India – A Global Investment Destination

India, an emerging economy, has witnessed unparalleled levels of economic development, along with countries like China, Russia, Mexico and Brazil. India, being a cost effective and labor intensive economy, has benefited immensely from outsourcing of work from developed countries, and a strong manufacturing and export oriented industrial framework. India's competitiveness from a natural and human resources standpoint is making it the destination of choice for investors. With the economic pace picking up, global commodity prices have staged a comeback from their lows and global trade has also seen healthy growth over the last two years.

India is a fast-growing economy with a dynamic and robust financial system. Being a democracy ensures a stable policy environment and its independent institutions guarantee the rule of law.

A senior adviser to the government has revealed that India can showcase its massive infrastructure spending and a wider current account deficit at the next G20 summit as its contribution to reviving global economic demand. Going forward, the country is targeting an annual GDP growth rate of 8-9%.

India is in the global arena for increased foreign investment - both through the Equity markets - termed Foreign Institutional Investment (FII) - and Foreign Direct Investment (FDI). While its size and growth potential make India attractive as a market, the most compelling reason for investors to be in India is that it provides a high Return on Investment. India is a free market democracy with a legal and regulatory framework that rewards free enterprise, entrepreneurship and risk taking.

A Morgan Stanley report -- India and China: New Tigers of Asia -- says that India would match China's GDP growth over the next two years, barring another global financial crisis, reaping the rewards of very positive demographics and an increasingly dynamic economy.

Along with China, India is the most preferred destination for Foreign Direct Investment (FDI). India's growth potential, rate of GDP growth and expanding sectors are geared to absorb capital, transfer of technology, strengthening infrastructure, which is necessary for enhancing competitiveness of the domestic economy, raising productivity & generating new employment opportunities. With its highly skilled & cost-effective manpower, it offers immense opportunities not only for Business Process Outsourcing but increasingly for the higher end of value chain in Knowledge Process Outsourcing & Engineering Process Outsourcing. A continuous review of the FDI policy & the associated procedures which includes, progressive simplification of procedures, dispensing with the need of multiple approvals from the regulatory authorities, extending the automatic route to more to more sectors, & allowing FDI in new sectors, is earnestly undertaken to create a more liberal, attractive & conducive investment climate.

As an Indian company

A foreign company can commence operations in India by incorporating a company under the Companies Act, 1956 through:
Joint Venture: Foreign Companies can set up their operations in India by forging strategic alliances with Indian partners. It may entail the advantages like established distribution/ marketing set up of the Indian partner, available financial resource & established contacts of the Indian partners which help smoothen the process of setting up of operations.
Wholly Owned Subsidiary: Foreign companies can also set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy.

Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the FDI policy.
For registration or incorporation of a Company an application has to be filed with the Registrar of Companies (ROC). Once a Company has been duly incorporated & registered as an Indian company, it is subject to Indian laws & regulations as applicable to other domestic Indian companies.

As a foreign company

Foreign Companies can set up their operations in India through:
Liaison Office / Representative Office: It acts a channel of communication between the principal place of business & its entities in India. Its role is limited to collection of information about possible market opportunities & providing information about the company & its products to the prospective Indian customers. It can promote export/import from/to India & also facilitate technical/financial collaboration between parent company & companies in India.
Project Office: Foreign companies planning to execute specific projects in India have now been granted general permission by Reserve Bank of India (RBI) to set up temporary project/site offices in India, subject to specified conditions. Such offices cannot undertake or carry on any activity except that incidental & relating to the execution of the project.
Branch Office: Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:
Branch Office on a 'Stand Alone Basis': such branch offices would be isolated & restricted to the Special Economic Zone (SEZ) alone & no business activity/transaction will be allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.

RBI accords approval under the automatic route for foreign technological agreements in all industries for technical know-how, design & drawings and engineering services on lump sum & royalty payments.

Indian Companies entering into technology transfer agreements with the foreign companies are permitted to remit payments towards know-how & royalty under the terms of the foreign collaborations agreements.

Indian Companies can hire services of foreign technicians & make remittances for technical services fees subject to certain conditions regardless of the duration of engagement of foreign nationals in any calendar year.

Dividends & profits earned in India by foreign companies are allowed to be repatriated after, the payment of taxes, if any, due on them. No RBI permission is necessary for such remittances except to the compliance of certain specified conditions.

The Concept
The provision regarding the licensing of trademarks in favour of the registered users was introduced for the first time in the United Kingdom by the Trade Marks Act, 1938 on the recommendations of the Goshen Committee which suggested the relaxation of common law principle that there could be no separation or splitting up between the proprietorship of the mark & the trade origin of the goods bearing such marks. Cogently put, Trademark Licensing is an authorization by the proprietor granting to another person the right to exploit his trademark, either on an exclusive or non-exclusive basis. In international trade, licensing is in the present day is much more extensive as compared to the domestic market & has now assumed importance as an indispensable tool of business organization on an international level.

The Indian Scenario
The law governing the licensing of trademarks (The Trademarks Act, 1999) & registration of the registered users has been substantially modified to reflect the approach towards the modern trend of business. A Licensee would fall under the definition of a permitted user under the 1999 Act, where 'Permitted Use' means not only the use by a third person of a registered trademark as a registered user but also use by a third person of a registered trademark by consent of the registered proprietor in a written agreement without that person being a registered user. Though the Act is mute on the question of licensing of an unregistered trademark, yet the courts have endorsed the same as common law licensing.

The Purpose
Registered proprietors of trademarks find it beneficial to enter into licensing agreements for various reasons:

The Territorial Scope
The territorial limits of a license agreement for a registered trademark are determined by the consent of the parties. The owner of an unregistered trademark selling his goods in a particular territory acquires the right of trademark in that territory only. The same trademark can be used by any other person outside the territory without violating the trademark rights vested in the owner.

The Term
There is no fixed term for the grant of license under the Act & the same is dependent on the terms of license agreement entered into between the licensor & the licensee. Nevertheless, the law provides for a confirmation at any time by the Registrar of Trademarks from the proprietor, as to whether the registered user arrangement still subsists.

Rights & Obligations of the Licensor
As the maker of goods seeks to acquire & maintain a reputation for the quality of his goods, the licensor has the right to exercise control over the quality of the products manufactured & marketed under the trademark license. The owner also has the means to review the manner in which the trademark is being used by the licensee. The licensor has a right for the 'permitted use' of his mark to be considered as use by him & so no application can be filed by anyone for revocation of the trademark on the grounds of non-use, if there is a permitted use of the trademark in that period. Further, the registered licensor has the right to maintain the continuing distinctiveness of the trademark. Since the function of the trademark is to indicate the trade origin of goods & services, to prevent any deception of the public, the Act imposes an obligation on the licensor/owner of the trademark to maintain a connection in the course of trade with those goods & services. The registered proprietor also has an obligation to confirm to the Registrar as to whether the Agreement filed before the Registrar continues to be in force.

Rights & Obligations of the Licensee
A registered user has a right to use the registered trademark in relation to the goods or services for which it is registered, but does not get any assignable or transmissible right to use the mark. However, the registered user has the right to file suit for infringement in his own name, making the registered proprietor a defendant. The rights & obligations of such registered user must be concurrent with those of the registered proprietor. A 'permitted user', however will have no rights to institute any proceedings for any infringement. The obligations of the licensee can be introduced & the existing ones can be further qualified by the stipulations under the License Agreement.

The existence of a well-grounded legal framework is perhaps the most significant aspect of the corporate environment. Not being an exception, the Indian company law, largely based on its English counterpart, streamlines the procedure for regulation of Indian entities & branches of foreign entities operating in India.

Concept & Types
As per the Indian Companies Act, 1956 ("Act"), a company is an association of persons incorporated & registered under the Act as an entity distinct from its members constituting. Companies so incorporated can exist as public companies, private companies or joint-stock companies limited by shares or guarantee, or unlimited.

Private company is characterized by no. of members being not less than 2, restriction on the right to transfer its shares, prohibition on invitation or acceptance of deposits from public, restriction on inviting public to subscribe for its shares or debentures, etc. Devoid of the above restrictions, a company can be designated as a public company. Besides various privileges, exemptions & differences to / between public and private companies, there also exists provision for conversion of one into the other.

Incorporation
The promoters, deciding the nature of company to be floated, can initiate incorporation of a company, by making application for availability of the name, prepare memorandum & article of association and file it with Registrar of Company (R.O.C.), who after scrutinizing the documents issues a certificate of incorporation.

MoA & AoA
Memorandum of association (MoA) comprises of the fundamental parameters upon which company would act and carry on its business operations in the future. MoA & AoA are most pertinent documents for any company. MoA guides the principle objects for which a company has been or is proposed to be incorporated. Whereas, AoA are the Rules which regulate day to day functioning such as Board or Shareholders meeting, appointment of Directors, passing of Special Resolutions, convening of Annual general meeting, issue of shares, voting rights, resrved matters etc. of a company. MoA includes clauses of name, registered office, objects, liability & subscription. Similarly, articles of association (AoA) constitute the rules & regulations that govern the management of its internal affairs & conduct of business including provisions relating to share capital of the company, rights of various shareholders, transmission of shares etc. The act also contains provisions & regulates the acceptance of public deposits, which gets initiated through advertisement.

Share Capital
Shares may be defined as indivisible units of fixed amounts into which the capital of the company is divided. Generally, a public company is entitled to issue two kinds of shares-equity & preference. Shares can be issued either by private placement or by inviting the public to subscribe for shares through a prospectus, or by allotting the same to an issue house which offers it for further sale to the public. SEBI has prescribed guidelines for issue of shares to the public. In case a company desires to increase its subscribed capital, it has to first offer the share to the existing shareholders. The company can augment its accumulated profits available for paying dividends, by issue of bonus shares. Any person owning Shares carries a proprietary right in the same and thus, can be freely transferred subject to certain restrictions postulated in the Act like restrictions on a private company to transfer its shares.

Debentures
Debentures, which are also a source of long term-capital for a company, are acknowledged as debt by a Company for the purposes accounting as well as the Act. They may be non-convertible, partly or fully convertible. The issue of such PCDs & FCDs by a company requires prior approval of its shareholders. SEBI, which regulates the issue of capital by a listed company or a company intending to get its stock listed on any recognized stock exchange, has specified that debentures offered to the public have to be secured by mortgage of assets of the issuer company, if the redemption takes place on the expiry of 18 months after allotment or afterwards. More importantly, a company desirous of raising capital through public issue of securities (debentures, bonds) has to issue a prospectus, which has to be approved by the stock exchange(s), where the stocks are proposed to be listed, before it is filed with the Registrar of Companies. SEBI is the regulator of the securities market & ensures investor protection, and for achieving the said objective scrutinizes such documents.

Directors
The Act also lays down the provisions relating to composition of the board of directors, who are entrusted with the management & direction of the company to carry out the objectives as outlined in the MoA. As per the Act, a private company and public company is required to have atleast 2 & 3 directors, respectively. The AoA of a company describe the powers & duties of the board of directors. Unless specifically required by the AoA, the directors need not own any shares. Even a foreign national can be appointed as the director of a company, without seeking any prior approval. The directors, who act in the nature of trustees of the company's assets, are required by the Act to hold a board meeting at least in every quarter of the year.

Amalgamation & Merger
Used interchangeably, these terms involve the taking over or absorption of the assets, liabilities & business of the transferor company by the transferee company. The formalities are initiated by the formal expression of desire of the transferor company, subject to the sanction by the tribunal, to amalgamate itself with the transferee company, valuation of shares of both the companies & consideration of its exchange followed up by approval of the same by the boards. According to a recent amendment, powers of the High Courts' & Company Law Boards' have been transferred to National Company Law Tribunal, to which the petition for amalgamation has to be moved, initially by the transferor company. SEBI has come out with recommendations regarding mandatory disclosures, which are required to be made to the shareholders by a listed company.

Accounts & Audit
The statute makes it a mandatory requirement for the any company to maintain its book of account, which provides a genuine view of the financial maneuvers of the company. It further obligates the company to present its shareholders the company's financial account statements (along with the auditor's & director's report), at every annual general meeting. A member of I.C.A.I. has to be appointed by the company in the nature of an auditor, to audit the company's account.

Winding Up
It may be defined as the termination of the life of the company, & involves the appointment of a liquidator who supervises property administration through collection of assets, payment of debts & distribution of assets. Winding –up can be compulsory (by the court, on presence of some conditions which make it essential) or voluntary (members & creditors). Petition for compulsory winding up can be made by the company, its creditors, registrar etc.the petition is to presented to the district/high court which is followed by appointment of a liquidator (provisionally) & passing of the order on satisfaction of the court on all counts. From the commencement of the winding up the company shall cease to carry on its business except so far as may be required to secure a beneficial winding up of the company. In the event of winding up, certain payments rank in priority to others, called the preferential payments; and have to accordingly taken up.

The following regulations are available for foreign investment in India:-
SEBI (Foreign Institutional Investors) Regulations, 1995 provides that every foreign institutional investor prior to making investments in India should get itself registered with SEBI under the applicable regulations. It lays down certain investment conditions and restrictions for a foreign institutional investor. It specifies the type of securities in which investment may be made. It lays down the general obligations and responsibilities for a foreign institutional investor whereby it has to provide for the appointment of a domestic custodian, maintenance of proper books of account, appointment of a compliance officer and submission of the required information to the Securities and Exchange Board of India and the Reserve Bank of India. There is a prohibition on giving advice in publicly accessible media. It also provides for procedure for action in case of a default.

SEBI (Foreign Venture Capital Investors) Regulations, 2000
It provides for the following: The following are the eligibility criteria for grant of a certificate of registration as per regulation 4 of SEBI (Foreign Venture Capital Investor) Regulations 2000:

EUROISSUE
Euro issues are to be treated as foreign direct investment.

We play a significant role in planning and executing Mergers & Acquisitions, regularly representing both buyers and sellers in Mergers & Acquisitions transactions for Fortune 500 as well as middle market companies. We actively assist our clients in structuring, negotiating, documenting, conducting general legal due diligence, with a special focus of technology rights and other key assets, counseling Board of Directors and other parties for clients such as Fedders, Mentor Graphics, The McGraw Hill Companies Inc. etc.

Franchising as a business concept is also rapidly developing in India. At present the concept is present in the hotel, fast food chains both international and domestic/regional brands and various retail outlets & computer education. Therefore, in appropriate cases, it would also be an attractive option for a foreign company to establish business in India through the franchising route. India does not have any franchise specific legislation therefore the relationship and arrangement in a franchise network would be governed by different branches of law for which specific legislations are enacted in India such as

general law of contract
intellectual and industrial property law
monopolies and restrictive trade practices or competition laws
taxation
labour law
legislation regulating foreign exchange and foreign investments and consumer protection.

Other legislations may merit consideration depending upon the nature of franchising business and involvement of different parties. Payments under franchise would be subject to the provisions of FEMA, in as much as, remittance of foreign exchange for use and/or purchase of trademark or franchise in India would require prior approval of RBI.

The Competition Act has been architect to deal with matters relating to regulation of competition and monopoly. The main objective of the Commission is to prevent practices having adverse effect on the market and to ensure fair competition with openhanded protection to consumer interests. The rubric of new Competition Act is Anti-Competitive agreements, Abuse of dominance, Combination regulations. Section 3(1) of the Act prohibits any agreement 'which causes or is likely to cause an appreciable adverse effect on competition within India' and Section 3(2) holds such agreements to be void. Section 4(1) of the Act prohibits abuses of a dominant market position. A dominant position is defined as a 'position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour. Section 6 of the Act provides that 'no person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void. This Act has been formulated in view of the policy shift from curbing monopoly to promote competition. The Indian Competition Act, 2002 envisages Commission with the extra territorial jurisdiction. Section 32 provides that the commission shall have the power to enquire into an agreement or abuse of dominant position or combination even if the act has taken place outside India or the party or enterprise is outside India provided it has an appreciable adverse effect on competition in India. Being a quasi-judicial body the Commission also has power to issue interim relief, impose penalty, order de-merger etc.

The Indian labour legislations were enacted under the overarching framework of the Constitution of India, with a tradition of binding precedents and an adversarial system of conducting a trial. Almost all Indian laws are codified, except personal laws to some extent and the Law of Torts. Thus courts refer to English Common Law only when the statute is silent and there is no relevant Indian case law. India has a wide variety of labour laws which are essential for the smooth functioning of industrial relations in the country.

Proper regulation of employee-employer relationships is one of the key aspects of a progressive society. India's dynamic employment laws have their roots in the promotion of social justice. Employment laws in India seek to achieve the objective to create conditions which are conducive to economic growth, establish social, political and economic justice, to maintain industrial harmony and to ensure rights of workers to bargain collectively for the betterment of their service conditions.

The labour legislations in India are broadly divided in the following categories:
While conforming to the essentials of the laws of contracts, a contract of employment must adhere also to the provisions of labour laws and the rules contained under the Standing Orders of the establishment.

List of major labour legislation in India is as below:

The Minimum Wages Act 1948 has classified workers as unskilled; semi-skilled; skilled and highly skilled
The Industrial Employment (Standing Orders) Act 1946
Factories Act of 1948
Payment of Wages Act 1936
Minimum Wages Act 1948
Workmen's Compensation Act 1923
Employees Provident Funds and Miscellaneous Provisions Act 1952

Classification should be made as per the Standing Orders. Where there are no Standing Orders or service rules applicable to employees, then classification can be made either based on trade tests or any other test which is reasonable and in accordance with the Model Standing Orders. Generally, the workers are classified as:

The main objectives of the Factories Act are:
This act applies to all factories including Government factories. A "factory" as defined in the Act means any premises including the precincts where ten or more workers are employed on any day of the preceding 12 months and a manufacturing process is carried on with the aid of electric power and where 20 or more workers are employed on any day of the preceding 12 months and a manufacturing process is carried on without the aid of electric power.

The obligations of the employers are, practically speaking, the rights of the employees to claim the minimum health and safety measures and welfare amenities as provided for in the Act, observance of working hours, holidays, overtime, annual leave and special protection against hazardous processes and dangerous substances, to obtain information relating to workers' health and safety at work from the occupier, to get trained by or through the occupier, in respect of workers' health and safety, to represent to the Inspector directly or though a representative in the matter of inadequate provision for protection of health or safety in the factory, not to pay any fee or charge for the facilities or appliances provided by the employer and to claim wages for or in lieu of allowable leave under the provisions of the Payment of Wages Act

The employer is bound to pay to every employee engaged by him wages at a rate not less than the minimum rates of wages fixed for that class of employees without making any deduction (except as permitted under the Payment of Wages Act). The employees are entitled to the minimum wages at all times and under all circumstances.

The employer must pay compensation for an accident suffered by an employee during the course of employment and in accordance with the Act. The employer must submit a statement to the Commissioner (within 30 days of receiving the notice) giving the circumstances attending the death of a worker as result of an accident and indicating whether the employer is liable to deposit any compensation for the same. It should also submit an accident report to the Commissioner within seven days of the accident.

EPF Act aims to provide for instituting a compulsory contributory fund for the future of the industrial worker after retirement or for the workers dependents in case of early death.

The Act applies to all the employees including those employed through a contractor. However, the employees who receive wages in excess of INR 6,500/-a month are specifically excluded from its applicability. The Act requires both the employer and the employee to make a contribution towards the Employee Provident Fund. The employer is liable under the Act to make the contribution at a specific rate and is further obliged to deduct the employee's contribution from employee's wages, at the same rate as is contributed by the employer.

From 1st October, 2008, the "International Workers" were also covered under the ambit of the Act. Who can be treated as an international Employee has been defined in the Act .Under the Act, every International Worker employed with the establishment in India, to whom the Act applies, is now covered by the Act and is entitled to its benefits, unless such employee is specifically excluded from the applicability of the Act (excluded employee).

The principal pollution control statutes in India are the Water (Prevention and Control of Pollution) Act, 1974 the Air (Prevention and Control of Pollution) Act, 1981, and the Environment (Protection) Act, 1986, which is designed to act as an umbrella legislation for the environment, with the responsibility for administering the new legislation falling on the Central Pollution Control Board ("CPCB") at the national level and the State Pollution Control Board ("SPCB") at the State level. The mandate of the CPCB is to set environmental standards for:
All industries (except acknowledged non-polluting industries e.g., Wind Power Generation) have to obtain clearance from the CPCB and/or SPCB for the establishment of the industry and have to comply with the requirements and conditions imposed at the time of grant of such clearance. Powers have been delegated to the State Governments for grant of environmental clearance for certain categories of thermal power plants. Setting up industries in certain locations considered ecologically fragile are guided by separate guidelines issued by the Ministry of Environment of the Government of India.

Also, India has a legal framework for dealing with environmental issues relating to forests and biodiversity. The Ministry of Environment and Forests is the apex regulatory and administrative agency for all matters relating to environment. India has also developed the institutional capacity for documentation of flora and fauna, forest cover, biospheres, land degradation, and traditional knowledge. Consequences of non-compliance with relevant provisions of the statutes are provided in the respective statutes. Violation of provisions attract inter alia, fine and (or) imprisonment. In some extreme cases, licenses and consents are liable to be cancelled.

India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax.

Value Added Tax (VAT), Stamp Duty, State Excise, Land Revenue and Tax on Professions are levied by the State Governments. Local bodies are empowered to levy tax on properties, Octroi and for utilities like water supply, drainage etc.

Indian tax system is poised for major reforms as Government proposes to introduce Direct Tax Code (DTC) in 2011, and Goods and Service Tax at the Centre and State level. Together these will make India's tax system more efficient and transparent.

Taxes Levied by Central Government

Direct Taxes

Tax on Corporate Income
Capital Gains Tax
Personal Income Tax
Tax Incentives
Double Taxation Avoidance Treaty

Indirect Taxes
Excise Duty
Customs Duty
Service Tax
Securities Transaction Tax
Sales Tax/VAT
Municipal/ Local Taxes
Other State Taxes

Taxes on Corporate Income

Companies’ residents in India are taxed on their worldwide income arising from all sources in accordance with the provisions of the Income Tax Act, 1961. Non-resident corporations are essentially taxed on the income earned from a business connection in India or from other Indian sources. A corporation is deemed to be resident in India if it is incorporated in India or if it's control and management is situated entirely in India.

Domestic corporations are subject to tax at a basic rate of 30%, a 2% education cess and 1% secondary and higher education cess if the net income of the company is not more than Rs. 10 million. However, a surcharge of 7.5% shall also be added to the above mentioned rate of tax, education cess and secondary and higher education cess if the net income of the company exceeds Rs. 10 million. Foreign corporations have a basic tax rate of 40% and a 2.5% surcharge if the income of the foreign corporation exceeds Rs. 10 million. In addition, an education cess at the rate of 2% and a secondary and higher education cess at the rate of 1% on the tax payable is also charged. Corporates are subject to wealth tax at the rate of 1%, if the net wealth exceeds Rs. 3 million.

Domestic corporations have to pay dividend distribution tax at the rate of 16.2225%; however, such dividends received are exempt in the hands of recipients. Corporations also have to pay for Minimum Alternative Tax at 18.5% (plus surcharge and education cess) of book profit as tax, if the tax payable as per regular tax provisions is less than 18% of its book profits.

Capital Gains Tax

Tax is payable on capital gains on sale of assets.

Long-term Capital Gains Tax is charged if
» Capital assets are held for more than three years and
» In case of shares, securities listed on a recognized stock exchange in India, units of specified mutual funds, the period for holding is one year.


Long-term capital gains are taxed at a basic rate of 20%. However, long-term capital gain from sale of equity shares listed on a recognized stock exchange or units of mutual funds is exempt from capital gain tax.

Short-term capital gains are taxed at the normal corporate income tax rates. Short-term capital gains arising on the transfer of equity shares or units of mutual funds are taxed at a rate of 15%.

Long-term and short-term capital losses are allowed to be carried forward for eight consecutive years. Long-term capital losses may be offset against taxable long-term capital gains and short-term capital losses may be offset against both long term and short-term taxable capital gains.

Personal Income tax

Personal income tax is levied by Central Government and is administered by Central Board of Direct Taxes under Ministry of Finance in accordance with the provisions of the Income Tax Act, 1961. The rates for personal income tax are as follows:-

Table of Income Tax Rates in India for an Individual in (financial year 2011-2012)

Rates of Withholding Tax

Current rates for withholding tax for payment to non-residents are:-

Interest: maximum 20%

Dividends paid by domestic companies (where Dividend Distribution Tax has already been paid): Nil

Dividends (other than dividends referred to in Section 115-O): 20%

Royalties: 10%

Technical Services: 10%

Any other income
» Individuals: 30% of the income
» Companies: 40% of the net income

The above rates are general and are applicable in respect of countries with which India does not have a Double Taxation Avoidance Agreement (DTAA).
Tax Incentives
Government of India provides tax incentives for:-
Corporate profit
Accelerated depreciation allowance
Deductibility of certain expenses subject to certain conditions.

These tax incentives are, subject to specified conditions, available for new investment in
Infrastructure,
Power distribution,
Certain telecom services,
Undertakings developing or operating industrial parks or special economic zones,
Production or refining of mineral oil,
Companies carrying on R&D,
Developing housing projects,
Undertakings in certain hill states,
Handling of food grains,
Food processing,
Rural hospitals etc.

Double Tax Avoidance Treaty

India has entered into DTAA with 81 countries including the US. In case of countries with which India has Double tax Avoidance Agreement, the tax rates are determined by such agreements. Domestic corporations are granted credit on foreign tax paid by them, while calculating tax liability in India.

In the case of the US, dividends are taxed at 15-20%, interest income at 15% and royalties at 15%.

Excise Duty

Manufacture of goods in India attracts Excise Duty under the Central Excise Act 1944 and the Central Excise Tariff Act 1985. Herein, the term Manufacture means bringing into existence a new article having a distinct name, character, use and marketability and includes packing, labeling etc.
Most of the products attract excise duties at the rate of 16%. Some products also attract special excise duty/and an additional duty of excise at the rate of 8% above the 16% excise duty. 2% education cess is also applicable on the aggregate of the duties of excise. Excise duty is levied on ad valorem basis or based on the maximum retail price in some cases.
Central Excise duty is administered by the Central Board of Excise and Customs.
Excise Tariffs - Central Excise Tariff Act 2005
Central Excise Manual
The Central Excise Act 1944

Customs Duty

The levy and the rate of customs duty in India are governed by the Customs Act 1962 and the Customs Tariff Act 1975. Imported goods in India attract basic customs duty, additional customs duty and education cess. The rates of basic customs duty are specified under the Tariff Act. The peak rate of basic customs duty has been reduced to 15% for industrial goods. Additional customs duty is equivalent to the excise duty payable on similar goods manufactured in India. Education cess at 2% is leviable on the aggregate of customs duty on imported goods. Customs duty is calculated on the transaction value of the goods.
Rates of customs duty for goods imported from countries with whom India has entered into free trade agreements such as Thailand, Sri Lanka, BIMSTEC, south Asian countries and MERCOSUR countries are provided on the website of CBEC.
Customs duties in India are administered by Central Board of Excise and Customs under Ministry of Finance.
Schedule of Customs duties- The Customs Tariff Act 2005
The Customs Act 1962
Customs Manual
Baggage Rules 1998

Service Tax

Service tax is levied at the rate of 10% (plus 2% education cess and 1% Higher Education Cess) on certain identified taxable services provided in India by specified service providers. Service tax on taxable services rendered in India are exempt, if payment for such services is received in convertible foreign exchange in India and the same is not repatriated outside India. The Cenvat Credit Rules allow a service provider to avail and utilize the credit of additional duty of customs/excise duty for payment of service tax. Credit is also provided on payment of service tax on input services for the discharge of output service tax liability.

Securities Transaction Tax

Transactions in equity shares, derivatives and units of equity-oriented funds entered in a recognized stock exchange attract Securities Transaction Tax at the following rate:-
Delivery base transactions in equity shares or buyer and seller each units of an equity-oriented fund - 0.075%
Sale of units of an equity-oriented fund to the seller mutual fund - 0.15%
Non delivery base transactions in the above - 0.015%
Derivatives (futures and options) seller - 0.01%

Sales Tax Acts of various State Governments and Central Sales Act governed the application of Sales Tax/VAT.

Sales Tax/VAT

Sales tax is levied on the sale of movable goods. Most of the Indian States have replaced Sales tax with a new Value Added Tax (VAT) from April 01, 2005. VAT is imposed on goods only and not services and it has replaced sales tax. Other indirect taxes such as excise duty, service tax etc., are not replaced by VAT. VAT is implemented at the State level by State Governments. VAT is applied on each stage of sale with a mechanism of credit for the input VAT paid. There are four slabs of VAT:-

0% for essential commodities
1% on bullion and precious stones
4% on industrial inputs and capital goods and items of mass consumption
All other items 12.5%
Petroleum products, tobacco, liquor etc., attract higher VAT rates that vary from State to State
A Central Sales Tax at the rate of 2% is also levied on inter-State sales and would be eliminated gradually.

Municipal/Local Taxes

Octroi/entry tax: - Some municipal jurisdictions levy octroi/entry tax on entry of goods.

Other State Taxes
Stamp duty on transfer of assets
Property/building tax levied by local bodies
Agriculture income tax levied by State Governments on income from plantations
Luxury tax levied by certain State Government on specified goods

Central Sales Tax Act	1956	74
Cess and Other Taxes on Minerals (Validation) Act	1992	16
Companies (Profits) Surtax Act	1964	07
Customs Act	1962	52
Customs Duties and Cesses (Conversion to Metric Units) Act	1960	40
Customs Tariff Act	1975	51
Expenditure-tax Act	1987	35
Foreign Aircraft (Exemption from Taxes and Duties on Fuel and Lubricants)	2002	36
Gift-tax Act	1958	18
Hotel-Receipts Tax Act	1980	54
Income-tax Act	1961	43
Interest-tax Act	1974	45
Municipal Taxation Act	1881	11
National Tax Tribunal Act	2005	49
Professions Tax Limitation (Amendment and Validation) Act	1949	61
Provisional Collection of Taxes Act	1931	16
Sales Tax Laws Validation Act	1956	07
Voluntary Surrender of Salaries (Exemption from Taxation) Act	1961	46
Wealth-tax Act	1957	27

Real Estate is one of the booming sectors in India appealing investments from both, the domestic and offshore investors. We are detailing out herein-below, in brief, some of the important rules, regulation and bye-laws, which an offshore investor should be acquaint off prior investing in real estate in India or setting-up its operation of business opportunity in any other sector.

In General Per-se Foreign investment is prohibited in the Real Estate Sector.

Sub-section (5) of Section 6 of the Foreign Exchange Management Act, 1999 ("Act") provides that an Offshore entity may hold, own, transfer or invest in any immovable property situated in India, provided such immovable property was held, acquired or owned during the period when such person was resident in India or the same is inherited from a person resident in India.

Section 6 (3)(i) of the Act provides that an offshore entity is permitted to take on lease any immovable property on lease provided the term of such lease shall not be more than five (5) years.

The Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 ("Regulations") enshrines provisions pertaining to acquisition and transfer of immovable property in India. As per the regulation, transfer of immovable property in India by a foreign entity is not permitted. However, there is an exception to this restriction and the same is where there is failure in repaying the external commercial borrowing availed by a domestic entity, the AD Bank may authorize the overseas lender to sell the immovable property mortgaged against said ECB and repatriate the proceeds thereof.

Person being citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan is not allowed to acquire or transfer immovable property in India. However, a lease not exceeding beyond five (5) years could be entered into with the prior permission of Reserve Bank of India.

Repatriation of Proceeds

Proceeds of sale of an immovable property situated in India cannot be repatriated to a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan.

Authorized Dealers have been permitted by RBI to allow remittance of sale proceeds of an immovable property to a foreigner or PIO provided such immovable property do not fall in the category of agricultural/plantation property or a farmhouse.

No Lock-in requirement for NRI's/PIO's repatriating proceeds from sale of immovable property.

The amount to be repatriated should not exceed the amount at which such immovable property was purchased. With respect to Residential properties, not more than proceeds of two properties is allowed to be repatriated.

However, hundred (100)% foreign investment is allowed through automatic route in the townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure).

Above liberalization is subject to compliance of certain conditions as provided, amended and/or framed by Reserve Bank of India from time to time.

For the sake of clarity, the term 'Real Estate' for the purposes of Foreign Exchange Management Act, 1999, does not include within its meaning development of townships, construction of residential/commercial premises, roads or bridges provided and as stated above that such projects meet the prescribed criteria.

Minimum Capitalization requirement of USD 10 Million for wholly owned Subsidiaries and USD 5 Million for Joint Ventures.

Repatriation of Investment cannot be earlier than three (3) years.

Liaison Office/Branch Office/Project Office

As per the Regulations, a branch or office (other than a Liaison) is permitted to acquire immovable property for carrying out necessary activities in India.

As stated above, a branch, liaison or project office of a foreign entity is allowed to take on lease any immovable property in India, provided such lease shall not be for a period more than five (5) years.

Wholly Owned Subsidiaries

A wholly owned subsidiary would be an entity incorporated in India under the Indian Companies Act, 1956, there is no restriction on purchase, sale and transfer by it of any immovable property until such sale, purchase, acquisition and transfer is not carried out by such wholly owned subsidiary for the business purposes.

Joint Venture Companies

Where the Joint venture Company is owned and controlled by residents, no restriction as to acquisition and transfer of immovable property shall be applicable. In case, the JVC is an entity owned and controlled by foreign residents, restrictions as stipulated in earlier paragraphs of this note shall be applicable.

Trademark may be defined as a mark (in the form of label, word, device etc.) capable of distinguishing goods or services of one person from another & which can be graphically represented. Distinctiveness (acquired / inherent) is the most important feature of a trademark.

The registration of a trademark is not mandatory, but its non- registration keeps it devoid of protection against infringement; though, of course, the common law remedy of passing – off is always available.

The Act provides for absolute (devoid of distinctive character etc.) as well as relative (identity or similarity with other goods or services etc.) grounds of refusal of registration. The act further gives an exclusive right to the proprietor of a registered trademark to use the same in relation to his goods or services & even to file a suit for infringement & obtain injunction, damages etc.

The registration of the trademark involves application to the registrar, advertisement of the application, inviting of opposition, correction & amendment followed by registration. The registration subsists for a period of ten years after which it has to be renewed. The trademark is also capable of being assigned & transmitted by the proprietor.

Copyright subsists in the original literary, dramatic, musical, artistic works, cinematograph films & sound recordings. It is an intangible, incorporeal right granted to the author or originator of the above works whereby he is invested, for a specific period, with the sole & exclusive privilege of multiplying, publishing & selling copies of his works. The specified period is sixty years, following the year in which the work was first published.

The copyright exists in the tangible expression or the form of an idea & not in the idea itself. That is why even translations & arrangements form a part of copyrightable subject matter.

The author is generally the owner of copyright & enjoys a bundle of rights in relation to his creation – reproduction in any form, communication, translation, adaptation etc. this further augments the scope of assignment & transmission of copyright.

Barring cases of fair dealing or reproduction for educational or judicial purposes, any act done by a person, in relation to the matter that enjoys copyright & without a license from its exclusive owner, constitutes infringement. Civil, criminal & administrative remedies are available to the owner & his assignees.

Patent is an exclusive & territorial right granted to the owner of an invention (product / process) to make, use, manufacture & market the invention. To be patentable, a product / process must embrace the characteristics of novelty, industrial applicability & non-obviousness. The protection granted to the invention is for a limited period (normally 20 yrs.).

An application for obtaining may be made by the first & true inventor or his assignee / legal representative .The patent application would be accompanied with complete / provisional specification (description, usage methods & scope of the invention) which is then allotted a priority date. The applicant should then file for the examination of his patent application within 12 months of his filing for the patent. Accordingly, examination report is received upon which objections are to be invited within 3-4 months. If the examiner raises no objections, the same would be published in the gazette. If no objections are received from the public the applicant is awarded the patent within a further period of three months. On the other hand, if objections are received the same goes for hearing & disposal to the Examiner (patents). There are provisions for appeal to the Appellate Board & further to the High courts & Supreme Court. The final disposal may take around 6-8 years.

The month of January 2005 was marked by the lapse of the 'transition period' given to the developing nations to adjust themselves to the global patent regime; thus rendering the provision of EMRs & mailbox applications redundant.

India joining the Patent Cooperation Treaty, Dec'98 (hereinafter PCT) simplified the procedure of filing of patents. The PCT application allows the applicant to know about the potential Patentability of his invention (through international search report & optional international preliminary examination). Unlike the traditional patent system, the PCT system consolidates & streamlines patenting procedures, reduces costs & helps in decision making.

Design means the feature of shape, configuration, and pattern applied to any article by any industrial process; which in the finished article appeal to & are judged solely by the eye. The primary object of the statute in India is to protect the shape & not the function. It does not include a method or principle of construction.

The designs which are not new / original or has been disclosed or is not sufficiently distinguishable cannot qualify for registration. After the registration of the designs, the registered proprietor enjoys a copyright in the design for 10 years; this right can be further extended for a period of 5 years.

After obtaining registration of the design the owner of the design is entitled to restrain others from infringing his designs or importing articles bearing the designs.

Geographical indications may be defined as an indication, which identifies such goods as agricultural, natural, or manufactured goods as manufactured in particular territory, region locality etc. The indication specifies the quality & reputation, which is essentially attributable to the geographical origin of goods.

The Geographical Indication of Goods Act, 1999 provides detailed & streamlined procedure for the registration of such indications. The registration, though not compulsory, of course, provides prima-facie evidence of validity. The procedure is similar to that of trademarks – application, advertisement, inviting opposition, amendment/correction & the grant. Registration subsists for 10 years after which it should be renewed.

Nevertheless, unlike trademarks, there is an express prohibition on assignment/ transmission of geographical indication.

The apex court of the country enjoys original, appellate & advisory jurisdiction. The extensive original jurisdiction of the court ranges from matters like enforcement of fundamental rights (enumerated in the constitution), to disputes between the states as well as between the union & the states, the appellate jurisdiction of the apex court can be invoked through a certificate of leave of the high court or by special leave granted by the supreme court in respect of any judgment, order or decree from high court. Writs (mandamus, certiorari etc.) can be filed by any person against the violation of fundamental rights or against the orders of administrative tribunals.

Working under the direct guidance & supervision of the Supreme Court, the High Courts are generally the last court of regular appeal. The High Courts of Mumbai, Chennai, Kolkata & Delhi enjoy original jurisdiction beyond a certain financial limit (For instance, Rs.20 lakhs & above in case of Delhi). Besides, for invoking writ jurisdiction, the High Courts can be approached for enforcement of other rights. It has the power to supervise the subordinate courts falling within its territorial jurisdiction. In certain cases, High Courts also has original jurisdiction, for expeditious remedy.