1.

About ndia
ndia is the 7
th
largest and 2
nd
most populous country in the world. t is also the 4
th

largest economy in the world in terms of PPP. A series of ambitious economic reforms
aimed at deregulating the economy and stimulating foreign investment has moved ndia
firmly into the front runners of the rapidly growing Asia Pacific Region and unleashed
the latent strength of a complex and rapidly changing nation. Today ndia is one of the
most exciting emerging markets in the world. Skilled managerial and technical
manpower that matches the best available in the world and a middle class whose size
exceeds the population of the USA or the European Union, provide ndia with a distinct
cutting edge in global competition. ndia's time tested institutions offer foreign investors
a transparent environment that guarantees the security of their long term investments.
These include a free and vibrant press, a well established judiciary, a sophisticated
legal and accounting system and a user friendly intellectual infrastructure. ndia's
dynamic and highly competitive private sector has long been the backbone of its
economic activity and offers considerable scope for foreign direct investment, joint
ventures and collaborations.
2. Reforms in ndustrial Sectors in ndia
ndustrial Sector was among the first sectors to be liberalized in ndia in a series of
measures. ndustrial licensing has been abolished except in a small number of sectors
where it has been retained on strategic considerations.
3. ndustrial Policy:
The Government's liberalization and economic reforms programme was initiated in July
1991, under the new ndustrial Policy Resolution. The industrial policy reforms have
substantially reduced the industrial licensing requirements, removed restrictions on
expansion and facilitated easy access to foreign technology and foreign direct
investment.
4. Foreign Direct nvestment Policy:
Foreign Direct nvestment in ndia is allowed on automatic route in almost all sectors
except
OProposals that require an industrial licence and cases where foreign investment is
more than 24% in the equity capital of units manufacturing items reserved for the small
scale industries.
OProposals in which the foreign collaborator has a previous venture/tie-up in ndia.
OProposals relating to acquisition of shares in an existing ndian company in favour of a
Foreign/Non-Resident ndian (NR)/Overseas Corporate Body (OCB) investor; and
OProposals falling outside notified sectoral policy/caps or under sectors in which FD is
not permitted and/or whenever any investor chooses to make an application to the
Foreign nvestment Promotion Board and not to avail of the automatic route.
5. Foreign nvestment Promotion Board (FPB) is a competent body to consider and
recommend foreign direct investment (FD), which do not come under the automatic
route. With the shifting of the FPB to the Department of Economic Affairs, Ministry of
Finance, the FPB has been reconstituted as under:
- Secretary, Department of Economic Affairs Chairman
- Secretary, Department of ndustrial Policy & Promotion Member
- Secretary, Department of Commerce Member
- Secretary, (Economic Relation), Ministry of External Affairs Member

The Board would be able to co-opt Secretaries to the Govt. of ndia and other top
officials of financial institutions, banks and professional experts of industry and
commerce, as and when necessary
6. Entry Strategies and setting up a Company
(i) Entry nto ndia
Foreign nationals (except citizens of Nepal and Bhutan) entering into ndia are required
to carry a valid passport/travel documents and a valid visa. Visas for the purpose of
tourism, entry, transit, conferences, business and employment in ndia re issued to
foreign nationals by ndian Embassies and Consulates abroad.
Business visas may be issued for upto 5 years, with multiple entry provision. While a
business visa is issued by an ndian Embassy abroad, it can be renewed/extended
within ndia if the applicant so desires. Foreign nationals who wish to work in ndia must
obtain a Residential Permit from the Foreigners Regional Registration Office (FRRO)
that are located in all major cities, or, in the case of smaller cities, from the principal
police station.
A foreign national, holding a visa (other than a tourist visa) valid for a period exceeding
180 days, is required to be registered with the FRRO within 15 days of arrival in ndia.
Change of purpose or type of visa is a not permitted. Further, visa other than
employment, student and entry are normally not considered for extension.
The transfer of residence scheme applies to foreign nationals visiting ndia for long
durations. Under this scheme, foreign nationals can import certain personal effects
without paying customs duty. A bank guarantee has to be provided for this purpose,
which is returnable after the individual has stayed in ndia for a year. To avail of this
scheme, the goods have to be shipped within two months before the entry into ndia or
one month after entry into ndia. The goods brought into ndia under the transfer of
residence scheme have to be owned by the importer or his family for at least one year.
(ii). Setting up of a company
The principal forms of business organisation in ndia are:
Companies both public and private
Partnerships
Sole proprietorships
Companies incorporated in ndia and branches of foreign corporations are regulated by
the Companies Act, 1956 (the Act). The Act, which has been enacted to oversee the
functioning of companies in ndia, draws heavily from the United Kingdom's Companies
Acts and although similar, is more comprehensive. The Registrar of Companies (ROC)
and the Company Law Board (CLB), both working under the Department of Company
Affairs, ensure compliance with the Act.
(a) Types of Companies
A company can be a public or a private company and could have limited or unlimited
liability. A company can be limited by shares or by guarantee. n the former, the
personal liability of members is limited to the amount unpaid on their shares while in the
latter, the personal liability is limited by a pre-decided nominated amount. For a
company with unlimited liability, the liability of its members is unlimited.
Apart from statutory government owned concerns, the most prevalent form of large
business enterprises is a company incorporated with limited liability. Companies limited
by guarantee and unlimited companies are relatively uncommon.
(i) Private Companies
A private company incorporated under the Act has the following characteristics:
O The right to transfer shares is restricted.
O The maximum number of its shareholders is limited to 50 (excluding
employees).
O No offer can be made to the public to subscribe to its shares and
debentures.
O Private companies are relatively less regulated than public companies as
they deal with the relatively smaller amounts of public money. A private
company is deemed to be a public company in the following situations:
O When 25 percent or more of the private company's paid-up capital is held
by one or more public company.
O The private company holds 25 percent or more of the paid-up share
capital of a public company.
O The private company accepts or renews deposits from the public.
O The private company's average annual turnover exceeds Rs. 250 million
during a period of 3 consecutive financial years.
(ii) Public Companies
A public company is defined as one which is not a private company. n other words, a
public company is one on which the above restrictions do not apply. Regarding the
necessary procedures to be followed for registering the company, a flow chart presents
the summary of the steps involved in formation of a company with Registrar of
Companies.
(iii) Foreign Companies
Foreign investors can enter into the business in ndia either as a foreign company in the
form of a liaison office/representative office, a project office and a branch office by
registering themselves with Registrar of Companies (ROC), New Delhi within 30 days of
setting up a place of business in ndia or as an ndian company in the form of a Joint
Venture and wholly owned subsidiary. For opening of the foreign company specific
approval of Reserve Bank of ndia is also required.
7. Approvals/clearances required for new projects
For starting a new project, a number of approvals/clearances are required from different
authorities such as Pollution Control Board, Chief nspector of Factories, Electricity
Board, Municipal Corporations, etc.
8. Foreign Exchange Management Act (FEMA)
The Parliament has enacted the Foreign Exchange Management Act, 1999 to replace
the Foreign Exchange Regulation Act, 1973. This Act came into force on the 1st day of
June 2000. The object of the Act is to consolidate and amend the law relating to foreign
exchange with the objective of facilitating external trade and payments and for
promoting the orderly development and maintenance of foreign exchange market in
ndia.
This Act extends to the whole of ndia and will also apply to all branches, offices and
agencies outside ndia owned or controlled by a person resident in ndia. t will also be
applicable to any contravention committed outside ndia by any person to whom this Act
is applicable.
9. Taxation in ndia

Since the onset of liberalization in the country, tax structure of the country is also
being rationalized keeping in view the national priorities and practices followed in other
countries. Foreign nationals working in ndia are generally taxed only on their ndian
income. ncome received from sources outside ndia is not taxable unless it is received
in ndia. The ndian tax laws provide for exemption of tax on certain kinds of income
earned for services rendered in ndia. Further, foreign nationals have the option of
being taxed under the tax treaties that ndia may have signed with their country of
residence.

Remuneration for work done in ndia is taxable irrespective of the place of receipt.
Remuneration includes salaries and wages, pensions, fees, commissions, profits in lieu
of or in addition to salary, advance salary and perquisites. Taxable payments include all
allowances and tax equalisation payments unless specifically excluded. The stock
options granted by the employer are taxable as capital gains at the time of sale of
shares acquired due to exercise of options.
10 Repatriation of Earnings
A foreign national may open bank accounts in ndia and receive funds from abroad. A
foreign national is allowed to repatriate 75 percent of his net after-tax earnings after his
employment is approved by the government and the exchange control authorities. f
employment is for a short duration, such approvals are not necessary, provided the
amount of remittance is within approved limits.
11. Ready Reckoner for NR nvestment
The Ready Reckoner for Non-Resident ndians (NRs) nvestment provides
information, at a glance, about investment opportunities available to Non Resident
ndians (NRs)/Persons of ndian Origin (PO)/Overseas Corporate Bodies (OCBs).
12. Labour Rules/Regulations
Under the Constitution of ndia, Labour is a subject in the Concurrent List where both
the Central & State Governments are competent to enact legislation subject to certain
matters being reserved for the Centre. Some of the important Labour Acts, which are
applicable for carrying out business in ndia are:
Employees' Provident Fund and Miscellaneous Provisions Act, 1952 | Employees' State nsurance Act,
1948
Workmen's Compensation Act, 1923 | Maternity Benefit Act, 1961 | Payment of Gratuity Act, 1972 |
Factories Act, 1948
Dock Workers (Safety, Health & Welfare) Act, 1986 | Mines Act, 1972 | Minimum Wages Act | Payment of
Bonus Act 1965 Contract Labour [Ragulation & Abolition] Act 1970 | Payment of Wages Act, 1936 |

13. ntellectual Property

ndia is a signatory to the agreement concluding the Uruguay Round of GATT
negotiations and establishing the World Trade Organisation (WTO). This Agreement,
inter-alia, contains an Agreement on Trade Related Aspects of ntellectual Property
Rights (TRPS), which came into force from 1
st
January 1995. t lays down minimum
standards for protection and enforcement of ntellectual Property Rights in member
countries, which are required to promote effective and adequate protection of
ntellectual Property Rights with a view to reducing distortions and impediments to
international trade. The obligations under the TRPS Agreement relate to provision of
minimum standards of protection within the member country's legal systems and
practices.
As regards the status of various ntellectual Property laws in ndia and standards in
respect of various areas of intellectual property, a law on Trade Marks has been
passed by Parliament and notified in the gazette on 30.12.1999. This law repeals and
replaces the earlier Trade & Merchandise Act, 1958. A new law for the protection of
Geographical ndications, viz., the Geographical ndications of Goods (Registration and
the Protection) Act, 1999 has also been passed by the Parliament and notified on
30.12.1999. A law called the Designs Act,2000 relating to ndustrial Designs which
repeals and replaces the earliar Designs Act, 1911 has also been passed by
Parliament in its Budget Session, 2000. The Act has been brought into force from
11.05.2001. A Bill on Patents to amend the Patents Act, 1970 was introduced in Rajya
Sabha on 20.12.1999 and the Bill was passed by Parliament on 14.05.2002.
14. ncentives offered by States
ndia is a federal country consisting of States and Union Territories. States are also
partners in the economic reforms being undertaken in the country. Most of the States
are making serious efforts for simplifying the rules and procedures for setting up and
operating the industrial units. Single Window System is now in existence in most of the
States for granting approval for setting up industrial units. Moreover, with a view to
attract foreign investors in their states, many of them are offering incentive packages in
the form of various tax concessions, capital and interest subsidies, reduced power tariff,
etc.
The specific website addresses containing the incentive packages offered by various
states/UTs are given in the List.
15. Foreign nvestment mplementation Authority (FA)
Government of ndia has set up Foreign nvestment mplementation Authority (FA) to
facilitate quick translation of Foreign Direct nvestment (FD) approvals into
implementation by providing a pro-active one stop after care service to foreign
investors, help them obtain necessary approvals and by sorting their operational
problems. FA is assisted by Fast Track Committee (FTC), which have been
established in 30 Ministries/Departments of Government of ndia for monitoring and
resolution of difficulties for sector specific projects.
Senior officers of the Department have been designated Nodal Officers for specific
states for follow up of FD cases and to bring to notice of FA any difficulties in
implementation. n case of any difficulties, nodal officers can be contacted.