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 for our Clients because:
    • India is the 2nd largest economy in Asia by GDP and is expected to become the world’s fastest growing economy by 2020 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 Group PLC 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$200 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 2019 index, Chennai and Bangalore are one of the 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.
  3. India is known for its organized employability:
    • 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 strikingly young population is in sharp contrast to that of other large economies such as China, USA, and Europe;
    • New businesses can leverage this opportunity by generating employment and increasing productivity.
  4. As the 3rd largest Asian economy in 2018, after China and Japan, India’s consumer market is expected to reach more than ₹3 trillion by 2020;
  5. Considering the focus on emerging cities in India, infrastructural development is expected to grow exponentially in the coming years, which will translate to 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 5 months for a simple LLC company registration in India 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;
    • India’s infrastructure is negatively ranked 55th in the world in the Global Competitiveness Report 2018. 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 77th 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 78th out of a total of 183 countries;
    • Patent and licensing guidelines favor local manufacturers rather than international players. Consequently, India is ranked 36th out of 50 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:
  5. India’s population is expected to surpass China’s population by 2024. High population means harsh domestic competition for foreign investors;
  6. High 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.

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