Doing Business in India - RSM Austria

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2.3 Prohibition on investments 2.3.1 Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not (such as, Trusts) which is engaged or proposes to engage in the following activities: i. Business of chit fund, or ii. Nidhi Company , or iii. Agricultural or plantation activities or iv. Real estate business, or construction of farm houses v. Trading in Transferable Development Rights (TDRs). “Real Estate Business” mentioned above, does not include development of townships, construction of residential/commercial premises, roads or bridges educational institutions, recreational facilities, city and regional level infrastructure, townships. It is further clarified that partnership firms /proprietorship concerns having investments as per FEMA regulations are not allowed to engage in print Media sector. 2.3.2 In addition to the above, investment in the form of FDI is also prohibited in certain sectors such as: a. Retail Trading (except single brand product retailing) b. Atomic Energy c. Lottery Business d. Gambling and Betting e. Business of chit fund f. Nidhi company g. Trading in Transferable Development Rights(TDRs) h. Activities / sectors not opened to private sector investment i. Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors) and Plantations (other than Tea Plantations). j. Manufacture of Cigars, Cheroots, Cigarillos & Cigarettes, of Tobacco or of Tobacco substitutes. The sectors which are prohibited are annexed vide Annexure-1 2.4 Investment under Foreign Direct Investment (‘FDI’) Scheme Entry routes for investments in India Foreign investment is freely permitted in almost all sectors. Under Foreign Direct Investments (FDI) Scheme, investments can be made by non-residents in the shares / convertible debentures of an Indian Company, under two routes; Automatic Route and Approval / Government Route. Under the Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment. Under the Approval / Government Route, prior approval of the Government of India, Ministry of Finance, Foreign Investment Promotion Board (FIPB) is required. Entry route for non-resident investors in India as well as sector specific investment limits in India are given in Annexure -2. 60 DOING BUSINESS IN INDIA
2.4.1 Automatic route of FDI The Government of India has substantially expanded the scope of foreign investment under the Automatic Route to include all items/ activities, except certain items, for investment under FDI. FDI up to 100 % is allowed under the automatic route from foreign/NRI investor without prior approval in most of the sectors including the services sector. FDI in sectors/activities under automatic route does not require any prior approval either by the Government or RBI. An Indian company receiving investments from outside India for issuing shares / convertible debentures / preference shares under the FDI scheme, should report the details of the amount of consideration to the RBI within 30 days from the date of receipt of inward remittances. Foreign investment coming as fully convertible preference shares would be treated as part of share capital. This would be included in calculating foreign equity for purposes of sectoral caps on foreign equity, where such caps have been prescribed. Foreign investment coming as any other type of preference shares {nonconvertible, optionally convertible or partially convertible) would be considered as debt and shall require conforming to External Commercial Borrowings (ECB) guidelines / ECB caps. 2.4.2 Investments in sectors where 100% FDI under automatic route is not available i. The RBI’s Automatic Route is not available for Foreign investment in Indian Company which is engaged in any activity, or in manufacturing of item included in is given in the Annexure 1 of this note. An Indian company which is not engaged in the activity or manufacture of items listed in Annexure 1 is permitted to issue shares or convertible debentures to a person resident outside India upto the extent specified in Annexure 2 on repatriation basis, subject to compliance with the provisions of the Industrial Policy and Procedures, provided – a. The issuer company does not require an industrial license; b. The shares/ convertible debentures are not being issued for acquiring existing shares of any Indian company; c. If the person resident outside India to whom the shares are being issued proposes to be a collaborator or proposes to acquire the entire shareholding of a new Indian company, he should have obtained Central Government’s approval if he had any previous investment/ collaboration/ tie up in India (according to press note number 1 (2005 series) dated 12 January 2005 previous means prior to 13 January 2005) in the same field in which the Indian company issuing the shares is engaged. This restriction is not applicable for issue of shares of an Indian company engaged in Information Technology sector or in the mining sector. DOING BUSINESS IN INDIA 61
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International global excellence in
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Doing business in India
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Marine Drive, Mumbai
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Contents Hawa Mahal, Jaipur
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Education .........................
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SIGNIFICANT COMPANY LAW REGULATIONS
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ANNEXURE 1 Sectors Prohibited for F
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Chapter 1 India - A Profile Golden
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2.2 Language India is a land of man
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5.2 Communication The Indian teleph
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7.5 Public Holidays The statutory p
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CHAPTER 2 INDIAN BUSINESS AND INVES
Page 26 and 27: This resulted in a fall in the Bomb
Page 28 and 29: 4.3.3 Designs After expiry of three
Page 30 and 31: non-banking finance activities viz.
Page 32 and 33: trading in derivative based on BSE
Page 34 and 35: same as those where concessional fi
Page 36 and 37: 10.3 Low Research and Development C
Page 38 and 39: CHAPTER 3 BUSINESS ENTITIES 1.0 FOR
Page 40 and 41: Sr. No. Criteria Requirements 1 Tra
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Page 44 and 45: cause the disassociation of the par
Page 46 and 47: 2.1.2 MOA 2.1.3 AOA Companies for r
Page 48 and 49: paid up equity capital can be less
Page 50 and 51: The requirements for public and pri
Page 52 and 53: 3.0. STATUTORY REQUIREMENTS FOR COM
Page 54 and 55: 3.4 Online Filing System Ministry o
Page 56 and 57: Section Nature of default 168 Defau
Page 58 and 59: 4.0 SIGNIFICANT COMPANY LAW REGULAT
Page 60 and 61: 4.7 Audit Committees For better cor
Page 62 and 63: The meetings of the board are requi
Page 64 and 65: Chapter 4 Human Resources Kathakali
Page 66 and 67: Employee benefit What is it? Applic
Page 68 and 69: Employee benefit D e p o s i t L i
Page 70 and 71: 2.5 The Equal Remuneration Act, 197
Page 72 and 73: The Factories Act safeguards agains
Page 74 and 75: CHAPTER 5 FOREIGN INVESTMENT IN IND
Page 78 and 79: ii. Subject to compliance with the
Page 80 and 81: ii. iii. iv. The NRI investor has t
Page 82 and 83: ii. On repatriation basis An NRI ca
Page 84 and 85: Indian company can issue ESOPs to e
Page 86 and 87: ii. iii. iv. The foreign equity aft
Page 88 and 89: vi. Branch Offices have to submit A
Page 90 and 91: ii. ECB up to US$ 20 million or equ
Page 92 and 93: 3.2 Approval Route 3.2.1 Eligible B
Page 94 and 95: 3.2.6 End Use not permitted i. Util
Page 96 and 97: issued by Reserve Bank from time to
Page 98 and 99: Sr. No. Sector/Activity FDI Cap / E
Page 100 and 101: Sr. No. II C POWER Sector/Activity
Page 106 and 107: Sr. No. 29. Sector/Activity Telecom
Page 108 and 109: Chapter 6 Taxation System India Gat
Page 110 and 111: Entity Domestic Company Financial y
Page 112 and 113: **** Mutual funds, other than equit
Page 114 and 115: interest deductible is restricted t
Page 116 and 117: 2.4 Tax Relief In order to encourag
Page 118 and 119: Section Details of Exemption / Dedu
Page 120 and 121: Section 35 DDA 54G 54GA 54EC 10(34)
Page 122 and 123: Sr. No. Nature of activity and loca
Page 124 and 125: Sr. No. Nature of activity and loca
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Sr. No. Nature of activity and loca
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Sr. No. xviii Nature of activity an
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No deduction under 80IA, 80IB, 80IA
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Tax is payable in advance on income
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3.1.2 Other Non-corporate Entities
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the Finance Act 2010, 'bullion' is
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Rs. 40,00,000. The scheme is applic
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4.5 Income of Offshore Funds Income
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7.3 Advance Rulings The Indian gove
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9.0 INDIRECT TAXES 9.1 Goods and Se
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on goods manufactured and vice vers
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Annexure I Double Taxation Avoidanc
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Sr. No. Country Dividend [Note 1] T
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ANNEXURE II: TAX DEDUCTION AT SOURC
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NOTES 142 DOING BUSINESS IN INDIA
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RSM International Executive Office,
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