registrar Companies permission in single form for which some fees need to be paid.
  • The entity is referred to as an extension of the specific office. ‘ABC Inc.’ branch office in India, for example, will be called ABC Inc India Branch Office.
  • Authorized signatory is to be appointed in India, who will be responsible towards meeting all compliances set by the Foreign Company established in India.

The above are few of the procedures that need to be followed to establish limited company business in the country. But it will be useful to contact the consultants who are industry experts and know the right steps to be taken to imitate the business without any hassle or roadblock.

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