The Key Challenges for NRIs Starting a Business in India

Indian citizens living and working outside India are known as NRIs or Non-Resident Indians. While they are liable for taxes abroad, this results in a loss of tax revenue for India. To mitigate this, the Indian government has launched initiatives to attract NRI investments by streamlining foreign investment procedures and documentation. This article examines the hurdles NRIs encounter in the Indian business landscape and the efforts made to overcome them. So, next time when you plan to visit India to do business, you should grab cheap tickets to India from Canada through Tripbeam for a hassle-free experience.

How NRIs can do business in India

While NRIs have frequently invested in Indian businesses or taken on significant managerial roles, it is uncommon for them to directly own businesses in India. This rarity stems from obstacles such as regulatory demands for a physical office, mandatory physical presence for incorporation, and other bureaucratic red tape that complicates both the initial setup and ongoing operations of the business.

Some of the challenges for NRIs To Do Business In India:

When you travel with Business class flight tickets to India as an NRI, the legal challenges begin right from the incorporation process. Due to various reasons and existing conditions, NRIs often find Private Limited Company registration to be the only viable option. General rules state that, while NRIs can register as a Private Limited Company with at least two shareholders, one must be a resident of India. Additionally, there are numerous regulations that a resident director must meet to qualify.

Another significant issue is the requirement for a local address for a registered office, which is mandatory for business registration. NRIs frequently struggle to secure office space with utility bills in their name, as this poses geographical challenges.

Issues Over the Requisite Documents

Another significant roadblock for NRIs is obtaining a Director Identification Number (DIN), essential for holding a directorial position in a company. NRIs can only acquire a DIN through verification and attestation by the Indian Embassy in their residing country. This process involves scheduling an appointment with the embassy and getting the documents properly attested. Often, even after obtaining the documents, the registrar may request additional paperwork, necessitating another embassy appointment. This time-consuming and harrowing process delays the commencement of business operations, leading to idleness of funds, increased opportunity costs, and loss of potential revenue, causing considerable stress and operational challenges.

Suggested Read: NRI inheritance: The necessity of a will to protect your legacy

Scenario Analysis

The challenges mentioned were commonly faced while registering a firm in the past. However, the current scenario has evolved. Let’s explore how recent legal changes have made it easier for NRIs to start a business in India. Many NRIs are now aware of the recent efforts to reduce entry barriers. So, what are these changes, and how has the government enabled NRIs to own businesses more freely?

The government’s increased openness to foreign investments reflects a growing interest in doing business within India.

SPICe to the Rescue

The SPICe Form, introduced by the Ministry of Corporate Affairs, marks a significant improvement for NRIs aiming to start businesses in India. SPICe stands for Simplified Proforma for Incorporating Company Electronically and mitigates the challenges of separate registrations. This form transforms the complex task into a straightforward one, enabling the simultaneous application of PAN, TAN, DIN, DSC, and all required processes through one form.

Virtual Set-Ups

Establishing physical office spaces poses another challenge for NRIs. In response, the government has introduced virtual directors and offices as a solution. These concepts have gained popularity, leading to a surge in business incorporations in India. Several startups offer shared office spaces for rent, allowing businesses to maintain a physical presence for a designated period.

Make in India

Although the Make in India initiative primarily supports domestic entrepreneurs with incentives like interest-free financing and tax breaks, efforts have also been made to attract foreign entities to establish operations and manufacture goods within India. Foreign companies are eligible for these incentive programs and tax breaks if they meet the established criteria.

Despite these advancements, NRIs still encounter significant obstacles, and it may take some time to establish a seamless mechanism for conducting business in India without hurdles. The solutions proposed for these challenges are unconventional. For example, the primary issue of requiring an Indian citizen as a director is being addressed by individuals willing to serve as directors for a salary. Additionally, office space is provided by various institutions and incubation centers, serving as hosting spaces for NRIs. However, these are workarounds rather than direct solutions. It is crucial to recognize that several factors, such as the misuse of foreign funds and the creation of shell companies for tax evasion, have historically contributed to these restrictions.

Conclusion

Hence, you now have insight into the challenges encountered by NRIs when travelling with last minute flights from Canada to India to do business in India. Although initiating a business comes with its set of hurdles, the present climate offers unprecedented ease. While there may be initial challenges, maintaining optimism and leveraging the Ministry of Corporate Affairs’ initiatives are crucial for enhancing business operations. Furthermore, it is an opportune time to enact new laws to foster the establishment of more NRI-owned businesses.