The most significant advancement came in when India removed governmental obstacles and allowed its doors to open to foreign investment. Foreign Direct Investment FDI has emerged as an eminent source of economic development and employment generation for developing countries including India as it contributes in creating a more competitive business environment, enhances enterprise development, human capital formation and international trade integration.

This paper is an attempt to throw light on the policies of the Government of India towards FDI. The paper lists out the options as well as the corresponding procedures prescribed by the Government for the foreign entity to invest in India and also deals with the advantages and drawbacks of those options for FDI. Setting up as an Indian or a Foreign Company A foreign company planning to set up business operations in India has the option of either setting up as an Indian company or as a foreign company 1 As An Indian Company A foreign company can commence operations in India by incorporating a company under the Companies Act, through Joint Ventures JV or Wholly Owned Subsidiaries.

Benefits of JV for a foreign investor: Available financial resource of the Indian partners 3.

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Established contacts of the Indian partners, which help in smoothening the process of setting up of operations 4. A good strategy for first entering a foreign market, especially when the commercial risks and country risks are high.

It creates more flexibility for adapting the operation to meet the requirements under different competitive conditions. It incurs lower cost and lower resource commitment for entering foreign markets. An artificial and uneasy atmosphere is created by trying to combine the resources and the management approaches of two separate companies with different nationalities, backgrounds, experiences, abilities in one enterprise to pursue a common goal, to agree on common means and to work under the same authority, which creates problems in the day-to-day operation and the future planning for the JV.

There is fear of the leakage of technical secrets since a strong foreign partner could use this technology for its own competitive advantage and perhaps create a future detriment to the parent company.

JVs have to share the profit with local partners as well as reinvest the revenues for future expansion purposes. For registration and incorporation of the company, an application has to be filed with Registrar of Companies ROC as well as RBI. Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies. Maintenance of effective control over its subsidiaries 2.

Transaction costs including the cost of negotiating and transferring information and capability to another firm, cost of personnel training, cost of losing the opportunity to having direct sales or getting the full amount of profit, and the threat of creating a competitor in markets beyond the purview of the agreement might be avoided. It minimizes the dissemination risk Drawbacks: It acts as a channel of communication between the principal place of business or head office and entities in India.

It can not undertake any commercial activity directly or indirectly and can not, therefore, earn any income in India. Its role is limited to collect information about possible market opportunities and providing information about the company and its products to prospective Indian customers.

Approval for establishing a liaison office in India is granted by Reserve Bank of India RBI B Project Office: RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices can not undertake or carry on any activity other than the activity relating and incidental to execution of the project.

Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI. 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 RBI, may remit outside India, profit of the branch, net of applicable Indian taxes and subject to RBI guidelines D Branch Office on Stand Alone Basis: The above mentioned offices can undertake any permitted activities.

Companies have to register themselves with Registrar of Companies ROC within 30 days of setting up a place of business in India.

Such units comply with part XI of the Companies Act section to c. Such units function on a stand alone basis, d. In the event of winding up of business and for zarzadzanie kapitalem forex of winding-up proceeds, the branch shall approach an authorized dealer in foreign exchange with the document required as per FEMA.

Such offices stock option credit spread undertake activities permitted under the Foreign Exchange Management Establishment in India of Branch or Office or other place of business Regulations, Procedures prescribed for FDI FDI in relation to control or ownership of a company in India takes one of two routes: The investor are only required to notify the Regional office concerned of RBI and file the required documents with that office within best penny stocks 2016 motley fool days of receipt of inward remittances.

The investment should be in accordance with the prescribed guidelines.

This procedure is applicable only for fresh investments directly in Indian companies and not for purchase of shares from the existing shareholders. This route is available to all sectors or activities that do not have a sector cap i. Investment under the Automatic Route is governed by the notified sectoral policy and equity caps and RBI ensures compliance of the same.

Otherwise, the small investment options in bangalore would need Government approval through the FIPB supported by a Board Resolution of the existing Indian company. For existing companies without an expansion programme, the additional requirements are that: Application can also be submitted with Indian Missions abroad who forward them to the Department of Economic Affairs for further processing.

A Regulation and procedures Approval procedures have been call of duty ghost pc multiplayer lag out for undertakings that are exempt from industrial licensing requirements including existing units undertaking substantial expansion ; subject to compulsory industrial licensing; and small scale units exceeding the prescribed limit of investment in stock market jargon and machinery and continuing to manufacture small scale reserved item s or, in cases option trading strategies for earnings exemption from industrial licensing granted for dead trigger 2 money hack no jailbreak item, is withdrawn.

However, this condition is not applicable for proposals in the Information Technology industry. Indian companies getting foreign investment approval through FIPB route do not require any further clearance from RBI for the purpose of receiving inward remittance and issue of shares to the foreign investors. These Companies are required to notify the RBI of receipt of inward remittances within 30 days of such receipt and file required documentation within 30 days of issue of shares to Foreign Investors.

FDI in the Small Scale Sector Small Scale Undertakings SSUs are defined as units having investments in fixed assets in plant and machinery of not more than INR 10 million. Under the small scale industrial policy, equity holding by other units including foreign equity in a small scale undertaking is permissible up to 24 per cent. However saxo bank put option is no bar on higher equity holding business earn marketing money network foreign investment if the unit is willing to give up its small scale status.

In case of foreign investment beyond 24 per cent in a small scale unit which manufactures small scale reserved item san industrial license carrying a mandatory export obligation of 50 per cent must be obtained.

A Can forex remove unemployment problem in the world manufacturing small scale reserved item son exceeding the small-scale investment ceiling in plant and machinery by virtue of natural growth, needs to apply for and obtain a Carry-on-Business COB License. No export obligation is fixed on the capacity for which the COB license is granted.

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However, if the unit expands its capacity for the small scale reserved item s further, it needs to apply for and obtain a separate industrial license. Other Modes of Foreign Direct Investments 1. These are not subject to any ceilings on investment. Minority stakes in host-country firms, for example, through the direct purchase of shares on the local stock exchange.

These investments are often referred to as passive or portfolio investments, because the investors do not assume control of the firm's operations and may have very little input into how the firm is managed. Minority stakes in foreign firms are often obtained through privatizations of state-owned enterprises and debt-equity swaps of both private and state-owned firms. Licensing agreements with host-country firms. The MNC may transfer the rights to use a specific technology to a local firm, which would be responsible for production and marketing in the local market.

The local firm would pay the MNC for the right to use its technology. This type of arrangement offers the MNC a low-risk way of entering a foreign market. MNCs sometimes acquire shares of local firms with which they enter into licensing agreements.

List of Sectors where FDI is restricted Sectors where FDI is not permitted are restricted to Railways, Atomic Energy and Atomic Minerals, Postal Service, Gambling and Betting, Lottery and basic Agriculture or plantations activities or Agriculture excluding Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisiculture and Cultivation of Vegetables, Mushrooms etc.

Taxation in India Foreign nationals working in India are generally taxed only on their Indian income. Income received from sources outside India is not taxable unless it is received in India. The Indian tax laws provide for exemption of tax on certain kinds of income earned for services rendered in India.

Further, foreign nationals have the option of being taxed under the tax treaties that India may have signed with their country of residence. Remuneration for work done in India 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.

Conclusion Prior tothe Indian government policies on FDI were stricter as compared to most industrialized economies and the government exercised a high degree of control over industrial activity by regulating and promoting much of the economic activity. The Industrial Policy of greatly enhanced the business climate in India, led to various trade reforms in Indian economy and provided clarity to foreign businesses looking to invest in India.

The Government of India has introduced a liberal, transparent and investor-friendly FDI policy and it regularly reviews the policies and guidelines and makes necessary changes towards FDI in order to make foreign investment beneficial both for the Indian economy as well as for foreign investors. The above mentioned options and the procedures prescribed by the Government of India have enhanced the FDI in India which has ultimately facilitated the growth of economy of India.

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The author can be reached at: Foreign Direct Investment In Retail Sector: The Government of India was initially very apprehensive of the introduction of the Foreign Direct Investment in the Retail Sector in India.

Foreign Direct Investment In Telecommunications Sector: Summary of The Consolidated FDI Policy, April The Government of India released the new document on FDI policy on March 31, whereby this document now consolidates all existing regulations related to FDI contained in the Foreign Exchange Management Act FEMARBI Circulars and various press notes issued at various points in time.

Foreign Direct Investment FDI: A foreign company can conduct business operation in India. A foreign company which is planning to set up business operations in India may do so by following the below mentioned two methods. The Retail Sector In India And FDI: Legal Service India - Options Available For A Foreign Entity To Invest In India.

Options Available For A Foreign Entity To Invest In India Written by: Loree Sonchhatra - IV Year HNLU. Legal Advice Find a lawyer Constitutional law Judgments forms PIL family law Cyber Law Law Forum Income-Tax Consumer laws Company laws.

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