A detailed guide to start a business in India by a foreigner/non resident.

India is continuing to be investment destination for the investors across the world. India’s markets have shown a good  returns of above 14% (based on NIFTY index) since inception. There are a few factors that interest investors like, young workforce, easing of FDI regulations, size of Indian market,revised  tax policies, robust infrastructure, global competitiveness etc.

A foreign enterprise or an individual can choose to operate in India or invest in India. We have tried to make an attempt to list down all the steps that that a foreign investor should understand and appreciate before an investment is made into India. 

A step by step approach for an easy understanding of the statutes, compliance with them and the procedures to be followed have been elucidated

To start and manage a business in India there are 5 steps 

Step 1 

private limited company registration as per the Companies Act 2013 which is a wholly owned subsidiary company 

Step 2 

Study of applicability of FDI Guidelines w.r.t proposed business line in particular to the client business. Reporting with the Reserve Bank of India about the Investment into India as per Foreign Exchange Management Act 1999 (FEMA) 

Step 3 

Obtaining the requisite statutory registrations applicable to the nature of business carried out by the company 

Step 4 

Monthly compliance review w.r.t filing of Goods & Service Tax returns, TDS returns, Payroll processing and other applicable Indian labour laws.

Quarterly secretarial compliances w.r.t conducting of Board Meetings, Annual General Meetings and maintenance of Minutes, statutory records and registers and maintenance of legal documentation as per the Companies Act 2013. 

Step 5 

Audit of books of account, Filing of Annual returns with Registrar of Companies (Ministry of Corporate Affairs) & Filing of Income tax returns as per the Income Tax Act 1961 

Activities done in different steps

Step 1-Incorporation of a Private Limited Company 

For incorporation of company at least one person who is a Resident of India should be a director of your company. 

Minimum Requirements: 

-Minimum 2 Shareholders 

-Minimum 2 Directors 

-At least 1 of the Directors shall be an Indian Resident 

-The directors and shareholders can be same people 

-Minimum Share Capital shall be Rs 100,000 (INR One Lac)  

Step 2-Reporting with the Reserve Bank of India about the Foreign Direct Investment into India 

1. Study on the Foreign Direct Investment (FDI) into India within the purview of RBI & FEMA laws. 
2. Advisory on the Capital Structure proposition w.r.t equity share capital. 
3. Adherence to the Reporting requirements w.r.t the receipt of FDI to Reserve bank of India 
4. Allotment of shares to the Proposed Holding Company as per the decided shareholding pattern   as per Companies Act 2013. 
5. Issue of share certificates to the shareholders 
6. Reporting to RBI w.r.t allotment of shares to the investors 

Step 3-Obtaining of all the statutory registrations applicable to the nature of business carried out 

1. Permanent Account Number
2. Tax Deduction and Collection Account Number
3. Goods & Service Tax 
4. Labour license under shops and establishment Act 
5. Trade License
6. Provident Fund (In case the number of employees exceeds 20)
7. Professional Tax

Step 4- Monthly compliance review w.r.t Accounting, filing of Goods & Service Tax returns, Payroll processing and labour laws applicable 

1. Accounting for the transactions
2. Payment assistance and filing of GST returns within the purview 
3. Payroll processing for employees 
4. Compliance in withholding of Tax and filing of returns for the same (From employees and from vendors)

Step 5-Audit of books of account, Filing of Annual returns with ROC & Filing of income tax returns. 

1. Audit of books by a Chartered Accountant. 
2. Conducting of board meetings and general meetings in the company and preparation of  necessary documentation respectively. 
3. Filing of annual accounts with Registrar of Companies (ROC) 
4. Filing of income tax returns for the relevant assessment years 
5. If transfer pricing is applicable, transfer pricing documentation is to be done and transfer pricing report is to be certified.

The government fees , process and  the documentation for the Step- 1 and Step-2 depend on a few factors like 

1. Number of promoters / Shareholders 
2. Number of Directors from Foreign country
3. Number of Directors from India 
4. Authorized Share capital you propose to have for the company 
5. Amount of paid up capital that you wish to bring in as Foreign Direct Investment

All these steps have been defined in a more detailed manner for an easy understanding of the investors’ or entrepreneurs to understand and make decisions. This will help for the readiness towards investments to be made in India and participate in setting up of business in India. 

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