Non-Resident Indians (NRIs) have always been an integral part of India’s economy. Along with large inward remittances, NRIs also bring along skills, vast knowledge and expertise when setting up businesses in India. India received the highest annual FDI inflows of $84.835 billion in the Financial Year (FY) 2022. However, despite their immense contributions, NRIs face several challenges in doing business in India. In this blog post, we will discuss some of the significant challenges faced by NRIs while doing business in India.
Challenges in Doing Business in India for NRIs
Given below are some of the challenges faced by NRIs while doing business in India:
- Opening of Bank Accounts
If an NRI plans to start business in India or receive payments from Indian clients, having an NRO (Non-Resident Ordinary) or NRE (Non-Resident External) account can simplify the financial transactions. These accounts allow NRIs to hold and manage their Indian earnings and repatriate their funds to their foreign accounts if required. However, NRI account opening is a tedious process which can take several days.
If you are an NRI and wish to open an NRI account in India, you can do it with SBNRI app with minimal documentation and in a few steps.
- Process of Incorporation
According to the New Companies Act, NRIs (Non-Resident Indians) and PIOs (Person of Indian Origin) cannot set up a one-person company in India. But, what they can do is become directors of an Indian company. However, the problem of a one-person company is that even though an NRI registers as a Private Limited Company with a minimum of two shareholders, one of them must be an Indian resident. Also, for the resident director to qualify as a director, there are a bunch of rules.
- Issues over the Requisite Documents
Another challenge is getting the Director Identification Number (DIN) and Digital Signature Certificate for NRIs which are necessary for a person to hold the position of a director in a company. To acquire these documents, NRIs must undergo verification and attestation by the Indian Embassy in their country of residence. This procedure necessitates scheduling an appointment with the embassy and ensuring that all documents are correctly attested. Furthermore, in some instances, additional documentation may be requested by the registrar, resulting in the need for a subsequent embassy appointment. This entire process can be both time-consuming and frustrating, as the incorporation process cannot begin until the company receives its DIN. As a result, the company may experience a loss of potential revenue, an increase in opportunity costs, and the immobilization of funds, all of which can create significant pressure and unease regarding operations.
Solution:
The Ministry of Corporate Affairs has introduced a significant development that enables NRIs to commence business plans in the country. This is achieved through the introduction of the SPICe Form (Simplified Proforma for Incorporating Company Electronically). The form eliminates the challenges faced by new entrants who have to apply separately for each new registration. By consolidating the multiple registrations into one, the SPICe form simplifies the process and transforms it from a cumbersome task to an easy one. It offers a convenient option to apply for PAN, TAN, DIN, DSC, and complete all the necessary processes using just one form.
- Address Proof
Having an address proof is a crucial prerequisite for registering a business in India. When planning to commence a business in India, numerous Non-Resident Indians (NRIs) encounter difficulties as they lack address proof such as electricity or gas bills since they reside in other countries.
- Office Set-Ups
NRIs encounter a hindrance in establishing office spaces in India. To tackle this issue, the government has introduced the concept of virtual directors and virtual offices as a solution. These ideas have gained widespread popularity, resulting in an increase in the number of businesses being incorporated in India. Numerous startups now offer to share their office spaces with other businesses for a fee to maintain the space for a specified period.
Conclusion
While starting a business has always been challenging, the initiatives taken by the Ministry of Corporate Affairs have made the process much easier. The introduction of the SPICe form has been a significant improvement that enables NRIs to initiate business in India. It simplifies the process of applying for PAN, TAN, and DIN, thereby streamlining the entire process. Additionally, the government has implemented the option of virtual offices and directors to support the growth of businesses. Despite these developments, however, they are not yet the mainstream solution for NRIs looking to start a business in India.
When incorporating a business in India, it is advisable to seek the guidance of a legal or professional consultant. They possess the necessary knowledge and expertise regarding the process, as well as awareness of the various incentives and initiatives launched by the government.
Contact SBNRI
To get more clarity on how NRIs can operate a business in India in compliance with FEMA and RBI guidelines, you can get in touch with NRI legal experts.
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