Doing Business in India 2018
Foreign companies and employees intending to start work in India must abide by the rules and regulations regarding registration equally. The following article focuses on the framework for foreign employees in India, ranging from visa application to registration, PAN and Aadhaar card.
In this guide, we consolidated our knowledge to give you a brief summary of doing business in India wherein you will find guidelines on obtaining Visa, Registration, PAN and Aadhaar.
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One preliminary advice that should generally be followed in India: Contracts should always be signed on every single page by all contractual partners, including the company’s stamp for business contracts.
In order to obtain an Employment Visa for India, the following documents and information have to be submitted to the Indian Embassy or the respective Consulate, with a visa agency acting as the first point of contact:
- The Official Application Form, accessible via https://indianvisaonline.gov.in . Though chronologically this step comes last, it forms a central component of all steps; hence, it is mentioned beforehand. The application form has to be submitted electronically, as well as in print. Personal information has to be provided, as well as specificities about the future employer, e.g. Provident Fund Number. The printout hast to be submitted to the visa agency, along with supporting documents and 2 passport pictures (5 x 5 cm).
- A Letter of Undertaking, addressed to the Indian Embassy. It has to contain the details of the applicant, a description of the offered position, as well as a guarantee that the company takes full responsibility for the employee during his/her entire stay in India and will repatriate him/her in case of any kind of misbehaviour violating the employment contract or Indian law.
- The Employment Contract has to be comprehensive, unlike brief appointment letters that are commonly drafted in India with reference to general HR guidelines. The annual salary has to be at least equivalent to 25,000 US Dollars in Indian Rupees (INR). For the registration later in India, it is in turn necessary to provide an employment contract which mentions at least 1.625.000 INR annual salary. So, both currencies have to be mentioned in the contract.
- Certificates of university degrees and further education, along with recommendation letters from former employers, which verify the applicant’s qualification(s) for the offered position. Jobs are generally not given to foreigners if there is a matching Indian citizen who is at least equally qualified. In case of doubt, the embassy may demand further details on the applicant’s particular qualification for the job. Should this not be convincing, the application may be declined.
- A Handwritten Motivation Letter in which the job applicant describes the targeted position, including the annual salary, and declares that the company has agreed to the mentioned remuneration, ensuring his/her livelihood in India. This is a rather new requirement for obtaining an employment visa.
Registration with the Foreigners Regional Registration Office
Foreigners are required to register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival in India. And until recently, they needed to do so by filling out a form online and then physically appearing at the FRRO, delays were fined at 1.800 INR. On top of that, latecomers could expect a scolding from officials, as well as having to furnish a handwritten explanation and apology for delay. Given that the first days in India can be particularly hectic and exhausting (e.g. finalizing accommodation etc.), it was quite likely to exceed this two-week deadline. The above mentioned fine may therefore have been a welcome source of income. However, since February 2018, FRROs in Bengaluru, Chennai, Delhi and Mumbai have introduced solely electronic registration and it is expected that this practice will be extended countrywide. The following forms and documents have to be submitted electronically:
- The FRRO Application Form, as mentioned in https://indianfrro.gov.in/eservices/home.jsp . Again, this is theoretically the last step that should follow after all relevant documents have been compiled. However, it is the crux for registration in India. Once all relevant documents are submitted, the applicant ideally receives the Residential Permit (RP) soon thereafter electronically and via post. A copy of this RP should be carried along during all trips out of India, since it can be demanded during passport inspections. Visiting the FRRO is generally not necessary anymore, unless it is specifically demanded. The following documents have to be submitted electronically:
- The Passport - first page and visa.
- A passport picture.
- The Employment Contract, including the already mentioned minimum 1,625,000 INR annual salary.
- A Request Letter, issued by the company to the FRRO, asking for the registration of the employee. It should mention the passport and visa details, as well as place of residence. This letter has to be signed by an Indian national.
- The company’s Registration Certificate with the Registrar of Companies (RoC).
- The company’s Memorandum of Association (MoA).
- The company’s Permanent Account Number Card (PAN Card).
- The Rental Agreement on e-stamp paper, which serves as verification.
A new visa and registration is required in case a foreign employee changes jobs in India. Copies of the PAN card and the income tax form 16 have to be additionally submitted. In case this form is not available yet, form 26 AS can be submitted. With this, the Aadhaar card may also be requested in the near future (Information about this ID card can be found in the section below).
Generally, the foreign employee’s landlord also has to register the new tenant with the FRRO as well as with the nearest police office. The FRRO can also request a home visit to conclusively confirm the information given by the foreigner.
Concerning the rental agreement, it can be beneficial to limit the duration to 11 months and prolong it accordingly. Agreements for longer periods have to be registered separately which involves considerable cost and public office visits.
Every taxable employee and company has to apply for a Permanent Account Number at the Income Tax Department. It is provided in form of a card, which also contains the applicant’s name, the father’s name (being quite common in India as is also required in the FRRO application), birthdate and a profile picture.
The company must apply for the PAN card on behalf of the employee. In reference to rule 114 of the Income Tax Rules of 1962, it has to be confirmed that the foreign employee is working for the company, as along with the the starting date. The letter must also include the place of residence, registration number and PAN of the company, as well as the PAN of the undersigning supervisor. Copies of the passport, visa and residential permit are also needed to complete the application.
The Aadhaar card implementation involves the creation of the world’s largest biometric database. What started as voluntary registration in 2009, with the primary goal of preventing misuse of welfare schemes, has by now become de facto mandatory for Indian citizens and foreign residents in India. Around 1.2 billion individuals are already recorded in the database.
Since it is already mandatory in many cases to submit one’s Aadhaar number for obtaining various services and products like SIM cards and bank accounts, it can be expected that foreign employees won’t be able to get around registering with the Aadhaar authorities in the future. This is quite foreseeable, although concerns especially about data security are raised from various sides with the Supreme Court currently dealing with the matter.
Applications can be done at the nearest public office, responsible for foreign nationals. Name, fingerprints, photo and iris-scans are required for registration as well as the Passport, PAN Card and Residential Permit. After a few weeks, the applicant should receive a unique 12-digit number and the Aadhaar card in electronic form as well as a printed version via mail soon thereafter.
Currently, regulations indicate that foreign nationals need to have spent at least 182 days during the last 12 months in India, in order to be eligible for an Aadhaar card. This can of course be quite an obstacle - for instance, when a bank account needs to be set up quickly for receiving salary and the concerned bank insists on Aadhaar verification. An amendment to this regulation should be expected in this regard.
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