| INVESTMENT INCENTIVES |
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The Government offers many incentives to investors in India with a view to stimulating industrial growth and development. The incentives offered are normally in line with the government's economic philosophy, and are revised regularly to accommodate new areas of emphasis. |
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| Central Government Incentives | State Government Incentives | ||
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Tax Incentives |
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The following are some of the important incentives offered, which significantly reduce the effective tax rates for the beneficiary companies: 1. Five year tax holiday for :
3. Deduction of 30 per cent of net (total) income for 10 years for new industrial undertakings. 4. Deduction of 50 per cent on foreign exchange earnings by construction companies, hotels and on royalty, commission etc. earned in foreign exchange. 5. Deduction in respect of certain inter-corporate dividends to the extent of dividend declared |
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In view of the continuing backwardness of North East region, the need for a new and synergetic incentive package was widely felt to stimulate development of industries. (Hon'ble Prime Minister made a statement at Guwahati on October 27, 1996 that new initiatives would be announced for the industrial development of the North Eastern Region) . Expert groups / committees were constituted by the Ministry of Industry and the Planning Commission to concretize the initiatives. Subsequently, Inter Departmental Meetings were held under the Chairmanship of Member Secretary (Planning Commission) to consider the recommendations and finalise the proposals. Based on these proposals, Government approved the new Industrial Policy and other Concessions in the North Eastern Region which interalia envisage the following: A. Development of Industrial Infrastructure i. Currently the funding pattern of the growth centres envisages a Central assistance of Rs. 10.0 crores for each Centre and balance amount to be raised by the State Government. Government has approved that entire expenditure on the growth centres would be provided as Central assistance, subject to a ceiling of Rs.15.0 crores ii. In respect of the IID centres, the funding pattern would be changed from 2:3 between Government of India and SIDBI to 4:1, and the Government of India funds would be a grant. B. Transport Subsidy Scheme The transport subsidy scheme will be extended further in so far as N E States are concerned, for a period of another 7 years i.e upto 31st March , 2007 being coterminous with the Tenth Five Year Plan on same terms and conditions as are applicable now . C. Fiscal Incentives to New Industrial Units and their Substantial Expansion. i. Government has approved for converting the growth centres and IIDs into a total Tax Free Zone for the next 10 years. D. Relaxation of PMRY Norms The PMRY would be expanded in scope to cover areas of horticulture, piggery , poultry , fishing , small tea gardens etc. so as to cover all economically viable activities . PMRY would have a family income ceiling of Rs.40, 000.00 per annum for each beneficiary along with his / her spouse and upper age limit will be relaxed to 40 years. Projects costing up to Rs.2 lakhs in other than business sector will be eligible for assistance. No collateral will be insisted for projects costing upto Rs.1.0 lakh. Group financing upto Rs. 5.0 lakhs will be eligible. Scheme will have a subsidy component @15% with an upper ceiling of Rs.15,000.00 . The margin money may vary from 5% to 12.5% of the project cost to make the subsidy and margin contribution at 20% of the project cost. PMRY would continue to have Entrepreneurship Training Component as per the existing rate. E. Other Incentives Proposed
i. A comprehensive insurance scheme for industrial units in the North East will be designed in consultation with General Insurance F. Procedure for Release of Assistance Under the New Initiatives. It is approved that the transport subsidy budget may be released by a designated agency on the basis of the recommendation of the S L C. It is proposed that NEDFC may be designated as the nodal agency for release of transport subsidy in N E States. NEDFC may be paid administrative expanses for this service, which may be decided in consultation with IDBI. G. Development of Village & Small Industries (VSI) Sector. Weavers Service Centres (WSCs) in NE region and Indian Institute of Handloom Technology at Guwahati would be suitably strengthened to provide technology and training support to the weavers. National Handloom Development Corporation will give priority in supply of hank yarn to the NE Region. All the four varieties of silk would be covered under the Mill Gate Price Scheme. Priority would be given to the NE region in scheme of setting up of market complexes and permanent exhibition facilities. A new design centre for development of handicraft would be set up in NE region. To up grade the skill of artisan, advance training programme would be organised. New emporia will be set up and financial assistance for renovation of existing emporia would be provided. The Central Silk Board will give priority to NE region in implementation of its scheme. Central Comprehensive Insurance Scheme 1997-Amendment Notification, Dated Aug 1, 2005Tentative List Of Agro - Forest And Gas - Based Industries Appropriate For Development In The North Eastern Region:
1. Fruit and Vegetable Processing |
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The Govt. of India has been operating an Incentive Scheme of reimbursement of expenses of acquiring Quality Management System (QMS) ISO-9000 certification in the Small Scale Sector to the extent of 75% of the amount limited to Rs. 75,000/- to each unit. The scope of this Scheme now has been extended to provide reimbursement of expenses of acquiring EMS -ISO 14001 Certificate. The Salient features of the Scheme are as under:
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The Government has provided a wide range of incentives and concessions to Non-Resident-Indians, some of which are being listed here. It should, however, be remembered that many of the following definitions, rules and regulations are under regular review and the latest position should be precisely ascertained from the concerned authorities. Non-Resident Indians (NRIs) generally fall under the following categories:
The various investment opportunities for NRIs on repatriation as well as non-repatriation basis are as follows: Investment in Non-Resident Bank Account - Non-Resident (Ordinary) (NRO) rupee account The existing accounts of Indian nationals going abroad and gaining non-resident status are automatically designated as NRO accounts. Interest payable on these accounts will be at the same rates as on resident accounts. - Non-Resident (External) (NRE) rupee account NRE accounts were opened to encourage remittances from NRIs. Such accounts opened in Indian rupees and all foreign exchange remittances received for credit of these accounts are first converted to Indian rupees at the buying rates by the banks - Foreign Currency Non-Resident (FCNR) account Such accounts help protect NRIs to some extent against exchange rate fluctuations and permit the acceptance of deposits in designated foreign currencies instead of Indian rupees. - Foreign Currency (Ordinary Non-Repatriable) account Under this scheme, deposits are kept denominated in US dollars for a fixed period varying between six months and three years. Such accounts may be opened in freely convertible foreign exchange transferred from outside India in an approved manner from the country of residence of the prospective non-resident account holder or from any other country. - Non-resident (Non-Repatriable) rupee deposit account The only additional benefit in this account scheme, apart from the ones in the FCNR account schemes, is that authorized dealers in foreign exchange can grant loans/overdrafts in India to deposit holders against security of these deposits without any limit for purposes other than investment. Authorized dealers may allow premature withdrawal and levy penalty for premature withdrawal as per their discretion. Investment in Shares and Other Miscellaneous Facilities NRIs are allowed the following benefits:
To open up more areas for investment by NRIs, OCBs and Foreign Institutional Investors, the RBI has decided to allow them to invest in shares/convertible debentures in all activities, except agriculture & plantation activities, on a repatriation basis, provided the aggregate allocation to NRIs qualifying for the facility does not exceed 24 per cent of the new issue. Investments by FIIs, too, will be subject to the guidelines applicable to them for making investments in the Indian capital market. Acquisition of Immovable Property for Residential Purposes Facility of acquisition of immovable property for residential purposes Investment in immovable property in India is allowed only on non-repatriation basis. Sale proceeds of the property of income earned thereon are not allowed to be repatriated outside India under any circumstances. Renting out temporarily the immovable property acquired for bona fide residential used by NRI citizens would amount to business or commercial activity and no permission for such renting out will be necessary. The rent received in this regard cannot be repatriated and is allowed to be credited to NRO accounts of the owners. NRIs can purchase immovable property in India from proceeds of forming inward remittances or from balances held in their NRE/FCNR or NRO accounts. Gifting of properties by NRIs relatives is freely permitted subject to taxation without prior permission. NRIs will be permitted to acquire up to two houses, provided the purchase is effected using foreign exchange. The required permission for purchase of the house will be given by the Income Tax Department within 15-30 days. Foreign Inward Remittance Payment System (FIRPS) In order to simplify the form and procedures of banks for payment of inward remittances and to ensure that such remittances are received by the beneficiaries with minimum delay and least expenses, the Foreign Exchange Dealers' Association of India (FEDAI) has enolved a common instrument under the FIRPS which can be used by all banks for settlement of payment of foreign inward remittances. FIRPS can be issued only in favour of resident Indians for a maximum amount of Rs.50,000. It cannot be issued in favour of firms/associations/companies, etc. The validity of the FIRPS instruments is three months from the date of issue. Under the system, banks authorized to deal in foreign exchange shall, without delay, convert into rupees, foreign currency remittances received from abroad by telegraphic transfers, pay orders, etc. and issue a FIRPS instrument from any branch of any bank authorized to deal in foreign exchange. This allows for expeditious payments. Facilities to Returning Indians Indian and persons of Indian origin holding a foreign passport residing abroad and desiring to return to India for securing suitable employment or for exploring possibilities of setting up small-scale industrial units in India or for any exploratory purpose are eligible, to avail of the benefits under this scheme.
1 - Such persons shall not be required to surrender their foreign currency balances within 3 months of their return to India as
nationality/origin returning to India, general exemption has been granted to retain all foreign exchange assets such as investments in foreign currency, shares or securities, immovable properties outside India or investment in businesses, etc. outside India, lawfully acquired by such persons. All income by way of interest/dividend, etc. and also the sale proceeds are also exempted from surrender. Pensions received by such persons from erstwhile employers outside India are also eligible for exemption. Setting Up an Industrial Unit in India The Government has progressively liberalized its policies for allowing investments in India by NRIs and they have been provided a range of facilities for direct investments in firms and companies. NRIs and overseas corporate bodies (OCBs) predominantly owned by them will be permitted to invest up to 100 per cent foreign equity in 34 high-priority industries with full benefits of repatriation of capital invested and income accruing thereon. All such business proposals will be automatically cleared by the RBI, subject to the condition that capital goods imports, if any, are met from the NRI's equity contribution. Direct investment by NRIs up to 100 per cent is also welcome in industries other than the 34 referred to above, except the areas reserved for the public sector. However, such proposals will be cleared and processed by the Secretariat for Industrial Approvals in the Ministry of Industry. Investments in industries manufacturing items reserved for the small- scale sector and NRI equity holding up to 100 per cent will also be permitted in hotels and tourism-related industries, hospitals, advanced diagnostic centres, shipping, export-oriented deep-sea fishing and oil exploration services with full repatriation benefits. Equity investment in existing companies through stock exchanges is allowed up to 24 per cent of the equity by NRIs or OCBs controlled by them. NRIs are permitted to make investments in proprietorship/partnership concerns in India on a non-repatriation basis. Similarly, NRIs and OCBs are permitted to invest in new issues of shares, debentures of Indian companies on a non-repatriation basis Loans/Overdrafts Loans/overdrafts in India can be granted by authorized dealers to account holders themselves for purposes other than investment in India, provided the regulations relating to normal margin, interest rate etc. are complied with. Grant of loans/overdrafts for investment in Indian companies requires the permission of the RBI. Authorized dealers have been permitted to grant rupee loans/overdrafts to their NRI constituents against the security of NRE/FCNR fixed deposits for the purpose of making direct investment in India on a non-repartriation basis in the capital of Indian firms/companies engaged or proposing to engage in manufacturing/industrial activities, hospitals, hotels of three- star or higher grades, shipping, computer software and oil exploration services, subject to certain conditions. Repayment of loans granted against NRE/FCNR deposits may be done either from proceeds of fresh inward remittances or by way of adjustment of fixed deposits under NRE/FCNR accounts held as security. Adjustment of loans from a local source requires permission from the RBI. The Government also permits NRIs to transfer shares of Indian companies by way of a gift to a resident in India. Tax Savings
Baggage Rules Used articles of personal wear (excluding jewellary but including not more than one wrist-watch) of a certain value and articles of personal use of passengers (for satisfying daily necessities of life) may be passed free of duty. NRIs can import every six months, 5 kilograms of gold at a nominal duty of Rs.220 per 10 grams of gold. |
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The Government of India has been supplementing the efforts of State Governments for accelerating the industrial development of backward areas and special category states through various policies and packages of incentives. The schemes being currently implemented to encourage disbursal of industries include Growth Centre and Transport Subsidy Scheme Receipts pending in DIPP for processing (simplification of procedure) Following packages of incentives for special category states are being implemented by DIPP: Sikkim Industrial Policy dated 23.12.2002.
Expenditure for North East and Sikkim Uttaranchal & Himachal Industrial Policy dated 07.01.2003. / Corrigendum dated 07-02-2003 / Amendment in the Negative List dated 21-06-2005
For Uttaranchal and Himachal Pradesh please contact :
Under Secretary (Special Packages),
Section Officer (Special Packages), |
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