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Frequently
Asked Questions
Q.1
What are the inherent strengths that make India an ideal
place for Foreign Direct Investment ?
A.1. Advantage
India .
Q.2
Are any permissions required for making Foreign Direct
Investment in India ?
A.2 Foreign Direct
Investment
Q.3
What is the Government policy for Foreign Direct
Investment in India ?
A.3 Foreign Direct
Investment
Q.4
Are any licences required for setting up manufacturing
or service activities in India ?
A.4 No licences are required for setting up service
activities in India. Industrial licence is also not
required for manufacturing activities, except for-
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industries reserved for the Public Sector;
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industries retained under compulsory licensing;
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items of manufacture reserved for small scale sector;
and
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if the proposal attracts locational restriction.
For
details, click Industrial
Licensing .
Q.5
Is Foreign Direct Investment prohibited in any industries
in India ? Is a foreign investor prohibited from entering
into a joint venture agreement with a new partner if
he has had a joint venture with another partner ?
A.5. FDI is prohibited in the following industries
in India -
For
details, click Sector
Specific Guidelines . All proposals, in which the
foreign collaborator has previous venture / tie up in
India through investment in shares or debentures or
a technical collaboration or a trade mark agreement
or investment by whatever name called in the same field
or in the allied field in which the Indian company issuing
the shares is engaged, would require approval from Secretariat
for Industrial Assistance, Government of India.
Q.6
What is the Automatic Route for Foreign Direct Investment
? Are any conditions to be satisfied by a foreign investor
? What procedure is required to be followed ?
A.6. Foreign Direct
Investment
Q.7
Can a foreign investor set up a wholly owned company
in India ? Is there any requirement for minimum capitalisation
?
A.7. Yes. For details, click Setting
up Business Activities in India and Sector
Specific Guidelines . There is no requirement for
minimum capitalization except in the case of Non-Banking
Financial Companies.
Q.8
Can a foreign company /foreign national set up business
activities by opening a liaison office or a branch office
to begin with ?
A.8. Setting
up Business Activities in India
Q.9
Can a foreign contractor secure turnkey or sub-contracting
projects in India and set up a project office to facilitate
execution of such projects ?
A.9. Setting
up Business Activities in India
Q.10
Is Foreign Direct Investment in retail trading allowed
in India ? What is the Government policy on setting
up a trading company by a foreign trader ?
A.10. Under the present Government policy, FDI
is not permitted in domestic retail trading. The present
policy permits FDI up to 100% in cash and carry wholesale
trading subject to prior FIPB approval. FDI up to 51%
is permitted under the Automatic Route in the case of
a Trading company provided it is primarily engaged in
export activities and the undertaking is an export house/trading
house/super trading house/star trading house. For more
details, click Setting up a Trading
Company by Foreign Investor .
Q.11.
Can a foreign company purchase shares from the shareholders
of an existing Indian company ? Is any permission required
for purchase of such shares ? What are the basis for
valuation of shares in the case of listed and non-listed
companies ?
A.11. Permissions, first from the Government
and thereafter from Reserve Bank of India are required
if a foreign company proposes to purchase shares from
a resident shareholder of an existing company. The basis
of valuation are different in the case of shares of
an Indian company if they are traded on stock exchange,
if they are not listed on stock exchange or thinly traded
or where they are not listed on any stock exchange.
For details, Transfer or issue
of Security by a person resident outside India
Q.12.
Are foreign direct investments permitted on 'repatriation
basis' ? Can profits and dividends be repatriated by
Indian companies to the foreign investor.
A.12. Foreign direct investment and returns thereon
are freely repatriable except where the approval is
subject to specific conditions such as lock in period
on original investment, dividend cap, etc. as per the
notified sectoral policy.
Q.13.
What advantages are available to foreign investors in
setting up units under Government schemes applicable
to 100% Export Oriented Units, Export Processing Zones,
Special Economic Zones, Electronic Hardware and Software
Technology Parks ?
A.13. The main advantages include:
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Import of capital goods, raw materials and components
for production shall be exempt from customs duties.
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Indigenously procured capital goods, raw materials
and components required by the undertaking shall
be exempt from the levy of excise duty.
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Finished products authorized for manufacture shall
be exempt from payment of excise duties on their
export from India.
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Units engaged in manufacturing and services shall
be eligible for deductions in respect of payment
of income tax as per the provisions of Income Tax
Act.
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FOB value of export of a unit can be clubbed with
FOB value of export of its parent company in the
DTA for the purpose of according Export House, Trading
House, Star Trading House or Super Star Trading
House status for the latter.
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Foreign equity up to 100% is permissible.
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Exemption from industrial licensing for manufacture
of items reserved for small scale industries
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