A very stringent adherence is observed in India when it comes to laws pertaining to cross border transactions. Especially in a country like India, where capital is not readily available, Foreign Direct Investment plays a crucial role in funding our companies. For example, the recent investment by Facebook (USD 5.7 billion) and Google (US 4.5 billion) in an incumbent company like Reliance Jio or Amazon’s investment of USD 10 billion in its Indian subsidiary were a great boost to the Indian economy and for employment.
FEMA compliances are complicated and arcane and if not handled with the utmost diligence, then there are good chances that you might end up in some undesired consequences like penalty or in some cases, even scrutiny.
Common FEMA Compliances
- Filing yearly return for Foreign Liabilities and Assets (FLA)
- Annual Performance Report (APR)
- External Commercial Borrowings
- Single Master Form
- Advance Reporting Form (ARF)
- Form FC-GPR
- Form FC-TRS
- Form ODI
How Foreign Companies can Operate in India
First of all, the Indian organisation needs RBI approval. If the US counterpart is a JV or a WOS, then RBI approval may not be required. Though, if the Indian organisation is pumping investment in the US counterpart in the arena of financial services, prior approval of RBI as well as from the concerned regulatory authority in the US is needed.
Once done with all the formalities like to the incorporation, the company needs ITIN and EIN. Let’s not forget annual tax filings and maintenance of books for accounts. The US also levies 15 per cent “branch profits” tax on Indian companies. For the initial taxation and investment purposes in order to acquire fixed assets, real estate, and maintain liquidity, cash flow needs to be established between the parent company and the US subsidiary within the framework of Liberalised Remittance Scheme (LRS) and ODI policies.
Complying with FEMA and LRS provisions can be a complicated and tedious task. There are issues like multiple tax jurisdictions, remittances limit, prior RBI approvals, etc. On top of it, cross border transactions are heavily scrutinised by the governments nowadays, thus one mistake can even attract criminal liability and at the very least, penalties of thousands of dollars.
Thus, it is important to have experienced professional with you from the outset who can smoothly walk you through the complex yet important transactions. USAIndiaCFO is a confluence of CAs and CSes with 10+ years experience in the arena of finance. We have a nationwide as well as an international clientele comprising of offline companies, tech startups and individuals. We have helped them with their international financial issues, from accounting to taxes to complete the business setup.
To know how can we add value and implement our innovative solutions in your business, give us a ring at 7727887799 (also available on WhatsApp) or drop us an email at firstname.lastname@example.org with all your queries and our team will reach out to you within 2 hours.
We take care of your FEMA compliances, along with a range of other services to take full accountability as the virtual CFO to your business.
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