Valuation Certificate: An In-Depth Guide for Indian Businesses
Introduction:
Foreign Direct Investment (FDI) has become a critical driver of economic growth and development in today’s interconnected world. This article aims to shed light on the importance of FDI and explore its various types. By understanding the significance and nuances of FDI, businesses and governments can harness its potential to foster prosperity and create sustainable economies.​
The Importance of Foreign Direct Investment (FDI):
Foreign Direct Investment holds immense significance due to the following reasons:
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Economic Growth: FDI inflows contribute to economic growth by boosting investment, creating jobs, and enhancing productivity. It injects capital into the host country’s economy, leading to increased production and consumption.
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Technology Transfer: FDI plays a crucial role in transferring advanced technologies, knowledge, and managerial practices from developed countries to developing ones. This transfer helps bridge technological gaps and enhances productivity and innovation in the recipient country.
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Employment Opportunities: FDI often leads to the creation of new jobs, reducing unemployment rates and improving living standards in the host country. It brings in expertise and resources that stimulate entrepreneurship and support the growth of local businesses.
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Infrastructure Development: FDI contributes to the development of infrastructure, such as transportation, communication, and utilities. This enhances the overall business environment and attracts further investment in the host country.
Types of Foreign Direct Investment:
Foreign Direct Investment can take various forms, each with its unique characteristics:
Greenfield Investments: Greenfield investments involve setting up new operations or facilities in a foreign country. This type of FDI enables companies to establish a physical presence and build operations from the ground up.
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Greenfield Investments: Greenfield investments involve setting up new operations or facilities in a foreign country. This type of FDI enables companies to establish a physical presence and build operations from the ground up.
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Mergers and Acquisitions: Mergers and acquisitions (M&A) involve the acquisition of existing businesses in the host country. M&A transactions can help companies expand their market share, gain access to new technologies, and enter new markets more rapidly.
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Joint Ventures: Joint ventures occur when two or more entities collaborate to form a new business entity in a foreign country. By sharing resources, knowledge, and risks, companies can tap into the local expertise and market knowledge of their partners.
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Strategic Alliances: Strategic alliances are partnerships formed between companies to achieve specific objectives, such as research and development or market expansion. These alliances facilitate knowledge sharing, resource pooling, and risk mitigation.
Conclusion: Foreign Direct Investment plays a crucial role in driving economic growth, technology transfer, and global integration. It brings in capital, expertise, and opportunities that contribute to job creation, infrastructure development, and overall prosperity. By recognizing the importance of FDI and understanding its various types, businesses and governments can foster an environment conducive to attracting and benefiting from foreign investments. Embracing FDI as a catalyst for growth can propel nations towards sustainable development and global competitiveness.
TDS on various incomes of Non-Resident Individual
In India, for the purpose of income tax, there is “Pay as you earn scheme”. As per such scheme, every person is required to pay tax through TDS/ TCS and advance tax, during the year only, in which the income has been earned.
The rates of TDS are pre-determined and specified in the Income Tax Act, 1961. The aim of TDS is to collect tax from the very source of income. For resident individuals, TDS is required subject to some conditions, however, for non-resident individuals, TDS on all the payments made to non-resident individuals, which is chargeable to tax under the Act, has been made mandatory.
Let’s go into the TDS provisions in respect of various incomes of non-resident individual –
Salary income
TDS on salary income of a non-resident individual shall be deducted u/s 192 of the Income Tax Act, 1961 at the applicable slab rates. Tax liability for the whole year shall be calculated on the prospective salary income of the non-resident and such determined tax shall be then deducted from the payment to be made of salary, in twelve monthly instalments.
When to deduct TDS?
TDS shall be deducted at the time of making payment of salary income.
Capital Gains
Tax at source is required to be deducted on sale of property by non-resident individual, irrespective of the transaction value of property on below-mentioned rates –
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Rate of TDS on sale of property held for more than two years – 20%
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Rate of TDS on sale of property held for two years or less – Applicable slab rate
Surcharge and Cess will also be levied on the above amount.
When to deduct TDS?
TDS shall be deducted whenever any payment is made to the NRI for purchase of property. Even on payment of advance, TDS is required to be deducted.
Amount on which TDS is required to be deducted?
TDS on sale of property must be deducted on the capital gains. However, for this purpose, capital gains cannot be computed by the seller himself but should be computed by the Income Tax Officer.
The seller shall make an application in Form 13 with the Income Tax Department and request them to compute the capital gains on the sales. In revert, income tax department will compute the capital gains and issue a certificate of Nil/ Lower deduction of TDS, specifying the rate at which TDS is ought to be deducted by the buyer. The seller can also furnish the details of any deduction which he is eligible to claim. Effect of such deduction will also be taken and a lower rate of TDS will be derived.
Hence, the seller will furnish such certificate to the buyer and then the buyer will deduct TDS on the rate mentioned therein. If the seller fails to obtain such certificate from the department then, TDS shall be deducted at the pre-specified rate that too on the total sales price and not on the capital gains.
Income under the head Other Sources and Business/ Profession
> Some specific Interest Incomes
On incomes of non-resident earned by way of –
Interest from Indian company (Section 194LC)
Interest on certain bonds and Government securities (Section 194LD)
Interest from infrastructure debt fund (Section 194LB)
rate of TDS applicable shall be 5%. Such concessional rate is introduced to encourage investment of non-residents into above mentioned funds/ securities.
When to deduct TDS?
TDS shall be deducted at the time of credit of such income to the account of the non-resident or at the time of payment, whichever is earlier. Payment can be made in any way whether in cash or by cheque, draft or any other mode.
> Any other Income
On payment of any sum to a non-resident which qualifies as income as per the provisions of Income Tax Act, 1961, tax shall be deducted on payment of such sum under the authority of Section 195 at the rate in force.
Tax has to be deducted on payments made to non-residents irrespective of any threshold limit. If income of the non-resident is taxable in India, then the payer needs to deduct TDS u/s 195.
When to deduct TDS?
TDS shall be deducted at the time of credit of such income to the account of the non-resident or at the time of payment, whichever is earlier. However, if income constitutes interest payable by Government, public sector bank or public financial institution, then deduction shall be made only at the time of payment.
Thus, proper mechanism of deduction of tax at source has been framed by the government not just to ensure that the individual pays tax on the income as and when earned, but also to make sure that no income of the non-resident escapes from being taxed, if it is liable to be taxed.
What are the documents/information needed to form an Indian company?
Article explains Documents/Information needed to Form an Indian Company under Companies Act, 2013 and same includes Documents required from client’s end, Document required In case of Body Corporate/Company acting as Subscriber cum shareholders in Indian Company and Documents that require to be drafted and filed as per Laws in India towards Company Registration.
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Documents required from client’s end:
In case of Indian Subscribers and/or Directors:
Directors’ Identification Number (DIN), if already obtained from Registrar of Companies in India1 Colored photograph
Copy of valid PAN Card
Copy of valid Aadhar Card/Passport
Copy of Address Proof such as Telephone Bill / Mobile Bill/Electricity Bill / Bank Account Statement must be in the name of foreign national and should not be older than 2 months.
Valid Mobile Number
Valid Email ID
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In case of Foreign National acting as subscriber and/or Directors:
Directors’ Identification Number (DIN), if already obtained from Registrar of Companies in India1 Colored photograph
Copy of valid Passport
Copy of Address Proof such as Telephone Bill / Mobile Bill/Electricity Bill / Bank Account Statement must be in the name of foreign national and should not be older than 2 months.
Valid Mobile Number
Valid Email ID
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In case of Body Corporate/Company acting as Subscriber cum shareholders in Indian Company:
1. Copy of Certificate of incorporation.
2. Copy of Memorandum and Articles of Association.
3. Board resolution of the existing company authorizing for shareholding in the proposed company.
4. Coy of PAN Card of Company, in case, the Subscriber Company is registered in India.
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Documents that require to be drafted and filed as per Laws in India towards Company Registration:
Along with the documents as mentioned above, the following mentioned documents shall also be prepared and filed with the Registrar in order to file the application for Company Registration.
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1. Consent to act as a Director in form DIR 2.
2. Form INC 9 regarding offences in connection with formation/promotion of Company.
3. Declaration for non-acceptance of public deposits.
4. PAN undertaking, in case of foreign national / foreign body corporate.
5. Memorandum of Association of proposed Indian Company containing the main business activities and capital clause of the Company.
6. Articles of Association of proposed Indian Company containing the bye-laws, rules and regulations of the Company.
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Important Note:
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All the documents mentioned above shall be notarized by notary public in home country and shall be apostilled/ consularised, as the case may be, in case of Foreign National acting as Director and/or subscriber or in case of Body Corporate acting a shareholder/subscriber in an Indian Company.
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If a foreign national is present in India on Business Visa, then all the documents requires self-attestation instead of notarization and apostillation/ consularisation.
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In case of Indian Nationals, self-attested documents would suffice.
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