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Who says, "Doing
Business in India is not a nightmare"
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NRI Nightmare: Doing Business in India
By Kul Bhushan
"Doing business in India is a nightmare for NRIs," moaned
Lakshmi Shah of Toronto who burnt his fingers in his venture. No
doubt it's tough but if an NRI ventures in a planned and unemotional
manner, it can succeed.
Here's a basic checklist:
First, get a PIO or Person of Indian Origin card that puts
you on a par with an Indian as far as business and tax matters are
concerned. Among other benefits, a PIO has visa-free entry for 15
years and allows you to engage in business and own property, like
any Indian.
Second, get a PAN or Permanent Account Number card issued
by the income-tax department. Any person - NRI or Indian - making
an investment of over Rs.50,000 is required to quote his/her PAN
number. This also applies to purchases of over Rs.50,000.
Since you plan to go into business in India, you will eventually
file your income-tax returns annually. So you need a PAN card that
is also a very useful identification document because it has your
photo on it and you can show it in many places where you wish to
be identified as an Indian - and not overcharged as an NRI!
The third point is business partners. Obviously, it is
impossible for you to go into business on your own unless you want
to move to India. If not, you need partners for your proposed venture.
You will identify and select your partners on the basis of their
track record, integrity and other personal attributes.
Be careful of the single and most common pitfall of going into
business with your relatives and close friends on the basis of your
family relations or friendship. A great majority of NRI business
ventures have come to grief because of this 'emotional' alliance.
When the business collapses, you have lost not only your money but
also a precious relationship.
The fourth is business structure. A simple partnership is
a viable takeoff for your venture although it has some pitfalls.
All it takes is a lawyer to draw up the agreement between you and
your partner(s) and register on a legal, stamp paper of Rs.100 and
it takes just a few days to complete this simple formality.
When your turnover exceeds four million rupees, you need the services
of a qualified accountant to audit your accounts and file your tax
returns.
Limited liability companies take a lot of time to get off the ground.
You need a lawyer or an auditor to register the name of your company
called a 'private limited company'. This involves paying a small
fee and suggesting at least three proposed names.
It takes about a week for the Registrar of Companies to
inform you which of the three proposed names is available. On deciding
its name, the lawyer/accountant prepares its memorandum and articles
of association and files them with the appropriate fees depending
on value of the share capital. The minimum expense for all this
is at least Rs.15,000-20,000 and it can go higher with higher share
capital. It takes at least one month to carry out all these registration
of company formalities.
These 'private limited companies' are regulated under a host of
'company laws' that cover most organizational and accounting matters
from writing the minutes of every board meeting to filing of its
annual returns to the working of company directors to the format
of their balance sheets.
There are rules and regulations all the way during the operations
of this company and if you want to close down this limited liability
company, you must again go to the lawyer/accountant and it can
take up to eight or ten years to obtain the permission of the High
Court for winding up the company. In addition to the court fees,
there are lawyers' fees to be borne by the directors.
No wonder NRIs shy away from getting into business in India,
especially in private limited liability companies.
Five, once you take all these steps, you are - at last!
- ready to launch into business. Of course, you have decided the
area in which you are going to engage in business. So your company
should become a member of the different business organisations looking
after this sector in addition to the local chamber of commerce.
Many NRIs have ventured into exports from India as they help in
marketing through their contacts. All export/impost business must
be registered with the Director General of Foreign Trade. The application
form requires a bank account number and a letter from the bank plus
various details of partners/directors. The registration takes about
two to three weeks.
Thus a partnership is perhaps the best company structure to start
business in India. For establishing a limited liability company,
you have to go through the grind but it's not a nightmare.
(A media consultant to a UN Agency, Kul Bhushan previously worked
abroad as a newspaper editor and has travelled to over 55 countries.
He lives in New Delhi and can be contacted at kulbhushan2038@gmail.com)
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