Foreign Direct Investments (FDI) in IT & IT Enabled Services in India-2: Lawyers Advice on Foreign Investments in India | Law Firm for Foreign Investments in India | FDI Attorney in India | India Business Entry | Legal Advice for Foreign Investors in India
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Applicable Laws:
• Government introduced the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 under the Information Technology Act, 2000, which apply to bodies corporate and persons located in India.
• Indian Patent Act,1970- In India, as per the 2002 amendment to the Patents Act “computer programs” per se “were not regarded as inventions”, causing debate on whether a computer program with any added features such as industrial application, would be patentable. It can’t merely be software but it should also have a technical effect to it.
• Copyright Act, 1957- Computer programs / computer databases are protected under Indian copyright laws, it is important to recognize the issues and concept of “work for hire / first owners” the software developed by the employee during his course of employment will make him the owner unless there is a contract that states contrary.
• Consumer Protection Act, 1986- applies to all goods and services, excluding goods for resale or for commercial purpose and services rendered free of charge and under a contract for personal service.
• There are rules and regulations which have to be followed by the investee company while receiving share application money in foreign currency, allotment/ issue of shares to the investor and further transfer of shares to other company. In 2018, RBI introduced an online reporting platform, FIRMS (Foreign Investment Reporting and Management System), for treatment of foreign investment in India in Single Master Form.
Documents and Agreements:
• Registration certificate of the IT company.
• Required documents for registration as IT Park:
a) Occupation Certificate
b) Letter from concerned agency for supply of electricity
c) Progress report
d) Affidavit
e) Copy of Challan
f) IT/ITES Certificate issues by concerned agencies.
Taxation Aspects:
• Taxation in India has been evolving in recent years with a number of cross-border e-commerce models coming under the examination of the Indian tax authorities.
• Various incentives have been presented to Indian technology businesses such as software companies. Although the exemptions available to export oriented units and software technology parks have been removed but the tax holiday available to units set up in special economic zones (“SEZ”) are still obtainable.
• Further, acknowledging the need to reduce burdens on small technology driven enterprises, the central government announced as part of the Budget (2015) that the rates of tax on royalty and fees for technical services under the Income Tax Act, 1961 will be reduced from 25 % to 10 %, in an effort to facilitate the inflow of technology into the country.
Export Potential:
• The USA, UK and EU are the major markets for the IT software/services exports, accounting for 90% of the total IT-ITeS exports.
• Demands from Asia Pacific (APAC), Latin America and Middle East Asia is growing and new opportunities are budding for getting bigger in continental Europe, Japan, China and Africa.
Recent Developments:
• In January 2020, Nippon Telegraph and Telephone, a Japanese tech announced its strategy to invest a major part of its US$ 7 billion global promise for data centres companies in India over the next four years.
• In February 2020, Tata Consultancy Services has contracted worth Rs 10,650 crore (US$ 1.5 billion) from pharmacy company Walgreens Boots Alliance.
• Total export income of the industry is estimated to grow 8.3 per cent year-on-year to US$ 136 billion in FY19.
• In May 2019, Infosys acquired 75 per cent stake in ABN AMRO Bank’s subsidiary State for US$ 143.08 million
Authored By: Adv. Anant Sharma