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INDIAIntroduction to

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INDIA:A GLANCE

Background

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Population: 1,251,695,584 (July 2015

est.)GDP (PPP): $7.376 trillion (2014

est.)GDP (abs): $2.05 trillion (2014

est.)GDP (growth): 7.2% (2014

est.)Repo Rate : 6.75% (Sep

2015)

Coordinates : 20 00 N, 77

00 EArea : 3,287,263 sq

km

Then – Now- Future

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GDP (INR)

Why India?

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Fast economic growth

Democracy + Political Stability

Talented Workforce

Tax and other

Incentives

Low Valuations

Low Cost

Intellectual property

protection

Increasing Domestic

Consumption

Export infrastructur

e

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Initiatives

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Push for Infrastructure

DevelopmentEasier Reporting Requirements

FDI caps raised

Greater ease of doing

businessMost clearances moved online

Setting up faster, easierStable, taxpayer friendly tax regime

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Key Sectors

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SETTING UP

Applicable taxes

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Setting up in India

Options for Foreign Investors

Applicable Laws

Industrial Policy of

Government of India

Companies Act, 2013

Foreign Exchange

Management Act, 1999 (FEMA)

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Applicable Laws

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Industrial PolicyGoverned by Department of Industrial Policy & Promotion (DIPP) a part of the Ministry of Commerce & Industry, Govt of IndiaDIPP Formulates Industrial policy and strategies for developmentAlso Responsible for attracting Foreign Investment , developing FDI policy and even formulates policies relating to intellectual propertyDIPP releases the annual FDI policy document prescribing sectors under automatic route, approval route, sector limits etc.The Secretariat of Industrial Approvals (SIA)/ Foreign Investment Promotion Board (FIPB) also under the Ministry of Commerce & Industry is responsible for cases not covered by Automatic Route

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Sectoral Caps (illustrative)

Existing Airports

100% Titanium Minerals

100% Asset Reconstruction Cos

100% Single brand retailing

100%(49% automatic)

Multi brand retailing

51% Telecom - Carriers

100% Defence

49% Print Media

49% Broadcasting

Agriculture Atomic energy Lottery, betting and

gambling Chit fund

Negative ListPrior Approval

Agri-sector services IT / ITeS Special Economic Zones Manufacturing sector Hotels and tourism Infrastructure Courier Services Shipping Real Estate (subject to

limitations) Insurance (49 % cap) Telecom – IP Category 1 Financial services NBFC (minimum

capitalization norms)

Automatic Route

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Options for investorsForeign Investor

Unincorporated entities

Liaison Office

Branch Office

Project Office

Incorporated entities

WOS

JV company

Partnership Firms

LLPs

Subject to eligibility norms

Generally permitted

Require Approval before set up

Unlimited liability

Partnerships

Permitted Activities

Representing parent company/group companies in India, acting as communication channelPromoting export/import from/to India, technical/financial collaborations between with India

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Liaison Office

Setting Up

Governed by FEMA and Companies ActRequires approval of RBI under FEMA and registration with RoC

Requirements

Profit making track record in the preceding three financial years and net worth not less than USD 50,000 in the home country

Annual Compliances

Statutory Audit of Accounts of LOFiling of annuaal returns with the RoCFiling of Annual Activity Certificate with the Reserve bank of India (RBI)Since no incomes are earned by LO, no taxes are applicable

Permitted Activities

Export/import of goods, professional or consultancy services, research with parent co, IT and software development, technical support services. Foreign airline/shipping companyTechnical/financial collaborations between parent co and India, acting as buying/selling agent for parent co.

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Branch Office

Setting Up

Governed by FEMA and Companies ActRequires approval of RBI under FEMA and registration with RoC

Requirements

Profit making track record in the preceding five financial years and net worth not less than USD 100,000 in the home country

Annual Compliances

Statutory Audit of Accounts of BOFiling of annual returns with the RoCFiling of Annual Activity Certificate with the Reserve bank of India (RBI)Liable to tax at 40% plus surcharge Transfer Pricing provisions applicable

Permitted Activities

Execution of a contract which the parent company has won from an Indian counterpart, provided the project is funded directly by inward remittance from abroad, or the project is funded by a bilateral or multilateral International Financing Agency; or the project has been cleared by an appropriate authority; or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project

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Project office

Setting Up

Governed by FEMA and Companies ActGeneral permission is available provided the parent co has secured a contract from Indian co.

Requirements

None

Annual Compliances

Statutory Audit of Accounts of POFiling of annual returns with the RoCFiling of Annual Activity Certificate with the Reserve bank of India (RBI)Liable to tax at 40% plus surcharge

Permitted Activities

All activities which are not on the exclusion list of the FDI policy as well activities on the approval list, with FIPB approval.

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WOS/JV

Setting Up

Governed by Companies ActAllowed only in sectors where 100% FDI is allowed either under automatic route or approval route

Requirements

Private companies require minimum of two shareholders and directors.Share capital

Annual Compliances

Statutory Audit of Accounts Filing of annual returns with the RoCFiling of Annual Activity Certificate with the Reserve bank of India (RBI)Liable to tax at local tax rate (30% plus surcharge)Minimum Alternative Tax (MAT) and Dividend Distribution Tax (DDT) apply

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APPLICABLETAXES

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Tax LandscapeTaxes in India

Direct Taxes Indirect Taxes

Income Tax Customs Duty

Dividend Distribution

taxService Tax

Minimum Alternative

TaxExcise Duty

VAT/ Octroi / Entry Tax

Federal levy

Federal levy

State levy

Indian Tax year – 1st April to 31st March Amendments to tax code carried out annual as part of budget exerciseIndia has DTAA agreements with 89 countries Treaties override domestic tax law to the extent that treaty more beneficial to taxpayer

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Direct TaxesScope of Taxation

For residents & domestic companies – worldwide incomeFor non-residents – income accruing, arising or received in India, or deemed to accrue or arise or be received in India

Rates

Domestic Companies : 30% + surcharge (effective 33.2175%)Foreign Companies – 40%+ surcharge (effective 44%)DDT – 16.995%MAT – 18%

Dividends are tax exempt in the hands of shareholdersCapital Gain

Nature of Capital asset transferred

Long Term Capital Gain

Short Term Capital Gain

Listed Securities Exempt 15%Unlisted Securities (NR)

10% 40%

Other (R) 20% 30%Other (NR) 20% 40%

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Indirect TaxesService Tax

Tax applicable on rendering of services, Flat Rate 14%, exemptions / abatements available

Customs Duty

Duty applicable on exports / imports, peak rate 28.85%,

VAT / CST

Tax on local and inter-state sale of goods, VAT rates vary state to state, CST rate specified by central govt. VAT/CST and Service Tax are soon to be subsumed into a new tax framework called the goods and service tax (GST) expected in 2016

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CULTURALASPECTS

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Cultural AspectsDifferent corner – vastly different culturesLast names with salutations ( Mr, Ji, saab) preferred by the older generationsBe prepared for delays in appointments, specially in government officesYou will not always receive direct answersIndians are reluctant to offend, will rarely say no or contradictDon’t be offended at personal questions, be prepared to make small talk before getting to businessConfrontational, aggressive attitude rarely works. Written agreements, always

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ARKAY & ARKAY

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Integrated professional services firm offering services in the domains of

Direct and Indirect taxation,

Transfer Pricing

Audit and Assurance,

Risk Advisory and

Other allied services to domestic and global business of all sizes.

The firm focuses on value optimization for clients  by offering practical yet

innovative solutions.

Who We Are

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20+ team

Partner led engagement

Better than Big-4 quality, at values that SMEs can afford

Hands on approach

Global service delivery experience

One stop for regulatory and compliance

Motto : “Client’s Problem is our problem”

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New Locations : Soon

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Sample Credentials

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Suite 1101, KLJ Towers North, NSP New Delhi -110034 Tel : 91-11-2735-7350 | 91-11-2735-7030 info@arkayandarkay.com www.arkayandarkay.com

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THANK YOU