India company registration

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India company registration

DOING BUSINESS IN INDIA

Since 2003, Healy Consultants Group PLC has been efficiently and effectively assisting our Clients with establishing a business in India. Our experts serve our Clients with i) India business registration ii) government compliance iii) license registrations iv) visa applications v) work space rental solutions and vi) employee recruitment solutions.

SummaryLLCNominee LLCFree zone companyLLPBranch companyRepresentative office
Best use of company?Trading companyTrading companyManufacturing & distributionProfessional servicesProjects and assignmentsCustomer service/research
Legally tax exempt if properly structured?NoNoYesYesNoYes
Corporate bank account location?SCB IndiaDBS IndiaHSBC IndiaHDFC IndiaCitibank IndiaAxis India
Client must travel to India?NoNoNoNoNoNo
Can secure trade finance?YesYesYesYesYesNo
Limited liability entity?YesYesYesYesNoNo
Sales tax payable on sales to local customers?YesYesYesYesYesNo sales allowed
Withholding tax on payments to shareholders?20%20%20%20%20%0%
Average total engagement costs?US$14,355US$23,555US$15,505US$16,355US$15,605US$15,435
Average total engagement period?4 months4 months4 months4 months5 months5 months
Accounting and tax considerationsLLCNominee LLCFree zone companyLLPBranch companyRepresentative office
Statutory corporate tax payable?34%34%0%0%43%None
Must file an annual India tax return?YesYesYesYesYesNo
Effective corporate tax rate on net profits of US$250,000?34%34%0%0%43%None
Must file annual financial statements?YesYesYesYesYesYes
Investment income is legally tax exempt in India?NoNoNoYesNoNo
Access to double taxation treaties?YesYesYesNoYesNo
This entity enjoys Government incentives?YesYesYesYesYesNo
Monthly sales tax reporting to the Government?YesYesYesYesYesNo sales allowed
Legally tax exempt entity?NoNoYesYesNoYes
Dividends received are legally tax exempt?NoNoNoNoYesNo
Company registrationLLCNominee LLCFree zone companyLLPBranch companyRepresentative office
Resident director\partner\manager required?YesYesYesYesYesYes
Minimum number of shareholders\partners?1112Parent companyParent company
Minimum number of directors/managers?111111
Minimum paid up share capital?US$1,650US$1,650US$1,650US$1NoneNone
Shelf companies available?YesYesNoNoNoNo
Time to incorporate a new entity?2 months3 weeks2 months2 months3 months3 months
Can easily convert to a local PLC company?YesYesYesNoNoNo
Can have preference shareholders?YesYesYesYesNoNo
Business considerationsLLCNominee LLCFree zone companyLLPBranch companyRepresentative office
Can invoice local customers?YesYesYesYesYesNo
Can hire local staff?YesYesYesYesYesYes
Can rent local office space?YesYesYesYesYesYes
Secures a residence visa for business owner?YesYesYesYesYesNo
Good entity for trademark registration?YesYesYesYesYesNo
Other useful informationLLCNominee LLCFree zone companyLLPBranch companyRepresentative office

India has signed free trade agreements?Yes, see this link
This country is a member of WIPO and TRIPS?Yes
The country is a member of the ICSID?Yes
Average customs duties suffered?6.2%
Government foreign investment approval is required?Yes
Average monthly office rental? (US$ per sq m)50
Minimum statutory annual salary?40
Average monthly US$ salary for local employees?190
INR deposit interest rate? (1 year average)7%
US$ deposit interest rate? (1 year average)1.7%
Overseas remittance currency controls?Yes
Public register of shareholders and directors?Yes
Banking considerations
Multi-currency bank accounts available?Yes
Corporate visa debit cards available?Yes
Quality of e-banking platform?Yes
Crowd funding available in this country?Yes

  • Healy Consultants recommends our Clients to incorporate an LLC for starting their business in India. This entity will be subject to 34% corporate income tax;
  • Alternatively, our Clients may choose to setup in one of India’s several free zones. It is possible for trading companies in the free zones to be completely corporate tax exempt;
  • To setup the company, our Clients will be required to appoint at least 1 resident director and deposit US$1,650 into the company bank account;
  • Lastly, our Clients embarking on complex projects may wish to check out the multitude of business incentives offered by the Indian Government.

Benefits and problems of registering a company in India

Press the link headings below to read detailed, relevant, up to date information.

  • Benefits and problems

    Benefits of India company registration

    India business registration advantages

    1. The Indian economy presents massive untapped market potential for our Clients because:
      • India is the 3rd largest economy in Asia by GDP and is expected to become the world’s fastest growing economy in 2015 with a projected growth rate of 7.5%. India is also the world’s 2nd largest country (by population) and has a massive consumer market which is expected to quadruple from US$991 billion in 2010 to US$3.6 trillion in 2020;
      • The Indian Government has recently started to allow foreign direct investments (FDIs) in various sectors including retail, finance, insurance, airline, railways and telecom. So, Healy Consultants encourages its Clients to setup a base in India to tap these new markets;
      • India has signed 90 double tax avoidance agreements (DTAAs) and 28 free trade agreements (FTAs). This will allow our Clients to not only reduce their withholding taxes but also market their product to other huge markets including China and Australia.
    2. Operating a business in India will be cheap for foreign entrepreneurs because:
      • An Indian limited liability company can be incorporated with a low paid up share capital of US$1,650;
      • Average salaries in India are very low at US$169 per month;
      • Electricity retail prices in India are low at US$0.08 per Kwh;
      • India has amongst the lowest consumer cost index in the world. According to the Worldwide Cost of Living 2014 index, Mumbai and Delhi are respectively the 1st and the 3rd least expensive cities in the world. As a result, our Clients will find it relatively inexpensive to live and work in India;
      • Foreign entrepreneurs will find it cheap to travel within the major metropolitan cities as average domestic airfare is lower in India as compared to the rest of the world.

    Problems with India company registration

    1. Doing business in India is difficult for foreigners because:
      • It can take up to 5 months to incorporate a simple LLC and open the corporate bank account, because of the amount of paperwork involved and government approvals required;
      • Companies will need to work regularly with government authorities for matters relating to business approvals and licenses which can be very chaotic and disorganized. As a result, the World Bank negatively ranks the country as 155th in the world for starting a new business;
      • India’s infrastructure is negatively ranked 81st in the world in the Global Competitiveness Report 2014-15. Problems including power cuts (Electricity infrastructure rank – 115th) and underdeveloped roads, railways and airports (Transport infrastructure rank – 32nd) should be expected. That said, India does have a massive distribution network with the 2nd largest roadways and the 4th largest railways in the world. This allows resident businesses cheap connectivity to every part of the country;
      • Labor unrest can be a problem in India as industrial disputes and strikes occasionally impact productivity;
      • Consequently, the World Bank listed India as 130th best in the world in its annual Doing Business survey.
    2. Foreign entrepreneurs are nervous about the security of their investments in India because:
      • Foreign investors may have difficulty relying on the Indian regulatory system to protect their business interests as the country’s corruption index ranks 85th out of a total of 183 countries;
      • Patent and licensing guidelines favor local manufacturers rather than international players. Consequently, India is ranked 46th out of 97 countries in the Intellectual Property Rights index;
      • India rupee value is volatile, impacting the value and profitability of foreign investments in India.
    3. Total tax paid by companies in India (as a percentage of profit) can be as high as 60% because:
      • Corporate tax rate for a resident company is 34% while for a branch of a foreign company is 43%;
      • Additional taxes and levies include i) VAT at 14% ii) import and export duties at an average rate of 12% iii) central excise duty at 12% iv) tax on dividends at 20% and v) employer’s social security contributions at 12%. For more information, kindly refer to our section on accounting and tax.
    4. The process of repatriating funds from India can be cumbersome because:
  • Best uses for an Indian company

    1. India is an excellent country to setup a manufacturing company because:
      • Companies setting up a manufacturing unit in a Special Economic Zone (SEZ) can claim i) 100% tax deduction on export profits for the first 5 years and ii) 50% tax deduction for the next 10 years. Furthermore, miscellaneous incentives including exemption from custom duties, excise duties and VAT may also be available, depending on the state in which the SEZ is located;
      • Oil and gas companies engaged in production of either mineral oil or natural gas will be 100% corporate tax exempt for the first 7 years. Furthermore, companies involved with laying down and operating new oil and gas pipelines for distribution purposes will receive full refund of all costs associated with the project;
      • Companies engaged in recycling bio-degradable waste to produce agricultural products including fertilizers and pesticides will receive corporate tax exemption for the first 5 years. Furthermore, companies which are looking to setup new facilities to produce fertilizers will receive re-imbursement worth 150% of the total cost of setup;
      • Businesses setting up new plants or purchasing new machinery to be used for manufacturing of goods or generation and distribution of power will be eligible to claim additional depreciation worth 20% of the cost of the new plant/machinery;
      • Manufacturing companies will receive 100% exemption on custom duty on import of capital goods and raw materials if the value of the goods exported is at least 6 times the custom duty incurred;
      • India has the world’s 2nd largest labor market with 487 million people and 54% of the total population below the age of 25. The overall literacy rate is 74% and the number of English speakers are over 125 million. Furthermore, the country has over 380 universities, 11,200 colleges and 1,500 research institutions which has produced the world’s largest pool of English speaking scientists and engineers;
      • Resident manufacturing companies are eligible to claim a deduction equivalent to 30% of wages of the newly hired employees for 3 consecutive financial years;
      • Companies investing at least US$40,300 in agriculture based projects will receive refund worth 150% of the total cost of training and guiding local farmers. However, these projects must be approved by the Department of Agriculture and the Income Tax Department;
      • The Ministry of Commerce and Industry (MCI) provides funding under the Marketing Development Assistance Scheme, to local firms who wish to promote their businesses in international trade shows and exhibitions. These companies can also apply for financial grants to study the international markets, under a scheme operated by the Small Industries Development Organization (SIDO);
      • The Export Credit Guarantee Corporation of India Limited (ECGC) offers exporting companies the following services i) guarantees on behalf of the companies to banks and other financial institutions ii) credit risk insurance to companies in case of loss of export goods/services and iii) investment insurance to resident companies if they are involved in joint ventures (JVs) with foreign firms;
      • As a result, Deloitte ranks India as the 4th most competitive global destination for setting up a manufacturing company and projects the country to become the 2nd most competitive by 2018.
    2. Foreign investors should establish a services company in India because:
      • Companies looking to incorporate in the Software Technology Parks (STPs) in India will receive benefits including i) 100% custom duty exemption on all imports ii) 100% central excise duty exemption and central sales tax exemption on locally procured goods and iii) accelerated depreciation of 100% on computers;
      • IT companies incorporating in Bangalore (India’s IT hub) will be eligible for i) 100% exemption from payment of tax on capital goods and purchase of computer hardware ii) sales tax exemption for 10 years iii) exemption from payment of electricity tax. Furthermore, companies looking to work in Bangalore’s IT Park will, additionally, receive 50% exemption from stamp duty and registration charges for land purchase in the area;
      • Entrepreneurs incorporating either i) a new bank ii) subsidiary of an international bank or iii) a unit of an international financial service centre in the SEZ will be eligible for 100% deduction in certain income for the first 5 years and 50% deduction in the next 5 years;
      • Companies investing in operating or maintaining infrastructure facilities including roads, highways, airports or seaports will receive 100% corporate tax exemption for 10 years. These incentives will also be available to companies involved in developing and maintaining SEZs;
      • Companies investing in renewable energy sources are eligible for i) refunds up to 20% of their total cost and ii) accelerated depreciation of 80% on the value of the solar panels and wind mills. Furthermore, companies engaged in recycling waste material to generate power will receive 100% corporate tax exemption for the first 5 years;
      • Resident companies involved with setting up and operating i) cold chain facilities ii) inland container depots iii) container freight stations and iv) warehousing facilities for agricultural products are eligible for re-imbursement up to 150% of the total cost of operations;
      • R & D companies i) investing in in-house biotechnology projects or ii) outsourcing their science based projects to other Indian companies, universities and research associations are eligible to receive refund up to 200% of their total costs;
      • Indian companies exporting services worth US$16,150 (INR 1,000,000) in a fiscal year can utilize the duty credit script (Served from India Scheme) to make payments for either custom duties on imports or excise duties on domestic goods;
      • Consumer demand for India’s Business Process Outsourcing (BPO) industry continues to remain high as 56% of the world’s outsourcing business is handled by the country. As a result, our Clients must setup a company in India to take advantage of this massive demand;
      • The SMERA Rating Agency Pte. Ltd. provides credit ratings to small and medium enterprises (SMEs). Our Clients can use these credit ratings in order to obtain benefits including i) cheap loans from banks and other financial institutions and ii) better business image to prospective Clients and suppliers;
      • As a result, India has the 2nd fastest growing service sector in the world after China, growing at an average rate of 9% per year.

Healy Consultants’ video on registering a business in India

Contact us

For additional information on our company registration services in India, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Mr. Kunal Fabiani, directly:
client relationship officer - Kunal