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 May 09, 2024

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Doing Business In India: Challenges For NRI

Indian citizens who reside and work outside of India’s borders are Non-Resident Indians. The Non Resident Indian (“NRI”) status is given to Indian citizens, who stay abroad for 182 days or more in one financial year. When individuals work abroad, they are subject to paying taxes in the respective country, resulting in a loss of tax revenue from the Indian government’s standpoint. Therefore, in order to prevent that, the government has developed measures that encourage NRIs to invest in conducting business in India by reducing the amount of documentation and procedures associated with investment and business startup. However, despite their immense contributions, NRIs face several challenges in doing business in India.

HOW NRI DO BUSINESS IN INDIA

NRIs conduct business in India by setting up companies, partnering locally, and investing strategically in existing ventures. They use technology for operations, engage with government initiatives, and explore trade opportunities. This allows them to contribute to India’s economy while tapping into its diverse business landscape.

CHALLENGES TO CONSIDER

  1. Opening Bank Accounts: If any NRI plans to start a business in India, they have to open a Non-Resident Ordinary (NRO) or Non-Resident External (NRE) account to simplify the financial transactions. These accounts allow NRIs to hold and manage their Indian earnings and transfer their funds to their foreign accounts if required. However, NRI account opening is a time-consuming process which can take several days and some banks do not allow virtual account opening applications.
  2. Legal and Regulatory Framework: The legal and regulatory landscape in India can be complex and time-consuming. NRIs often encounter challenges related to company registration, obtaining licenses, complying with tax regulations, and understanding labor laws.
  3. Issues Regarding Documents: Another challenge is getting the Director Identification Number (“DIN”) and Digital Signature Certificate (“DSC”) for NRIs which are necessary for a person to hold the position of a Director in a company. To acquire these documents, NRIs must undergo verification and attestation by the Indian Embassy in their country of residence. Furthermore, in some instances, additional documentation may be requested by the registrar, resulting in the need for a subsequent embassy appointment. This entire process can be both time-consuming and frustrating, as the incorporation process cannot begin until the company receives its DIN.
  4. Registered Office: The other important problem is the need for a local address for a registered office in the country which is a mandatory criterion required to register the business. The NRIs usually find it difficult to have an office space with the Electricity bill, Telephone bill addressed to the owner i.e. NRI, as these pose challenges.

SOLUTIONS

Most of the NRIs are aware of the recent changes that have been made in India on the minimization of entry barriers.

  • The major improvement allowing NRIs to initiate business plans in the country is the introduction of the SPICe Form by the Ministry of Corporate Affairs (“MCA”). SPICe stands for Simplified Proforma for Incorporating Company Electronically. It stands as an easy option to apply for Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), DIN, DSC and complete all the processes, with the assistance of a single form.
  • Setting up office spaces in the country is another challenge that NRIs face. To offer a solution to this problem, the government has introduced the process of having virtual directors and virtual offices. These concepts have grown faster in terms of popularity.

SUMMARY AND ANALYSIS

Despite these developments, there are problems that NRIs face and it will take a while until a seamless mechanism can be put in place to allow NRIs to do business in India without any hurdles. The solutions offered to these challenges are not mainstream solutions. One must understand that there are several factors in play which have led to these restrictions in the past. Misuse of foreign funds, creation of shell companies for tax evasion, non-availability of owners within the sovereign borders, etc. are a few of the problems. Starting a business has never been easy. It is necessary to use the initiatives of the MCA to ease business operations.

HOW WE CAN HELP ?

  • Our experienced team can guide NRIs through the complex regulatory environment of doing business in India.
  • Our legal experts provide comprehensive support for NRIs looking to invest in existing businesses or startups.
  • Our professionals stay updated of government initiatives and provides strategic advice to NRIs.
  • Our resolution team offers effective strategies and representation to protect the interests of NRIs and resolve conflicts efficiently.

For more information or queries, please email us at

[email protected]