Download INDIA THE INCREDIBLE INVESTMENT DESTINATION

INDIA - THE INCREDIBLE INVESTMENT
DESTINATION
PRESENTED BY:
CA K RAGHU,
IMMEDIATE PAST PRESIDENT – INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA
INTRODUCTION
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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
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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 Ecommerce market
Gross Domestic Product(GDP)
• GDP: $1.877 trillion (2013)
• June 2015 GDP Rate at 7%
Investment Gateways in India
Securities
Real Estate
FDI
Mutual Funds
Venture Capital
Fund
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
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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 investorfriendly 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
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Offers Dividends and Interest
Capital 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.
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: +919341219091
E-mail: [email protected] – Website: www.kraghu.com