Professional Documents
Culture Documents
Doing Business in India
Doing Business in India
Doing Business in India
2013
How
How to
to register
register aa company
company
in
in India
India
INDEX
India and its Culture
P3
Country Overview
P4
Business Culture
P7
Employing People
P10
Entry and Residence
P13
Liaison Office
P16
Branch
P22
Company Limited by Shares
2
P28
India:
The country and its Culture
10
12
13
14
India:
Choosing a Business Format
15
16
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Companies limited by shares are formed under the Companies Act 1956 and may be
public or private. This section is concerned only with private companies. Such a
company has a minimum share capital of INR100,000, must restrict the right to
transfer its shares, may not have more than 50 members and may not invite or
accept subscriptions to its shares from members of the public. Formation of a limited
company in India can be a lengthy and bureaucratic procedure. Once incorporation
has been completed, the company can then register with the tax and customs
authorities, obtaining a PAN (permanent account number) and a TAN (tax collection
number). Visas for foreign staff can now be issued and bank accounts opened. All
companies incorporated under the Companies Act must file audited accounts
annually with the Registrar of Companies. If turnover exceeds INR6m, a separate tax
audit must be carried out. Limited companies can hire local and foreign staff.
Normally a foreigner employed by a limited company will require an Employment
Visa, although if only short visits are being made a Business Visa may be sufficient.
Indian companies are taxed on the previous year's income. Thus, for resident
companies, income in the 2010/2011 financial year is assessed to tax in the
2011/2012 assessment year (beginning in April 2011) at 30% plus a 7.5% surcharge
plus 3% education 'cess' for a total of 33.22%.Companies with taxable income below
INR10m are exempt from the surcharge. No-resident companies are taxed at 40%
plus surcharge and 'cess' giving a total of 42.23%.
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20
The Limited Liability Partnership (LLP) was introduced in India in 2010; the previous
General Partnership form was not much used since its members were too easily able
to escape their liabilities by dissolving the partnership. The LLP however has legal
personality while still preserving a limitation on liability for individual members.
There must be an LLP agreement which specifies the contributions of all members.
There must be at least one 'designated member' who has responsibility for
managerial and procedural aspects of the partnership. The LLP Agreement needs to
be filed with the Registrar of Companies, who must also verify availability of the
name of the LLP, and will issue a Certificate of Incorporation. An LLP must maintain
annual accounts reflecting a true and fair view of its affairs. A statement of accounts
and solvency must be filed with the Registrar of Companies every year. Limited
Liability Partnerships can hire local and foreign staff. Normally a foreigner employed
by an LLP will require an Employment Visa, although if only short visits are being
made a Business Visa may be sufficient. LLPs, like Indian companies, are taxed on
the previous year's income. Thus, income in the 2010/2011 financial year is assessed
to tax in the 2011/2012 assessment year (beginning in April 2011) at 30% plus a
7.5% surcharge plus 3% education 'cess' for a total of 33.22%.LLPs with taxable
income below INR10m are exempt from the surcharge. Profit remaining after tax is
distributed to members in proportion to their contributions or according to the LLP
Agreement and is not taxed further.
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Liaison Office
-
Nature
Formation
Ongoing Formalities
Employing Staff
Taxation
22
23
24
A liaison office is required to file annual audited financial statements with the RBI
and the Registrar of Companies; tax returns also have to be filed, even though no tax
is going to be due.
25
26
27
Branch Office
-
Nature
Formation
Ongoing Formalities
Employing Staff
Taxation
28
29
30
A liaison office is required to file annual audited financial statements with the RBI
and the Registrar of Companies; tax returns also have to be filed, even though no tax
is going to be due.
31
32
33
Nature
Formation
Ongoing Formalities
Employing Staff
Taxation
34
Companies limited by shares are formed under the Companies Act 1956 and may be
public or private. This section is concerned only with private companies. Such a
company has a minimum share capital of INR100,000, must restrict the right to
transfer its shares, may not have more than 50 members and may not invite or
accept subscriptions to its shares from members of the public. It is governed
according to its Memorandum and Articles of Association by a board of directors.
There must be at least two members and two directors. The liability of the
shareholders is limited to the amount of share capital subscribed by them.
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Indian companies are taxed on the previous year's income. Thus, for resident
companies, income in the 2009/2010 financial year is assessed to tax in the
2010/2011 year, at a rate of 30% plus surcharge (10%) and education 'cess', for a
total of 33.99%.Income in the 2010/2011 financial year is assessed to tax in the
2011/2012 assessment year (beginning in April 2011) at 30% plus a 7.5% surcharge
plus 3% education 'cess' for a total of 33.22%.Companies with taxable income below
INR10m are exempt from the surcharge. Non-resident companies are taxed at 40%
plus surcharge and 'cess' giving a total of 42.23%.The Direct Taxes Code, which may
come into force in April 2012, would put in place a flat 30% rate of corporate income
tax for both resident and non-resident companies; but foreign-owned companies
would pay a 15% 'branch profits tax'. There is a Minimum Alternative Tax which
bears on companies declaring taxable profit of less than 10% of accounting profit, at
a rate of approximately 18%, increasing to approximately 18.5% in the current year,
and to 20% next year. Dividend distributions to shareholders are subject to a 15%
final withholding tax (plus surcharges).
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Project Office
-
Nature
Formation
Ongoing Formalities
Employing Staff
Taxation
40
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42
Banks can open non-interest bearing foreign currency account for project offices in
India subject to the following:
A: The project office has been established in India, with the general/specific
permission of Reserve Bank, having the requisite approval from the concerned
project Sanctioning Authority,
B: The contract under which the project has been sanctioned, specifically provides
for payment in foreign currency.
C: Each project has only one foreign currency account.
D: The permissible debits to the account shall be payment of project related
expenditure and credits shall be foreign currency receipts from the project
sanctioning authority, and remittances from parent/group company abroad or
bilateral/multilateral international financing agency.
E: The foreign currency account has to be closed at the completion of the project.
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44
45
Nature
Formation
Ongoing Formalities
Employing Staff
Taxation
46
The Limited Liability Partnership (LLP) was introduced in India in 2010; the previous
General Partnership form was not much used since its members were too easily able
to escape their liabilities by dissolving the partnership. The LLP however has legal
personality while still preserving a limitation on liability for individual members. A
minimum of two partners is required, but there is no maximum number. Unlike the
General Partnership, which was not open to foreigners, foreign individuals and
companies can be members of an LLP. Two persons, individual or corporate, are
required to be partners as a minimum. A corporate partner must nominate an
individual as a representative. Domestic or foreign individuals or companies may be
partners.
47
Every partner must contribute towards an LLP in some manner; the value of nonmonetary contributions must be certified by a practicing accountant. The liability of
an individual partner is limited to their contribution. There must be an LLP
agreement which specifies the contributions of all members. There must be at least
one 'designated member' who has responsibility for managerial and procedural
aspects of the partnership. Each designated partner must obtain a DPIN (Designated
Partner Identification (Number) from the government, but an existing DIN (Director
Identification Number) will do instead. Various forms needing to be filed, including
those involved during incorporation, are electronic, and at least one of the
Designated Partners must therefore have a DSC (Digital Signature Certificate).The
LLP Agreement needs to be filed with the Registrar of Companies, who must also
verify availability of the name of the LLP, and will issue a Certificate of Incorporation.
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49
50
LLPs, like Indian companies, are taxed on the previous year's income. Thus, income
in the 2009/2010 financial year is assessed to tax in the 2010/2011 year, at a rate of
30% plus surcharge (10%) and education 'cess', for a total of 33.99%.Income in the
2010/2011 financial year is assessed to tax in the 2011/2012 assessment year
(beginning in April 2011) at 30% plus a 7.5% surcharge plus 3% education 'cess' for
a total of 33.22%.LLPs with taxable income below INR10m are exempt from the
surcharge. The Direct Taxes Code, which may come into force in April 2012, would
put in place a flat 30% rate of corporate income tax for LLPs. The salaries and
expenses of members of the LLP are allowed as deductions from income before
taxation, subject to certain limits, but are taxed in the hands of the members. Profit
remaining after tax is distributed to members in proportion to their contributions or
according to the LLP Agreement and is not taxed further. In this respect, the LLP has
a tax advantage over the regular limited company, whose dividends are subject to
withholding tax.
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Thank you !
For further information,
kindly contact us at:
Chindia Chamber of
Commerce and Industry
Email: admin@chindiachamber.org
Tel: +91-11-41014288
Address: D-38, Anand Niketan, New Delhi -110021,
Url: chindiachamber.org
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