In this article we will discuss the ease of doing business for NRIs in India and the initiatives taken by the government to promote business here
NRIs or Non Resident Indians are Indian citizens who live and work outside the sovereign boundaries of India. However, when they do work abroad, they are liable to pay taxes there which is a loss of tax revenue from the government’s perspective. So in order to avoid that, the government has come up with various initiatives through which it can invite NRIs to invest in doing business in India by easing certain formalities and regulations with regard to foreign investment and documentation required for starting a business. In this article we will discuss some of the challenges for Nris To Do Business In India and what is being done to tackle these issues.
How NRIs can do a business in India
In the past NRIs have invested in businesses or have played key managerial roles in businesses in India. But it is a rare case, having NRIs as the direct owner of any business in India. This is due to the challenges the NRIs have to face to facilitate business in their names. Some of the challenges are: regulatory requirements such as presence of a physical office, physical presence during incorporation and other red tape rules that cause a major convenience not just during the incorporation stage but even during operations.
Some of the challenges for Nris To Do Business In India:
The legal deadlock that starts at the process of incorporation. Due to varied reasons and other prevailing conditions, the NRIs usually have the only option of using Private Limited company registration as all other options tend to be less viable. The general rules are that, even though the NRIs register as a Private Limited Company with a minimum of two shareholders, one must definitely be a resident of India. And even for the additional resident director there were a whole bunch of rules for qualifying as a director.
The other important problem is the need for a local address for a registered office in the country which is a mandatory criterion needed to register the business. The NRIs usually tend to find it difficult to have an office space with the Electricity bill, telephone bill addressed to the owner (i.e. NRI), as these pose geographical challenges.
Issues Over the Requisite Documents
There exists another roadblock wherein the NRIs have to get a Director Identification Number (DIN) which is necessary for a person to hold the position of a director in a company. A DIN can be obtained by NRIs only with verification and attestation by the Indian Embassy of the country in which the NRIs are staying. This requires getting an appointment with the embassy and getting the documents attested properly. Sometimes even after getting the documents the registrar might ask for additional documents which involves seeking another appointment with the embassy and this entire process can get not only time consuming but harrowing as the company cannot begin operations until the incorporation process is complete. This can cause idleness of funds, increase in opportunity costs and loss of prospective revenue, all of which can cause immense pressure and uneasiness as far as operations are concerned.
Scenario Analysis
The above are the problems that were common in registering a firm. But now let us see the current scenario. And also on how the law has made way for any NRI to initiate a business in India. Most of the NRIs are aware of the recent changes that have been made in India on the minimization of entry barriers. So what are these changes and how has the government given NRIs the liberty of owning a business?
The propensity to allow foreign investments into the country has increased. This leads to the testimony of the fact that there is more interest to do business in the Indian territory.
SPICe to the Rescue
The major improvement allowing NRIs to initiate business plans in the country is the introduction of the SPICe Form by the ministry of corporate affairs. SPICe stands for Simplified Proforma for Incorporating Company Electronically. This form mitigates all the hardships that a new entrant has to face to apply separately for every new registration. The SPICe form transforms the cumbersome task into an easy one. It stands as an easy option to apply for PAN, TAN, DIN, DSC and complete all the processes, just with one form.
Virtual Set-Ups
Setting up office spaces in the country is another roadblock NRIs face. To offer a solution to this problem, the government has introduced the process of having virtual directors and virtual offices. These concepts have caught on pretty fast in terms of popularity with a surge in businesses being incorporated in India. There are various startups which are ready to share their office space with other businesses for a remuneration to keep the office space intact for a certain amount of period.
Make in India
While the make in India scheme has been primarily targeted at indigenous entrepreneurs giving them several incentive schemes in the form of interest free financing and tax breaks, there has also been proactivity towards getting foreign entities to set up shop in India and produce goods in India. These entities too are entitled to these incentive programs and tax breaks as long as they meet the prerequisites that have put in place.
Despite these developments, there are still quite a few roadblocks that NRIs face and it will take a while until a seamless mechanism can be put in place to allow NRIs to do business in India with no hiccups. The solutions offered to these challenges are not mainstream solutions. For instance, the first and foremost issue is the need of an Indian citizen for the post of directors. Indeed, this challenge is being satisfied by the people who are ready to work for a salary as a director. And the office space as mentioned above has been provided by many institutions and incubation centres which tends to be a hosting space for the NRIs. But still, these are all work-arounds and not exactly direct solutions to the problems. But one must also understand that there are several factors in play which have led to these restrictions in the past. Misuse of foreign funds, creation of shell companies for tax evasion, non-availability of owners within the sovereign borders, etc. are a few of the problems.
Conclusion
Thus, you might have got to know about the Nris To Do Business In India. Starting a business has never been easy as it is now. There will always be issues and problems which can be stated to be teething problems. At the same time it is important to be optimistic and use the initiatives of the ministry of corporate affairs to ease business operations. However, it would be the perfect time to have a new law in place to encourage more businesses from being incorporated by NRIs.
The major improvement which allows the NRIs to initiate business in india is through the SPICe form. SPICe means Simplified Proforma for Incorporating Company Electronically. Moreover, this makes it easier to apply for PAN, TAN and DIN and complete the process. The government has come up with the process to have virtual offices and directors. However, even after these developments, it is not the mainstream solution for the NRIs to start business in India.
It is always advisable to seek the advise of a legal or a professional consultant when incorporating a business in India not only because they are aware of the process but are also aware of the various incentives and initiatives launched by the government. If you are looking to incorporate a company and need guidance or answers to your queries, feel free to contact our team of business incorporation experts and they will guide you through the process as per your requirements.
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