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Doing Business In India 2016 www.moorestephenssinghi.com A Legacy of Values Doing Business in India 2016 Preface This Guide has been prepared by Moore Stephens Singhi Advisors LLP (‘MSSA’), an independent member of Moore Stephens International. It is designed to provide information on a number of subjects important to those considering investing or doing business in India. Moore Stephens International is the world’s 10th largest branded accountancy and business advisory network by combined fee income (over USD 2.7bn) and is represented by 299 firms in 106 countries and over 27,000 personnel worldwide. Its members are high quality, independent accountancy and business advisory firms, all of whom are committed to provide the best possible service to their clients, both in their own marketplace and across the world. This guide is one of a series of country profiles compiled for use by Moore Stephens International member firms’ clients and professional staff. Doing Business in India has been designed for the information of readers. Whilst every effort has been made to ensure accuracy, information contained in this guide may not be comprehensive and recipients should not act upon it without seeking professional advice. Up-to-date advice and general assistance on Indian matters can be obtained from Moore Stephens Singhi Advisors LLP; contact details can be found at the end of this guide. We hope that you find this publication useful. We would be happy to hear your comments and suggestions at [email protected]. This publication does not constitute professional advice. The information in this publication has been obtained or derived from sources believed by MSSA to be reliable but MSSA does not represent that this information is accurate or complete. Any opinions or estimates contained in this publication represent the judgment of MSSA at this time and are subject to change without notice. Readers of this publication are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of this publication. MSSA neither accepts nor assumes any responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take. Kolkata, March 2016 Page 2 Contents Doing Business in India 2016 ..................................................................................................................................................................................... 2 Contents ............................................................................................................................................................................................................................... 3 1. India at a Glance - Fact Sheet ........................................................................................................................................................................... 4 2. Business Entities and Accounting.................................................................................................................................................................. 6 3. Finance and Investment .................................................................................................................................................................................. 10 4. Employment Regulation and Social Security ......................................................................................................................................... 12 5. Taxation .................................................................................................................................................................................................................. 14 Touch Points ................................................................................................................................................................................................................... 19 Page 3 1. India at a Glance - Fact Sheet Geography Location Southern Asia, bordering the Arabian Sea and the Bay of Bengal, between Burma and Pakistan Area 3,287,240km2 Land boundaries China, Nepal, Tibet, Bhutan and the mountain range of the Himalayas (north); Myanmar and Bangladesh (east); Pakistan and Afghanistan (north west) Coastline 7,517km. Climate Varies from tropical monsoon in the south to temperate in the north Terrain Upland plain (Deccan Plateau) in the south, flat to rolling plain along the Ganges, deserts in the west, Himalayas in the north Time zone GMT+5.5 (India does not operate Day Light Saving) People Population India is the second most populous country in the world, with over 1.29 billion (2015 est.) Ethnic groups India has more than 2,000 ethnic groups Religion Hindu 79.8%, Muslim 14.2%, Christian 2.3%, Sikh 1.7%, other 2.0% Language The Constitution of India recognizes 22 languages as official languages of India. The use of English is widespread, particularly in business circles Page 4 Government Country name India Government type Federal Republic Capital New Delhi Administrative divisions 29 states and 7union territories Political situation The president, vice-president, and the council of ministers officially wield executive power. The president of India is the figurehead of the country, and is given instructions (or “advice”) by the prime minister, who leads a council of ministers (advisors). The parliament and the state governing bodies have control of the legislative branch of government. This body is made up of two houses (the Council of States and the House of the People) and the president. Economy GDP – per capita US$ 1,581.5 (2014 est.) GDP – real growth rate 7.0% (for the FY 2014-15) Labour force 496 million (2014 est.) Unemployment 3.6% (2014) US$ 2.049 trillion Page 5 2. Business Entities and Accounting 2.1. Incorporation Options The principal business entities for doing business in India are: • Limited liability company -public or private or one person • Partnership • Limited liability partnership (LLP) • Sole proprietorship 2.1.1. Companies A company may be incorporated either as a public or private company or a One Person Company. The characteristics and requirements of the various types of company are outlined below: Public Private One Person Company Minimum number of 7 2 1* subscribers/shareholders/ members Maximum number of No limit 200 1* subscribers / shareholders / members Minimum number of directors 3 2 1 Invitation to public for shares / Yes No No debentures / Deposits from public permitted *The member should be a natural person, Indian citizen and resident in India. The term "resident in India" means a person who has stayed in India for a period of not less than 182 days during the immediately preceding calendar year. 2.1.2. Partnership Partnerships, governed by the Indian Partnership Act, 1932, are created by execution of a Partnership Deed. At least 2 members are required to start a partnership. The number of members should not exceed 100. The partners are jointly and severally liable for the debts of the partnership. Prior approval from the Reserve Bank of India (RBI) is required if foreign nationals intend to become partners in an Indian partnership. Page 6 2.1.3. Limited liability partnership A Limited Liability Partnership is an alternative business vehicle that not only gives members the benefit of limited liability but also the flexibility of organising their internal structure as a traditional partnership. It is a separate legal entity and, while the LLP itself is liable for the full extent of its assets, the liability of the members is limited. Every LLP shall have at least 2 partners and shall also have at least 2 individuals as Designated Partners, of whom at least 1 shall be a resident in India. The duties and obligations of Designated Partners shall be as provided in the law. Investment in a LLP by a body corporate incorporated outside India is governed by the foreign direct investment (‘FDI’) policy of the RBI along with the provisions of the Foreign Exchange Management Act, 1999. As per the provisions of these legislations, a person resident outside India or an entity incorporated outside India shall be eligible investor for the purpose of FDI in LLPs. However, some specified persons are not eligible to invest in LLPs. Further, the eligible investor would be eligible to invest, only in LLPs operating in sectors / activities where 100% FDI is allowed under the automatic route. LLP engaged in activities wherein investment is allowed through government route or where investment is allowed for less that 100% through automatic route are not eligible for FDI. 2.1.4. Sole proprietorship Sole proprietorship is a form of business organisation in which an individual introduces his / her own capital, uses his/her own skill and intelligence in the management of its affairs, assumes all the risks of business and is solely responsible for the results of its operations. 2.1.5. Others In addition to the above legal entities, the following types of entities are available for foreign investors / foreign companies doing business in India: • Company: A foreign company can set up a Company in India to carry out business activities. Such a company is treated as an Indian resident. At least 2 shareholders for a private limited company and 7 shareholders for a public limited company are mandatory. In addition, there is also the requirement that one of the directors of
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