Foreign Direct Investments (FDI) in Education Sector 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:
• Right to Education Act, 2009: This act recognizes a right to free, compulsory primary education for all, an obligation to develop secondary education accessible to all.
• Companies Act, 2013: The Act regulates the formation, financing, functioning and winding up of companies. The Act contains the mechanism regarding organizational, financial, and managerial, all the relevant aspects of a company.
• Foreign Exchange Management Act, 1999: The main objective is of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
• Income tax Act, 1961: This act levies, administrates, collects & recovers Income-tax in India
• Conditions imposed under the various approvals obtained from regulatory authorities (such as University Grant Commission (UGC), All India Council for Technical Education (AICTE), study professional councils, state boards etc.).
Documents and Agreements:
• Memorandum of Association
• Details of land/building
• Project report of proposed school
• Experience of society/members in the field of education
• Auditor’s statement of account(s)
• Staff statement as Performa etc. along with essentiality certificate (EC)
Functioning and Management:
• The focus is on the effectual management of the staff, resources and the information that is provided by the institutions.
• The infrastructure should be used with utmost care and there should be clarity in documentations of such.
• Transparency should be maintained for any institutions aiming to get a bigger hold of the market.
• The resources provided by the foreign entity used for land/building or any other such facilities which aids the process of learning should be meticulously recorded and kept for future reference.
Taxation Aspect:
• Tax implications under the Income Tax Act, 1961 will have to be kept in mind to understand the nature of the entity. A Foreign organization intending to provide services through an education services company will be subject to taxation provisions as applicable to a corporate entity in India. Service tax will be levied for the services provided by the Foreign Institution.
• Non-residents are taxable only on earnings that is:
a) Received or deemed to be received in the country; or
b) Accrues or arises or is deemed to accrue or arise in the country.
• In case of a foreign investor being situated in a jurisdiction with which India has a double tax avoidance agreement (“DTAA”), the provisions of the Income Tax Act will be subject to relief under such agreement.
Export Potential:
• Various initiatives have been adopted to boost growth of distance education market as well as various education techniques like E-learning and M-learning.
• An improved financial outlay with an increase in human resource has gained significance in overall development of education sector and has increased the education infrastructure in the current decade.
Recent Developments:
• Department of Promotion of Industry and Internal Trade released the data that the total sum of Foreign Direct Investment (FDI) inflow into the education sector in India stood at US$ 3 billion from April 2000 to December 2019.
• Harappa Education raised amount from James Murdoch-led Lupa Systems in a funding round.
• Unacademy raised US$ 110 million from investing companies like Facebook and General Atlantic
• Maharashtra International Education Board (MIEB) has collaborated with Google for imparting Education.
• Qatar sovereign fund led investment round that raised US$ 150 million in Byju’s.
• Vision Digital has launched online course with the goal to bring digital education to 1 lakh students in the coming future.
Authored By: Adv. Anant Sharma