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India - Invest in India
Foreign corporate and individual investment in India, termed collectively
as Foreign Direct Investment (FDI) when it relates to control or
ownership of a company in India, takes one of two routes:
A- Automatic route or Automatic Approval:
This requires no prior approval for FDI. Post-facto filing of data relating
to the investment made with the Reserve Bank of India (RBI) are for record
and data purposes.
B- FIPB Approval – the Foreign Investment Promotion Board (FIPB)
approves investment proposals:
• where the proposed shareholding is above the prescribed sector caps, or
• where the activity belongs to that small list of sectors where FDI is
either not allowed or where it is mandatory that proposals be routed through
the FIPB (sectors that require industrial licensing, for example)
The FIPB ensures a single-window approval for the investment and acts as a
screening agency (for sensitive/negative list sectors). FIPB approvals (or
rejections) are normally received in 30 days. Some foreign investors use the
FIPB application route where there may be absence of stated policy or lack
of policy clarity.
Sectors where FDI is not permitted are restricted to Railways, Atomic
Energy and Atomic Minerals, Postal Service, Gambling and Betting, Lottery
and basic Agriculture or plantations.
A foreign company planning to set up business operations in India has the
following options:
Incorporate a company under the Companies Act, 1956 through:
- Joint Venture or
- Wholly owned Subsidiary
Foreign equity in such Indian companies can be up to 100% depending on the
requirements of the investor, subject to equity caps in respect of the
sector/area of activities under the FDI policy.
- Enter as a Foreign Company through:
- Liaison Office/Representative Office
- Project Office
- Branch Office
India has a well developed tax structure. The power to levy taxes and
duties is distributed among the three tiers of Government, in accordance
with the provisions of the Indian Constitution. Permanent Account Number
(PAN) is an all India, unique ten-digit alphanumeric number, issued in the
form of a laminated card by the Income Tax Department.
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