Investment in India - Entry Options for Foreign Investors

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.

Such offices can undertake activities permitted under the Foreign Exchange Management Regulations, 2000 (Establishment in India of branch or office of other place of business).

INCORPORATION OF A COMPANY

For registration and incorporation, an application has to be filed with the Registrar of Companies (ROC). Once a company has been registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.

For additional information: Ministry of Company Affairs, website: http://dca.nic.in

LIAISON OFFICE/REPRESENTATIVE OFFICE

The role of the liaison office is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between the parent company and companies in India. A liaison office cannot, however, undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Grant of approval for the establishment of a liaison office in India is by the Reserve Bank of India (RBI).

PROJECT OFFICE

Foreign companies planning to execute specific projects in India can set up temporary project/site offices in India. The RBI has now granted general permission to foreign entities to establish project offices subject to specified conditions. Such offices cannot undertake or carry on any activity other than which is related and incidental to the execution of the projects. Project offices may remit the surplus of the project on completion outside India, a general permission for which has been granted by the RBI.

BRANCH OFFICE

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

1. Export/Import of goods.
2. Rendering professional or consultancy services.
3. Carrying out research work, in which the parent company is engaged.
4. Promoting technical or financial collaboration between Indian companies and parent or overseas group company.
5. Representing the parent company in India and acting as buying/selling agent in India.
6. Rendering services in Information Technology and development of software in India.
7. Rendering technical support to the products supplied by the parent/group companies.
8. Foreign airline/shipping company.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch offices established with the approval of the RBI may remit outside India the profit of the branch net of applicable Indian taxes and subject to RBI guidelines. Grant of permission for setting up branch offices is by RBI.

BRANCH OFFICE ON 'STAND-ALONE BASIS' IN SEZ

Such branch offices would be isolated and restricted to the Special Economic Zone (SEZ) and no business activity/transaction will be allowed outside the SEZ in India, which include branches/subsidiaries of their parent office in India.

No approval shall be necessary from the RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities, subject to specified conditions.

Application for setting up Liaison/Project/Branch office may be submitted in form FNC 1 (available at RBI website at www.rbi.org.in and FEMA section).

INVESTMENT IN A FIRM OR A PROPRIETARY CONCERN BY NRIs

A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India may invest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis provided:

1. the amount is invested by inward remittance or out of specified account types (NRE/FCNR/NRO accounts) maintained with an Authorised Dealer (AD).
2. the firm or proprietary concern is not engaged in any agricultural/plantation or real estate business i.e. dealing in land and immovable property with a view to earning profit or earning income therefrom.
3. the amount invested shall not be eligible for repatriation outside India. NRIs/PIOs may invest in sole proprietorship concerns/partnership firms with repatriation benefits with the approval of government/RBI.

INVESTMENT IN A FIRM OR A PROPRIETARY CONCERN BY OTHER THAN NRIs

No person residing outside India other than NRI/PIO shall make any investment by way of contribution to the capital of a firm or a proprietorship concern or any association of persons in India. The RBI may, on an application made to it, permit a person residing outside India to make such an investment subject to such terms and conditions as may be considered necessary.