Legal Checklist For Starting A Business In India As An NRI

Strong economic growth and supportive government reforms are attracting NRIs to expand their investments and ventures back home. However, registering a business in India can seem like a bureaucratic nightmare. Navigating through India's regulatory framework can feel overwhelming, but a well-planned checklist can help foreign investors avoid penalties or delays while incorporating their company in India.

Henceforth, this blog provides a detailed compliance and legal checklist for starting a business in India as an NRI, ensuring smooth business registration and operations.

1: Determine The Type Of Business Entity

The very first step in registering a business in India is deciding on the type of company you would like to incorporate. Ensure that the type of business entity you choose suits your business goals as well. As an NRI, you can choose from several different business structures, such as. 

• Private Limited Company
• Limited Liability Partnerships (LLP)
• Sole Priperieriship
• Partnerships
• Public Limited Company. 

Please know that each business entity type has its own set of legal and tax implications. 

2: Get A Digital Signature Certificate (DSC)

A DSC is required to submit electronic documents to the Ministry of Corporate Affairs (MCA). Every NRI incorporating a company in India must obtain a DSC from the certifying authority in India. This certificate is essential for legally validating electronic transactions and documents in India.

The DSC is primarily needed for e-filing income tax returns, GST registration, e-tenders, MCA company filings, e-procurement, and so on.

3: Get A Director Identification Number (DIN)

NRIs planning to serve as directors of companies in India must apply for a Director Identification Number (DIN) through the MCA portal. DIN is a unique identification number assigned to individuals who are appointed as directors of a company.

Under the Companies Act 2013, a DIN is required for compliance, ensuring complete transparency and preventing fraud.

4: Reserve A Business Name In India

As an NRI, before you incorporate a company in India, you need to have a business name that is unique and does not conflict with any existing trademarks. To check the availability of your chosen name, you can visit the MCA portal.

Furthermore, as an NRI business owner, you can protect your brand in the long term by registering a trademark.

5: Draft MOA (Memorandum Of Association) and AOA (Articles Of Association)

When starting a company in India for NRIs, you need to draft the MOA and AOA to incorporate the company. The MOA defines the objectives, whether short-term or long-term, of your company, whereas the Articles of Association (AOA) define the company's rules and regulations governing its internal affairs. 

Both MOA and AOA are required to be signed and submitted during your business incorporation process. 

6: Register With The MCA (Ministry Of Corporate Affairs)

To incorporate your business with the Ministry of Corporate Affairs, NRIs are required to file the required forms (SPICe forms) through the MCA portal. 

This process includes submitting details such as business name, registered address, shareholders, capital structure, and directors. Once all submitted details are approved, the Ministry of Corporate Affairs issues an Incorporation certificate confirming that your company has been officially established. 

7: Get A Permanent Account Number (PAN) & Tax Account Number (TAN)

NRIs for the purpose of taxation in India must obtain a Permanent Account Number (PAN) and a Tax Deduction & Collection Account Number (TAN). TAN is required by the company to deduct or collect tax at source, whereas PAN is needed for essential Income Tax Filings. 

8: Register For Goods & Service Tax (GST)

NRIs, if your company's annual turnover exceeds a government-prescribed limit, get yourself GST-registered. GST will enable businesses to collect tax on sales and claim input tax credit. However, even if you have not exceeded the turnover limit, you can still register for GST to avail specific tax exemptions. 

9: Comply With Foreign Direct Investment (FDI) Regulations

NRIs are eligible to invest in foreign direct investment (FDI) in India. But there are certain rules and regulations under the FEMA Act that you must adhere to. FDI in some specific sectors is restricted and requires prior approval from the government of India. 

1. Automatic Route: Certain industries, such as infrastructure, manufacturing, and renewable energy, permit automatic FDI, provided compliance and local regulations are met. 
2. Government Approval Route: Whereas some industries, such as defense, print media, broadcasting, civil aviation, and so on, require the government's approval for FDI. 

NRI investors must ensure that their business activities comply with the respective FDI polices. 

10: Registering For Other Licenses & Permits

Given the nature of your business, you may need additional licenses to operate legally in India. This includes: 

• Shops and establishments license. 
• Import-Export Code: This is for businesses involved in international trade. 
• Food Safety and Standards Authority of India (FSSAI) for food businesses. 
• Environmental Clearances for industries that impact the environment. 
• Labour and Employee-related Registrations

11: Open A Bank Account 

Once business registration is successful, NRIs must open a business bank account in India. The account should be in the company's name, and NRIs must submit additional documents, including proof of identity, proof of address, and the certificate of incorporation. Furthermore, NRIs must select a bank that understands their requirements and offers specialized services. 

12 Compliance With Indian Labour Laws

As an NRI running a business in India, if you are hiring employees in India, you are required to comply with the Indian labour laws. Some key regulations for it include: 

• Payment of Gratuity Act. 
• Employees Provident Fund and Miscellaneous Act
• Provisions Act. 
• Maternity Benefit Act
• Payment Of Bonus Act

These laws aim to protect workers' rights and impose an obligation on employers to maintain fair labor practices. 

13: File Annual Returns & Financial Statements

Once the business has successfully registered in India, as the business owner, it is important to file annual returns and financial statements with the MCA to stay compliant. This include submiited Form 23AC (The Balance Sheet) and Form 23ACA (Profit & Loss Account). Non-compliance with it might result in fines and penalties.

14: Adhere To Indian Taxation Rules

NRIs are required to remain compliant with Indian tax rules. 

• Income Tax: Any business income generated through a company operating or set up in India is fully taxable. Furthermore business must file their annual income tax return before the deadline. 
• Transfer Pricing: If businesses engage in international transactions, they must comply with transfer pricing regulations.

15: Maintaining Book Of Accounts

For legal and audit purposes, NRIs must keep their books of accounts accurate and up to date. For this, you are required to follow Indian accounting standards and ensure that records are immediately available for government inspection whenever required. 

The Bottom Line

For NRIs, starting a business in India is a strong opportunity for growth. However, setting up a business comes with its own set of compliances and legal requirements, and hence, you need a compliance checklist for NRIs to register a business in India. From registering a company to managing the taxation, every step plays an important role. 

As an NRI, if you are seeking professional assistance for setting up a company in India, Savetaxs is the name to trust. Our experts provide end-to-end assistance with the incorporation, NRI business registration in India, and launch of a new NRI business entity. Furthermore, they will help you in managing documentation, ensure regulatory compliance, assist with administrative processes, and so on. 

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