Government Incentives, Schemes and Packages for Foreign Direct Investments (FDI) in IT and IT Enabled Services: Best FDI Attorney Advice in India

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“Foreign Direct Investments in India or FDI in India involves a very complex process whereby a lot of statutpry and non-statutory compliances have to be complied with and the same involves an in-depth study of the FDI laws as well as the corporate laws of India. The Government of India and the respective State Governments have come up with several incentives and schemes to attract foreign investments in India and the same are discussed here. The investor before making any kind of FDI in India should always obtain online legal consultation from the best FDI attorney in India or from the best corporate law firm in India to avail correct and relevant information.”

India has established itself as the world’s leading BPM destination, with the IT-BPM industry accounting for 45 percent of overall Indian service exports. With 4.1 million employees, the industry has the biggest number of employers in the private sector. As a result, it is not unexpected that the state has relaxed foreign investment restrictions in order to promote greater FDI in India’s IT sector.

Developments in IT and IT Enabled Services
In 2018-19, India’s IT and BPM sector rose to USD $181 billion. In FY19, industrial exports climbed to USD $137 billion, while domestic revenue surged to USD $44 billion. In FY19, the sector’s exports climbed to USD 137 billion, while domestic revenues increased to USD 44 billion. IT services make up 56.4 percent of overall IT exports. Software and engineering services account for 21.3 percent of overall IT exports. The National Optical Fibre Network seeks to provide high-speed broadband to all 250,000 Gram Panchayats in the country. The Indian IT industry contains about 16,000 enterprises, of which 1,000 or more are significant firms having over 50 delivery sites throughout India. By 2025, the revenue of the Indian Information Technology and Business Process Management industry is expected to exceed USD $350 billion.

Support provided by the Central Government to the IT Industry
The following are the measures that were taken by the Central Government:
1) Infrastructure support: Information Technology Investment Regions have been established by the Department (ITIRs). These areas are well-served by a well-developed infrastructure.
2) R&D promotion: The Income Tax Act allows for a deduction of up to 150 percent of in-house R&D expenses.
The ministry has put in place two main schemes in addition to the existing programme for supporting R&D projects:
a) Encourage the protection of international patents in the fields of electronics and information technology (SIP-EIT).
b) The Multiplier Grants Program (MGS).
3) Tax incentives: The government has taken initiatives over the years to reduce the total taxes level on electronics devices.

Government Schemes in various States especially for the IT and IT enabled Services
Several states in India contribute positively to IT sector and the government has taken up several initiatives and schemes to develop It sector in several states. The Indian government has launched many important measures to develop the IT/ITeS sector in India. In India, both the national and state governments have taken initiatives to build digital solutions to facilitate citizen services. The government is continuing to prioritise hyper-scale computing, blockchain, artificial intelligence, cybersecurity.
Indian telecom service providers (TSPs) are giving 1GB of mobile data for $0.09 or INR 6.7, making it one of the lowest in the world. Digital infrastructure offers easy access to services such as banking, government, and more.

Andhra Pradesh- Having three productive Electronics Manufacturing Clusters, Andhra Pradesh (AP) accounts for 10% of India’s electronic product manufacturing. Furthermore, the state has three IT-specific special economic zones and 4 incubation centres located in the districts of Kailash, East Godavari, Anantapur and, Visakhapatnam,

Delhi- The city is a centre for software companies, which provide solutions including system of document management, enterprise resource planning, software development, SQL server, and management of customer relations.

Jharkhand- To encourage investments in the industry and to promote the expansion of the IT sector, the state has created the Jharkhand IT/ITeS Policy, BPO/BPM Policy, ESDM Policy, and Start-Up Policy.

Uttar Pradesh(UP)- UP Electronics Corporation Limited was formed to promote and grow the state’s IT and electronics businesses. De-Core Science and Technologies, a maker of nano-opto-electronic devices, intends to manufacture LEDs in India’s first sophisticated semiconductor lab in the Noida Special Economic Zone.

Goa- The state is the 4th biggest software exporter, with $4 billion in services exported in 2014-15. According to the state budget for 2016-17, the Government of India approved the state government’s construction of the Electronics Manufacturing Cluster in Tuem by giving the state government with a federal aid of USD $7.6 million.

Karnataka- Karnataka is the largest software exporter in India, the second largest chip design centre, and also the fourth greatest provider to electronic industrial production. Karnataka has emerged as India’s information technology (IT) powerhouse. With IT and electrical goods exports totaling $30.41 billion in 2017-18, the state is India’s top software exporter. It is home to the fourth largest technical cluster in the world.

The above referred list is not exhaustive and in order to know more legal advice should be obtained from an FDI attorney in India who can describe in detail the incentives and schemes available to the investor for making Foreign Direct Investment in India. The best way to go ahead is to opt for is through legal consultation by way of online mode.

Conclusion
FDI promotes growth through increasing technical efficiency and, more broadly, the effectiveness of resources used in the recipient economy, in addition to the first macroeconomic stimulus mostly from real investment. The Central government and the State government has brought up many new schemes and initiatives in order to boast the IT industry.
Authored By: Adv. Anant Sharma & Afsana Khan