Benefits and problems

Benefits and problems of registering a company in India

Benefits of India company registration

It is the 3rd largest in Asia by GDP. India is also the world’s 2^nd largest country (by population) with a massive consumer market;
The Indian government has recently started to allow foreign direct investments (FDIs) in various sectors including retail, finance, insurance, airline, railways and telecom. Healy Consultants Group encourages its Clients to set up a base in India to tap opportunities in these sectors;
India has signed 85 double tax avoidance agreements (DTAAs) and 42 free trade agreements (FTAs) with countries around the world This allows our Clients to not only reduce their withholding taxes but also market their products to large markets such as China and Australia.

An Indian limited liability company can be incorporated with a paid up share capital of just US$1,650;
Electricity retail prices in India are low, at US$0.08 per Kwh;
India has one of the world’s lowest consumer cost index; According to the Worldwide Cost of Living 2019 index, Chennai and Bangalore are two of the world’s least expensive cities. As a result, living and doing business in India is inexpensive;
Average domestic airfares are lower in India compared to other countries.

It has a median population age of 27.3 years, and boasts a labour force of nearly 530 million, of which the majority is under 30 years of age;
It’s young population is in sharp contrast to that of other large economies such as China, the USA, and Europe;
New businesses can leverage this opportunity by generating employment and increasing productivity;
India has more than 125 million English speakers, so there are few language barriers to business. Furthermore, all government documentation is in English and the local state language.

Problems with India company registration

It can take up to 4 months for simple LLC company registration in India and opening of the corporate bank account. That is because of the amount of paperwork involved and government approvals required;
Companies need to liaise regularly with government authorities for matters relating to business approvals and licenses. Indian bureaucracy is renowned;
India’s infrastructure is negatively ranked 70^th in the world in the Global Competitiveness Report 2019. Problems including power cuts (Electricity infrastructure rank 103^rd) and underdeveloped roads, railways and airports (Transport infrastructure rank 28^th) should be expected. That said, India hasa massive distribution network, with the world’s 2^nd largest roadway network and 4^th largest railway network. This allows resident businesses cheap connectivity to every part of the country;
Labour unrest can be a problem in India as industrial disputes and strikes impact productivity;
The World Bank lists India as the world’s 63^rd best place to do business.

They have difficulty relying on the Indian regulatory system to protect their business interests from corruption;
Patent and licensing guidelines favour local manufacturers rather than international players. Consequently, India is ranked 36^th out of 50 countries in the Intellectual Property Rights index;
India’s rupee is volatile, impacting the value and profitability of foreign investments in India.

Corporate tax rate for a resident company is 34%, while for a branch of a foreign company is 43%;
Additional taxes and levies include i) VAT at 14%; ii) import and export duties at an average rate of 12%; iii) central excise duty at 12%; iv) tax on dividends at 20% and v) employer’s social security contributions at 12%. For more information, refer to our section on accounting and tax.

Our Clients will be required to settle their TDS (withholding tax) claims applicable to the amount remitted and submit i) Form 15CA to the Income Tax Department; ii) Form 15CA and Form 15CB to the Reserve Bank of India (RBI) and Form A2 to the bank;
This process can take up to 3 weeks. For more information, refer to our section on repatriating funds from India;