Foreign investment in India

India is the fourth largest economy in the world and offers considerable scope of foreign direct investment, joint ventures and collaborations. Foreign Direct Investment in India is allowed on the automatic route in almost all sectors except as specifically prohibited or as specifically requiring prior approvals. 

Foreign companies or individuals planning to set up operations in India can do so in any of the following ways:- 

a.  Liaison Office – Representative Office

b.  Project Office

c.  Branch Office

d.  As an Indian company as:

    i)  Joint Venture

   ii)  Wholly Owned Subsidiary (WOS)

Depending on the commercial requirements, any of the above can be the means of effecting an India entry and establishing the commercial presence in India. The aforementioned are briefly detailed as under:

a.         Liaison office – Representative Office
 

As the words suggest, a Liaison Office is to establish the Indian presence and investigate possibilities of establishing a commercial venture in India. It is to be noted that a Liaison Office cannot be a profit centre and therefore cannot undertake any commercial activities. It can function only as a pure and simple Liaison Office for the foreign entity and in no other manner.

b.         Branch Office
 

A Branch Office in comparison with the Liaison Office provides a little more flexibility in so far as conduct of business by the foreign entity is concerned. To establish a Branch Office or a Liaison Office, prior approval of the Reserve Bank of India is required. A Branch Office can undertake any commercial activity including export import activities, rendering professional consultancy services, research work, promoting technical collaborations for the overseas companies parent company in India, act as buying and selling agents, rendering services in information technology field, rendering technical support for products supplied by the parent company, etc. All profits of the Branch Office can be remitted/repatriated outside India net of applicable Indian Taxes.

c.         Project Office
 

The Reserve Bank of India has granted general permission to any foreign entity to set up a Project Office in India provided the foreign company has secured a contract from an Indian company to execute a project in India and the project is funded by inward remittances from abroad and the project has been cleared by the appropriate authorities.

A Project Office is specific to the project awarded and all profits incurred by the Project Office can be repatriated/remitted outside India subject to applicable Indian Taxes.

d.         Joint Venture

A foreign entity can establish a joint venture in India as an Indian company through a joint venture with any Indian entity and for specific purpose of the venture regulations. All relating to an Indian corporate entity including all statutes relating to companies would be applicable to such joint venture company also. The profits as dividends can be remitted abroad net of Indian Taxes.

e.         Wholly Owned Subsidiary (WOS)
 

A foreign entity can establish a WOS in India as  a corporate entity and the foreign company can hold the entire paid up share capital of such WOS. The WOS can undertake all activities as authorized by its Memorandum of Association subject to prohibited activities under the Regulations of Foreign Exchange Management Act, 1999. All regulations/statutes relating to an Indian corporate entity would be applicable to the WOS also as applicable to any corporate entity incorporated in India.

Various routes are therefore available for foreign direct investment in India. However all investments as foreign direct investment are subject to the Regulations of the Foreign Exchange Management Act, 1999 and Notifications of the Reserve Bank of India as amended from time to time. Foreign Direct Investment is either permitted under the automatic route which means no prior approval is required for such investments or through the government approval route. Most of the sectors are under the automatic route subject to sectoral caps on investments and investments outside the automatic route can be made with the prior approval of the Government of India.

For any assistance, advise and others required for ensuring a smooth India entry the best contact is : E-mail : This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

---

Be first to comment this article

Only registered users can write comments.
Please login or register.