Benefits and problems of registering a company in India

Benefits of India company registration

India business registration advantages

  1. The Indian economy presents massive untapped market potential because:
    • It is the 3rd largest in Asia by GDP. India is also the world’s 2nd largest country (by population) with a massive consumer market;
    • The Indian government has recently started to allow foreign direct investments (FDIs) in various sectors including retail, finance, insurance, airline, railways and telecom. Healy Consultants Group PLC encourages its Clients to set up a base in India to tap opportunities in these sectors;
    • India has signed 85 double tax avoidance agreements (DTAAs) and 42 free trade agreements (FTAs) with countries around the world This allows our Clients to not only reduce their withholding taxes but also market their products to large markets such as China and Australia.
  2. Operating a business in India is cost-effective for foreign entrepreneurs because:
    • An Indian limited liability company can be incorporated with a paid up share capital of just US$1,650;
    • Electricity retail prices in India are low, at US$0.08 per Kwh;
    • India has one of the world’s lowest consumer cost index; According to the Worldwide Cost of Living 2019 index, Chennai and Bangalore are two of the world’s least expensive cities. As a result, living and doing business in India is inexpensive;
    • Average domestic airfares are lower in India compared to other countries.
  3. India is known for its labour force:
    • It has a median population age of 27.3 years, and boasts a labour force of nearly 530 million, of which the majority is under 30 years of age;
    • It’s young population is in sharp contrast to that of other large economies such as China, the USA, and Europe;
    • New businesses can leverage this opportunity by generating employment and increasing productivity;
    • India has more than 125 million English speakers, so there are few language barriers to business. Furthermore, all government documentation is in English and the local state language.
  4. As Asia’s 3rd largest economy the value of India’s consumer market is expected to reach more than ₹3 trillion by 2020;
  5. Considering the focus on emerging cities in India, infrastructure development is expected to grow exponentially in the coming years, which will translate into high investment across all industries.

Problems with India company registration

  1. Doing business in India is difficult for foreigners because:
    • It can take up to 4 months for simple LLC company registration in India and opening of the corporate bank account. That is because of the amount of paperwork involved and government approvals required;
    • Companies need to liaise regularly with government authorities for matters relating to business approvals and licenses. Indian bureaucracy is renowned;
    • India’s infrastructure is negatively ranked 70th in the world in the Global Competitiveness Report 2019. Problems including power cuts (Electricity infrastructure rank 103rd) and underdeveloped roads, railways and airports (Transport infrastructure rank 28th) should be expected. That said, India hasa massive distribution network, with the world’s 2nd largest roadway network and 4th largest railway network. This allows resident businesses cheap connectivity to every part of the country;
    • Labour unrest can be a problem in India as industrial disputes and strikes impact productivity;
    • The World Bank lists India as the world’s 63rd best place to do business.
  2. Foreign entrepreneurs are nervous about the security of their investments in India because:
  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, refer to our section on accounting and tax.
  4. The process of repatriating funds from India can be cumbersome because:
  5. India’s population is expected to surpass China’s population by 2024. High population means high domestic competition for foreign investors;
  6. Regional diversity means each state in India has a different business culture. It is not possible to make the same business plan work across the whole country. This drives up costs of planning and setting up;
  7. Insolvency of a company in India takes an average of four years. This is higher than the South Asia and OECD average. This is due to the high amount of paperwork and unavoidable formalities by the court systems. Moreover, a lot of field work is required to achieve insolvency. It is challenging to accomplish this online.

Contact us

For additional information on our company registration services in India, please contact our in-house country expert, Mr. Simon Guidecoq, directly:
client relationship officer - Simon