Investment Solutions For NRIs

The Indian government provides great solutions for Despite the ongoing slowdown, India continues to offer numerous investment opportunities for foreign investors, who do not enjoy such high rates in their country of work. The current volatility has created attractive entry points for NRIs across a range of asset classes. If you are looking to invest in India, what are the options you should consider?

If you wish to invest in India, the first step is to open a savings bank account. There are three basic types of bank accounts for NRIs.

Go for a non-resident external (NRE) rupee account if you are looking to remit overseas earnings to India and hold them in rupees, as also transfer the proceeds of your investments back to your home country without any restrictions. An NRE account is completely tax-free and no tax is payable on the interest earned on the balance.

But you cannot put income from rent, salary and dividends in the NRE account. For that you need a non-resident ordinary (NRO) account. However, the interest earned on the NRO account is taxed at the marginal rate of 30% plus surcharge and cess. The balance in the account is also subject to wealth tax.

The advantage is that NRO accounts can be jointly opened with a resident Indian. If you do not wish to be exposed to exchange rate risk, you can instead open a foreign currency non-resident (FCNR) account with a local bank, where your funds are held in the foreign currency, and not converted to rupees.

In order to open an account, you can either visit the nearest branch of the Indian bank in your home country, if any, or send the completed application form (you can get it online) along with the documents to any of the branches in India (see box). Today, there are also multiple service providers who help you do investment in India. They not only handle the entire process but also offer viable solutions that ensure highest return on investments.

Before investing in India, it is necessary to be aware of the tax implications. Although there is not much difference between tax rates for residents and NRIs, it is important to know that for NRIs, the tax is deducted at the source.

For most NRIs, property is the primary choice of investment. The bulk of their money is directed towards real estate investments. However, some experts feel this is not the ideal route for all NRIs.

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Foreign company registration in india

A foreign company can  set up its operations in India by forming a wholly owned subsidiary in India in sectors where 100% FDI is permitted under the automatic route or where approval from the FIPB has been obtained for such investment.

A wholly owned subsidiary can be set up as a:

Private Limited Company

A private limited company is a company limited by shares having a minimum of 2 and not more than 50 shareholders. A private company needs to have a minimum paid-up share capital of Rs.1lac. It cannot make invitation to the public for subscription of shares or debentures and cannot make or accept deposits from public. Moreover, by virtue of its article of association, there is restriction on the free transferability of shares. The liability of each shareholder is limited to the extent of the unpaid amount of the face value of share and the premium thereon in respect of the shares held by him. However, the liability of a director/manager of such private company at times can be unlimited. 

Public Limited Company

A public limited company is defined to mean a company that is not a private company and which has a minimum paid up share capital of Rs. 5 lakh or more. The restrictions that are statutorily applicable on a private company do not apply to a public company. Therefore, the shares of a public company are freely transferable and there is no restriction on the maximum number of shareholders that it may have. A public company can also accept deposits from public as opposed to a private company. As per Companies Act, 1956, even a private company that is a subsidiary of a public company falls within the definition of a public company. This means that a private company which is a subsidiary of a public company will be required to comply with almost all provisions of the Companies Act that apply to a public company. However, the basic characteristics of a private company provided under Companies Act such as restrictions on transferability of shares, minimum paid up capital, etc. do not change by virtue of it being a subsidiary of a public company. 

Other than the approval that may be required to be obtained from the FIPB in case of regulated sectors, the procedure for setting up of a subsidiary is same as that of any other private or public limited company. 
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Investment opportunities for foreign nationals in India

The business sector in India is growing and expanding both in size and in terms of the level of investment. There has been a steady growth in the number of start-ups and SMEs (Small and Medium Enterprises). In the last five years, India’s GDP has grown at an average of 8.5 percent.

According to the World Survey, India was ranked as the fourth best place in the world for entrepreneurs to start a new venture. Also, according to the International Monetary Fund; India is set to become the third largest economy in the world by 2030. The government of India is looking at creating a strong entrepreneurial culture and vibrant economy by easing the regulations for expats, NRIs or foreign nationals to start businesses in India. Investment in India is not an easy task. There are many clearances and permissions to be obtained from various boards. The time taken to incorporate business in India depends upon the nature of the business and a myriad of factors. Roughly it takes about 3 to 5 months for expats to setup a business in India.

Foreigners and expats can invest their capital in many different ways. We’ll take a look at three of the most popular ways foreign investment can happen in the Indian market.

• ADRs: ADRs (American Depositary Receipts) are the traditional way of investing in foreign companies. ADRs represent individual stocks and are traded on the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) or the Nasdaq. There are three different types if ADRs.

• Exchange trade funds and mutual funds:Foreign Institutional Investors (FII), have had access to the Indian market for 10 years or more. There are several ETFs and mutual funds available, which cover a number of different sectors within the Indian economy.

• Qualified foreign investor:QFI status allows you to invest directly in Indian companies via the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE). You can also invest in Indian based mutual funds and corporate bonds.

There is no doubt that India offers exciting investment opportunities. But there are certain pitfalls. India is a developing country and therefore requires a huge amount of investment in infrastructure, before it can truly compete on the world stage. If this investment fails to take place, long term growth could be stagnated.

Apart from the above methods, foreign nationals can set up investment in India as a public limited company, project office, liaison office, branch office and joint venture. The routes for foreign investment are not limited.

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