NRI Legal Solutions
There are various ways you can set up your business in India. Reserve Bank of India has been extending cooperation for welcoming foreign companies to set up their offices in India with a reasonable level of simplicity. Following are the options available for a foreign company looking for an entry in India:
Set up a Branch in India
Requirements and Conditions :
• The name of Indian Branch office shall be same as parent company.
• The Branch office does not have any ownership; it is just extension of the existing company in the foreign country.
• All the expenses of the BRANCH office are met by the head office, if it does not have the revenue from Indian operations.
• The foreign parent company looking to start a Branch office in India shall have a profitable track record during immediately preceding five years in the home country.
• The Net Worth i.e. total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name, shall be more than USD 100,000.
Documents required:
Following documents are required to open a branch office in India :
• Form FNC 1 (Three copies)
• Letter from the principal officer of the Parent company to RBI.
• Letter of authority from the parent company in favour of Local Representative.
• Letter of authority/ Resolution from parent company for setting up BRANCH office in India.
• Comfort letter from the parent company intending to support the operation in India.
• Two copies of the English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent company duly attested by the Indian embassy or notary public in the country of registration.
• Certification of Incorporation - Translated & Duly Notarized and properly authenticated.
• The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years and properly authenticated
• Name, Address, email ID and telephone number of the authorized person in Home Country.
• Details of Bankers of the Organization the Country of Origin along with the bank account number
• Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India
• Expected funding level for operations in India.
• Details Relating to address of the proposed local office, number of persons likely to be employed, number of Foreigners among such employees and address of the head of the Local office, if decided
• Details of Activity carried out in Home Country by the applicant organization in brief about the product and services of company in Brief.
• Bankers Certificate
• Latest Proof of identity of all the Directors - Properly Certified by Banker in Home Country and duly authenticated
• Latest Proof of address all of Directors - Properly Certified by Banker in Home Country and duly authenticated
• Details of the Individuals / Company holding more 10% of Equity
• Structure of the Organization and its Shareholding pattern
• Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company
• Resolution for Opening up Bank Account with the Banker
• Duly Signed Bank Account Opening Form for Indian Bank
Note: The timeline for setting up BRANCH office has increased recently due to increased documentation requirements.
Other Incorporation Requirements :
Every Branch office registered with RBI shall get itself registered with the Ministry of Corporate Affairs. On such registration a CIN i.e., Corporate Identity Number is allotted by the Registrar of Companies. The following documents shall be filled with the Registrar of Companies:
• Form 44
• Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the company(In the manner provided under Rule 16, 17 of the Companies (Central Government's) General Rules and Forms, 1956)
• If the above documents are not in English then the translated version of the documents.
• Director(s) details - individuals
• Director(s) details - bodies corporate
• Reserve bank of India approval letter
• Secretary(s) details
• Power of attorney or board resolution in favor of the authorized representative(s)
Post Incorporation Procedural Requirements :
• Permanent account number – PAN
• Tax deduction number - tan number Shop & establishment
• GST Registration (only if the Branch carries out trading activities in India)
Annual Compliance Activities :
• Maintenance of Books of Account
• Getting Annual Accounts audited
• Filling of Annual Activity Certificate with RBI
• Filling of Annual Return and Balance sheet with Registrar of Companies
• Intimating any change in constitution of Foreign Company to RBI & ROC
• Intimating any change in Directors of Foreign Company to RBI & ROC
• Intimating each and every change in the BRANCH office to RBI & ROC
• No additional place of business can be started unless approval is taken from RBI.
How to Close a Branch Office in India :
Generally a branch office licenses is given for three years. If at any time the foreign company plans to close the branch office setup in India it shall file the necessary documents with RBI. The application for the closure generally includes the followings:
• Copy of Reserve Bank's permission/ approval from the sectoral regulator(s) for establishing the BO / LO.
• Auditor's certificate: i) indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets; ii) confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Office have been either fully met or adequately provided for; and iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un- repatriated to India.
• No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance/s.
• Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance.
• A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the Office in India.
• Any other document/s, specified by the Reserve Bank while granting approval.
Branch office on 'Stand Alone basis" in India :
• Stand Alone Branch Offices are isolated and restricted to the Special Economic Zone (SEZ) alone and no business activity/transaction is allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.
• No approval is necessary from RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities subject to specified conditions.
A branch office is suitable for foreign companies looking to setup a temporary office in India and not interested or not planning to have long-term plans for the Indian operations. Also, a branch office is not allowed to carry out manufacturing activities on its own although it is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI may remit outside India whatever profit of the branch, net of applicable Indian taxes. Most importantly, the provisions of Income Tax Act and DTAA should be kept in mind for avoiding tax litigations in future. For instance, if a foreign company is deciding to depute some personnel for X weeks or months, and for which it needs to pay salaries to such deputed personnel, then various factors would need to be kept in mind for avoiding litigations. Structuring of expenses in form of salaries vis-à- vis reimbursements, and also whether such expenses should be incurred by the parent foreign company or Indian company are some questions which need to be addressed before moving further.
Set up a Liaison Office in India
Procedure for RBI Approval :
• The companies desirous of opening a liaison office in India may make an application in form FNC-1 along with the documents mentioned therein to RBI.
• Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by the Regional Office in whose jurisdiction the office is set up.
• Liaison/Representative offices have to file an Activity Certificate on an annual basis from a Chartered Accountant to the concerned Regional Office of the Reserve Bank of India, stating that the Liaison office has undertaken only those activities permitted by Reserve Bank of India.
Permitted Activities :
• Representing the parent company / group companies in India.
• Promoting export / import from / to India.
• Promoting technical/ financial collaborations between parent / group companies and companies in India.
• Acting as a communication channel between the parent company and Indian companies.
We identify our NRI division as a one stop destination for NRI related Financial, Investment and Taxation services. NRIs comprise a substantial portion of our current client base. Our continuous endeavor is to provide quality services to our valuable clients. We offer a whole spectrum of NRI related services to our clients spread across the globe. We extend our services from handling NRI investment related queries, to providing excellent solutions to NRIs regarding setting up business in India, to NRI Banking Solutions, to assisting returning and emigrating Indians. Our NRI Consultancy Services, which involves all the above aspects and solves many more issues interfacing with Indian and Foreign Taxation Laws. We have credible experience of providing multitude of services to a diverse clientele profiles. We always strive to provide value added services to our clients through strong customer relationship management.
We Serve…..
• Emigrating Indians/New NRIs
• NRIs who intend to remit funds from India to Abroad or vice versa
• NRIs who have/intend to have investments in India
• NRIs who inherit assets in India
• NRIs who have/intend to set up a business in India
• Returning NRI
• NRIs who are subject to report under Foreign Taxation Laws
Emigrating Indians / New NRIs:
India has one of the world’s most diverse and complex migration history. In the present globalized world, migration of people from one country to another, for employment has become a common phenomenon. Emigration to the different countries has been most manifest in the growth of trade and financial flows of India. An emigrating Indians/New NRIs are crucial to the Indian economic development. We help them in the following matters:
• Facilitate repatriation of sale proceeds and income of assets held in India
• Determination of residential status in India
• Plan for NRIs tax liability in India
• Appplication for obtaining PAN number and filing of Income Tax return in India
• Opening up various bank accounts and compliances thereof
• Opening a Portfolio Investment Scheme account in respect of Stock Market transactions
• Monitor, record and report about his/her investments in India
• Facilitating execution of Power of Attorney
NRIs who Intend to remit funds from India to Abroad or vice versa:-
The Indian foreign exchange market has operated in a liberalized environment for more than a decade. Nobody can doubt the contribution of foreign exchange remittance in the economic development of India. We facilitate our clients to conduct hassle free remittance transactions as follows:
• Opening of various bank accounts in India namely ‘Rupee Accounts’ like NRE A/c, NRO A/c and ‘Forex Accounts’ like FCNR A/c and RFC A/c
• Issuance of CA Certificates like 15CA and 15CB
• Monitoring of your bank accounts with regards to various compliances and also effective tax planning for credited amounts
• Repatriation of sale proceeds of residential and immovable property in India, current income repatriation like interest, dividend, pension, rent etc.
NRIs who have/intend to have investments in India:
Investing in India, when living abroad, has always been the safe route to ensure good financial gains and securing future-return plans to the country. We can provide you the needed advisory and assistance in taking the best decision for your real estate properties and investments which will definitely form a larger part of the portfolio of assets. We assist our clients to invest in a very efficient and effective way as follows:
• Suggesting balanced allocation between Fixed Income investments, Equity based investments and Real Estate properties
• Recommending best investment option in light of Indian laws
• Advising allocation of investments in the most convenient routes such as Mutual Funds, Govt. Risk-free bonds, Securities, Fixed Deposits and Quality Real Estate projects
• Suggesting various reinvestment options to minimize Capital gain tax
• Monitor, record and periodically report on such investments
• Facilitate repatriation of income from investments and rent
• Facilitate liquidation/lease of property
• Facilitate repatriation of sale proceeds
• Complete banking and other regulatory formalities
NRIs who inherit assets in India:
NRIs inherit property from their parents or someone else, have manifold implication of legal issues. At the same time that can be avoided by well thought plan in regard of the property. We can manage these issues well by considering every aspect of the matter as follows:
• Drafting and registration of a WILL
• Representing before tax authorities on behalf of the assesse if required
• Handling of issues relating to inheritance, a succession certificate, mutation of records etc.
• Facilitating repatriate the sale proceeds of the property or manage the same in most tax efficient manner.
NRIs who have/intend to set up a business in India:
The Indian government has played a responsible role in addressing the financial investment needs of its cash-rich, non-resident diaspora. Adopting a multi-level approach, the government has tried to ensure holistic investment opportunities for the wide-spectrum of foreign investor profiles. Recently India has become the land of opportunity for many NRIs, to invest under “Make in India” and other investor friendlyschemes. Setting up business in India by NRIs attract various legal compliances. We enable him/her to do so by providing the following services:
• Arrange finance for the project by preparing a detailed project report and liaison with banks/ financial institutions and joint venture partners
• Tax planning via different forms of entities like Trusts, Companies, Firms, etc.
• Develop an entry strategy and a financial model
• Evaluate potential partners by carry out financial due diligence reviews
• Advising on appropriate compliance for complete set of regulatory approvals
• Provide insight about various Foreign Direct Investment Schemes and benefits under the same
• Facilitate liquidation/lease of property
• Determine the form of entity and process related to incorporation of the same
Returning NRIs:
Returning to India for good is a big decision and involves various aspects to be considered in order to re-establish settlement in India without omitting any legal compliance. When relocating to India, the following aspects must be taken care of:
• Taxability of Income earned in and outside of India in respect to the Indian Income Tax Act, 1961
• Interpretation of DTAA with a view to reduce tax liability
• Reorganize your asset portfolio in India/outside India with professional assistance to ensure minimum tax liability
• Planning the date and month of return to India to reduce tax liability
• Residential status under different laws
• Compliances with respect to the ‘Income-Tax Act, 1961’ and filing of Indian Income Tax Return
• Re-designation of all Indian bank accounts as Resident accounts and taxability thereof
• Opening and complying with respect to ‘Resident foreign currency’ (RFC) account
NRIs who are subject to report under Foreign Taxation Laws:
NRIs are subject to the tax laws of different countries or the international aspects of an individual country's tax laws as the case may be. Governments usually limit the scope of taxation of income in some manner territorially or provide for offsets of taxation relating to extraterritorial income. Each country has separate laws in respect to levy tax on the taxpayers. Because of varying nature of laws in different countries NRIs have to disclose certain assets and investment made overseas. We assist in the following manner:-
• Provide understanding of various Foreign Taxation Laws
• FATCA and CRS reporting requirement and processes related to it
• FBAR reporting and implications of it
• Declaration under PFIC reporting
• Helping to opt under various Voluntary Disclosure Schemes
• Planning of various investments across the globe in a tax effective manner
Here's investing in Mutual Funds could prove to be a good financial decision:
Who is an NRI?
1. An NRI is an Indian citizen who stays outside India.
a. For purposes of carrying out employment or any business or vocation.
b. Under circumstances indicating an intention to stay outside India for an uncertain duration.
2. Any Indian citizen deputed outside India for a temporary period in connection with employment.
Who is a PIO?
A citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) is a PIO if:
1. He / She at any time held an Indian Passport OR
2. He / She or either of his parents or any of his / her grandparents was a citizen of India OR
3. Spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen (a) or (b) above.
What are the products offered to NRI?
NRI can invest in the following products.
1. Equity trading on BSE and NSE
2. Derivatives trading on the NSE
3. IPO online
4. Portfolio Management
5. Investments in Mutual Funds
What steps an NRI needs to take to start investing in the Indian Stock Market?
An NRI should open a new bank account (NRE / NRO or both) with designated bank which is approved by RBI (Reserve Bank of India) for this purpose.
He should apply for a general approval for investment in Indian Stock Market through his designated bank branch.
He should open a Demat Account with an NBFC to hold his shares and register to execute his buy / sell orders on the stock exchange(s).
What type of saving bank account(s) can be opened by an NRI or PIO in India?
Any NRI / PIO can open two types of savings accounts with any bank in India. They are NRE and NRO bank accounts.
What is a NRO account?
A NRO bank account is an ordinary saving bank account opened for Non resident Indians. This is why it is known as Non-Resident Ordinary account. Since it is an ordinary account i.e. as good as a normal saving bank account, Funds lying in NRO account cannot be taken outside the country or in other words, the Funds lying in NRO account are not repatriable.
Yes money can be freely transferred from NRE account to NRO account.
What is the status of NRO / NRE accounts on the return of the account holder to India?
RBI has advised banks to re-designate such accounts as resident accounts on return of the account holder to India.
In case a resident Indian becomes a non-resident, will he / she be required to change the status of his / her holding from Resident to Non-Resident?
As per section 6(5) of FEMA, NRI can continue to hold the securities, which he / she had purchased as a resident Indian, even after he / she has become a non-resident Indian, but has to transfer the shares to his NRO (Non Resident Ordinary) account
Can NRIs invest in shares, debentures and units of Mutual Funds in India?
NRIs are permitted to make direct investments in shares / debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e . purchase of share / debentures of Indian Companies through stock exchange. These facilities are granted both on repatriation and non-repatriation basis.
NRIs subscribe to public issues? What are the permissions / approvals required?
Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from GOI / RBI. Therefore, individual NRI need not obtain any permission.
Does an NRI require any permission to receive bonus / rights shares?
No.
What is PIS?
Portfolio Investment Scheme (PIS) is a scheme of the Reserve Bank of India (RBI) defined in Schedule 3 of Foreign Exchange Management Act 2000 under which the 'Non Resident Indians (NRIs)' and 'Person of Indian Origin (PIOs)' can purchase and sell shares and convertible debentures of Indian Companies on a recognized stock exchange in India by routing all such purchase / sale transactions through their account held with a designated Bank Branch. Any NRI or a PIO wanting to trade/make fresh investments in the Indian Equity Secondary Market needs and must have one PIS account with only one designated bank in India. Notes:
1. PIS account is applicable only for NRIs and not for resident Indians.
2. It is only for trading in Indian markets and not any other foreign markets.
3. It is applicable only for equity trades and not MF investments.
What are the types of PIS account?
There are two types of PIS account:
1. NRE PIS account
2. NRO PIS account
Why is PIS required?
For all the Indian companies or companies listed on Indian stock exchanges, there are certain limits which have to be monitored under FEMA regulations. For any company the foreign investment into that company cannot cross certain limit. This limit is different from company to company and sector to sector. Also individually any NRI or a PIO cannot invest more than 5% in any Indian company.
How many PIS account can a NRI open?
NRI/PIO can open only one PIS account with any designated banks (Preferred bank – UTI Bank) in a prescribed format for PIS account, upon which the bank can issue a PIS approval letter to the investor.
Can I invest in all products through PIS account?
No. Any investment done in secondary market should be routed through a PIS account. For other products the investment can be done through direct subscription route.
What is a NON PIS Account?
It is a normal savings bank account which can be opened with any bank in India. Non-PIS is an account for which the transactions are not reported to RBI. This account takes care of selling all those shares which are not allowed under PIS. Shares acquired under IPO or received as gift or bought as resident Indian can be sold under Non-PIS account.
What are the types of NON PIS Account?
There are two types of NON PIS account
1. NRE NON PIS account
2. NRO NON PIS account
What type of transactions is allowed under NON PIS account?
1. Sale of shares which were acquired other than PIS.
2. Shares acquired through IPO's.
3. Gifts from relatives or otherwise.
4. Shares bought as resident Indian.
5. Fresh acquisition through IPO's.
6. Investment in Mutual Funds.
What is meant by investment through direct subscription route?
As per the regulations NRIs are allowed to invest up to a certain percentage of the total paid up capital of the company by directly subscribing to the equity/convertible debentures of the company either though a public offering made by the company or through private placements on one to one basis. Regulations provide for different ceilings on such investments based on the industry to which the company belongs and also the nature of investments (repatriation / non-repatriation basis).
Do investments made through IPO's or Private placements come under PIS?
No. Investments made by NRIs though subscription to Initial Public Offerings (IPO's) or Private placements are not covered by Portfolio Investment Scheme. Such investments are covered by RBI's regulations with regard to Foreign Direct Investments.
Do NRIs need any permission of RBI to subscribe for IPO's or Private placements of equity shares/convertible debentures of existing or new companies?
No. NRIs do not require any permission to invest though Initial Public Offerings (IPO's) or Private placements. In such cases, the Issuing Company should comply with all necessary regulations for issuing securities to a person resident outside India.
Do NRIs need approvals from RBI for selling securities acquired through IPO's / Private Placement?
No. NRIs can sell such shares / debentures on the Exchange without any approval. However, while seeking the credit of sale proceeds to NRE / NRO account, the bank should be provided with the details regarding date of allotment and cost of acquisition to calculate the taxes, if any.
Can an NRI have investments under PIS on repatriation and non-repatriation basis?
Yes. Investment can be made on repatriation as well as non-repatriation basis. However, an NRI will have to open NRE account as well as NRO account with designated bank branch as the sale proceeds of non-repatriation investment can only be credited to NRO account.
Under what circumstances can investments made under PIS are repatriated?
The repatriation of the sale proceeds, net of taxes, are allowed if the original purchase was made on repatriation basis and such investments were made out of funds from NRE / FCNR account or by means of remittance from abroad.
What are the provisions for corporate benefits for investment on repatriation and non-repatriation basis?
Corporate benefits may be in the form of dividend, interest, rights, bonus, etc. Any corporate benefit resulting out of investment in securities on non-repatriation basis will not carry the right of repatriation. Similarly any corporate benefit resulting out of investment in securities on repatriation basis will carry the right of repatriation. This is subject to change depending on prevailing RBI regulations.
Where can an NRI / PIO open a demat account?
NRI/PIO needs to open a demat account with an NBFC as explained above.
Can investments made under different schemes be held under a single demat a/c?
No. Securities received against investments under 'Foreign Direct Investment scheme (FDI)', 'Portfolio Investment scheme (PIS)' and 'Scheme for Investment' on non – repatriation basis have to be credited into separate demat accounts. Investment under PIS could be on repatriation or non – repatriation basis. Investment under FDI scheme is on repatriation.
What is the procedure of Dematerialization?
Client submits a DRF form along with the physical share certificate to NBFC, who in turn forwards it to the Registrar & Transfer agent for confirmation from the company. After the confirmation is received the client a/c is credited.
What is TDS?
As per regulatory guidelines, Tax (if applicable) has to be deducted at source for all the profits done in the equity market transactions. Before crediting sales proceeds it is the responsibility of the broker and the PIS cell to determine the appropriate Tax and deduct it at source.
How is TDS computed?
TDS is computed on the profit amount or the gain as per the applicable rate i.e. short term or long term on a First-In, First-Out (FIFO) basis.
How the TDS deducted and money is transferred to the bank account?
For any TDS to be deducted and money to be remitted to bank account, there are three things which have to be verified.
1. Amount of gain = Selling price – Purchase price
2. Duration of holding i.e. long term or short term = Selling date – Purchase date
3. Source of fund for purchase i.e. NRE or NRO
Important: TDS is deducted only at the time of crediting sales proceeds.
What is PMS?
Portfolio Management Services provides the benefits of diversification across assets, sectors, and funds. The experts in Portfolio Management combine best of breed investment of avenues as they aim to achieve optimal returns at managed levels of risk. It is transparent collective investments.
What is Mutual Fund?
A Mutual Fund is nothing but a pool of fund aggregated from different investors and invested in equity and debt in different proportion as per the risk appetite of investors by a professionally managed Asset Management Company. Through Mutual Funds one can create wealth and also minimise the market risk factor by a technique called averaging which can be achieved through Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP).
How do I invest in Mutual Funds?
You can invest in Mutual Funds through NON PIS account.
How much is the risk involved while investing in Equity Investments?
Equity investments are subject to market risks and there is no assurance or guarantee that the objective of the portfolio management service will be achieved. As with any investment in securities, the net asset value of the managed portfolios can go up or down depending on the factors and forces affecting capital markets. Past performance of the portfolios does not indicate the future performance.
What is International Equity Commodity?
International Equity division provides an opportunity for investors to scale up their investment horizon, by tapping into International Equity and Commodities markets.