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Benefits of Investing in India: From an NRI or Foreigner’s perspective

Ishita Ramani 
on 24 April 2021

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Why a Non-Resident (NRI or Foreigner) should Invest in India? How investing in India would benefit an NRI or a Foreigner?

Why India? Any person who wishes to invest his/her hard-earned money would think about this before making a move toward India. In this article you will find enough of reasons why it would be beneficial for an NRI or foreigner to invest in India. Let' s look in to some figures that are attractive enough for any person be it Indian resident or Non resident Indian (NRI) or person of foreign origin including foreign companies to invest in India and which gives a clear picture of the benefits of investing in India.

Content

Benefits of Investing in India: From an NRI or Foreigner’s perspective

Fastest Growing Economy

  • As per the Department of Promotion of Industry and Internal Trade, Government of India, India has crossed the $70 billion mark in FY 2019-20 and recorded total FDI inflow of $73.45 billion for the first time.
  • Not only this but the Government of India has announced a special economic and comprehensive package of more than $270 billion which is equal to 10% of India' s total GDP under the Atmanirbhar Bharat Abhiyan (Self-reliant India).

Largest Youth Population

  • The second most important reason is that India is home to the world' s largest youth population.
  • India has its largest adolescent and youth population. Not only the population wise but infrastructure wise as well, India is about to take a first-of-its-kind initiative to provide world-class infrastructure across the country. The world bank has estimated that almost 42% of the population of India would be urbanized by the end of 2030.

Ease of Doing Business

  • If we talk about 'Ease of Doing Business' policies, India is now at 79 position upwards the charts, jumping directly from 142nd to 63rd in just 5 years in 'World Bank' s Ease of Doing Business Ranking 2020′.
  • To take a step ahead, the Finance Minister announced that now an NRI or a Foreigner, apart from starting Private Limited Company and Limited Liability Partnership, can start 'One Person Company' in India which earlier was not the case.
 

Hike in Company and LLP Incorporation

  • Recently, the Ministry of Corporate Affairs declared the hike in the Company Incorporation and LLP Incorporation in India.
  • According to one report, in the last financial year there has been rise in the company incorporation by 27% and in LLP incorporation 17% in India.

Here, we talked about figures, but are there any factual benefits to the foreigners and NRIs wishing to invest in India? Are there any monetary benefits of Investing in India - From an NRI or Foreigner's perspective?

The answer to this is yes. India has special provisions in the Income Tax laws for the NRIs and Foreigners wishing to invest in India, that are rather beneficial to the Non-residents. The income tax rules and benefits allowed to Non-Residents (NRIs and Foreigners) are widely different from those applicable to resident Indians.

Benefits of Investing in India for NRIs and Foreign Nationals

What does Non-Resident Mean for the Income Tax purpose?

Non-Resident means a person who is not a resident in India. That includes, Non-Resident Indians (NRI), Foreign Individuals, Foreign Companies, Place of effective management (POEM) situated outside India.

Determination of the Non-Residential status under Income Tax laws

As per the Income Tax Laws, an individual residing outside the country is defined as a Non-Resident under the Income Tax laws if his stay does not exceed 181 days in a particular Financial Year.

The current Income Tax Laws state that an Indian citizen who stays abroad for the employment or carrying on business for an indefinite period is also considered as Non-Resident.

Taxable Income

As per the Income Tax laws in India, where a resident person is liable to pay tax on his global income, a Non-Resident shall be liable to pay taxes in India in respect of the following incomes only:

  • Income received or is deemed to be received in India in such year or
  • Income accrues or arises or is deemed to accrue or arise to him in India during such year.

Exemptions available on Income to the NRI and and Foreign nationals including foreign companies

Income Not Chargeable to Tax

No.

Particulars

Limit of Exemptions / Deduction / Computation of income

Available to?

1.

Interest on money standing to the credit in a Non-resident (External) account in India.

Interest amount

Person resident outside India (under FEMA Act) and person who has been permitted to maintain said account by RBI

2.

Remuneration received by Foreign Diplomats/Consulate and their staff (Subject to conditions)

Remuneration

Individual (not being a citizen of India)

3.

Remuneration received by non-Indian citizen as employee of a foreign enterprise for services rendered by him during his stay in India, if:

a) Foreign enterprise is not engaged in any trade or business in India

b) His stay in India does not exceed in aggregate a period of 90 days in such previous year

c) Such remuneration is not liable to be deducted from the income of employer chargeable under this Act

Remuneration

Individual - Salaried Employee (not being a citizen of India)

4.

Salary received by a non-resident, for services rendered in connection with his employment on a foreign ship if his total stay in India does not exceed 90 days in the previous year.

Salary

Non-resident Individual - Salaried Employee (not being a citizen of India)

5.

Remuneration received by an Individual, who is not a citizen of India, as an employee of the Government of a foreign state during his stay in India in connection with his training in any Government Office/Statutory Undertaking, etc.

Remuneration

Individual-Salaried Employee (not being a citizen of India)

6.

Tax paid by Indian company, engaged in the business of operation of aircraft, who has acquired an aircraft or its engine on lease, under an approved (by Central Government) agreement entered after 31-3-2007, on lease rental/income

Tax liability so borne by Indian Company

Government of foreign State or foreign enterprise (NR Person)

7.

Income by way of royalty or fees for technical services rendered in India or abroad in projects connected with security of India pursuant to agreement with Central Government

Royalty and fee for technical services

Notified foreign company

8.

Income by way of royalty or FTS for services rendered in or outside India to the National Technical Research Organization.

Entire Income

Non-resident or Foreign Company

9.

Any income received in India in Indian currency by a foreign company on account of sale of crude oil or any other goods or rendering of services as may be notified by the Central Government, to any person in India under an approved and notified agreement or arrangement (Subject to certain conditions)

Specified Income

Foreign Company

10.

Any income accruing or arising to a foreign company on account of storage of crude oil in a facility in India and sale of crude oil therefrom to any person resident in India (subject to certain conditions)

Entire income

Foreign company

11.

Any income arising to a foreign company on account of sale of leftover stock of crude oil from the facility in India after expiry of the agreement referred to in 10(48A) or on termination of the said agreement (Subject to certain conditions)

Entire Income

Foreign Company

12.

Any income which is chargeable to equalization levy under Chapter VIII of the Finance Act, 2016.

Entire income

Non-resident

Income under the head Profit and gains from business or profession (Presumptive Income for Non-Residents- NRIs and Foreign Nationals)

 

Section 44B- Income from shipping business shall be computed on presumptive basis (Subject to certain conditions).

7.5% of specified sum shall be deemed to be the presumptive income

Non-resident engaged in shipping business

 

Section 44BB- Income of a non-resident engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils shall be computed on presumptive basis (Subject to certain conditions).

10% of specified sum shall be deemed to be the presumptive income

Non-resident engaged in activities connected with exploration of mineral oils

 

Section 44BBA- Income of a non-resident engaged in the business of operation of aircraft shall be computed on presumptive basis (Subject to certain conditions).

5% of specified sum shall be deemed to be the presumptive income

Non-resident engaged in the business of operating of aircraft

 

Section 44BBB- Income of a foreign company engaged in the business of civil construction power turnkey or the business of erection of plant or Machinery or testing or commissioning there of, in connection with projects shall be computed on presumptive basis (Subject to certain conditions).

10% of specified sum shall be deemed to be the presumptive income

Foreign Company

 

Section 44C- Deduction for Head office Expenditure (Subject to certain conditions and limits)

Deduction for head-office expenditure shall be limited to lower of following:

a) 5% of adjusted total income* ; or

b) Head office exp. as attributable to business or profession of taxpayer in India

Non-resident

 

Section 44DA- Deduction of expenditure from royalty and FTS received under an agreement made after 31-03-2003 which is effectively connected to the PE of non-resident in India (Subject to certain conditions)

Expenditure incurred wholly and exclusively for the business of PE or fixed place of profession in India shall be allowed as deduction.

Non-resident

 

Other Benefits available to NRIs and Foreigners for Investing in India

  • It is not necessary for NRI furnish Return of Income when total income include only Interest income LTCG or both and / or TDS has already been deducted.
  • NRI who becomes Resident, may file a declaration in writing requesting assessing officer for continuing benefits until transfer or conversion into money of such assets.
  • The rate of tax for an income of an overseas financial corporation from units purchased in foreign currency or LTCG arising there from shall be 10% only.
  • The income of a Resident employee of an Indian company or its subsidiary company engaged in specified knowledge based industry or service would be taxed at 10%.
  • Also, royalty of patent developed and registered in India shall be taxable at 10% only.

Source: Income Tax India

India is proving to be the key for global business, not only because of the largest youth population or lower tax rates etc but, there are numerous other benefits such as ease of doing business, encouragement to the start-ups, facilities provided to the foreigners and also, no actual physical presence required to start one' s own business in India. India is also expecting more development and attracting more foreign individual by introducing 'Make in India' project.


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