Saturday, 29 November 2014

Foreign Direct Investment

  • An industrial undertaking, i.e., a company with interests in industry can invest upto 24% equity in a SSI unit.
  • If the equity goes beyond 24%, the industrial unit loses its SSI status.
  • There is no restriction on the extent of equity that can be held by a Non-resident Indian (NRI) as an individual/partner in a SSI unit.
  • Investors need to file an application with the Reserve Bank of India (RBI) in the prescribed format and approval is ordinarily granted within 15 days.
  • For foreign investment outside the automatic route, clearance has to be obtained from Foreign Investment Promotion Board (FIPB).
  • Applications for setting up a 100% Export Oriented Unit are also required to be filed with the SIA.
  • For setting up a unit in an Export Processing Zone (EPZ), application has to be filed with the Development Commissioner of the concerned EPZ.
  • Under automatic procedures, foreign technology agreements are being permitted in respect of industries that are designated as high priority industries.
  • The use of foreign brand names and / or trade mark of goods is also now being permitted freely.

    Automatic permission is given for foreign technology agreements up to certain ceilings covering the same high priority areas.
    No government permission is necessary for hiring foreign technicians and full powers have been delegated to the RBI.

    Further Liberalisation in "FDI"


    It has now been decided by the Government that all companies irrespective of the extent of foreign equity in the shareholding, who have entered into foreign technology collaboration agreements may henceforth be permitted on automatic approval route to make royalty payments at 8% on exports and 5% on domestic sales without any restriction on the duration of the royalty payments. The ceiling on payment of lumpsum fee/ royalty on the automatic route would continue to apply in all cases.
    Earlier only wholly owned subsidiaries were permitted to make payment of royalty at the same rate to their offshore parent companies without any restriction on the duration of the royalty payment.

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