Setting up an industry in Kerala, (InfoPark) Setting up IT Software and Services operations
in India has certain rules and regulations
Indian company / individual
An Indian citizen can set up IT software and services
operations in India through the following:
As an Individual / Proprietor
As a Partnership / Firm / Trust
As a Company registered under the Companies Act, 1956
No prior permission of the Government of India is required
to set up IT / Software units in India.
Overseas company / individual
A Foreign Company is one that has been incorporated
outside India and conducts business in India. These
companies are required to comply with the provisions
of Companies Act, 1956.A foreign company or individual
planning to set up business operations in India can
do so as:
A foreign company through a Liaison Office / Representative
Office, Project Office or a Branch Office
an Indian company through a Joint Venture or a Wholly
Owned Subsidiary
Register the Company
Liaison Office / Representative Office
A liaison office is not allowed to undertake any business
activity in India and earn any income here. The role
of such offices is limited to collecting information
about possible market opportunities and providing information
about the company and its products to prospective Indian
customers. The Foreign Exchange Regulation Act (FERA)
regulates the opening and operation of such offices.
Also, approval of Reserve Bank of India (RBI) is required
for opening of such offices. These offices have to ensure
the following:
Expenses of such offices are met entirely through inward
remittances of foreign exchange from Head Office abroad.
These offices do not undertake any trading or commercial
activities. Commercial activities should be limited
to collecting and transmitting information between its
overseas Head Office and potential Indian customers.
Such offices should not charge any commission or receive
other income from Indian customers for provision of
liaison services.
Project Office
Foreign companies planning to execute specific projects
in India can set up temporary project/ site offices
in India with the approval of RBI. Such approval is
generally accorded in respect of projects approved by
designated authorities or projects financed by an Indian
bank/ financial institution or a multilateral/ bilateral
international financial institution. The tenure of the
office is dependent upon the duration of the project
and normally approval is not accorded for more than
3 years. Further, a separate approval is required for
each project proposed to be undertaken.
Branch Office
Foreign companies engaged in manufacturing and trading
activities abroad may set up Branch offices in India,
with the permission of RBI, for the following purposes:
To represent the parent company / other foreign companies
in various matters in India e.g. acting as a buying
/ selling agents in India.
To conduct research work in the area in which the parent
company is engaged provided the results of the research
work are made available to Indian companies.
To undertake export and import trading activities.
To promote possible technical and financial collaborations
between Indian companies and overseas companies. A branch
office is not permitted to carry out manufacturing activities
on its own but is permitted to sub-contract these to
Indian manufacturers.
As an Indian Company
A foreign company can commence operations in India
through incorporation of a company under the provisions
of Indian Companies Act 1956. Foreign equity in such
Indian companies can be up to 100 percent depending
upon the business plan of the foreign investor, prevailing
investment policies of the Government and on receipt
of requisite approvals.
Joint Venture with an Indian Partner
Foreign companies can set up their operations in India
by forming strategic alliances with Indian partners.
Setting up of operations through a Joint Venture may
provide the following advantages to a foreign investor:
Already established distribution / marketing set up
of the Indian partner.
Available financial resources of the Indian partner.
Already established contacts of the Indian partner that
help ease the process of setting up operations. Foreign
investments are approved through two routes as under:
Automatic Route: Approvals for foreign equity up to
50 percent, 51 percent and 74 percent are given on an
automatic basis subject to fulfilment of prescribed
parameters in certain industries as specified by the
Government. RBI accords automatic approval to all such
cases.
Government Approval: Approval in all other cases where
the proposed foreign equity exceeds 26 percent, 50 percent,
51 percent or 74 percent in the specified industries
or if the industry is not in the specified list, it
requires prior specific approval from Foreign Investment
Promotion Board (FIPB).
Wholly Owned Subsidiary
The foreign investor has the option of setting up a
wholly owned subsidiary (WoS), wherein the foreign company
owns 100 percent share of the Indian company. As above,
foreign investments may be approved through the Automatic
Route or Government Approval. Automatic route is available
for establishing WoS in the Information Technology sector.
Investment Promotion And Management Cell
The IT units that are setting up operations in Kerala
are invited to register with the Investment Promotion
and Management Cell (IPMC) of Kerala State IT Mission.
Benefits of registering with IPMC
· Facilitates the initial entry phase of business
into the state
· Directs enquiries to registered IT units
· Promotes IT units at tradeshows.
· Registration is compulsory as a first step
towards availing of the eligible incentives announced
in the IT Policy.The Units can register with the IPMC
through the simple web-based Form provided by IPMC.
The registration no. assigned by IPMC will have the
status of provisional registration given by Industries
Dept. of the Government of Kerala.
Registered IT units will be informed of the latest
developments in IT in Kerala, including information
on upcoming events, trade shows, seminars & conferences
as well as latest Government Orders, guidelines &
notifications related to IT sector within the state
Incentives in IT Sector
All IT units registered with IPMC in the Kerala State
IT Mission can apply for eligible incentives.
Process of applying
· On line applications are available as side
link on this web page. The relevant application is to
be filled and submitted to the Coordinating Officer
under whose jurisdiction the unit falls. GM-DIC, MD-KSIDC
and CEO's of IT Parks are the Coordinating Officers.
· CO's shall forward the application to the
consultant (empanelled CA firm)
· CO / CA firm shall verify the application
based on site visit and perusal of relevant documents
· The application is then forwarded to KSITM
with the recommendation
· The unit will offer a Bond of Indemnity along
with personal guarantees given by the directors in the
prescribed format to the extent of incentives received.
The guarantee shall be invoked along with 14% interest
if (a) the unit ceases to be in operation within 3 years
of receiving this incentive (b) misrepresent facts
· Disbursements will be effected from KSITM
· Service charge for the CA firm is to be paid
by the applicant unit (incentive will be deducted to
that extent)
Other Conditions
· Amount sanctioned as incentives can be adjusted
against Govt dues.
· Units financed by KVIC / KVIB will not be
eligible for SIS
· If a proprietor / partner has 60% or more
profit share in any other IT firm that has already claimed
for SIS, he is not eligible. A self declaration will
be required.
If a co has minimum of 51% share holding in any other
co or controlling interest in proprietary / partnership
firm, such co’s are not eligible. A board resolution
is required.
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