Doing - Business - in - India - A Business Guide PDF

A COMPLETE BUSINESS GUIDE
1
*** DOING BUSINESS IN INDIA ***
CONTENTS
An overview of India 5
Brief economic profile 5
Recent trends in economic growth 6
Official language 8
Laws Existing 8
Country fact file 8
Starting Business in India 10

Incorporating a Company 10
Options Available for Exit from the Business 10
Drawing up an agreement 11
Types of Companies & Company Law 12

Share capital 14
Management 15
Audit of accounts 16
Summary Of Steps Involved In Forming a Public Company 17
Foreign Direct Investment (FDI) Policy 18

Procedure under normal route 18
Procedure under Government Approval 19
Regulatory Framework on Investment in India 20

Automatic route 20
Government approval route 20
Investment by way of acquisition of shares 21
New investment by an existing collaborator in India 22
Portfolio investment in India 22
Policy on FII investment 23
Investment Vehicles for Foreign Investors 25

Choice of vehicle 25
Taxation in India 27
Taxes Levied by Central Government 28
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*** DOING BUSINESS
BUSINESS IN INDIA ***
Taxes Levied by State Governments and Local Bodies 32
Transfer Pricing 34
Determination of arms length price 35
Burdon of proof & assessment 35
Labor Rules & Regulations 37

Payment of Bonus Act, 1965 37
Employees provident fund & Miscellaneous provisions
Act, 1952 38
Payment of Gratuity Act, 1972 38
The Employees State Insurance Act, 1948 39
Contract labor (Regulation and Abolition) Act, 1970 39
Shops and establishment Act 40
Working hours 40
Wages and Benefit 40
Other Benefits 41
Termination of Employment 41
Labor-Management Relations 42
Employment of foreigners 43
Intellectual Property 45
Foreign Exchange Regulations & Repatriations 46

Foreign Exchange Management Act (FEMA) 46
Repatriation of foreign exchange 46
Dividends 47
Royalty payments under technical collaboration 47
Consultancy services 48
Import of goods 48
Repatriation of capital 49
Netting 49
Other remittances 49
Visa and Entry Requirements 50
Incentives offered 53
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*** DOING BUSINESS
BUSINESS IN INDIA ***
Statistical Information 55
Economic Survey 2007-08 55
Indias foreign trade: April, 2008 55
Country wise Export 55
Country wise import 62
Map of India 70
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AN OVERVIEW OF INDIA
India, being the 7th largest and 2nd most populous country, is one
of the most exciting emerging markets in the world. Today, India
has moved firmly into the front runners of the rapidly growing
Asia Pacific Region and has developed into a powerful complex
and a rapidly changing nation due to a series of ambitious
economic reforms aimed at deregulating the economy and
stimulating foreign investment.
India is also the 4th largest economy in the world in terms of

Public Private Partnership programme. India has been provided
with a distinct cutting edge in global competition by the skilled
managerial and technical manpower that matches the best
available in the world and a middle class whose size exceeds the
population of the USA or the European Union.
Indias time tested institutions offer foreign investors a

transparent environment that guarantees the security of their
long term investments. These include a free and vibrant press, a
well established judiciary, a sophisticated legal and accounting
system and a user friendly intellectual infrastructure. India offers
considerable scope for foreign direct investment, joint ventures
and collaborations due to its dynamic and highly competitive
private sector, that has long been the backbone of its economic
activity.
Brief economic profile

Indian economy is on the fulcrum of an ever increasing growth
curve. With positive indicators such as a stable 8 percent annual
growth, rising foreign exchange reserves of close to USD 150
billion, a booming capital market with the popular Sensex
(sensitive index of The Stock Exchange, Mumbai) topping the
11,000 point mark, increasing flow of foreign direct investment
(FDI), and more than 20 percent surge in exports, India is now
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emerging as amongst the preferred destinations for global
investors.
Some significant dimensions of the dynamic growth in recent
years are: a new industrial resurgence; a pick up in investment;
modest inflation in spite of spiraling global crude prices; rapid
growth in exports and imports with widening of the current
account deficit; laying of some institutional foundations for
faster development of physical infrastructure; and progress in
fiscal consolidation.
Recent trends in economic growth
The GROSS DOMESTIC PRODUCT (GDP) grew by 7.4 percent in
the first quarter and 6.6 percent in the second quarter of the year
2005-06. The Economic Survey 2005-06 estimates that the GDP
will grow at 8.1 percent. Growth of GDP at constant prices in
excess of 8.0 percent has been achieved by the economy in only
five years of recorded history, and two out of these five are in
the last three years.
Prospects of agricultural output in 2005-06 are considered to be
reasonably bright due to near normal monsoon. The industrial
sector too has been on a high and while manufacturing growth
has accelerated steadily from 7.1 percent in 2003-04 to 9.4
percent in 2005-06, construction growth has been quite
encouraging during last three years. Substantive commercial
bank credit flows to the housing and real estate and retail
sectors continue to provide support to the boom in construction
and consumer durables.
Indias merchandise exports (in US dollar terms and customs

basis) have been recording annual growth rates of more than 20
percent since 2002-03. In 2004-05, such exports grew by 26.2
percent the highest annual growth rate in the last three
decades to cross USD 80 billion. Five major sectors gems
and jewellery, engineering goods, petroleum products, ores and
minerals, and chemicals and related products were the key
drivers. Despite recording a somewhat lower rate of growth of
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18.9 percent, exports during April-January 2005-06 had reached
USD 74.9 billion and were well on their way to achieve the USD
92 billion target set for 2005-06.
Services exports grew by 71 percent in 2004-05 to USD 46

billion, and 75 percent to USD 32.8 billion in the half year period
April-September, 2005. In 2004-05, software service exports grew
by 34.4 percent to USD 17.2 billion and by 32 percent to USD
10.3 billion in the half year period April-September, 2005.
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Official language
Article 343 of the Indian Constitution recognises Hindi as the
official language of central government India. The Constitution
also allows for the continuation of use of the English language
for official purposes.
The current position is thus that the Union government may

continue to use English in addition to Hindi for its official
purposes as a "subsidiary official language", but is also
required to prepare and execute a programme to progressively
increase its use of Hindi. The exact extent to which, and the
areas in which, the Union government uses Hindi and English,
respectively, is determined by the provisions of the Constitution,
the Official Languages Act, 1963, the Official Languages Rules,
1976, and statutory instruments made by the Department of
Official Language under these laws.
Laws Existing
The Indian law contents in the Legal subjects include:
International law
Constitutional and administrative law
Criminal law
Contract law
Tort law
Property law
Equity and Trusts
Further disciplines
Country fact file
Total area 3.29 million square kilometers
Capital New Delhi
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Population Over 1 billion
Political system The Indian Constitution

and government provides for a parliamentary
democracy with a bicameral
parliament and three
independent branches the
executive, legislature and
judiciary. The country has a
federal structure with elected
governments in states.
Head of State President
Head of Government Prime Minister
Principal markets USA, UAE, Hong Kong, UK, China,

for exports Singapore, Belgium, Japan, Italy,
Bangladesh, Sri Lanka, France,
Netherlands, Indonesia, Saudi
Arabia, Germany, Spain, Malaysia.
Principal markets US, China, Belgium, Switzerland,

for imports UK, Germany, Japan, Australia,
Korea, Indonesia, UAE, Malaysia,
Singapore, South Africa, Hong
Kong, Italy, France, Russia, Saudi
Arabia, Sweden
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STARTING BUSINESS IN INDIA
Overseas organizations, looking at setting up of their business

in India, need to consider the following factors:
Incorporating a Company
Registering with the Software Technology Parks of India
(STPI)
Gaining Approval from the Department of
Telecommunications (DoT) for Call Centers
Exit Options
Incorporating a Company
There are mainly two types of companies in India:

Public companies, and
Private companies.
Overseas organizations often find easier to set up a private
company rather than a public one as private companies have
more flexibility and are easy to operate. It takes around 20 - 30
days to incorporate a company in India.
Options Available for Exit from the Business
Exit options take place in the following forms:

Shareholders of Indian Companies can exit the company
either through a transfer of shares or other routes.
Under Indian Exchange Control Laws, the transfer of shares
from a resident to a non-resident will require the prior
approval of the Foreign Investment Promotion Board (FIPB)
and the Reserve Bank of India (RBI)
The transfer of shares from a non-resident to a resident
requires the prior approval of the RBI. The RBI ensures that
the price of the transfer is not above a maximum price,
which is based on the NAV (net asset value) of a private
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company and the price on the stock exchange for a listed
company.
Under the provisions of the IT Act, gains realized on
sale/transfer of shares on the Indian company by the foreign
company would attract capital gains tax in India.
Long term capital gains realized on sale of shares of Indian
companies not listed on a recognized stock exchange in
India will be taxed at the rate of 20% and a surcharge of 5%.
Long term capital gains realized on sale of shares of Indian
companies listed on a recognized stock exchange in India
will be taxed at the rate of 20%.
Short term capital gains realized by a domestic company will
be subject to tax at the rate of 36.75%.
Drawing up an agreement
The agreement, which defines the relationship between the
concerned parties and the nature of the transaction, can take
many forms including the following:
a third party agreement, where the customer and the vendor
are not related
a captive agreement, where the customer and vendor are
related parties
Building, Operation and Transfer agreements, where the
vendor builds and develops the operation for the customer
and at a future date transfers it to the customer.
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TYPES OF COMPANIES & COMPANY LAW

A company can be a public or a private company and could have
limited or unlimited liability. A company can be limited by shares
or by guarantee. In the former, the personal liability of members
is limited to the amount unpaid on their shares while in the
latter, the personal liability is limited by a pre-decided nominated
amount. For a company with unlimited liability, the liability of its
members is unlimited.
Apart from statutory government owned concerns, the most

prevalent form of large business enterprises is a company
incorporated with limited liability. Companies limited by
guarantee and unlimited companies are relatively uncommon.
The types of companies run mostly in India are:-

(i) Private Companies:
A private company incorporated under the Act has the
following characteristics:
The right to transfer shares is restricted.
The maximum number of its shareholders is limited to 50
(excluding employees).
No offer can be made to the public to subscribe to its shares
and debentures.
Private companies are relatively less regulated than public
companies as they deal with the relatively smaller amounts
of public money. A private company is deemed to be a
public company in the following situations:
When 25 percent or more of the private companys paid-up
capital is held by one or more public company.
The private company holds 25 percent or more of the paid-
up share capital of a public company.
The private company accepts or renews deposits from the
public.
The private companys average annual turnover exceeds Rs.
250 million during a period of 3 consecutive financial years.
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(ii) Public Companies:
A public company is defined as one which is not a private
company. In other words, a public company is one on which
the above restrictions do not apply. The necessary
procedures to be followed for registering the company has
been presented in the form of a flow chart, which
summarizes the steps involved in formation of a company
with the Registrar of Companies under the heading
SUMMARY OF STEPS INVOLVED IN FORMING A
COMPANY.
(iii) Foreign Companies:
Foreign investors can enter into the business in India either
as a foreign company in the form of a liaison
office/representative office, a project office and a branch
office by registering themselves with the Registrar of
Companies (ROC), New Delhi within 30 days of setting up a
place of business in India or as an Indian company in the
form of a Joint Venture and wholly owned subsidiary. For
opening of the foreign company specific approval of
Reserve Bank of India is also required.
Statutory requirements for formation of companies

Sr. No. Particulars Private Company Public
Company
1. Minimum number of Two Seven

shareholders
Maximum number of Unlimited

2. shareholders Fifty
Minimum number of
3. directors Three
Two
Twelve (can be
4. Maximum number of Seven increased with
directors Government
approval)
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5. Minimum paidup capital INR 1,00,000 INR 5,00,000

requirement (Approx. USD 2200) (Approx. USD
11000)
After verifying the documents, the ROC issues a Certificate of

Incorporation which is a proof of incorporation. A private
company can commence business immediately on obtaining a
Certificate of Incorporation. A public company is required to
obtain a Certificate of Commencement of Business by filing
additional documents with the ROC.
Share capital
The issue of shares symbolizes the payment of share capital in a
company. The share capital is required to be stated in the
companys memorandum of association (MoA).
Authorized share capital
The nominal or authorized share capital is the amount of capital
stated in the MoA that the company is authorized to issue. The
issued capital is that part of the nominal or authorized capital
that the company offers for subscription. Enhancement of
authorized capital necessitates passing of appropriate
resolutions by the board and shareholders of the company and
payment of additional fees to the ROC.
Paid-up share capital
The paid-up share capital is the amount of capital which is
subscribed by the shareholders i.e. the share holders have
agreed to give consideration in cash or kind for the shares,
unless those shares are fully paid up bonus shares issued by
a company (generally out of the accumulated profits which are
available for appropriation).
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Management
The Act lays down specific provisions with respect to managing
the affairs of a company so as to protect the interest of its
shareholders and investing public.
Directors
A public company is required to have a minimum of three
directors and a private company a minimum of two directors.
Directors are under a statutory duty to ensure that companys
funds are used for legitimate business purposes.
They have an obligation to:
maintain a register and index of members/ debenture holder;
call general meetings including the AGM each year;
ensure proper maintenance of books of accounts and
prepare balance sheets, profit and loss accounts and to get
them audited and place before AGM; and
disclose shareholdings etc.
Wholetime/ Managing Directors
Every public company or a private company which is subsidiary
of a public company having a paid up share capital of INR 50
Million must have a managing or whole time director or a
manager. An approval from the Central Government (Department
of Company Affairs) is required:
whenever any person is appointed as a wholetime/
managing director of a public limited or a private company
which is a subsidiary of a public company; and
if the remuneration proposed to be paid to such wholetime/
managing director is more than what is prescribed in
Schedule XIII of the Act.
Foreign Directors
There is no restriction on the appointment of foreign
citizens/Nationals/NRI as director/member of Board of Directors
of an Indian Company
Board meetings
Board meetings are required to be held every three months.
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The Board may delegate its powers to borrow, invest funds and
make loans up to certain specified limits, to the committee of
directors or managing directors.
Audit of accounts
Auditors of a company are appointed/ re-appointed in the AGM
of a company. Their tenure lasts till the conclusion of the next
AGM.
The company in a general meeting may remove auditors before

the expiry of their term in office.
Auditors are required to make a report to the members of the

company in respect of the accounts (balance sheet, profit and
loss account) examined by them at the end of each financial
year.
The Act also provides for formation of an audit committee,

consisting of qualified and independent directors, inter alia to
have discussions with the auditors about the internal control
systems and review half yearly and annual financial statements
before submission to the Board.
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Summary Of Steps Involved In Forming a Public
Company
START
Obtaining approval for the proposed name of the Company from

the ROC
Drawing up the Memorandum of Association
Drawing up the Articles of Association
Getting the appropriate persons to subscribe to the

Memorandum (a minimum of 7 for a public company and 2 for a
private company)
Payment of Registration Fee to the ROC
Receipt of Certificate of Incorporation
Obtain a certificate of commencement of business from the ROC

in case of a public company
END
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FOREIGN DIRECT INVESTMENT (FDI) POLICY

India has among the most liberal and transparent policies on FDI
among the emerging economies. FDI up to 100% is allowed
under the automatic route in all sectors except the following,
where prior approval of the Government is required:-
Sectors prohibited for FDI
Activities/items that require an industrial license
Proposals in which the foreign collaborator has an existing
financial/technical collaboration in India in the same field
Proposals for acquisitions of shares in an existing Indian
company in financial service sector and where Securities
and Exchange Board of India (substantial acquisition of
shares and takeovers) regulations, 1997 is attracted
All proposals falling outside notified sectoral policy/CAPS
under sectors in which FDI is not permitted
Most of the sectors fall under the automatic route for FDI. In
these sectors, investment could be made without approval of the
central government. The sectors that are not in the automatic
route, investment requires prior approval of the Central
Government. The approval in granted by Foreign Investment
Promotion Board (FIPB). In few sectors, FDI is not allowed.
After the grant of approval for FDI by FIPB or for the sectors
falling under automatic route, FDI could take place after taking
necessary regulatory approvals form the state governments and
local authorities for construction of building, water,
environmental clearance, etc.
Procedure under normal route

Here, the investors are only required to notify the Regional
Office concerned of RBI within 30 days of receipt of inward
remittances and file the required documents with that office
within 30 days of issue of shares of foreign investors.
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Procedure under Government Approval
Approvals of all such proposals including composite proposals
involving foreign investment/foreign technical collaboration is
granted on the recommendations of Foreign Investment
Promotion Board (FIPB).
Application for all FDI cases, except Non-Resident Indian (NRI)

investments and 100% Export Oriented Units (EOUs), should be
submitted to the FIPB Unit, Department of Economic Affairs
(DEA), Ministry of Finance.
Application for NRI and 100% EOU cases should be presented to

SIA in Department of Industrial Policy and Promotion.
Application can be made in Form FC-IL. Plain paper applications

carrying all relevant details are also accepted. No fee is payable.
The guidelines for consideration of FDI proposals by the FIPB
are at Annexure-III of the Manual for FDI.
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REGULATORY FRAMEWORK ON INVESTMENT IN INDIA
FDI can be divided into two broad categories:

Investment under automatic route; and
Investment with prior approval of the government.
Automatic route
The automatic route connotes no requirement of any prior

regulatory approval but only post facto filing/ intimation with the
RBI as under:
Filing of intimation with the RBI within 30 days of receipt of
investment money in India; and
Filing of prescribed documents and particulars of allotment
of shares within 30 days of allotment of shares to foreign
investors.
Government approval route
Investment in activities/ industries where automatic route is not
available can be made with the approval of the government.
Such approval is granted by the Foreign Investment Promotion
Board (FIPB). FDI up to 100 percent is allowed under the
automatic route in all activities/ sectors except the following
which require prior approval of the government:
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Where more than 24 percent foreign equity is proposed to
be inducted for manufacturing items reserved for small
scale sector.
Proposals in which the foreign collaborator has an existing
financial/ technical collaboration in India in the same field.
All proposals falling outside notified sectoral policy/ caps or
under sectors in which FDI is not permitted.
FDI policy is reviewed on an ongoing basis and changes in
sectoral policy/sectoral equity cap are notified through Press
Notes (please refer to the table on page 19 for current sector
caps).
An application is required to be filed with the SIA setting out the
details of investment, business plan, financials of the foreign
company, etc. Along with the application, a declaration as to
whether applicant has had or has any previous financial/
technical collaboration or trade mark agreement in India in the
same field for which approval has been sought.
Approval is granted by the FIPB on case to case basis after
examining the proposal for investment. Prescribed filings as
applicable to the automatic route are also required to be carried
out under prior approval route.
Investment by way of acquisition of shares
Shares of an Indian company may be acquired by a foreign

company without obtaining any prior permission of FIPB subject
to prescribed parameters/guidelines. However, acquisition of
shares which directly or indirectly result in acquisition of shares
of a company listed on stock exchange may require approval of
Securities Exchange Board of India in case it triggers Take-Over
Code Regulations. Where 15 percent or more of the voting
capital in a public listed company is acquired, the acquirer shall
have to make a public offer to acquire a minimum 20 percent
equity stake from the public.
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New investment by an existing collaborator in India
In case a foreign investor with an existing venture or

collaboration (technical and/or financial) with an Indian partner
in a particular field proposes to invest in another proposal in the
same field in India, such additional investment is permissible
only subject to a prior FIPB approval wherein both parties are
obliged to submit/ demonstrate that the new venture does not
prejudice the earlier venture. The FIPB approval however is not
applicable under the following circumstances:
investment by a venture capital fund registered with SEBI;
existing joint venture has less than 3 percent investment by
either party;
existing joint venture is defunct or sick.
An existing venture for this purpose has been clarified to mean a
venture existing as on January 12, 2005. Consequently, in case a
foreign investor had entered into a technical and/ or financial
collaboration prior to January 12, 2005 and has not exited from
the same before January 12, 2005, the investor would require
prior approval of the FIPB for making further investment in the
same field.
Portfolio investment in India

Qualified foreign entities (other than those predominantly owned
by non resident Indians) seeking to undertake portfolio
investments in India are regarded as foreign institutional
investors (FIIs). Investment by FIIs is governed by the Securities
and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995, (SEBI Regulations). Eligible institutional
investors that can register as FIIs include asset management
companies, pension funds, mutual funds, banks, investment
trusts, nominee companies, incorporated/ institutional portfolio
managers, power of attorney holders, university funds,
endowment foundations, charitable trusts and charitable
societies. Broad based fund means a fund established or
incorporated outside India which has atleast 20 investors with
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no single individual investor holding more than 10 percent of the
shares or units of the fund. Sub-account includes foreign
corporates or foreign individuals and those institutions,
established or incorporated outside India and those funds, or
portfolios, established outside India, whether incorporated or
not, on whose behalf investments are proposed to be made in
India by an FIl Investor. Nonresident Indians and overseas
corporate bodies registered with RBI are not permitted to
register as a sub-account.
Conceptually, an application for registration as an FII can be
made in two capacities, namely as an investor or as a manager
i.e. those investing on behalf of its clients. The clients would get
registered with SEBI as sub-accounts of the FII. In addition, an
FII (as a manager) can also invest its proprietary monies after
seeking specific approval of SEBI.
SEBI grants registration as FII based on certain criteria, namely
constitution and incorporation of FII, track record, previous
registration with any securities commission, legal permissibility
to invest in securities as per the norms of the country of its
incorporation etc. SEBI grants registration to the FII initially for a
five year period and could be extended for further five year
periods. The approval of the sub-account is co-terminus with
that of the FII.
Policy on FII investment
FIIs/ sub-accounts can invest in Indian equities, units,

exchange traded derivatives, commercial papers and debt.
An FII can invest up to 30 percent of its portfolio in debt
securities. It is also possible for an FII to declare itself a
100 percent debt FII in which case it can make its entire
investment in debt instruments.
Where the FIIs/ sub-accounts seeks to invest in debt

securities, SEBI sets annual limits on the quantum of funds,
which can be invested. Where FIIs/sub-accounts seek to
23
invest primarily in equities, no such approval is required for
the quantum of funds proposed to be invested.
FIIs can buy/ sell securities on stock exchanges. They can

also invest in listed and unlisted securities outside stock
exchanges where the price has been approved by RBI.
FII investments in India are subject to the following policy/

limits:
(i) No single FII/ sub-account can acquire more than 10
percent of the paid up capital of an Indian company. In
case of foreign corporate or individuals, each of such
sub-account shall not invest more than 5 percent of the
total issued capital of that company.
(ii) All FIIs and their sub-accounts taken together cannot
acquire more than 24 percent of the issued capital of an
Indian company. The investment can be increased up to
the sectoral cap/ statutory ceiling, as applicable to the
said company. This can be done by passing a resolution
by its Board of Directors followed by passing of a special
resolution to that effect by its General Body.
(iii) There are no limits on the investments made by FIIs/ sub-
accounts (whether primarily equity investor or debt
investor) in respect of debt securities (other than
convertible debt securities) issued by a single issuer;
(iv) FIIs/ sub-accounts can transact in dematerialized form
through a recognized stock broker and on a recognized
stock exchange and are required to give or take delivery
of securities.
24
INVESTMENT VEHICLES FOR FOREIGN INVESTORS
Choice of vehicle
Depending upon the business needs, a foreign company
considering a business presence in India can choose between
setting-up a liaison office, a branch office/project office or
incorporating a company, either wholly owned subsidiary or
joint venture with another person.
Liaison office
A liaison office (LO) is set-up to act as a channel of
communication between the head office and target customers in
India. It is not permitted to undertake any commercial/ trading/
industrial activity, directly or indirectly. Establishing an LO
requires approval of RBI which also monitors its activities on an
ongoing basis.
Branch office/ Project office
Foreign companies undertaking projects in India can set up
temporary project/site offices (PO) while a branch office (BO)
may be set-up by companies engaged in manufacturing and
trading activities. The opening and operation of these offices too
is regulated by the RBI. Requirement of obtaining prior approval
of PO that meets specified conditions has been dispensed with.
A PO can only undertake activities relating to and incidental to
the execution of specific projects in India. Whereas a BO can
carry out the activities permitted by RBI, those generally do not
include manufacturing (unless setup in an SEZ) and retail
trading.
Local subsidiary or joint venture company
Subsidiary or a Joint Venture Company can be formed either as
a Private Limited Company or a Public Limited Company. The
key distinction between the two is that a private limited company
can restrict the right of its members to transfer the shares, can
have only 50 shareholders and is not allowed to have access to
deposits from public directly. It is also subject to less regulatory
compliance requirements.
A company is regulated inter alia by the Registrar of Companies
(ROC) under the Companies Act, 1956.
25
A company with foreign investment can undertake activities
which are in compliance with the FDI guidelines (discussed
earlier in this document).
26
TAXATION IN INDIA
Since the onset of liberalization in the country, tax structure of
the country is also being rationalized keeping in view the
national priorities and practices followed in other countries.
Foreign nationals working in India are generally taxed only on
their Indian income. Income received from sources outside
India is not taxable unless it is received in India. The Indian tax
laws provide for exemption of tax on certain kinds of income
earned for services rendered in India. Further, foreign nationals
have the option of being taxed under the tax treaties that India
may have signed with their country of residence.
Remuneration for work done in India is taxable irrespective of
the place of receipt. Remuneration includes salaries and wages,
pensions, fees, commissions, profits in lieu of or in addition to
salary, advance salary and perquisites. Taxable payments
include all allowances and tax equalization payments unless
specifically excluded. The stock options granted by the
employer are taxable as capital gains at the time of sale of
shares acquired due to exercise of options.
India has a well-developed tax structure with clearly demarcated
authority between Central and State Governments and local
bodies. Central Government levies taxes on income (except tax
on agricultural income, which the State Governments can levy),
customs duties, central excise and service tax.
Value Added Tax (VAT), (Sales tax in States where VAT is not yet
in force), stamp duty, State Excise, land revenue and tax on
professions are levied by the State Governments. Local bodies
are empowered to levy tax on properties, octroi and for utilities
like water supply, drainage etc.
Taxes Levied by Central Government
Direct Taxes
Indirect Taxes
Taxes Levied by State Governments and Local Bodies
Sales Tax/VAT
27
Other Taxes
Taxes Levied by Central Government

Direct Taxes:-
Taxes on Corporate Income
Companies residents in India are taxed on their worldwide
income arising from all sources in accordance with the
provisions of the Income Tax Act. Non-resident corporations are
essentially taxed on the income earned from a business
connection in India or from other Indian sources. A corporation
is deemed to be resident in India if it is incorporated in India or if
its control and management is situated entirely in India.
Domestic corporations are subject to tax at a basic rate of 35%
and a 2.5% surcharge. Foreign corporations have a basic tax
rate of 40% and a 2.5% surcharge. In addition, an education cess
at the rate of 2% on the tax payable is also charged. Corporates
are subject to wealth tax at the rate of 1%, if the net wealth
exceeds Rs.1.5 mn ( appox. $ 33333).
Capital Gains Tax
Tax is payable on capital gains on sale of assets.
Long-term Capital Gains Tax is charged if
Capital assets are held for more than three years, and
In case of shares, securities listed on a recognized stock
exchange in India, units of specified mutual funds, the
period for holding is one year.
Long-term capital gains are taxed at a basic rate of 20%.
However, long-term capital gains from sale of equity shares or
units of mutual funds are exempted from tax.
Short-term capital gains are taxed at the normal corporate
income tax rates. Short-term capital gains arising on the transfer
of equity shares or units of mutual funds are taxed at a rate of
10%.
28
Personal Income tax
Personal income tax is levied by Central Government and is
administered by Central Board of Direct taxes under Ministry of
Finance in accordance with the provisions of the Income Tax
Act. The rates for personal income tax under different slabs are
as follows:-
Slab 1:
Secondary and
Education
Net income Surcharge highher
Income tax rates cesss [see
range [see Note 1] educations cess
Note]
[see Note 4]
Up to Rs.
Nill Nil Nil Nil
1,8,000
10% of (total
Rs. 1,8,000- 2% on income- 1% on income-
income minus Rs. Nil
Rs. 3,00,000 tax tax
1,80,000)
Rs. 3,00,000 Rs 12,000+20% of
2% on income- 1% on income-
- Rs. 5 (total income minus Nil
tax tax
,00,000 Rs. 3,00,000)
Rs. 5,00,000 Rs 52,000+30% of
- Rs. (total income minus Nil
tax tax
10,00,000 Rs. 5,00,000)
Rs 2,02,000+30% 10% of
Above Rs. of (total income income-
tax and tax and
10,00,000 minus Rs. tax[see Note
surcharge surcharge
10,00,000) 2]
Slab 2:
Secondary and
higher
Net income Surcharge Education cess
Income tax rates educations
range [see Note 1] [see Note]
cess [see Note
4]
Up to Rs.
Nil Nil Nil Nil
2,25,000
Rs. 2,25,000- 2% on income- 1% on income-
Nil Nil
Rs. 75,000+20%
Rs. 3,00,000 - of (total income 2% on income- 1% on income-
Nil
Rs. 5 ,00,000 minus Rs. tax tax
3,00,000)
Rs 47,000+30%
Rs. 5,00,000 - of (total income 2% on income- 1% on income-
Nill
Rs. 10,00,000 minus Rs. tax tax
5,00,000)
29
Rs. 1,97,500+30% 10% of

tax and tax and
10,00,000 minus Rs. tax[see
surcharge surcharge
10,00,000) Note 2]
Slab 3:
Secondary and
Surcharge higher
Net income Education cess
Income tax rates [see Note educations
range [see Note]
1] cuss [see Note
4]
Up to Rs.
Nil Nil Nil Nil
1,5,000
10% of (total
Rs. 1,50,000 - 2% on income- 1% on income-
income minus Rs. Nil
1,50,000)
Rs. 15,000+20% of
(total income minus Nil
Rs. 5 ,00,000 tax tax
Rs. 3,00,000)
Rs. 55,000+30% of
(total income minus Nil
Rs. 10,00,000 tax tax
Rs. 5,00,000)
Rs. 2,02,000+30% 10% of
tax and tax and
10,00,000 minus Rs. tax[see
surcharge surcharge
10,00,000) Note 2]
Tax Incentives
Government of India provides tax incentives for:-
Corporate profit
Accelerated depreciation allowance
Deductibility of certain expenses subject to certain
conditions.
These tax incentives are, subject to specified conditions, and
are available for new investment in:
Infrastructure,
Power distribution,
Certain telecom services,
Undertakings developing or operating industrial parks or
special economic zones,
Production or refining of mineral oil,
Companies carrying on R&D,
Developing housing projects,
30
Undertakings in certain hill states,
Handling of food grains,
Food processing,
Rural hospitals etc.
Double Tax Avoidance Treaty
India has entered into Double tax Avoidance Agreement (DTAA)
with 65 countries around the world. In case of countries with
which India has DTAA, the tax rates are determined by such
agreements. Domestic corporations are granted credit on
foreign tax paid by them, while calculating tax liability in India.
In the case of the US, dividends are taxed at 20%, interest
income at 15% and royalties at 15%.
Indirect Taxes:-
Excise Duty
Manufacture of goods in India attracts Excise Duty under the
Central Excise act 1944 and the Central Excise Tariff Act 1985.
Here, the term Manufacture means bringing into existence a new
article having a distinct name, character, use and marketability
and includes packing, labeling etc.
Most of the products attract excise duties at the rate of 16%.
Some products also attract special excise duty/and an additional
duty of excise at the rate of 8% above the 16% excise duty. 2%
education cess is also applicable on the aggregate of the duties
of excise. Excise duty is levied on ad valorem basis or based on
the maximum retail price in some cases.
Customs Duty
The levy and the rate of customs duty in India are governed by
the Customs Act 1962 and the Customs Tariff Act 1975. Imported
goods in India attract basic customs duty, additional customs
duty and education cess. The rates of basic customs duty are
specified under the Tariff Act. The peak rate of basic customs
duty has been reduced to 15% for industrial goods. Additional
customs duty is equivalent to the excise duty payable on similar
goods manufactured in India. Education cess at 2% is leviable
on the aggregate of customs duty on imported goods. Customs
duty is calculated on the transaction value of the goods.
31
Customs duties in India are administrated by Central Board of
Excise and Customs under Ministry of Finance.
Service Tax
Service tax is levied at the rate of 10% (plus 2% education cess)
on certain identified taxable services provided in India by
specified service providers. Service tax on taxable services
rendered in India are exempted, if payment for such services is
received in convertible foreign exchange in India and the same
is not repatriated outside India. The Cenvat Credit Rules allow a
service provider to avail and utilize the credit of additional duty
of customs/excise duty for payment of service tax. Credit is also
provided on payment of service tax on input services for the
discharge of output service tax liability.
Securities Transaction Tax
Transactions in equity shares, derivatives and units of equity-
oriented funds entered in a recognized stock exchange attract
Securities Transaction Tax at the following rates:-
Delivery base transactions in equity shares or buyer and
seller each units of an equity-oriented fund - 0.075%
Sale of units of an equity-oriented fund to the seller mutual
fund - 0.15%
Non delivery base transactions in the above - 0.015%
Derivatives (futures and options) seller - 0.01%
Taxes Levied by State Governments and Local Bodies
Sales Tax/VAT
Sales tax is levied on the sale of movable goods. Most of the
Indian States have replaced Sales tax with a new Value Added
Tax (VAT) w.e.f. April 01, 2005. VAT is imposed on goods only
and not services and it has replaced sales tax. Other indirect
taxes such as excise duty, service tax etc., are not replaced by
VAT. VAT is implemented at the State level by State
Governments. VAT is applied on each stage of sale with a
mechanism of credit for the input VAT paid.
32
There are four slabs of VAT:-
0% for essential commodities
1% on bullion and precious stones
4% on industrial inputs and capital goods and items of mass
consumption
All other items 12.5%
Petroleum products, tobacco, liquor etc., attract higher VAT
rates that vary from State to State
A Central Sales Tax at the rate of 4% is also levied on inter-State
sales and would be eliminated gradually.
Some municipal jurisdictions levy octoroi/entry tax on entry of
goods.
Other State Taxes
Stamp duty on transfer of assets
Property/building tax levied by local bodies
Agriculture income tax levied by State Governments on
income from plantations
Luxury tax levied by certain State Government on specified
goods
33
TRANSFER PRICING
In the case of businesses carried on by multinational
companies, detailed provisions relating to transfer pricing were
introduced by the Finance Act, 2001 in order to facilitate the
computation of reasonable, fair and equitable profits and tax in
India. The Indian transfer pricing provisions generally follow the
OECD guidelines albeit with some significant differences such
as a wider definition of the term associated enterprise; and the
concept of arithmetical mean as opposed to internationally
followed statistical measures of median/ arms length range.
In simple words, transfer pricing regulations require cross-

border transactions between associated enterprises to be
undertaken on an arms length basis. In this regard, Section 92
of the Income Tax Act, 1961 (Act) provides that the price of any
transaction between associated enterprises, either or both of
whom are non resident for Indian income-tax purposes
(international transaction), shall be computed having regard to
the arms length price.
Two enterprises are considered to be associated if there is

direct/ indirect participation in the management or control or
capital of an enterprise by another enterprise or by same
persons in both the enterprises. Further, the transfer pricing
regulations have prescribed certain other conditions that can
trigger an associated enterprise relationship. Significant
conditions among these include:
Direct/ indirect shareholding giving rise to 26 percent or
more of voting power;
Dependency relating to source of raw materials/
consumables as well as dependency relating to customer(s)
for manufactured/ processed goods, price and other
conditions being influenced by the other contracting party;
Authority to appoint more than 50 percent of the board of
directors or one or more of the executive directors;
34
Dependency in relation to intellectual property rights (know-
how, patents, trademarks, copyrights, trademarks, licenses,
franchises etc) owned by either party; and
Dependency relating to borrowings i.e. advancing of loans
amounting to not less than 51 percent of total assets or
provision of guarantee amounting to not less than 10
percent of the total borrowings.
Determination of arms length price

The Indian transfer pricing regulations require arms length price
in relation to an international transaction to be determined in
accordance with the most appropriate method from out of the
following prescribed methods:
Comparable uncontrolled price (CUP) method;
Resale price method (RPM);
Cost plus method (CPLM);
Profit split method (PSM); and
Transactional net margin method (TNMM).
Unlike the OECD guidelines, there is no order of preference

prescribed, although in practice transfer pricing authorities do
attempt to use traditional methods such as CUP, RPM and
CPLM, before accepting a profit-based approach. The choice of
the most appropriate method is required to be made having
regard to factors which inter alia include nature and class of
transaction, the classes of associated enterprises undertaking
the transaction, the functions performed by them.
Burden of proof and assessment

The burden of proving that the international transactions comply
with the arms length principle lies with the taxpayer. Further the
Act requires every person entering into an international
transaction to maintain prescribed information and documents
relating to international transactions. The documentation
requirements laid down by the Indian transfer pricing
regulations are detailed and prescriptive, and failure to maintain
35
prescribed documentation attracts penalties that can extend up
to 4 percent of the value of the international transaction entered
into by the taxpayer.
Further, every taxpayer entering into an international transaction

is required to file a report (referred to as an accountants report)
along with its tax return setting out prescribed details in respect
of international transactions and associated enterprises. The
accountants report forms the basis on which the transfer
pricing authorities undertake an audit. Under prevailing
regulations, taxpayers reporting international transactions with
associated enterprises exceeding INR 50 million (approx USD
1,100,000) are subjected to a transfer pricing audit. To the extent
of transfer pricing adjustments made as a result of the audit,
taxpayers lose any tax exemption to which they are otherwise
entitled to. Further, there are potential penalties to the extent of
one-time to three-times of the incremental tax arising as a result
of any adjustment. There is a separate penalty of INR 100,000
(approx USD 2200) for not furnishing the accountants report.
Indian transfer pricing regulations are in an evolving stage with

only two years of audits having been completed, and at present
there is limited administrative guidance and no judicial
precedent available. Further, it is pertinent to note that Indian
transfer pricing regulations do not have provisions for either
advance pricing arrangements or safe harbors. However
taxpayers are provided a limited safe harbor to the extent that
the transaction value of the international transaction can vary to
the extent of 5 percent of the arms length price.
36
*** DOING
DOING BUSINESS IN INDIA ***
LABOUR RULES & REGULATIONS
India provides for core labour standards of International Labour
Organization (ILO) for welfare of workers and to protect their
interests. India has a number of labor laws addressing various
issues such as resolution of industrial disputes, working
conditions, labor compensation, insurance, child labor, equal
remuneration etc. Labor is a subject in the concurrent list of the
Indian Constitution and is therefore in the jurisdiction of both
central and state governments. Both central and state
governments have enacted laws on labor issues. Central laws
grant powers to officers under central government in some
cases and to the officers of the state governments in some
cases.
The main central laws dealing with labor issues are given below:
Workmens Compensation Act 1923
Minimum Wages Act 1948
Payment of Wages Act 1936
Industrial Disputes Act 1947
Employees Provident Fund and Miscellaneous Provisions
Act 1952
Payment of Bonus Act 1965
Payment of Gratuity Act 1972
Maternity Benefit Act 1961
Industrial Employment (Standing orders) Act 1946
Payment of Bonus Act, 1965

Payment of Bonus Act, 1965 applies to every factory and
establishment all over India. Bonus is granted under the Act
based on profit or on productivity. It will be applicable if the
number of employees is greater than or equal to 20. It would
only be applicable to an employee whose total salary does not
exceed INR 3500/- per month (approx USD 80 per month).
37
Employees Provident Fund and Miscellaneous

Provisions Act, 1952
This is a retiral benefit to be paid to the employee on retirement,
which requires a monthly contribution to be made by the
employer with a matching contribution from the employee. At
present the monthly contribution is 12 percent of basic salary
(this can be built into the cost to company package negotiated
with the employees).
This Act will be applicable where the number of employees is
greater than or equal to 20 at any point of time during the year.
Employees getting basic salary of more than INR 6,500 per
month (approx USD 140 pm) can opt not to become the
members.
To comply with the Act, the enterprise will either need to obtain
a registration with the Government Provident Fund Department
or to form its own trust for the management of the provident
fund.
Payment of Gratuity Act, 1972
The Payment of Gratuity Act, 1972 provides for gratuity to

employees in factories, plantations, shops, establishments and
mines in the event of superannuation, retirement, resignation,
death or total disablement due to accident or disease. The
employee will get 15 days of wages based on the rate of wages
last drawn for every completed year of service in excess of six
months.
Gratuity is payable in any one of the following circumstances:

on the employees retirement ; or
on his becoming incapacitated prior to such retirement ; or
on termination of his employment ; or
on the employees death ( gratuity is received by the
successors of the employee)
38
However except in the case of death or disablement gratuity is
only payable if the employee has rendered five years of
continuous service.
The Employees State Insurance Act, 1948

The Employees State Insurance Act, 1948 provides employees
with sickness, maternity, and employment injury benefits. It will
be applicable if the employees are greater than or equal to ten
and to an employee whose total salary does not exceed INR
6500/- per month (approx USD 140 pm). The sickness cash
benefit includes a cash allowance that equals half of the sick
persons average daily wages during the previous six months.
In case of an employment injury, disablement and dependents

benefit may be granted. When the disablement is full, the person
will receive a monthly pension equivalent to half of his/ her
average wages during the previous twelve months.
Medical care and treatment to insured workmen are provided by

provincial governments at appropriate hospitals, dispensaries
and other medical institutions. All the medical care costs will be
shared between the corporation and the provincial government.
Contract Labor (Regulation and Abolition) Act, 1970

The Act is applicable if the number of contract employees in an
establishment (principal employer) is 20 or more. Contract labor
refers to a workman who is hired for the work of an
establishment through a contactor. For e.g. the security
services, housekeeping services being provided by an agency
(contractor) to the LO (principal employer). An establishment
covered under this Act is required to obtain registration as per
the manner specified. It is the primary responsibility of the
contractor to provide wages and other benefits to the contract
labor.
39
However where the contractor fails to discharge his liability, the
onus shifts on the principal employer. In order to ensure that the
contractor is complying with its various obligations, generally a
compliance certificate specifying the compliance with respect to
the various laws is submitted by the contractor to the principal
employer at timely intervals (say once in a quarter) .
Shops and Establishment Act

This Act will be applicable where the number of employees in
India is 10/ 20 depending on the specific rules of each state in
India. Generally, every state requires registration with the office
of the Shops and Establishment for obtaining a certificate which
is required to be displayed in the establishment at all the times.
Working hours
Factories Act 1948 requires maximum working hours of 48 hours
per week. In practice, however, office employees normally work
a five-day week of 3738 hours. Factory workers have on
average a six-day week of 4348 hours. In most places, any work
beyond nine hours per day or 48 hours per week requires
payment of overtime at double the normal wage.
Wages and benefits

Wages and fringe benefits vary considerably depending on the
industry, company size and region. Wages generally have two
components: the basic salary and the dearness allowance,
which is linked to the cost-of-living index. The allowance, paid
as part of the monthly salary, may be at a flat rate or on a scale
graduated by income group. A mandatory bonus supplements
wages.
Companies use both time and piece rates. The former is more
common in organized-factory industries, such as engineering,
chemicals, cement, paper, etc. Rates may be per hour, day, week
or month. Piece rates, which the government has encouraged in
order to boost productivity, are usually paid monthly, although
40
casual workers are paid on a daily basis. Some industries pay
production premiums.
In the organized sector, wages are often set by settlements
reached between trade unions and management.
Fringe benefits, such as provident funds, pensions and

bonuses, normally add 4050% to the base pay.
Other benefits
To reward the employees for their performance and as a
retention tool, Indian firms offer share options to their
employees. These are common in IT, biotechnology, media,
telecoms and banks. SEBI has issued Employee Stock Option
Scheme and Employee Stock Purchase Scheme Guidelines,
which are applicable to listed companies. Companies are
permitted to freely price the stock options but are required to
book the accounting value of options in their financial
statements. The guidelines specify among others a one-year
lock-in period, approval of shareholders by special resolution,
formation of a compensation committee, accounting policies
and disclosure in directors reports.
Termination of employment
Companies are required to obtain government permission to
close an operation or lay off workers in firms with 100 or more
employees. The Industrial Disputes Act requires employers
wishing to close an establishment to apply for permission at
least 90 days before the intended closing date. If the government
does not issue a decision within 60 days of the application,
approval is deemed granted. A company can appeal a rejection
to the Industrial Tribunal. Workers in an establishment closed
illegally (that is, without approval) remain entitled to full pay and
benefits.
It is usually difficult for large companies to dismiss staff.

Retrenchments and layoffs require full explanation to and the
41
prior approval of the state government. (Retrenchment under an
agreement specifying a termination date requires no prior
notice.) Companies usually follow the last-in-first-out principle.
Compelled by competition to cut wage costs or consider moving

out of high-wage locations, several companies have resorted to
voluntary retirement schemes (VRSs) or redeployments.
Beneficiaries under an approved VRS of a private-sector
company are exempt from tax on monetary benefits up to INR
500,000. Companies may amortize their VRS expenses over five
years. The government also uses VRSs in the public sector.
Labor-management relations
With some exceptions, India has company unions rather than
trade unions. These are often affiliated with national labor
organizations. Various trade unions are promoted by political
parties. The power of the unions is declining as the government
pushes forward its reform agenda.
There are a number of national labor organizations. The Indian

National Trade Union Congress (INTUC), the labor wing of the
Congress party, generally favors settlement of labor disputes
through arbitration, the wage boards or the tribunals. The All-
India Trade Union Congress (AITUC), affiliated to the Communist
Party of India, is a champion of workers rights and strikes. The
Centre for Indian Trade Unions (CITU) is affiliated to major
industries. Hind Mazdoor Sabha is affiliated to the International
Confederation of Free Trade Unions. Bharatiya Mazdoor Sangh
is affiliated with the Bharatiya Janata Party. In membership
terms, only these organizations qualify for recognition as
national trade unions.
In manufacturing companies, prior discussions between

management and labor leaders often help to forestall strikes.
When strikes occur, they are usually settled by negotiation or
through conciliation boards. It is common practice in many
foreign-owned manufacturing firms to avert strikes by
42
employing a labor welfare officer to act as a go-between for
labor and management. Firms with 500 or more workers must by
law have such an officer who acts as personnel manager, legal
adviser on labor law and, in non-unionized companies, a worker
representative.
The Industrial Disputes Act, 1947 requires industrial
establishments with 100 or more workers to set up works
committees to promote measures for securing and preserving
amity and good relations between the employer and workforce.
Collective bargaining has gained ground in recent years, but
agreements normally apply only at the plant level. Collective
agreements have traditionally been the norm in banking; such
pacts may last up to five years. An industry association usually
negotiates any rare industry-wide agreement.
At the central level, labor policies are managed jointly by the

Indian Labor Conference and its executive body, the Standing
Labor Committee, along with the various industrial committees.
Representatives from the government, employers and labor are
included in all three groups.
Employment of foreigners
Expatriate employment in manufacturing industries is generally
limited to technical and specialized personnel. Many foreign
affiliates have a few expatriates in India. Permission from the
Reserve Bank of India (RBI, the central bank) or government is
not required to employ a foreign national, but the Ministry of
Home Affairs, which grants visas and certain specific
appointments, may require government approval in some cases.
Foreigners entering India on a Student, Employment, Research
or Missionary Visa that is valid for more than 180 days are
required to register with the Foreigners Registration Officer
under whose jurisdiction they propose to stay within 14 days of
arrival in India, irrespective of their actual period of stay.
Foreigners visiting India on any other category of long-term visa
that is valid for more than 180 days are not required to register
43
themselves if their actual stay does not exceed 180 days on
each visit. If such a foreigner intends to stay in India for more
than 180 days during a particular visit, that person should
register within 180 days of arrival in India.
It normally takes about three months to obtain an immigration

visa, and foreign companies report no problems in acquiring
visas for their technical personnel. The visa is generally granted
for the same period as the employment contract. Once it is
obtained, a stay permit is granted; this must be endorsed
annually by the state government where the foreign national
resides.
Expatriates are often paid salaries several times those of their

Indian counterparts. Domestic private-sector salaries are rising
quickly, although they vary widely among industries.
44
INTELLECTUAL PROPERTY
India provides protection to Intellectual Property Rights in

accordance with its obligations under the Trade Related Aspects
of Intellectual Property Rights (TRIPS) Agreement of the World
Trade Organization (WTO). The importance of intellectual
property in India is well established at all levels- statutory,
administrative and judicial.
India has well-established administrative mechanism for

enforcement of Intellectual Property Rights (IPRs). Police
officers are empowered to take action against the infringement
of IPRs in case of pirated and counterfeit products.
Cases of infringement of IPRs are tried in the judicial courts.

Indian Intellectual Property Rights Laws also provide for appeals
in the judicial courts of the administrative decisions relating to
Intellectual Property Rights.
The Intellectual Property Rights protected under various statues

in India are as follows:-
Patents
Copyrights and related rights
Trademarks
Geographical indications
Plant varieties
Designs
Lay out designs of integrated circuits
Protection of undisclosed information
45
FOREIGN EXCHANGE REGULATIONS & REPATRIATION
India has liberalized its foreign exchange controls. Rupee is

freely convertible on current account. Rupee is also almost fully
convertible on capital account for non-residents. Profits earned,
dividends and proceeds out of the sale of investments are fully
repatriable for FDI. There are the restrictions on capital account
for resident Indians for incomes earned in India.
The Reserve Bank of Indias Foreign Exchange Department

administers Foreign Exchange Management Act 1999(FEMA).
Foreign Exchange Management Act (transfer of securities to any
person resident outside India) Regulation as amended from time
to time regulates transfer for issue of any security by a person
resident outside India.
Foreign Exchange Management Act (FEMA)
The Parliament has enacted the Foreign Exchange Management

Act, 1999 to replace the Foreign Exchange Regulation Act, 1973.
This Act came into force on the 1st day of June 2000. The object
of the Act is to consolidate and amend the law relating to foreign
exchange with the objective of facilitating external trade and
payments and for promoting the orderly development and
maintenance of foreign exchange market in India.
This Act extends to the whole of India and will also apply to all
branches, offices and agencies outside India owned or
controlled by a person resident in India. It will also be applicable
to any contravention committed outside India by any person to
whom this Act is applicable.
Repatriation of foreign exchange
India does not have full capital account convertibility as yet.

However, there have been significant relaxations in recent past
in both current account as well as capital account related drawal
of foreign exchange. Payments made in connection with
46
services procured in the ordinary course of business are
regarded as current account transaction provided such
payments do not alter payers assets and liabilities outside
India. Drawal of foreign exchange for current account
transactions is regulated as under:
In case of some of the transactions listed in Schedule II and III,

prior approval is not required if the payment is made out of
funds held in exchange earners foreign currency (EEFC)
account of the remitter. It is clarified by the RBI that remittances
for all current account transactions, other than those prescribed
in aforesaid schedules, may be made without any specific
approval. Some of the relevant current account payments are
discussed hereunder.
Dividends
Dividend can be remitted without any specific approval of the
RBI.
Royalty payments under technical collaboration

Royalty payments under technical collaboration are covered
under Schedule II as follows:
47
However, no approval is necessary if remittance is made out of

EEFC Account of the remitter.
Under the foreign direct investment guidelines, an Indian

company can also pay brand royalty, (on use of trademarks and
brand name of the foreign collaborator without technology
transfer), under automatic route to the extent of 2 percent for
exports and 1 percent for domestic sales.
In case of technology transfer, the payment for the use of

trademark and brand name subsumes into the technical know-
how royalty thereby additional brand royalties cannot be paid.
Consultancy services
Remittances for any consultancy service procured from outside
India and not involving transfer of technology are covered in
Schedule III. Remittance up to USD 1 million per project can be
made without any approval of the RBI. However, no such
approval is necessary if remittance is made out of EEFC account
of the remitter.
Import of goods
Payments in connection with import of goods and services in
the ordinary course of business are generally permissible and
can be undertaken freely through direct filing of required
documents with the authorized dealer/ banker. The guidelines
48
for imports contain specific provisions relating to period of
settlement, charging of interest, etc.
Repatriation of capital
Foreign capital invested in India is generally allowed to be
repatriated, along with capital appreciation, if any, after the
payment of taxes due on them. Generally, the repatriation of
capital may take place in the following scenarios:
Winding up of the company in India;
Sale of shares in the company to a third party
Netting
Foreign receivables and payables are not permitted to be netted
off and the Indian Company is obliged to realize the entire export
proceeds and pay for the import of goods and services
separately. Specific relaxation exists in the regulations for some
cases. The RBI also gives case specific approvals based on
industry practice and internal norms.
Other remittances
No prior approval is required for remitting profits earned by
Indian branches of companies (other than banks)
incorporated outside India to their head offices outside
India.
Remittances of winding-up proceeds of a project office of a

foreign company in India are permitted under the automatic
route subject to fulfilment of necessary compliances.
Winding-up proceeds of a branch/ liaison office of a foreign

company in India are permitted subject to RBI approval.
49
VISA AND ENTRY REQUIREMENTS
Foreign nationals (except citizens of Nepal and Bhutan) require
a valid passport or travel document and a valid visa to enter
India. Visas can be obtained from the Indian embassy/consulate
located in the home country of the foreign national. The
following visas are available from Indian embassies/consulates
abroad:
Business visa
This is valid for one or more years with multiple entries.
Business visas for long-term stays are issued to individuals
visiting India on business for extended periods. This type of
visa enables foreign nationals to travel in and out of the
country without having to re-apply for visas every six
months. A letter from a sponsoring organization indicating
the nature of business, the likely duration of stay, places
and organizations to be visited and incorporating a
guarantee to meet maintenance expenses, etc, should
accompany the application. The duration of stay in India for
each visit is only six months, even though a valid visa may
be for more than six months.
Employment visa
These are issued to skilled and qualified professionals or
persons who are engaged or appointed by companies,
organizations or economic undertakings as technicians,
technical experts, senior executives, etc. Employment visas
are valid for one to five years. An employment visa may be
obtained in the home country. A copy of the contract with
the employer has to be enclosed.
Conference visa
These are issued for individuals attending
conferences/seminars/meetings in India. A letter of
invitation from the organizer of the conference must be
submitted along with the visa application. Delegates may
combine tourism with attending conferences.
Tourist visa
Tourist visas are normally valid for six months and are
usually multiple-entry visas, although multiple entries
50
should be specifically requested at the time of application.
Applicants are required to produce documents to prove their
financial standing. Tourists traveling in groups of not less
than four under the auspices of a recognized travel agency
may be considered for a collective visa for six months, even
though a valid visa may be for more than six months.
Tourist visas for up to five years may be granted if the
foreigner is connected with the tourism trade.
Entry visa
These are issued on a case-by-case basis only to persons of
Indian origin depending on the purpose of the visit and
eligibility. However, members of the family of a person
employed in India are also eligible for an entry visa. An entry
visa is valid for a period of six months to five years, with
multiple entries permitted.
Research visa
Individual research projects can be undertaken in Indian
universities/higher education institutions after obtaining a
research visa. The approval of the Ministry of Human
Resource Development (Department of Education) should
accompany the visa application. The validity of the visa
coincides with the research period.
Student visa
These are issued for the duration of the academic course of
study or for a period of five years, whichever is less, on the
basis of firm letters of admission from universities,
recognized colleges or educational institutions in India.
Change of purpose or institution is not permitted. The
validity of all visas is determined from the date of issue.
Transit visa
Transit visas valid for single/double entry for short
stopovers for traveling to a third country are available.
These are issued for a maximum period of 15 days with
single-/double-entry facilities to bona fide transit
passengers only. Confirmed onward tickets and valid visa
for the final destination are required.
51
Missionaries
Valid for single entry and duration of stay. A letter in
triplicate, from a sponsoring organization indicating
intended destination in India, probable length of stay and
nature of duties should be submitted along with a guarantee
for the applicants maintenance while in India. Processing of
applications for missionaries may take up to three months.
Journalist visa
Journalist visas are given to professional journalists and
photographers for up to three months stay in India. The
applicant must contact the External Publicity Division of the
Ministry of External Affairs on arrival in New Delhi, and the
Office of the Government of Indias Press Information
Bureaus in other places.
52
*** DOING BUSINESS
USINESS IN INDIA ***
INCENTIVES OFFERED
Incentives and Concessions are being offered in India for

attracting Foreign and Domestic Investments in the following
form:
Customized package of incentives and concessions
Customized package of incentives and concessions is
provided to prestigious projects having very huge
investments.
Electricity duty exemption
Electricity duty exemption is provided to all new industrial
units except those in negative list of industries for a certain
period throughout.
Reservation of Plots for NRIs and Foreign Investment
Projects
10%f of plots in the nearly developed Industrial Estates and
Growth Centers have been reserved for NRIs with at least
33% export orders and units having a minimum foreign
equity of 33%.
Rebate on land cost
Rebate equivalent to 20% of the land cost is given if the
industrial unit starts commercial production within certain
number of years of offer of possession of industrial plots.
Time schedule for sanctions/approvals
A time schedule is fixed for various departments for giving
necessary sanctions/approvals to reduce time frames for
project completion.
Preferential allotment of land for IT industry
The Central Government has been giving preferential
treatment for allotment of land to the IT industries on an
ongoing basis in all industrial areas developed by Central
agencies.
Continuous-uninterrupted power supply for IT industry
The Central Government has been endeavoring to provide
continuous and uninterrupted power supply for IT industries
and shall exempt them from schedule power cuts.
53
Encouragement to captive power generation in IT Parks/IT
locations is always given.
Facilities on Generator Sets
Captive power generation sets installed by the information
Technology Industry are eligible for total exemption from
payment of electricity duty without any time limit.
Liberal change of existing industry to IT
The Central Government permits setting up of IT Software
units in urban areas and change of existing industry to IT.
Change of land use
No charges for change of land use (CLU) are levied for the IT
industry/IT Parks for a certain period. Permission for
sale/leasing/subleasing in constructed buildings and open
spaces is permitted for optimum utilization of infrastructure.
Licenses for setting up Software Technology Parks (STPs)
are being given liberally and on easy payment terms.
54
STATISTICAL INFORMATION
ECONOMIC SURVEY 2007-08

Please visit:
http://indiabudget.nic.in/es2007-08/esmain.htm
India's Foreign Trade: April- 2008

DEPARTMENT OF COMMERCE
ECONOMIC DIVISION
EXPORTS & IMPORTS : (PROVISIONAL)
APRIL (IRS)
EXPORTS (including re-exports)
2007-2008 46164
2008-2009 57633
%Growth 2008-2009/ 2007-2008 24.8
IMPORTS
2007-2008 74895
2008-2009 97151
%Growth 2008-2009/ 2007-2008 29.7
TRADE BALANCE
2007-2008 -28731
2008-2009 -39518
*Figures for 2007-08 are the latest revised whereas figures for 2008-09 are
provisional.
Country-wise Export
Values in Rs. Lacs
2007-
S.No. Country 2006-2007 %Share 2008(Apr- %Share %Growth
Jun)
1. AFGHANISTAN TIS 82,227.81 0.1438 19,675.61 0.1361
2. ALBANIA 2,020.77 0.0035 1,193.66 0.0083
3. ALGERIA 151,952.64 0.2658 37,706.45 0.2609
4. AMERI SAMOA 124.09 0.0002 24.95 0.0002
5. ANDORRA 58.16 0.0001 22.32 0.0002
55
6. ANGOLA 90,717.60 0.1587 39,962.88 0.2765

7. ANGUILLA 404.86 0.0007
8. ANTIGUA 636.89 0.0011 28.31 0.0002
9. ARGENTINA 95,798.55 0.1675 23,592.48 0.1632
10. ARMENIA 3,908.03 0.0068 1,007.71 0.0070
11. ARUBA 661.99 0.0012 32.11 0.0002
12. AUSTRALIA 418,457.03 0.7319 83,566.20 0.5782
13. AUSTRIA 59,705.70 0.1044 15,001.14 0.1038
14. AZERBAIJAN 11,105.75 0.0194 2,641.92 0.0183
15. BAHAMAS 27,690.31 0.0484 381.50 0.0026
16. BAHARAIN IS 83,071.38 0.1453 22,329.24 0.1545
17. BANGLADESH PR 736,596.94 1.2883 195,885.73 1.3553
18. BARBADOS 1,206.23 0.0021 162.37 0.0011
19. BELARUS 6,504.94 0.0114 1,586.61 0.0110
20. BELGIUM 1,572,170.50 2.7496 420,928.63 2.9124
21. BELIZE 710.38 0.0012 240.50 0.0017
22. BENIN 68,554.93 0.1199 20,182.84 0.1396
23. BERMUDA 339.92 0.0006 163.14 0.0011
24. BHUTAN 26,018.73 0.0455 7,537.52 0.0522
25. BOLIVIA 2,469.47 0.0043 511.44 0.0035
26. BOSNIA-HRZGOVIN 1,646.85 0.0029 455.33 0.0032
27. BOTSWANA 4,916.37 0.0086 1,077.09 0.0075
28. BR VIRGN IS 397.13 0.0007 3.93 0.0000
29. BRAZIL 657,677.13 1.1502 132,361.70 0.9158
30. BRUNEI 3,759.13 0.0066 876.28 0.0061
31. BULGARIA 18,192.93 0.0318 8,246.40 0.0571
32. BURKINA FASO 6,785.93 0.0119 2,233.27 0.0155
33. BURUNDI 3,586.04 0.0063 859.47 0.0059
34. C AFRI REP 1,090.57 0.0019 85.61 0.0006
35. CAMBODIA 23,603.67 0.0413 4,685.63 0.0324
36. CAMEROON 37,555.03 0.0657 8,819.72 0.0610
37. CANADA 502,450.47 0.8787 114,229.28 0.7903
38. CANARY IS 35.78 0.0001
39. CAPE VERDE IS 96.22 0.0002 15.05 0.0001
40. CAYMAN IS 145.02 0.0003 157.06 0.0011
56
41. CHAD 12,740.30 0.0223 1,647.13 0.0114
42. CHANNEL IS 162.43 0.0003 9.12 0.0001
43. CHILE 169,826.42 0.2970 17,672.37 0.1223
44. CHINA P RP 3,752,978.00 6.5637 794,362.69 5.4961
45. CHRISTMAS IS. 16.91 0.0000
46. COCOS IS 113.76 0.0002 10.53 0.0001
47. COLOMBIA 260,923.11 0.4563 25,460.13 0.1762
48. COMOROS 7,030.69 0.0123 908.50 0.0063
49. CONGO D. REP. 546.48 0.0010 171.78 0.0012
50. CONGO P REP 61,657.14 0.1078 10,682.68 0.0739
51. COOK IS 2.14 0.0000 38.77 0.0003
52. COSTA RICA 9,280.20 0.0162 3,096.62 0.0214
53. COTE D' IVOIRE 64,099.13 0.1121 34,663.23 0.2398
54. CROATIA 24,747.91 0.0433 6,828.61 0.0472
55. CUBA 12,148.67 0.0212 1,175.52 0.0081
56. CYPRUS 15,108.63 0.0264 3,766.92 0.0261
57. CZECH REPUBLIC 46,336.11 0.0810 18,758.45 0.1298
58. DENMARK 207,161.34 0.3623 43,679.28 0.3022
59. DJIBOUTI 139,207.94 0.2435 25,822.56 0.1787
60. DOMINIC REP 16,754.46 0.0293 3,369.58 0.0233
61. DOMINICA 1,287.59 0.0023 197.86 0.0014
62. ECUADOR 23,652.76 0.0414 6,885.79 0.0476
63. EGYPT A RP 344,350.84 0.6022 116,996.35 0.8095
64. EL SALVADOR 7,993.01 0.0140 1,384.32 0.0096
65. EQUTL GUINEA 2,152.15 0.0038 1,066.71 0.0074
66. ERITREA 3,008.65 0.0053 1,223.65 0.0085
67. ESTONIA 12,710.98 0.0222 14,375.83 0.0995
68. ETHIOPIA 52,384.09 0.0916 13,503.03 0.0934
69. FALKLAND IS 114.04 0.0002 18.95 0.0001
70. FAROE IS. 149.04 0.0003 11.34 0.0001
71. FIJI IS 20,101.12 0.0352 3,407.01 0.0236
72. FINLAND 87,924.24 0.1538 20,746.26 0.1435
73. FR GUIANA 34.90 0.0001 1.14 0.0000
74. FR POLYNESIA 927.82 0.0016 190.28 0.0013
75. FR S ANT TR 36.78 0.0001 4.01 0.0000
76. FRANCE 950,601.38 1.6625 227,436.67 1.5736
57
77. GABON 7,531.04 0.0132 2,292.36 0.0159
78. GAMBIA 12,459.87 0.0218 3,187.67 0.0221
79. GEORGIA 18,533.07 0.0324 4,824.00 0.0334
80. GERMANY 1,800,723.13 3.1493 457,425.16 3.1649
81. GHANA 208,633.61 0.3649 170,754.45 1.1814
82. GIBRALTAR 7,884.05 0.0138 434.70 0.0030
83. GREECE 304,306.09 0.5322 57,562.00 0.3983
84. GREENLAND 1.18 0.0000 1.80 0.0000
85. GRENADA 353.62 0.0006 136.20 0.0009
86. GUADELOUPE 773.97 0.0014 68.30 0.0005
87. GUAM 1,215.51 0.0021 72.34 0.0005
88. GUATEMALA 33,502.31 0.0586 5,137.67 0.0355
89. GUINEA 36,223.70 0.0634 13,427.52 0.0929
90. GUINEA BISSAU 307.79 0.0005 1,164.94 0.0081
91. GUYANA 5,951.67 0.0104 1,034.27 0.0072
92. HAITI 9,822.71 0.0172 2,390.13 0.0165
93. HEARD MACDONALD 5.31 0.0000 5.43 0.0000
94. HONDURAS 51,204.17 0.0896 8,554.26 0.0592
95. HONG KONG 2,117,937.75 3.7041 531,886.00 3.6801
96. HUNGARY 46,846.21 0.0819 18,435.22 0.1276
97. ICELAND 5,200.01 0.0091 1,456.02 0.0101
98. INDONESIA 917,696.75 1.6050 173,552.16 1.2008
99. IRAN 656,482.06 1.1481 278,003.59 1.9235
100. IRAQ 92,066.55 0.1610 22,951.61 0.1588
101. IRELAND 102,184.09 0.1787 24,170.91 0.1672
102. ISRAEL 597,937.19 1.0457 142,433.86 0.9855
103. ITALY 1,621,242.88 2.8354 381,425.75 2.6390
104. JAMAICA 9,111.92 0.0159 5,080.87 0.0352
105. JAPAN 1,295,361.13 2.2655 331,176.63 2.2914
106. JORDAN 80,881.48 0.1415 24,742.57 0.1712
107. KAZAKHSTAN 37,710.02 0.0660 9,167.43 0.0634
108. KENYA 595,254.94 1.0411 123,088.95 0.8516
109. KIRIBATI REP 1,520.00 0.0027 45.40 0.0003
110. KOREA DP RP 47,742.02 0.0835 86,983.41 0.6018
111. KOREA RP 1,137,901.00 1.9901 213,514.86 1.4773
112. KUWAIT 277,989.72 0.4862 63,227.47 0.4375
58
113. KYRGHYZSTAN 16,852.48 0.0295 3,119.31 0.0216
114. LAO PD RP 1,076.38 0.0019 151.28 0.0010
115. LATVIA 18,010.54 0.0315 5,562.57 0.0385
116. LEBANON 30,307.41 0.0530 8,053.46 0.0557
117. LESOTHO 2,470.46 0.0043 488.88 0.0034
118. LIBERIA 10,916.54 0.0191 2,437.80 0.0169
119. LIBYA 39,011.82 0.0682 5,420.94 0.0375
120. LIECHTENSTEIN 315.25 0.0006 56.12 0.0004
121. LITHUANIA 18,362.14 0.0321 5,338.01 0.0369
122. LUXEMBOURG 7,748.71 0.0136 1,004.48 0.0069
123. MACAO 732.04 0.0013 255.89 0.0018
124. MACEDONIA 2,578.95 0.0045 1,376.04 0.0095
125. MADAGASCAR 20,650.42 0.0361 4,274.42 0.0296
126. MALAWI 19,277.43 0.0337 6,533.17 0.0452
127. MALAYSIA 590,192.56 1.0322 155,614.47 1.0767
128. MALDIVES 31,096.43 0.0544 7,162.13 0.0496
129. MALI 28,891.37 0.0505 3,341.31 0.0231
130. MALTA 27,413.19 0.0479 1,617.36 0.0112
131. MARSHALL ISLAND 8,634.20 0.0151 21.20 0.0001
132. MARTINIQUE 952.31 0.0017 85.59 0.0006
133. MAURITANIA 9,827.12 0.0172 2,977.91 0.0206
134. MAURITIUS 333,275.78 0.5829 110,394.10 0.7638
135. MEXICO 242,437.53 0.4240 53,312.76 0.3689
136. MICRONESIA 14.68 0.0000 0.73 0.0000
137. MOLDOVA 2,497.39 0.0044 587.22 0.0041
138. MONACO 381.14 0.0007 9.54 0.0001
139. MONGOLIA 1,066.79 0.0019 300.30 0.0021
140. MONTSERRAT 70.59 0.0001 0.00 0.0000
141. MOROCCO 74,343.33 0.1300 17,033.79 0.1179
142. MOZAMBIQUE 86,753.70 0.1517 70,818.98 0.4900
143. MYANMAR 63,374.59 0.1108 13,457.28 0.0931
144. N. MARIANA IS. 9.05 0.0000 2.34 0.0000
145. NAMIBIA 8,363.95 0.0146 2,113.09 0.0146
146. NAURU RP 8.33 0.0000 6.95 0.0000
147. NEPAL 420,138.22 0.7348 131,115.95 0.9072
148. NETHERLAND 1,208,248.38 2.1131 329,312.38 2.2785
59
149. NETHERLANDANTIL 5,811.37 0.0102 1,047.42 0.0072
150. NEUTRAL ZONE 10,195.34 0.0705
151. NEW CALEDONIA 1,464.80 0.0026 222.51 0.0015
152. NEW ZEALAND 227,770.61 0.3984 12,112.90 0.0838
153. NICARAGUA 6,758.94 0.0118 1,358.18 0.0094
154. NIGER 6,481.71 0.0113 2,260.41 0.0156
155. NIGERIA 408,822.28 0.7150 85,878.23 0.5942
156. NIUE IS 50.00 0.0001
157. NORFOLK IS 245.06 0.0004
158. NORWAY 82,972.37 0.1451 14,609.97 0.1011
159. OMAN 285,267.88 0.4989 56,119.19 0.3883
160. PAKISTAN IR 610,688.44 1.0680 167,611.69 1.1597
161. PALAU 73.10 0.0001 0.69 0.0000
162. PANAMA C Z 227.61 0.0004 7.80 0.0001
163. PANAMA REPUBLIC 74,525.04 0.1303 6,014.13 0.0416
164. PAPUA N GNA 4,861.40 0.0085 922.55 0.0064
165. PARAGUAY 12,348.18 0.0216 2,618.02 0.0181
166. PERU 56,836.89 0.0994 16,904.75 0.1170
167. PHILIPPINES 263,596.78 0.4610 46,070.97 0.3188
168. PITCAIRN IS. 30.88 0.0001 0.64 0.0000
169. POLAND 138,582.66 0.2424 38,120.11 0.2637
170. PORTUGAL 165,721.88 0.2898 41,895.71 0.2899
171. PUERTO RICO 12,920.87 0.0226 1,895.36 0.0131
172. QATAR 149,939.95 0.2622 40,041.04 0.2770
173. REUNION 9,839.43 0.0172 2,477.69 0.0171
174. ROMANIA 76,637.48 0.1340 26,254.44 0.1817
175. RUSSIA 408,548.72 0.7145 78,931.55 0.5461
176. RWANDA 6,219.23 0.0109 703.78 0.0049
177. SAMOA 93.93 0.0002 48.75 0.0003
178. SAO TOME 393.17 0.0007 220.93 0.0015
179. SAUDI ARAB 1,171,137.13 2.0482 340,843.34 2.3583
180. SENEGAL 68,895.23 0.1205 14,831.12 0.1026
181. SEYCHELLES 5,844.40 0.0102 14,034.59 0.0971
182. SIERRA LEONE 9,403.73 0.0164 2,105.86 0.0146
183. SINGAPORE 2,746,160.75 4.8028 670,267.81 4.6375
184. SLOVAK REP 16,307.16 0.0285 6,561.18 0.0454
60
*** DOING BUSINESS
USINESS IN INDIA ***
185. SLOVENIA 40,193.43 0.0703 10,992.69 0.0761
186. SOLOMON IS 132.91 0.0002 36.88 0.0003
187. SOMALIA 38,941.73 0.0681 10,022.34 0.0693
188. SOUTH AFRICA 1,016,527.69 1.7778 307,279.38 2.1260
189. SPAIN 849,693.06 1.4861 210,237.69 1.4546
190. SRI LANKA DSR 1,020,638.25 1.7850 265,755.31 1.8387
191. ST HELENA 750.46 0.0013 25.46 0.0002
192. ST KITT N A 175.92 0.0003 7.83 0.0001
193. ST LUCIA 298.14 0.0005 28.17 0.0002
194. ST PIERRE 10,115.02 0.0177 1,085.18 0.0075
195. ST VINCENT 155.49 0.0003 19.46 0.0001
196. SUDAN 182,686.19 0.3195 32,450.43 0.2245
197. SURINAME 7,531.83 0.0132 1,039.98 0.0072
198. SWAZILAND 2,133.88 0.0037 501.65 0.0035
199. SWEDEN 175,293.03 0.3066 41,881.59 0.2898
200. SWITZERLAND 211,095.94 0.3692 60,576.80 0.4191
201. SYRIA 184,818.20 0.3232 46,789.68 0.3237
202. TAIWAN 413,348.75 0.7229 195,788.00 1.3546
203. TAJIKISTAN 3,374.67 0.0059 815.05 0.0056
204. TANZANIA REP 130,694.35 0.2286 43,597.84 0.3016
205. THAILAND 653,562.38 1.1430 123,984.14 0.8578
206. TIMOR LESTE 240.46 0.0004 5.78 0.0000
207. TOGO 55,147.25 0.0964 46,021.16 0.3184
208. TOKELAU IS 68.71 0.0001
209. TONGA 225.83 0.0004 13.73 0.0001
210. TRINIDAD 48,903.89 0.0855 4,460.40 0.0309
211. TUNISIA 49,486.14 0.0865 10,970.78 0.0759
212. TURKEY 598,311.50 1.0464 150,966.05 1.0445
213. TURKMENISTAN 15,309.08 0.0268 3,434.68 0.0238
214. TURKS C IS 238.02 0.0004 61.98 0.0004
215. TUVALU 42.85 0.0001 2.86 0.0000
216. U ARAB EMTS 5,444,497.50 9.5220 1,568,607.88 10.8530
217. UK 2,542,129.00 4.4460 595,453.63 4.1199
218. USA 8,536,848.00 14.9303 1,928,867.00 13.3456
219. UGANDA 48,609.62 0.0850 12,739.60 0.0881
220. UKRAINE 131,061.29 0.2292 35,457.18 0.2453
61
221. UNION OF SERBIA & 5,428.86 0.0095 1,341.21 0.0093
MONTENEGRO
222. UNSPECIFIED 109,508.09 0.1915 35,809.92 0.2478
223. URUGUAY 16,695.75 0.0292 4,506.94 0.0312
224. UZBEKISTAN 13,432.07 0.0235 2,875.22 0.0199
225. VANUATU REP 1,014.48 0.0018 277.60 0.0019
226. VENEZUELA 57,234.92 0.1001 17,785.31 0.1231
227. VIETNAM SOC REP 444,623.84 0.7776 97,664.11 0.6757
228. VIRGIN IS US 711.75 0.0012 25.32 0.0002
229. WALLIS F IS 274.57 0.0005
230. YEMEN REPUBLC 536,639.06 0.9385 188,949.83 1.3073
231. ZAMBIA 49,037.69 0.0858 16,747.47 0.1159
232. ZIMBABWE 14,444.58 0.0253 2,852.74 0.0197
India's Total Export 57,177,928.00 14,453,220.00
Country-wise Import
Values in Rs. Lacs
2007-
S.No. Country 2006-2007 %Share 2008(Apr- %Share %Growth
Jun)
1. AFGHANISTAN TIS 15,613.31 0.0186 6,217.64 0.0267
2. ALBANIA 16.76 0.0000 39.53 0.0002
3. ALGERIA 339,488.53 0.4039 91,588.70 0.3929
4. AMERI SAMOA 38,119.73 0.0454 339.03 0.0015
5. ANDORRA 12.43 0.0000
6. ANGOLA 111,098.33 0.1322 267.46 0.0011
7. ANTIGUA 506.13 0.0006 5.79 0.0000
8. ARGENTINA 398,459.25 0.4741 80,765.15 0.3465
9. ARMENIA 34,480.41 0.0410 194.08 0.0008
10. ARUBA 18.17 0.0000
11. AUSTRALIA 3,171,090.00 3.7728 1,066,657.00 4.5756
12. AUSTRIA 206,156.66 0.2453 60,731.45 0.2605
13. AZERBAIJAN 30,339.88 0.0361 29,559.99 0.1268
14. BAHAMAS 5,485.80 0.0065
15. BAHARAIN IS 213,109.67 0.2535 59,227.63 0.2541
16. BANGLADESH PR 103,390.55 0.1230 31,131.94 0.1335
62
17. BARBADOS 65.82 0.0001 3.25 0.0000
18. BELARUS 42,248.92 0.0503 13,344.98 0.0572
19. BELGIUM 1,874,160.25 2.2298 533,906.25 2.2903
20. BELIZE 2,670.88 0.0032 11.76 0.0001
21. BENIN 36,563.00 0.0435 12,712.44 0.0545
22. BERMUDA 250.24 0.0003 4.80 0.0000
23. BHUTAN 64,000.12 0.0761 19,372.79 0.0831
24. BOLIVIA 1,332.79 0.0016 331.06 0.0014
25. BOSNIA-HRZGOVIN 190.71 0.0002 13.49 0.0001
26. BOTSWANA 26.01 0.0000 0.25 0.0000
27. BR VIRGN IS 8,712.27 0.0104 50.37 0.0002
28. BRAZIL 448,731.19 0.5339 107,005.06 0.4590
29. BRUNEI 129,068.30 0.1536 15,087.29 0.0647
30. BULGARIA 35,181.48 0.0419 1,749.65 0.0075
31. BURKINA FASO 2,517.05 0.0030 1,469.29 0.0063
32. BURUNDI 2.03 0.0000
33. C AFRI REP 200.71 0.0002 103.44 0.0004
34. CAMBODIA 714.94 0.0009 70.08 0.0003
35. CAMEROON 3,443.26 0.0041 1,856.35 0.0080
36. CANADA 804,269.25 0.9569 139,079.78 0.5966
37. CAPE VERDE IS 93.05 0.0001 0.98 0.0000
38. CAYMAN IS 26,533.75 0.0316 9.60 0.0000
39. CHAD 74.65 0.0001 88.19 0.0004
40. CHILE 867,814.25 1.0325 261,652.08 1.1224
41. CHINA P RP 7,900,861.00 9.4001 2,512,827.25 10.7791
42. CHRISTMAS IS. 6,971.82 0.0083
43. COCOS IS 6.37 0.0000
44. COLOMBIA 34,668.59 0.0412 10,052.31 0.0431
45. COMOROS 3,142.49 0.0037 480.32 0.0021
46. CONGO D. REP. 7,709.94 0.0092 1,612.77 0.0069
47. CONGO P REP 27,036.17 0.0322 8,717.58 0.0374
48. COOK IS 12.14 0.0000
49. COSTA RICA 19,875.75 0.0236 15,285.30 0.0656
63
50. COTE D' IVOIRE 82,202.23 0.0978 24,300.47 0.1042
51. CROATIA 25,813.10 0.0307 4,511.85 0.0194
52. CUBA 503.61 0.0006 182.90 0.0008
53. CYPRUS 50,082.04 0.0596 1,190.73 0.0051
54. CZECH REPUBLIC 160,068.11 0.1904 37,442.39 0.1606
55. DENMARK 153,925.59 0.1831 43,123.99 0.1850
56. DJIBOUTI 970.07 0.0012 238.41 0.0010
57. DOMINIC REP 822.30 0.0010 164.47 0.0007
58. DOMINICA 169.39 0.0002 31.00 0.0001
59. ECUADOR 22,318.80 0.0266 5,343.43 0.0229
60. EGYPT A RP 788,705.63 0.9384 187,371.81 0.8038
61. EL SALVADOR 1,127.53 0.0013 305.42 0.0013
62. EQUTL GUINEA 47.20 0.0001 1.26 0.0000
63. ERITREA 154.38 0.0002 170.24 0.0007
64. ESTONIA 11,869.63 0.0141 1,463.82 0.0063
65. ETHIOPIA 5,136.59 0.0061 1,398.14 0.0060
66. FALKLAND IS 6.40 0.0000 0.93 0.0000
67. FAROE IS. 12.99 0.0000
68. FIJI IS 8,413.10 0.0100 17.54 0.0001
69. FINLAND 275,924.78 0.3283 83,338.01 0.3575
70. FR GUIANA 72.38 0.0001 278.55 0.0012
71. FR POLYNESIA 12.42 0.0000 3.31 0.0000
72. FR S ANT TR 0.73 0.0000
73. FRANCE 1,905,933.25 2.2676 216,232.84 0.9276
74. GABON 52,302.37 0.0622 5,863.76 0.0252
75. GAMBIA 8,104.79 0.0096 661.60 0.0028
76. GEORGIA 33,956.50 0.0404 851.31 0.0037
77. GERMANY 3,414,675.00 4.0626 899,263.94 3.8575
78. GHANA 46,701.35 0.0556 14,184.83 0.0608
79. GIBRALTAR 5.43 0.0000
80. GREECE 94,867.88 0.1129 9,743.76 0.0418
64
81. GREENLAND 21.95 0.0000
82. GRENADA 29.77 0.0000 1.17 0.0000
83. GUADELOUPE 72.08 0.0001
84. GUAM 87.68 0.0001 5.24 0.0000
85. GUATEMALA 949.40 0.0011 142.76 0.0006
86. GUINEA 154,934.34 0.1843 176,025.92 0.7551
87. GUINEA BISSAU 22,503.52 0.0268 2,505.93 0.0107
88. GUYANA 6,676.82 0.0079 952.90 0.0041
89. HAITI 513.22 0.0006 186.14 0.0008
90. HEARD MACDONALD 48.13 0.0001
91. HONDURAS 766.01 0.0009 129.13 0.0006
92. HONG KONG 1,123,930.25 1.3372 292,591.47 1.2551
93. HUNGARY 52,452.66 0.0624 10,129.55 0.0435
94. ICELAND 1,689.17 0.0020 106.45 0.0005
95. INDONESIA 1,886,486.00 2.2445 514,271.06 2.2060
96. IRAN 3,451,547.50 4.1065 1,000,631.31 4.2923
97. IRAQ 2,500,501.75 2.9750 608,734.88 2.6112
98. IRELAND 130,633.23 0.1554 19,937.85 0.0855
99. ISRAEL 488,558.03 0.5813 151,938.36 0.6518
100. ITALY 1,210,171.63 1.4398 330,469.22 1.4176
101. JAMAICA 272.95 0.0003 312.34 0.0013
102. JAPAN 2,079,487.75 2.4741 615,812.56 2.6416
103. JORDAN 213,223.53 0.2537 60,224.16 0.2583
104. KAZAKHSTAN 39,910.77 0.0475 7,887.21 0.0338
105. KENYA 25,556.88 0.0304 7,324.24 0.0314
106. KIRIBATI REP 17.49 0.0000 0.59 0.0000
107. KOREA DP RP 222,471.06 0.2647 12,252.73 0.0526
108. KOREA RP 2,174,699.75 2.5874 571,176.06 2.4501
109. KUWAIT 2,711,417.50 3.2259 606,407.38 2.6013
110. KYRGHYZSTAN 348.40 0.0004 78.68 0.0003
111. LAO PD RP 162.52 0.0002 3.01 0.0000
65
112. LATVIA 14,163.44 0.0169 5,324.67 0.0228
113. LEBANON 5,026.93 0.0060 790.01 0.0034
114. LIBERIA 21,347.30 0.0254 16,253.97 0.0697
115. LIBYA 61,029.12 0.0726 261,142.98 1.1202
116. LIECHTENSTEIN 172.92 0.0002 1,060.04 0.0045
117. LITHUANIA 9,116.41 0.0108 1,336.22 0.0057
118. LUXEMBOURG 14,413.56 0.0171 6,914.31 0.0297
119. MACAO 88.27 0.0001 58.80 0.0003
120. MACEDONIA 116.18 0.0001 40.76 0.0002
121. MADAGASCAR 8,704.09 0.0104 3,160.60 0.0136
122. MALAWI 2,269.47 0.0027 801.49 0.0034
123. MALAYSIA 2,395,876.00 2.8505 556,068.31 2.3853
124. MALDIVES 1,382.76 0.0016 399.98 0.0017
125. MALI 1,260.34 0.0015 620.03 0.0027
126. MALTA 90,477.91 0.1076 268.37 0.0012
127. MARSHALL ISLAND 6,611.80 0.0079
128. MARTINIQUE 0.86 0.0000
129. MAURITANIA 290.21 0.0003 70.31 0.0003
130. MAURITIUS 6,565.80 0.0078 1,263.43 0.0054
131. MEXICO 357,648.56 0.4255 66,670.79 0.2860
132. MICRONESIA 9.70 0.0000
133. MOLDOVA 206.13 0.0002
134. MONACO 79.75 0.0001 51.62 0.0002
135. MONGOLIA 1,015.88 0.0012 81.39 0.0003
136. MONTSERRAT 21.13 0.0000 0.79 0.0000
137. MOROCCO 222,309.64 0.2645 42,903.01 0.1840
138. MOZAMBIQUE 12,811.14 0.0152 1,581.24 0.0068
139. MYANMAR 354,094.53 0.4213 95,934.26 0.4115
140. NAMIBIA 1,546.76 0.0018 16.38 0.0001
141. NAURU RP 343.21 0.0004 94.11 0.0004
142. NEPAL 138,450.91 0.1647 39,927.00 0.1713
66
143. NETHERLAND 523,286.19 0.6226 165,784.58 0.7112
144. NETHERLANDANTIL 488.25 0.0006 219.51 0.0009
145. NEW CALEDONIA 9,656.09 0.0115 1,958.78 0.0084
146. NEW ZEALAND 120,266.44 0.1431 35,944.69 0.1542
147. NICARAGUA 34.13 0.0000
148. NIGER 2,448.30 0.0029 36.38 0.0002
149. NIGERIA 3,179,652.00 3.7830 867,940.63 3.7231
150. NIUE IS 131.63 0.0002 13.53 0.0001
151. NORFOLK IS 7.35 0.0000 14.06 0.0001
152. NORWAY 345,727.75 0.4113 64,957.93 0.2786
153. OMAN 208,233.77 0.2477 65,152.92 0.2795
154. PAKISTAN IR 146,272.81 0.1740 28,407.19 0.1219
155. PANAMA REPUBLIC 138,370.13 0.1646 2,266.12 0.0097
156. PAPUA N GNA 126,685.82 0.1507 21,123.94 0.0906
157. PARAGUAY 1,286.33 0.0015 42.10 0.0002
158. PERU 58,097.02 0.0691 6,532.60 0.0280
159. PHILIPPINES 75,737.13 0.0901 20,287.55 0.0870
160. PITCAIRN IS. 2.33 0.0000
161. POLAND 53,032.93 0.0631 16,360.56 0.0702
162. PORTUGAL 13,790.83 0.0164 3,914.00 0.0168
163. PUERTO RICO 3,084.79 0.0037 602.49 0.0026
164. QATAR 935,908.94 1.1135 208,557.00 0.8946
165. REUNION 2,490.47 0.0030 681.46 0.0029
166. ROMANIA 132,011.66 0.1571 49,961.15 0.2143
167. RUSSIA 1,090,283.50 1.2972 194,486.05 0.8343
168. RWANDA 741.45 0.0009 29.10 0.0001
169. SAMOA 500.10 0.0006
170. SAO TOME 0.41 0.0000
171. SAUDI ARAB 6,056,149.50 7.2054 1,355,392.75 5.8141
172. SENEGAL 32,924.24 0.0392 16,604.53 0.0712
173. SEYCHELLES 338.66 0.0004 64.80 0.0003
67
174. SIERRA LEONE 1,058.77 0.0013 333.34 0.0014
175. SINGAPORE 2,483,996.75 2.9554 728,457.00 3.1248
176. SLOVAK REP 8,958.71 0.0107 8,569.30 0.0368
177. SLOVENIA 16,426.37 0.0195 4,261.22 0.0183
178. SOLOMON IS 883.49 0.0011 1.23 0.0000
179. SOMALIA 8,209.58 0.0098 1,355.66 0.0058
180. SOUTH AFRICA 1,118,413.75 1.3306 416,046.41 1.7847
181. SPAIN 283,669.66 0.3375 83,004.84 0.3561
182. SRI LANKA DSR 212,955.69 0.2534 40,289.12 0.1728
183. ST HELENA 103.04 0.0001 0.13 0.0000
184. ST KITT N A 2.07 0.0000
185. ST LUCIA 1.60 0.0000 1,522.79 0.0065
186. ST PIERRE 7,900.77 0.0094
187. ST VINCENT 1,066.39 0.0013
188. SUDAN 40,424.61 0.0481 45,484.08 0.1951
189. SURINAME 496.17 0.0006 75.40 0.0003
190. SWAZILAND 25,750.29 0.0306 1,810.10 0.0078
191. SWEDEN 874,623.00 1.0406 240,296.39 1.0308
192. SWITZERLAND 4,128,317.00 4.9117 1,659,328.88 7.1179
193. SYRIA 35,995.02 0.0428 3,544.93 0.0152
194. TAIWAN 759,424.88 0.9035 269,404.72 1.1556
195. TAJIKISTAN 3,644.23 0.0043 122.62 0.0005
196. TANZANIA REP 44,392.18 0.0528 5,778.12 0.0248
197. THAILAND 789,880.13 0.9398 225,630.80 0.9679
198. TIMOR LESTE 270.17 0.0003 13.84 0.0001
199. TOGO 34,509.81 0.0411 7,172.22 0.0308
200. TOKELAU IS 109.60 0.0001 20.55 0.0001
201. TONGA 72.14 0.0001
202. Trade to Unspecified Countries 49.37 0.0002
203. TRINIDAD 23,012.34 0.0274 10,546.31 0.0452
204. TUNISIA 65,256.00 0.0776 29,335.46 0.1258
68
205. TURKEY 150,630.52 0.1792 140,948.13 0.6046
206. TURKMENISTAN 5,457.35 0.0065 994.80 0.0043
207. TURKS C IS 144.94 0.0002 126.87 0.0005
208. TUVALU 44.43 0.0002
209. U ARAB EMTS 3,917,494.25 4.6609 1,405,506.00 6.0291
210. U K 1,888,929.88 2.2474 505,529.91 2.1685
211. U S A 5,310,541.50 6.3183 1,138,668.38 4.8845
212. UGANDA 2,137.74 0.0025 1,354.63 0.0058
213. UKRAINE 451,866.00 0.5376 109,062.76 0.4678
214. UNION OF SERBIA & 785.18 0.0009 40.03
MONTENEGRO
0.0002
215. UNSPECIFIED 307,679.88 0.3661 58,174.86 0.2495
216. URUGUAY 3,292.52 0.0039 2,079.99 0.0089
217. UZBEKISTAN 15,330.50 0.0182 551.45 0.0024
218. VANUATU REP 4,173.63 0.0050 128.54 0.0006
219. VENEZUELA 336,257.41 0.4001 95,254.50 0.4086
220. VIETNAM SOC REP 75,861.20 0.0903 17,819.73 0.0764
221. VIRGIN IS US 40.43 0.0000 245.32 0.0011
222. WALLIS F IS 17.76 0.0000
223. YEMEN REPUBLC 909,901.88 1.0826 189,267.64 0.8119
224. ZAMBIA 39,023.43 0.0464 19,356.31 0.0830
225. ZIMBABWE 14,574.13 0.0173 2,702.20 0.0116
India's Total Import 84,050,632.00 23,312,034.00
69
*** DOING BUSINESS IN INDIA
INDIA ***
Map of India
70

Doing - Business - in - India - A Business Guide PDF

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A COMPLETE BUSINESS GUIDE

Starting Business in India 10

Types of Companies & Company Law 12

Foreign Direct Investment (FDI) Policy 18

Regulatory Framework on Investment in India 20

Investment Vehicles for Foreign Investors 25

Labor Rules & Regulations 37

Foreign Exchange Regulations & Repatriations 46

Visa and Entry Requirements 50

India is also the 4th largest economy in the world in terms of

Indias time tested institutions offer foreign investors a

Brief economic profile

Indias merchandise exports (in US dollar terms and customs

Services exports grew by 71 percent in 2004-05 to USD 46

The current position is thus that the Union government may

Country fact file

Total area 3.29 million square kilometers

Capital New Delhi

Population Over 1 billion

Political system The Indian Constitution

Head of Government Prime Minister

Principal markets USA, UAE, Hong Kong, UK, China,

Principal markets US, China, Belgium, Switzerland,

STARTING BUSINESS IN INDIA

Overseas organizations, looking at setting up of their business

There are mainly two types of companies in India:

Options Available for Exit from the Business

Exit options take place in the following forms:

TYPES OF COMPANIES & COMPANY LAW

Apart from statutory government owned concerns, the most

The types of companies run mostly in India are:-

Statutory requirements for formation of companies

1. Minimum number of Two Seven

Maximum number of Unlimited

5. Minimum paidup capital INR 1,00,000 INR 5,00,000

After verifying the documents, the ROC issues a Certificate of

The company in a general meeting may remove auditors before

Auditors are required to make a report to the members of the

The Act also provides for formation of an audit committee,

Obtaining approval for the proposed name of the Company from

Drawing up the Memorandum of Association

Drawing up the Articles of Association

Getting the appropriate persons to subscribe to the

Payment of Registration Fee to the ROC

Receipt of Certificate of Incorporation

Obtain a certificate of commencement of business from the ROC

FOREIGN DIRECT INVESTMENT (FDI) POLICY

Procedure under normal route

Application for all FDI cases, except Non-Resident Indian (NRI)

Application for NRI and 100% EOU cases should be presented to

Application can be made in Form FC-IL. Plain paper applications

REGULATORY FRAMEWORK ON INVESTMENT IN INDIA

FDI can be divided into two broad categories:

The automatic route connotes no requirement of any prior

Investment by way of acquisition of shares

Shares of an Indian company may be acquired by a foreign

New investment by an existing collaborator in India

In case a foreign investor with an existing venture or

Portfolio investment in India

Policy on FII investment

FIIs/ sub-accounts can invest in Indian equities, units,

Where the FIIs/ sub-accounts seeks to invest in debt

FIIs can buy/ sell securities on stock exchanges. They can