Investing in India: A Guide for Foreigners

1. How to Invest in India: The Complete Guide for Foreign Investors India is among the fastest-growing and most populous economies in the world, whose GDP growth rate is over 6 percent and whose population is over 1.3 billion. A look at India as an investment destination can be quite attractive to investors because of the many opportunities the country opens up to investors as well as the beauty of diversifying portfolios. Investing in India is more difficult compared to investing in other Asian countries because of some restrictions, regulations, and challenges that exist for foreign investors. In this blog post, we will cover the following aspects of investing in India: • Investing in India: the cost and benefits • Various forms of investment accessible to foreign investors • India's investing steps and requirements • Tax consequences and incentives for foreign investors • The best investment tips and resources for India Benefits and Risks of Investing in India Investing in India can offer several benefits for foreign investors, such as its most salient feature. • Access to a big and growing market with increasing middle-class and consumer demand• Experience with a diverse and rapidly changing anti-crisis economy with multiple sectors and industries • A labour force available at a low price, especially skilled English-speaking and IT ones. • Potential for high returns and capital appreciation as India is expected to be the third- largest economy by 2030. • Chances of the company utilising different government programmes and projects related to business environment transformation and FDI promotion. However, investing in India also comes with certain risks and challenges, such as: • In India, with problems ranging from corruption, poverty, and inequality to communal violence and political and social instability • Regulatory and bureaucratic barriers due to the fact that India has complicated as well as changing laws and policies that influence foreigners • Currency and inflation risks such as the Indian rupee are unstable and subject to depreciation, and the inflation rate is quite high.

2. • Infrastructure and logistics snags affect India given its poorly designed and inbuilt roads, railway, water, port, and electricity power systems. • Competition and protectionism due to India being large and diverse with many local and regional players, as well as certain sectors being reserved for Indian companies or subject to foreign ownership limits, Consequently, foreign investors must thoroughly research and carry out due diligence before investing in India, scrutinising the merits and demerits of each investment option. Types of Investments in India Foreign investments in India can be made through several channels and instruments that suit the objectives, preferences, and risk tolerance of the investors. Some of the most common types of investments in India are: Stocks: Foreign investors are able to purchase shares of Indian companies that are listed on the stock exchanges, e.g., the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Nevertheless, they cannot trade directly on the Indian stock market, and they have to use the FPI route, which requires registering with SEBI and meeting its disclosure and investment limits. They can rather invest in shares of Indian companies through exchange-traded funds (ETFs) or depository receipts (DRs) that are listed on foreign exchanges, such as the iShares MSCI. India ETF (BATS:Inds) or Infosys (NYSE:INFY) MD Bonds: The kinds of debt securities that foreign investors can invest in include government bonds, corporate bonds, debentures, and commercial papers issued by the Government of India and corporate entities. They need to avail of the FPI route and meet SEBI and RBI terms and limits. Alternatively, they can invest in Indian bonds through ETFs or DRs that are listed on foreign exchanges, such as the iShares India 50 ETF (NASDAQ:INDY) or the HDB DR. Real Estate: Foreigners can also invest in the Indian real estate market, which provides advantages such as rental income, value appreciation, and diversification. Notwithstanding the fact that they can own residential or commercial properties in India, they have to be developed and ready for occupation. Besides that, they need to follow the FEMA and RBI norms and regulations like minimum area, lock-in period, and repatriation of funds. Alternatively, they can invest in Indian real estate through REITs or joint ventures that are listed on the Indian or foreign exchanges, such as the Embassy Office Parks REIT (NSE:Either the Singapore Embassy or the Ascendas India Trust (SGX:CY6U).Business: Foreign investors are allowed to setup a new or acquire an existing venture in India so that they can have a higher degree of control over their investments. Nevertheless, they have to comply with the FDI policy and provisions, which change depending on the sector, activity, and ownership structure. They also take into account the legal, regulatory, and operational issues of doing business in India, for instance, incorporation, taxation, labour, and compliance. Another option would be for them to invest in Indian entities through venture capital or private equity funds that are regulated and registered by SEBI, e.g., Sequoia Capital India or Matrix Partners India.

3. Steps and Requirements for Investing in India The bounds set for investment in India are based on the investment type and mode of investment opted for by the foreign investor. However, some of the general steps and requirements for investing in India are: •Opt for an investment alternative that defines your objectives, tastes, and risk propensity. •Do the study and analysis of the market, the sector, and the company that you are going to invest in. •Register and get the necessary approvals and permissions from the concerned authorities, e.g., SEBI, RBI, FEMA, and FIPB. •Open a bank account and a demat account with a bank and a depository participant in India that are authorised. •Transfer funds and execute transactions through the designated channels and intermediaries like brokers, custodians, and banks. •Monitor and control your investment portfolio and those results. •File and pay taxes on your income from investments and capital gains both in India and your home country. •Bring back your funds and profits to your home country, but in compliance with the relevant regulations and limitations. Tax Implications and Incentives for Foreign Investors The tax implications and incentives for foreign investors are dependent on the form or nature of income, the length of the investment, whether the investment is in the form of a portfolio investment or a direct investment, and the tax treaty between India and the investor's home country. However, some of the general tax implications and incentives are: •Indian dividend income from stocks or bonds is typically exempt from tax in India, but it is normally taxable in the investor’s home country. •Interest earned on Indian bonds and deposits is subject to withholding tax at a rate of 5%–20%, which is determined by the type of bond and tax treaty. •The capital gains arising from the sale of Indian stocks or bonds are taxed in India at a rate of 10%–40%, depending on the type of asset, holding period, and the tax treaty. •Income from Indian properties received as rents is taxable in India at the rate of 30%, net of standard and municipal deductions. •The Italian income from the Indian entities is subject to Indian income tax in accordance with the Indian tax rate of 25% to 40%.

4. •Foreign investors have the choice of making a deduction or tax credit against the taxes paid in India in their home country, where applicable. •Apart from Indian investors, foreign investors can also avail of various tax incentives and benefits provided by the government to certain sectors, activities, and regions, which include special economic zones, infrastructure, startups, etc. Tips and Resources for Investing in India Investing in India can be rewarding but also difficult and risky. Hence, foreign investors have to be knowledgeable and well-equipped before investing in India. Some of the tips and resources for investing in India are: •See the professionals and consultants who can direct you through the legal, regulatory, and tax aspects of investing in India. •Diversify your positions in different asset classes, sectors, and regions to reduce your risk and your exposure to one market or one factor. •Do your homework on the market, sector, and company you want to invest in, and watch out for scams and frauds. •Stay in touch with economic, political, and social changes and developments in India so as to understand their impact on your investment. Conclusion: India is an immensely capable country in terms of economic growth, innovation, and social development. It provides ample space for multinational investors who want to cash in on vibrant and varied economies. Yet, investing in India is not without its challenges and risks. It is very important for foreign investors to take care of legal, regulatory, and tax aspects before, during, and after their investment decisions. Not only that, but also cultural and political factors should be kept in mind. We strive to help you achieve your investment targets in India. Our capable and experienced consultants are at hand to walk with you through all stages of your investment process, from market research and analysis to legal and tax compliance and beyond to property management and business development. In addition, we can get you involved with our affiliate network both locally and internationally, which will give you the best deals and opportunities in the area. If you want to find out how to invest in India. Contact us, Invest in India and be sure of your tomorrow.