INDIA - THE INCREDIBLE INVESTMENT DESTINATION

PRESENTED BY: CA K RAGHU,

IMMEDIATE PAST PRESIDENT – INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

INTRODUCTION

• India is one of the fastest growing economies• Economic Liberalization• Tremendous scope for Business• 10th Largest Economy in terms of Market

Exchange Rate• 3rd Largest Purchasing Power Parity• 2nd Largest Labour Class (48.66 Crore

Workmen)

DEMOGRAPHY

• Total Population: 1.27 Billion• Population Growth: 1.2%• 50% of Population below the age of 25 years.• Rural Population: 72.2%• Literacy Rate: 81.4%• Unemployment Rate: 7.8%

INDIAN ECONOMY

• 7th largest in the world by Nominal GDP.• Developing Economy with 7% growth rate.• Fastest growing economy from the last quarter of

2014 replacing China• India’s two major stock exchange BSE and NSE

market capitalization of $1.71trillion and $1.68 trillion respectively (Ranking 11th & 12th)

• One of the world’s fastest growing E-commerce market

Gross Domestic Product(GDP) • GDP: $1.877 trillion (2013)• June 2015 GDP Rate at 7%

Investment Gateways in India

Securities Mutual Funds

Venture Capital Fund

Real Estate

FDI

FOREIGN DIRECT INVESTMENT

• Reserve Bank of India regulates FDI in India.• FDI can be brought in via three routes:

– Automatic Route (Without RBI Approval)– Approval Route (RBI Approval)– Government Approval Route

• FDI is allowed under automatic route in almost all sectors except a few of national interest.

• Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares against FDI.

WHY INVEST IN INDIA

• Stable financial system• Strong external liquidity position• High degree of political stability• High savings and investment ratios• Strong and competitive private sector• High growth in exports• Strong demographic advantage• Highly educated work force• Innovative society

WHAT IS MAKE IN INDIA

• Make in India is an international marketing campaigning slogan coined by Narendra Modi, the prime minister of India on 25th September 2014 to attract businesses from around the world to invest and manufacture in India.

• Make in India is a new national program designed to transform India into a global manufacturing hub.

• Through make in India initiative government will focus on building physical infrastructure as well as creating a digital network.

KEY POLICIES• New Initiatives: To facilitate investment, foster innovation,

and build best-in-class manufacturing infrastructure.

• Foreign Direct Investment: To create an investor-

friendly atmosphere.• Intellectual Property Facts: The protection of

intellectual property rights of innovators and creators by bringing about changes at legislative and policy level.

• National Manufacturing: Policy to address the realms of infrastructure, regulation, technology, skill development.

GOVERNMENT INCENTIVES• Allowed 100 percent FDI in medical devices.• Increased FDI cap in insurance and sub-activities from 26

percent to 49 percent• Allowed 100 percent FDI in the telecom sector.• Allowed 100 percent FDI in single-brand retail. • FDI in commodity exchanges, stock exchanges and

depositories • Raised FDI limit to 74 percent in credit information and 100

percent in asset reconstruction companies• Raised FDI limit from 26 percent to 49 percent in the defence

sector

INDIAN MARKET• The government has always been proactive in its

strategies to make the future of India market lucrative and attractive.

• India market has witnessed outstanding growth over past few years.

• The liberal and transparent financial policies have steered the economy.

• The returns on investments in the India market have been substantially moderate from all the listed stocks.

• Public Private Partnership (PPP) is the new trend in the Indian marketplace.

Overview on Investment Gateways• Securities – Investments in Securities can be through :1. Capital Market - The capital market offers both long term

and overnight funds. The different types of financial instruments that are

traded in the capital markets are: a. Equity instruments b. Credit Market instruments c. Foreign exchange instruments d. Derivative instruments Capital Market Investment takes place through the Bond

Market and the Stock Market

2. Money Market – It includes all Short term securities such as :

Call / Notice Treasury Bills Term Money Certificate of Deposit Commercial Bills Commercial Papers

• Real Estate – Highly growing and attractive sector for Investment

• Mutual Funds and Venture Capital Funds –

Offers Dividends and InterestCapital Appreciation

BUSINESS OPTIONS IN INDIA

• Operations as an Indian Company – Wholly owned subsidiary: Foreign companies can set

up wholly owned subsidiary companies in India in form of private companies subject to FDI guidelines.

– Joint Venture with Indian partner: Foreign companies can also set up joint venture with Indian or foreign companies in India.

– Foreign Institutional Investors: FII’s can invest in India in financial markets such as pension funds, mutual funds, investment trusts and asset management companies.

BUSINESS OPTIONS IN INDIA• Operations as Foreign Company – Liaison Office: Office can undertake liaison activities on

its company’s behalf. The Approval for establishing a Liaison office in India is granted by Reserve Bank of India.

– Branch Office: Conduct their business in India through its branch office.

– Project Office: If a foreign company is engaged by an Indian company to execute a project in India, it may set up a project office.

Tax Implications• Legislation - Income Tax is governed by Income Tax Act,

1961.• Basis - Incomes are assessed based on Residential Status.• Rates - Indian Companies - 30% Foreign Company – 40% Individuals – At Rates specified in Finance Act.• DTAA – Further, the taxes paid in India is eligible for credit

in Foreign Countries when DTAA has been formed between such countries.

• Transfer Pricing – Cross Border Transactions with Associated Enterprises are subject to Transfer Pricing Laws.

Tax on Investment Income

Securities and Mutual Funds

• Dividend – Dividends received from any Indian Company & Mutual Funds are exempt from tax. However, any dividend received from a Foreign Company is subject to tax.

• Interest Income – Subject to Taxes.

• Sale or Redemption Transactions – Equity Instruments including Equity Oriented Mutual Funds:

Long Term • Exempt from Tax : If such Sale Transaction has taken place through Registered

Stock Exchange in India.• Capital Gains Tax at 20% or 10% : Any other Sale Transaction would be subject

to tax at 20% after providing Cost Inflation Index. Alternatively, may be taxed at the rate of 10% without providing Cost Inflation Index.

Short Term• Capital Gains Tax at 15% : If such Sale Transaction has

taken place through Registered Stock Exchange in India.• Tax at Normal Rates : Any other Sale Transaction would be

subject to taxes at Rates notified in the Finance Act.

Debt Instruments including Debt Oriented Mutual Funds: Long Term • Capital Gains Tax at 20% or 10% : Any other Sale

Transaction would be subject to tax at lower of 20% after providing Cost Inflation Index or at rate of 10% without providing Cost Inflation Index.

Short Term• Tax at Normal Rates : Any other Sale Transaction would be

subject to taxes at Rates notified in the Finance Act.

Real Estate – • Exemptions offered: Sale Proceeds from

Investments if reinvested in Assets specified or deposited in Special Scheme exemptions from tax is available. Otherwise, taxed at the rate of 20% when held for more than 36 months.

• If the same is sold within a period of 36 months it would be subject to taxes at Rates specified under Finance Act.

Venture Capital Investments –

• Interest and Dividend: Interest and Dividend income received is subject to Taxes

• Capital Redemption : Long Term • Exempt from Tax : If such Sale Transaction has taken place through

Registered Stock Exchange in India.• Capital Gains Tax at 20% : Any other Sale Transaction would be subject

to tax at 20% after providing Cost Inflation Index.• Alternatively, may be taxed at the rate of 10% without providing Cost

Inflation Index. Short Term• Capital Gains Tax at 15% : If such Sale Transaction has taken place

through Registered Stock Exchange in India.• Tax at Normal Rates : Any other Sale Transaction would be subject to

taxes at Rates notified in the Finance Act.

THANK

YOU

K.Raghu & Co.Chartered Accountants.“K R Pinnacle”,No.281,II Floor,7th Main, B.T.M Layout, 2nd Stage, Bangalore - 560 076.Ph: +91 80 26680897 / +91 80 26680941 - Mob: +919341219091E-mail: kraghu@kraghu.com – Website: www.kraghu.com