India is being increasingly viewed worldwide as a market with great prospects across all business sectors. In fact, with every passing day the potential for international business becomes increasingly lucrative. Growing at a rate of more than 7% annually, the international business sector is booming. With budding possibilities along with ample manpower and technology available, India is a fitting arena to explore new international business possibilities.
Before moving on to the laws to be followed while establishing an International Business, let’s first understand the basic definition of International Business. The exchange of goods, services and other commercial transactions that take place between two businesses and individuals belonging to different countries and political boundaries is classified as International Business. Establishing an International Business in a foreign land is not easy. India is a diverse country and there are several factors to be considered, some of which are mentioned below.
Foreign Investment Policy: One of the most important factors to be considered while establishing a foreign business in India is its Foreign Investment Policy. Foreign investment was previously restricted in India, but the economic reforms initiated in 1991 lead to FDI i.e. Foreign Direct Investment into India. The new policy provided approvals for projects with foreign equity participation of up to 51% in high priority areas.
Regulatory Environment: An important aspect to be taken into consideration is the Regulatory Environment. This is further subdivided to cover important factors. Exchange control, Companies Law, Stock Exchange Board of India (SEBI) and Competition Commission of India (CCI) cover the various aspects that protect all the parties involved.
Business Presence in India: This deals with different forms of business entities present in India. Foreign Companies are segregated into two main divisions. The first one is operating as a foreign company and the other is establishing an Indian company. These two options encompass several sub-types.
Tax Environment: Knowing the Tax Environment is probably the most important aspect of conducting International Business successfully. Tax is an extensive subject and covers a lot of factors. Constitutional Provisions and Tax legislation are some of the things to consider. Direct and indirect taxes along with Corporate Tax Rates are also important pointers to keep in mind. India has a federal level Income Tax structure governed by the provisions of Income Tax Act, 1961. Tax rules are subjected to change and an International Business entering the local scene should be thoroughly aware of the current tax rules.
Besides the above four aspects, being aware of international arrangements is also necessary. Keep yourself updated regarding recent tax and regulatory changes, for this is extremely important to know. Keeping all these factors in mind, grow your business in foreign lands and know that the world is yours if you know how to grow your International Business the right way.
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