An Indian citizen who stays abroad for carrying the business or for employment or stays abroad under some circumstances indicating an intention for the uncertainty duration of stay is a non-resident. The status of the person about the residence is purely depends on the duration of stay in India. This would be calculated on the number of days for each financial year which begins from 1st of April to 31st March. Under section 6 of the income tax act requires the physical presence of 182 days or more than that would be consider as a resident. The FEMA (Foreign Exchange Management Act) requires 183 days or more in stay to consider as a resident. The certain concepts of citizenship would be distinguishing the NRI. They are Persons of Indian Origin (PIO) and Overseas Citizenship of India (OCI). A person of Indian origin is the person who is originates from India or ancestry up to four generations. He may be a citizen of another country or subsequently taken the citizenship from both the countries. As per Indian constitution, it would not allow for dual citizenship. But if the person registers himself as “Overseas Citizens of India (OCI)”, it doesn’t amount to dual citizenship while registration and also it provides certain privileges for OCI holders.
How Non Resident Indians (NRIs) can set up a business in India?
Foreign investments in India are an effective one all the time. It is unsurprising that NRIs too want to get into this action or process. Nowadays, there are no restrictions either for NRIs or foreigners to incorporate a business in India. During “Foreign Exchange Regulation Act (FERA)” which is prior to Foreign Exchange Management Act (FEMA), NRIs were not allowed to incorporate a business in India without getting permission from the reserve bank. By repealing of FERA, those restrictions got abolished.
Type of entity should an NRI set up:
Foreign investments in proprietorship, one Person Company and partnerships are not allowed in India currently. With the prior approval of the Reserve Bank of India, foreign investments can be allowed in case of limited liability partnership. Foreign investments are allowed freely in private limited companies. Thus, private limited companies are the most convenient entity that an NRI can set up.
Things to know while setting up of a business:
Before the registration process, one should know about how this kind of entity helps us to grow and what advantages we can enjoy are.
What is private limited company?
It is an excellent form of business and a separate legal entity which gives the limited liability and a corporate identity. It stands in between the widely owned public company and a partnership form of organisation. It requires minimum of two members and a maximum of two hundred. A private limited company has benefits of flexibility, a combination of abilities and much more significant features. It also has greater stability, legal entity and a limited liability.
Advantages of a private limited company:
- Perpetual succession is the ultimate advantage here because it has a continuous existence until the company gets dissolved.
- We could incur debts under the entity and can own the property but the members of the company have no liability to the creditors of the company regarding such debts.
- It has some privileges in order to borrow some funds even banks and financial institutions prefer to assist such kind of companies.
Becoming a director:
Under the companies act, an NRI and even a foreign national can also become a director of the company which is incorporated in India. Director Identification Number (DIN) has to be obtained to become a director. After obtaining a DSC, you need to get this identification number for your director identity. To conduct these processes on overseas, NRIs need to produce the copies of address proofs and passport and also that has to be attested at the Indian embassies.
DSC (Digital Signature Certificate):
To electronically submit the incorporation form, a digital signature of the directors must be created and registered. Under the information technology act, the digital signature is certified by agencies. Digital signature can be obtained after paying the requisite fees and can be renewed from time to time. DSC can be generated within 24 hours by producing the valid documents.
DIN (Director Identification Number):
This is a very unique number which is allotted by the ministry of corporate affairs to a person appointed as a director of the company. It is obtained by applying the form-DIR3 under section 153 and 154 of the companies act. After the payment of fees, the form is digitally signed and needs to be attested by the company secretary. Once DSC is approved by the government, DIN can be obtained.
Number of directors:
The minimum number of directors could be 2 and maximum is 15. If we want to increase the number of directors, it can be increased by passing a special resolution.
Residence of directors:
There is no restriction based on the nationality of a director for a private limited company. As per section 149(3) of the companies act, 2013 any one of the director should be classified as a resident of India under the income tax act.
The important requirement to incorporate a company in India is that it should have a registered office. As per the ministry of corporate affairs, the company which has been registered in India should have the registered office in India itself.
Simplified Proforma for Incorporation Company Electronically (SPICE), it is an initiative by the ministry of corporate affairs in order to speed up the electronic incorporation. It encourages the foreigners and NRIs to set up businesses in India.
PAN and TAN:
A company requires a Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN) to establish a separate legal entity.
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