FDI in Construction Development sector in India

The Construction/ Real Estate sector is one of the most critical sectors of the Indian economy due to its huge multiplier effect on the economy. Any impact on the Real Estate sector has a direct bearing on economic growth. Due to the well-acknowledged need for foreign investments into this sector because of the sheer demand, the Foreign Direct Investment (FDI) route has attracted foreign investors’ interest in this sector.

In the year 2005, Reserve Bank of India (RBI) issued a notification and the township, housing, construction development project sector and built up infrastructure was opened for 100% FDI with specific terms and conditions.

The Reserve Bank of India has recently relaxed norms on end-use of funds raised via external commercial borrowings, making it more attractive and viable for corporates including non-banking finance companies to raise cheaper offshore funds. With a view to further liberalize the ECB framework, it has been decided to relax the end-use restrictions and allow the use of funds for working capital requirements, general corporate purposes and repayment of rupee loans. ECBs with a minimum average maturity period of 10 years can now be used for working capital purposes and general corporate purposes.

These changes will improve ease of doing business in India.

There have been changes in FDI policy in this sector from time to time and following is the updated policy as of now.

*Real Estate Business
“Real Estate Business” has been defined as dealing in land and immovable property with a view of earning profit there from and does not include development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city/regional level infrastructure, townships. Significantly, the earning of rent or income, not amounting to transfer, from lease of a project in which FDI is permitted would not tantamount to ‘Real Estate Business’.

Applicable conditions for FDI in Real Estate Sector in India:

ConditionsApplicability under FDI Policy 2017Minimum CapitalizationNo minimum requirementExit and Lock-in restrictions• The investor is permitted to exit from the investment: (i) after 3 years from the date of each tranche of foreign investment, or (ii) on the completion of the project; or (iii) on the completion/development of trunk infrastructure i.e., roads, water supply, street lighting, drainage and sewerage.• The lock-in period of 3 years will also not apply to Hotels & Tourist Resorts, Hospitals, Special Economic Zones, Educational Institutions, Old Age Homes and investment by NRIs.Transfer of stake from a non-resident investor to another non-resident investorTransfer without any repatriation of investment is not subject to any lock-in or prior RBI approval.Separate Phases/ProjectsEach phase of a project is considered as a separate project for the purposes of the FDI PolicyMinimum Land StipulationThere is no minimum area requirement.Completed Assets• 100% FDI is permitted under automatic route into completed projects for operation and management of townships, malls/ shopping complexes and business centers.• However, there is a lock-in period of 3 years applicable.Transfer of control from residents to non-residentsTransfer of control from residents to non-residents as a consequence of foreign investment is also permitted. However, there is a lock in period of 3 years applicable and no transfer of immovable property is permitted during this period.Earning or rent/income on lease of the propertyFDI is not permitted in an entity which is engaged or proposes to engage in ‘Real Estate Business’. However the earning of rent/ income on lease of the property, not amounting to transfer, does not amount to ‘Real Estate Business’ and hence is permitted.Obligations on Indian Investee company• Indian Investee Company is permitted to sell only developed plots, i.e. the plots where trunk infrastructure has been available.• Indian Investee Company is responsible for obtaining all approvals, payment of development and other charges, and compliance with all other requirements as prescribed by local government bodies.Authority to monitor complianceThe State Government/Municipal/Local Body concerned, which approves the building/development plans, will monitor compliance of all the conditions by the developer.

Open Conditions

• Timeline at which stage the foreign investment must come in is not provided in the existing regulations and the clarification on the same is awaited.
• In the absence of any timeline for investment, since the FDI is permitted in construction-development projects, it is to be seen at what stage a project can qualify as being in the ‘construction-development’ phase.
• Real estate being a state subject, any guidelines or regulations by state for the benefit of foreign investors would be a welcome step and is awaited.

Take Away
RBI has been regularly improving the real estate sector for FDI, which will hold great potential for formation of employment and generation of income. Furthermore, considering the urgent need to enhance the affordable housing stock, the government had provided definite relaxations to conditions for FDI in Real Estate sector. It also clarified that real estate broking services do not amount to real estate business and are, therefore, eligible for 100 per cent FDI under the automatic route.

FDI in India | FDI in India

Angel Tax Breather: Scheme to Accredit Investors in Works

India is eyeing a new framework for recognising investors so that they won’t be subject to the so-called angel tax provisions on their funding of startups. The Department for Promotion of Industry and Internal Trade (DPIIT) is looking to put in place such a regime so that investors will be able to fund startups without any limit.
“We are examining if a mechanism can be created for accrediting investors,” said a government official aware of the matter, details of which are being discussed.
The DPIIT will hold discussions with stakeholders on the proposed framework, which will help startups raise funds from accredited investors without any hitch. The accreditation regime is being envisaged as a simple procedure, said the person cited above.
The idea behind the move is that if a startup receives funding from a genuine, recognised investor then there is no fear of money laundering and hence the investment should not be scrutinised or face the so-called angel tax.

GST exemption limit for SMEs to be effective from April 1
The government notified April 1 as the date for the implementation of doubling of GST exemption limit to Rs 40 lakh, which will benefit small and medium enterprises.
Besides, the effective date for availing higher turnover cap of Rs 1.5 crore for availing composition scheme by traders has also been fixed as April 1.
Also, service providers and suppliers of both goods and services with a turnover of up to Rs 50 lakh would be eligible to opt for the GST composition scheme and pay a tax of 6 per cent from the beginning of next fiscal.
These decisions were taken by the GST Council, chaired by Finance Minister Arun Jaitley and comprising his state counterparts, on January 10. These decisions would come into effect from April 1, a finance ministry statement said.

FM: Ease of Doing Biz via Tax Reforms to Continue, Focus on lower tax rate and wider tax base
The Finance Minister, Shri Jaitley said that the process of reforms in case of direct and indirect taxes will continue in order to facilitate and further expedite the process of ease of doing business in the country. He said that Insolvency and Bankruptcy Code (IBC) has brought a change in the credit culture in the country and is helping the Banking Sector in making fast recoveries. The Finance Minister said that GST is now on the track and is in process of fast settling down. The Finance Minster said that the thrust of the Government is to lower the tax rate and widen the tax base and keep the revenue collections moving-up. He said that the indirect tax collections will further increase in future.
India continues to be the sweet spot as far as the Foreign Direct Investment is concerned and is the fastest growing economy in the world. He concluded that the Government is committed to keep this growth momentum high and inclusive to ensure that the benefits of growth reaches to all sections of the society especially to the vulnerable and weaker sections.

CBDT finalizes bilateral agreement on exchange of CbC reports between India and USA
The absence of an agreement between India and USA till now entailed a possibility of local filing of CbC Reports in India. However, a Bilateral Competent Authority Arrangement, along with an underlying Inter-Governmental Agreement, for exchange of CbC Reports between India and the USA has now been finalized and will be signed on or before 31st March, 2019. This would enable both the countries to exchange CbC Reports filed by the ultimate parent entities of International Groups in the respective jurisdictions, pertaining to the financial years commencing on or after 1 st January, 2016. As a result, Indian constituent entities of international groups headquartered in USA, who have already filed CbC Reports in the USA, would not be required to do local filing of the CbC Reports of their international groups in India.

FPI Quarterly Inflows Set for Highest Level Since 2017
Inflows from foreign portfolio investors (FPIs) in the January-March period are on track to be the highest in a quarter in two years, spurred mainly by the Bharatiya Janata Party-led coalition’s improved chances of returning to power. Adding to this is a rise in flows into emerging markets thanks to a dovish US Federal Reserve.
Though a large part of the inflows have come through exchange traded funds (ETFs) — considered relatively fickle — and block transactions on the bourses, active money has also started coming into local markets, said experts. Money managers believe that foreign flows will continue to be strong in the coming two months in the runup to the general election, which may drive the benchmarks to record highs.
FPIs have pumped in Rs. 30,500 crore since January, including provisional data for Wednesday, which is the highest in a quarter since the January-March period of 2017, when it amounted to Rs. 44,200 crore.

I-T Exemption Limit on Gratuity Doubled to Rs. 20L
The labour ministry has decided that the income tax exemption limit on gratuity has been increased to Rs. 20 lakh from the existing Rs. 10 lakh, a move that will benefit employees who are not covered by the Payment of Gratuity Act, 1972. “The ministry of finance has enhanced the income tax exemption for gratuity under Section 10 (10) (iii) of the Income Tax Act, 1961 to Rs. 20 lakh,” a labour ministry statement said.

Labour minister Santosh Kumar Gangwar said this would benefit those employees of public sector undertakings (PSUs) and other employees not covered by the Payment of Gratuity Act, 1972, and has thanked finance minister Arun Jaitley for enhancing the exemption limit.

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Over 7,000 cash-starved start-ups may benefit from angel tax relief

A series of changes made to the so-called angel tax by the government could give wing to 7,000 cash-starved start-ups, sources in the Department for Promotion of Industry and Internal Trade (DPIIT) said.

According to industry observers, an investment of around $12 billion might come from 2,000 angel investors and hundreds of smaller backers of start-ups by the end of the year. Of this, about $7 billion will come in the form of corporate investment.

After facing sustained pressure over the past three years from start-ups and venture capital funds over the tax, the government on Tuesday introduced changes in tax norms, giving in to most of the demands raised by the sector.

Providing a wider set of exemptions from the angel tax, the Centre allowed start-ups which have raised capital up to Rs 25 crore to claim tax benefits, as distinct from the earlier Rs 10 crore. It also gave a slew of waivers and a tweak in definition industry demanded.

MCA’s new e-form ‘Active’ need to be filled by all cos. incorporated on or before Dec. 31, 2017
The Ministry of Corporate Affairs (MCA) has further amended the Companies (Incorporation) Rules, 2014 wherein new e-form Active has been introduced for activation of company. The e Form ACTIVE need to be filed by all Cos. Incorporated on or before Dec 31, 2017. Last date of filing form is 25.04.2019. If a Cos files ACTIVE form on or after 26.04.2019 such Company shall be marked ‘ACTIVE Compliant’ only after payment of fee of Rs. 10,000.

Now, FPI can invest and trade in derivative contracts approved by SEBI
The Govt. notified the Foreign Exchange Management (Transfer of Issue of Security by a Person Resident Outside India) Regulations, 2017 wherein new clause has been inserted which explicated that a Foreign Portfolio Investor or NRI or an Overseas Citizen of India may trade and invest in all exchange traded derivative contracts approved by SEBI from time to time subject to the limits prescribed by SEBI board.

India and Brunei sign Tax Information Exchange Agreement
A Tax Information Exchange Agreement (TIEA) has been signed between the Governments of India and Brunei Darussalam on February 28, 2019 at New Delhi. The Agreement will enhance mutual co-operation between India and Brunei Darussalam by providing an effective framework of exchange of information.

The Agreement enables exchange of information, including banking and ownership information between the two countries for tax purposes. It is based on international standards of tax transparency and exchange of information and enables sharing of information on request as well as on automatic basis. The Agreement also provides for mutual assistance in collection of tax revenue claims between both countries.

Ind AS: Amendments proposed to meaning of ‘materiality’ & ‘business’
The Institute of Chartered Accountants of India (ICAI) has proposed to amend the meaning of ‘material’ wherever it is used in the Indian Accounting Standards (Ind AS). ICAI has also proposed amendment to the definition of ‘business’ in case of business combination under Ind AS 103, Business Combinations. These amendments are proposed after the International Accounting Standards Board made them to IFRS.

According to the newly proposed definition of material, an information shall be considered as material if it is expected reasonably that omitting, misstating or obscuring such information could influence the decisions of primary users of general purpose financial statements which are made on the basis of those financial statements which provide financial information about a specific reporting entity. So, this definition clarifies that an entity should assess materiality only from perspective of primary users of its general purpose financial statements and only on the basis of its financial statements.

MCA extends last date of filing initial return in MSME Form I
The MSME Form-I has not been deployed yet on MCA portal, in order to avoid inconvenience to stakeholders, MCA has clarified that period of thirty days for filing initial return in MSME form –I shall be reckoned from the date of the said form is deployed on MCA 21 Portal. On 22.01.2019, the MCA had issued Specified Companies (Furnishing of information about payment to micro and small enterprises suppliers) Order, 2019.

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Options for setting up business in India and the due process

While starting the business, an entrepreneur has many options on the choice of business entity that he should start with and larger the number of options larger the chances of confusion. In India, you can register a  Pvt. Ltd. Company, Limited Liability Partnership, One Person Company, or Partnership firm for purpose of carrying your business. This decision of selecting the right entity is very crucial and depends upon certain factors like liability, nature of business, number of owners, scale of business, taxation, estimated tenure of the business, future plans, closing etc.

A brief of entities as mentioned aforesaid is given below:

Company

1. Company is the oldest & renowned business Structure in India.

2. There are 2 types of company

Private Limited Company in India:

It is a closely held company with minimum requirement of at least 2 shareholders and maximum 200 shareholders, 2 Directors, and minimum paid up share capital of Rs 1,00,000.

Public Limited Company: A which is not a Private Limited Company in known as Public company. There should be at least 3 Directors and 7 shareholders with a minimum paid-up capital of Rs 5,00,000 . There is no limitation on the maximum number of shares and therefore such company can offer its shares to the  .. 

3. The entire capital of the company is divided into small units known as shares. Each member hold shares in the company are called as shareholders and the ownership is defined by number of shares in the total capital held by any shareholder

4. A company is run by Board of Directors, consisting of directors, which are appointed by the shareholders. Shareholders can themselves become director or they can also appoint any other individual as shareholder. Directors take all the decision related to company

5. Company is treated as an artificial person so that all assets and liabilities are owned by it and not its shareholders.
6. The liability of the shareholders is only limited to the capital to be paid on their shares

7. Registration 

a. Registering authority is Registrar of Companies
b. Minimum registration cost for private company is Rs 5200 and for public , it is Rs 24600
c. Time to Register : 15-20 working day

One Person Company

1. The concept of One Person Company (OPC) has been introduced in India in 2014. A company which has only one shareholder is called as One Person Company.

2. This is a new concept which has come up by the enactment of Companies Act, 2013.

3. This form of business entity is a Private Limited (OPC) in nature.

4. The shareholder must be the Citizen  of India

5. OPC shall have one shareholder, director and minimum paid capital of Rs 1,00,000

6. The shareholder of the OPC has to nominate a nominee who will the shareholder in case of death of the main shareholder or he is unable to enter into any contract.

7. As compared to normal company , OPC have lesser compliances

8. The remaining features of a OPC are similar to the company

9. Registration 

a. Registering authority is Registrar of Companies
b. Minimum registration cost is Rs 4800
c. Time to Register : 15-20 working day

LimitedLiability Partnership (LLP)


1. After company, the world's most recognized form of business i.e. Limited Liability Partnership.

2. A Limited Liability Partnership, popularly known as LLP is a hybrid form of company and partnership. It takes in the advantages of both but leaves disadvantages out.

3. A LLP should have minimum 2 partners and there is no minimum requirement of capital. So you can start with Rs 100 also.

4. In a LLP one partner is not responsible or liable for another partner's misconduct or negligence, this is an important difference from that of an unlimited partnership.

5. Registration 
5. Registration 

a. Registering authority is Registrar of LLP
​b. Minimum registration cost is Rs 1750
c. Time to Register : 10-15 working days

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How to save more taxes, restructure your income to cut tax -Tax consultancy in Mumbai

Patrick Francis earns a good salary, but more than 8% of his gross income goes in tax. If he rejigs his salary structure and avails of the deductions he is eligible for, his effective tax can come down to about 5.5%. Here's how he can save Rs 36,000 a year in tax.

Francis should ask his employer to reduce the fully taxable special allowance by Rs 61,000. Instead, 10% of his basic pay should be put in the New Pension Scheme (NPS) under Sec 80CCD(2). Another Rs 8,000 should be given as meal coupons. Also, the tax-free transport allowance should be enhanced to the maximum Rs. 1,600 a month.

These three steps will cut his tax by Rs 12,600. Francis' senior citizen mother suffers from a neurological disease. Assuming that it is among the diseases specified under Sec 80DDB, he is eligible for a deduction of Rs 60,000.




This will reduce his tax by Rs 12,360. Given that he can invest more, Francis should open an NPS account. If he puts Rs 50,000 in the NPS under Sec 80CCD1b, he can save Rs 10,300. He should also shift from FDs to debt funds to save around Rs 1,000 in tax. 

For more information on tax filling and know how to save tax on your earning please visit by clicking on Chartered accountant in Mumbai  and Tax consultant in Mumbai

source: http://economictimes.indiatimes.com/

Direct Foreign Direct Investment (FDI) in India

After hearing enough rambling on FDI’s and its urgent need to stop Indian rupee fall, one is very curious to know about FDI and trying to understand what qualifies as FDI and what routes are available for them to invest in our country.

Foreign Direct Investment (FDI)

FDI as the name suggests, it is an investment directly made by a foreign company into business in another country. Such investment could be either in the form of business expansion in another country or could be a result of buyout of the company.

Direct Foreign investments in India were introduced by the then Finance Minister Dr. Manmohan Singh in 1991 under Foreign Exchange Management Act to promote such investments thereby increasing supply of domestic capital & increase the economic growth.

As per Foreign Exchange Management Act, ‘FDI’ means investment by non-resident entity/person resident outside India in the capital of an Indian company under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000.

In India, foreign investments can be made through any of the following methods:

1.       Incorporate a wholly owned subsidiary (WOS) or a company

2.      Result of merger or an acquisition of an unrelated enterprise

3.      Acquire shares in an associated enterprise

4.      Participate in an equity joint venture with another investor or enterprise

    Who can invest in India?

1.       A Non-resident entity means a person resident outside India

2.      Non Resident Indian or Person of Indian Origin (PIO holder) or Overseas Citizen of India (OCI holder)

3.      A body corporate means a company incorporated outside India

4.      Foreign Institutional Investor (FII) means an entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the Securities and Exchange Board of India (SEBI) (Foreign Institutional Investor) Regulations 1995.

5.      Foreign Venture Capital Investor (FVCI) means an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI(FVCI) Regulations} and proposes to make investment in accordance with these Regulations

ENTRY ROUTES FOR INVESTMENTS

There are two important routes specified by Government of India through which an investor can apply for FDI. These are “Automatic route” and “Government approval route”.

“Automatic route” means Non Resident entities can invest in the capital of resident entities without the prior approval of Government i.e. Foreign Investment Promotion Board (FIPB), Department of Economic Affairs (DEA), Ministry of Finance or Department of Industrial Policy & Promotion, as the case may be.  Some of the major sectors in which Automatic route is permitted: Agriculture, mining, petroleum and natural gas, manufacturing, information services, trading, e-commerce activities. The investment percentage under Automatic route is permitted depending upon the nature of business.

“Government approval route” means that investment in the capital of resident entities by non-resident entities can be made only with the prior approval of Government i.e. Foreign Investment Promotion Board (FIPB), Department of Economic Affairs (DEA), Ministry of Finance or Department of Industrial Policy & Promotion, as the case may be. The sectors which are not covered under automatic route shall require approval of Government before any investment.

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New Rules for filing Tax Returns in India

New forms, additional information, completely paperless filing.... the Finance Ministry has introduced several changes in the way taxpayers will file their returns this year. As a taxpayer you need to be aware of these changes lest you file an incorrect return that gets rejected or results in a scrutiny notice.

This week's cover story looks at the changes in the tax filling process and documentation and explains what taxpayers need to do. There is also a smart step-by-step guide to tax filing that will ensure an error-free return.

Many taxpayers tend to believe that if they have no tax liability or have already paid all taxes, they need not file their returns. "It does not really matter whether you have paid any taxes or not.

Even if all your taxes are paid through TDS by the employer and bank or you have paid an advance tax, you still need to file returns if your annual income exceeds Rs 2.5 lakh, .But before we get there, let's look at the major changes in this year's tax filing rules

Extended deadline

The filing deadline has been extended to 31 August so you have about six weeks to file your return. But it's best not to delay the process unnecessarily. If you have got all your documents (Form 16 from employer, bank statement, TDS details, capital gains statement) in place, file your return as soon as possible and get over with it. Why delay something that you cannot avoid.

New tax forms

The massive outcry against the mandatory disclosures of foreign trips and dormant bank accounts in the new ITR forms has forced the government to revise them. The revised forms are much simpler and taxpayerfriendly. But though you won't have to fill a 14-page return, the new forms have retained some of changes proposed earlier.

A new three-page ITR 2A form has been introduced for individuals and HUFs who may own more than one property, but do not have any taxable capital gains, income from business or profession or foreign asset and income outside India.

ITR-1 (Saral) can now be filed by individuals even if they have exempt income. Earlier, individuals were not allowed to use this form if they had exempt income exceeding Rs 5,000. However, individuals having agricultural income exceeding Rs 5,000 will still not be able to use Form ITR-1.

E-filing scope widened

One major change is that e-filing is now mandatory for taxpayers who are claiming a refund. Even if their income is below Rs 5 lakh, they still need to take the online route. However, this rule does not apply to super senior citizens above 80 years. They can still file their taxreturns in the physical mode.

However, e-filing has its own benefits. "E-filed tax returns get processed much faster and the refunds gets credited early and go directly into your bank account. The taxpayer can also track the status of processing of his tax return online".

If you are familiar with tax forms and rules, you can file for free on the Income Tax Department website. Some portals also allow free tax filing. Others charge a small fee for guiding you. Take professional help if not sure. It costs a little, but will ensure that your tax return is error-free.

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