PUNEET SHIKHA GUPTA & ASSOCIATES CHARTERED ACCOUNTANTS
INCORPORATING SUBSIDIARY OF FOREIGN COMPANY IN INDIA
Name of Document : Setup Information Report.
1. Which legal entity is best suited to do business in India
Ans:-Generally it depends on the Requirement of the Client, but the most suitable form of entity for carrying out business in India with a long term objective would be to form a Private Limited Company, by making investment through the equity shares in the Company.
2. Which are the basic conditions to setup Private Company in India.
Ans:-The basic Conditions for a private Limited Company in India is as follows:-
Minimum Two Directors of The Company Minimum Two Shareholders of the Company
3. Can the same person become Director & Shareholders in Indian Private Company?
Yes, The Directors and Shareholder can be some person, only for Individual. Any body corporate is not allowed to be Director in an Indian Company.
4. Can another Company be Sole Shareholder & Director of Private Limited Company?
Ans:-As per the Basic requirement for the Company formation we need minimum 2 Shareholders and 2 Directors hence we need minimum two shareholders and directors.
In order to fulfill your requirement we can form Company by giving just one share to the second shareholders. The second shareholder will hold the shares on behalf of the Company itself hence the ownership will be 100% with the Company. In respect of the directorship we need minimum two individual to be acting as directors of the Company.
5. Do the Director need to be present in India to perform at the time Incorporation of Company?
No, the directors need not be present to perform the formation of the Company;they can provide the documents first through scanned copy and then courier to our office. The presence might be required for other registration post incorporation of the Company; hence the other company cannot become director in an Indian company.
As per the new Companies Act 2003, least one director shall be in India for 182 Days.
6. What are the documents required to carry out Private Company Incorporation in India?
Ans:-Formation of Private Limited Company by foreign promoters needs the following documents
Passport of the directors – Translated (if not in English) &Notarized
Proof of the Residential address of Directors – Utility Bill – Translated (if not in English) &Notarized
Photograph of Directors
Declaration of subscription of shares in the own handwriting of the shareholders or person authorized by Company. – Notarized& Certified by Indian Consulate
Self-Declaration by the Directors – format to be given by us.
Proof of Registered office Address in India. – Utility bill and No Objection Declaration for Non NBFC Activity by all director.
Signature Verification of Directors Other Declaration
Resolution by foreign company for investing in the Indian Company Resolution by foreign Company to signing authority
No Objection by Foreign Company to use same name in Indian Company.
7. What are the documents required to carry out Private Company Incorporation in India?
Ans:-The formation of the above Entity in India takes Approximate 15-20 Days after receipt of all the necessary Documents.
8. How much is the total Cost involved in the Setting up of Company, except Professional Fees i.e Government Cost?
Ans:-The Cost of formation of Private limited depends on the Authorized Capital of the Company; Following is the breakup of Cost for the formation of the Company with a Minimum required authorized Capital of INR 1 Lac.
Taking Digital Signature of Directors INR 5000/- Each Director*2
Filling fees of government * *INR 9200/- (Depends on Capital)
Total Cost INR 19200/-
* Fees Changes with the amount of Capital of Company
9. Company Incorporation is sufficient to start the business, or there is additional Business Licenses Required to start operations.
Ans:-Registration of Indian company is not sufficient; to carry out business in India the Indian Company shall have some additional Business registration depending on the nature of activity to be carried out in India. Some registrations are mandatory for all whereas other depends on nature of business.
Hence Yes, Every Company registered in India shall have additional business registration as required.
10. Company Incorporation is sufficient to start the business, or there is additional Business Licenses Required to start operations.
Ans:-The additional Business Registration shall be taken once the Company is registered. Generally following Registration are taken by companies in India depending on their nature of business as above
Type of Tax No. of Days Why Required
PAN & TAN 12 – 15 Days Registration Under Income Tax ,
Mandatory for All
Bank Account Opening 12 – 15 Days Necessary to carry out transactions
Service Tax 07 – 10 Days* For providing all types of Services in India
Shop Establishment 07 – 10 Days* For having office in municipal limits
Professional Tax 07 – 10 Days* For doing business in the Maharashtra
These registrations can be taken done simultaneously after getting PAN & TAN and Opening Bank Account.
11. What are the Government and Liaison Cost involved in getting the additional Business licenses to start the operations?
Ans:-To get various government registration for Private Limited company in India, the Company need to have the above registration , These registration have government
& Liaison fees involved Following are the details
Type of Tax Registration Government Cost
PAN & TAN
Bank Account Opening
Professional Tax Registration
Shop Establishment Registration
Import Export Code
* May differ from state to state
12. Being a Foreign Share Capital Company, does such company require some additional Compliance from any Indian Authorities?
Foreign companies setting up a subsidiary in India and investing in the Indian Company is called FDI i.e Foreign Direct Investment in India. The Company has to carry out Post investment Compliance with Reserve Bank of India (RBI) if the Investment is allowed under the Automatic route in India.
In case of investment in certain sector government has asked to take prior approval before investing in India, most of the sectors are covered under automatic.
13. What are the basic operating statutory and accounting requirements for Private Companies in India?
Ans:-A foreign company operating in India and registered in India is treated as a Local Indian company. Following are the basic information for your information:-
Subsidiary of Foreign Company need to take RBI Approval for investment made in India.
Company need to Maintain its books of Accounts.
Company need to get its accounts audited every year. Company need to file its tax return annually.
Company need to file annual account with authorities annually.
Income tax rates applicable to Companies on Net profit @30%.
Company need to have various Business registration with authorities like PAN, TAN, VAT, CST, Services Tax, Profession Tax, Central Excise, Import Export Code , Shop Act etc depending on the applicability.
Regular Monthly/Quarterly/Six Monthly Return shall be filled for above registration as per applicability.
Company should have a board meeting every quarter.
Every year one meeting of shareholders shall be kept i.e Annual General Meeting.
14. What are the basic Tax Rates applicable to Private Companies operating in India?
Ans:-As such there are not specific tax rates for foreign owned private limited Company , Once a Foreign Company has formed a Private Company in India it become an Indian Private Limited Company under the Companies Act 2003, and all the tax rates as applicable to Indian company would apply. Summary of the taxes are below:-
Type of Tax Rates Description
Income Tax 30% Paid on the net profit earned During the year.
Dividend 20% Paid by companies in case of Distribution of profits as
Distribution Tax dividend.
Value added Tax 0% – On sale & purchase done within state, rate depends
(VAT) 12.5% on product.
Central Sales Tax 2% On the sale & Purchase done between two states..rate
(CST) depends on product.
Central Excise 1% – 14% Paid on Manufacturing of Goods, or any process does
Duty which amounts to emerging of new product.
Service Tax 14% For services sector or providing services to customers
Custom Duties Wide Custom duty is charges when the goods are imported
range in India, The tax rates varies from product to product
15. What is the Complete Cost break with professional Fees?
Ans:-The below table indicates the professional fees for various Services , The foreign Companies need the three types of Services for a complete setup in India as below :-
Private Company Setup
Basic and Mandatory Licenses
RBI & Foreign Investment Compliance
Areas Activity to be done Fees
Company Formation To get an Approved Directors Identification No.
To Get the Digital Signature of Directors
To Get the approval for the Desired Name of the
To Draft the Memorandum and Articles of
To formulate the desired Shareholding pattern.
To Get the Certificate of Incorporation for
Registrations under various Act
Income Tax registration PAN & TAN
Bank Account opening Support Shop Establishment Registration
Profession Tax Company & Employee VAT/Registration
Import Export Code
RBI & Foreign Investment Documentation Preparation and Submission
work (Automatic Route) Compliance certificate from CS
Valuation Certificate from CA
Complete Professional Fees
GST would be charged @ 18%
Payment of 50% of fees and government fees of signing contract
SUMMERY OF TOTAL SETUP COST
Professional Fees + GST @18%
Government Cost – for Company Setup
Government Cost – Other Licenses
*The Government Cost will Change according to Share Capital