FOREIGN DIRECT INVESTMENT IN INDIA SERVICES:
Ways of FDI by a Foreign Company in India
(1) Incorporate a company under the Companies Act, 1956, as a Joint Venture or a Wholly Owned Subsidiary.
(2) Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000.
How to bring Foreign Direct Investment in an Indian Company?
(1) Automatic Route: FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.
(2)Government Route: FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, and Ministry of Finance. The application can be made in Form FC-IL, which can be downloaded from http://www.dipp.gov.in. Plain paper applications carrying all relevant details are also accepted. No fee is payable.
(3) The Indian company having received FDI either under the Automatic route or the Government route is required to comply with provisions of the FDI policy including reporting the FDI to the Reserve Bank.
Modes of payment allowed for receiving Foreign Direct Investment:
An Indian company issuing shares /convertible debentures under FDI Scheme to a person resident outside India shall receive the amount of consideration required to be paid for such shares /convertible debentures by:
(1) Inward remittance through normal banking channels.
(2) Debit to NRE / FCNR account of a person concerned maintained with an AD Category-I bank.
(3) Conversion of royalty/lump sum / technical know-how fee due for payment or conversion of ECB shall be treated as consideration for issue of shares.
(4) Conversion of import payables / pre-incorporation expenses/share swap can be treated as consideration for the issue of shares with the approval of FIPB.
(5) Debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category-I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration.
If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE / FCNR (B) / Escrow account, the amount shall be refunded. Further, Reserve Bank may on an application made to it and for sufficient reasons permit an Indian Company to refund/allot shares for the amount of consideration received towards an issue of security if such amount is outstanding beyond the period of 180 days from the date of receipt.
Sectors where FDI is prohibited in India, both under the Automatic Route as well as under the Government Route:
(1) Atomic Energy
(2) Lottery Business
(3) Gambling and Betting
(4) A business of Chit Fund
(5) Nidhi Company
(6) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors) and Plantations activities (other than Tea Plantations) (c.f. Notification No. FEMA 94/2003-RB dated June 18, 2003.
(7) Housing and Real Estate business (except development of townships, construction of residential/commercial premises, roads or bridges to the extent specified in Notification No. FEMA 136/2005-RB dated July 19, 2005).
(8) Trading in Transferable Development Rights (TDRs). (9) Manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.
(Please also see the website of Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India at www.dipp.gov.in for details regarding sectors and investment limits therein allowed, under FDI)
Foreign Direct Investment services include:
(1) FDI related consultancy.
(2) Preparation of proposals for RBI and obtaining permissions.
(3) Obtaining all type of Reserve Bank of India approvals
(4) Consultation on Foreign Exchange Management Act (FEMA)
(5) ECB (External Commercial Borrowing) related matters & consultancy
(6) Overseas Direct Investment (ODI) related matters & consultancy
(7) NRI & PIO related matters & consultancy
(8) An opening Liaison office, Project office & Branch office in India
(9) The opening subsidiary company in India
(10) Foreign collaboration agreement with various types of government approvals including FIPB
(11) Valuation of shares
For Any Query Click Here