Setting up I.T. software and services operations in India by an Overseas Company

No prior permission of the government of india is required to set up i.t./software units in india. moreover, to encourage units in this sector, the government of india has announced many schemes.

Domestic Tariff Area (DTA): The main focus here is to sell in the domestic market in India. The unit can be set up anywhere in India. All normal laws of India apply. No concession is available on import duties. Exports are permitted.

Export Processing Zones (EPZ): These zones are located at various places including Cochin, Falta (near Calcutta), Kandla, Chennai, Noida, Santa Cruz (Mumbai), Vishakhapatnam and Surat. A unit can be set up in these zones subject to the availability of space. No import duty, special 10-year’s income tax holiday are some of the incentives provided. There is no restriction on the quantity of domestic sales.

100% Export Oriented Unit (EOU): Similar to EPZ scheme, except that there is no need to be physically located at an EPZ.

Software Technology Park (STP): A special scheme under the aegis of the Ministry of Information Technology. STPs are located at Noida, Navi Mumbai, Pune, Gandhinagar, Hyderabad, Bangalore, Chennai, Bhubaneshwar, Jaipur, Mohali, Thiruvanathapuram. This scheme offers incentives such as zero import duty on the import of all capital goods, a special 10 years income tax holiday, availability of infrastructural facilities like high speed data communication links, etc.

Special Economic Zones (SEZ): With a view to enabling hassle free manufacturing and trading activity for the purpose of exports, SEZ are being set up. The units in these zones shall not be subjected to any pre-determined value addition, export obligation, input output/wastage norms. They shall be treated as being outside the Customs territory of the country. Sale in DTA by the units in these zones will be permitted only on payment of full customs duty. Initially two SEZ would be set up in the States of Gujarat and Tamilnadu. The existing Export Processing Zones may also be converted into SEZ by the Ministry of Commerce & Industry through issue of a notification.

Kandla, Santa Cruz(Mumbai) , Kochi & Surat EPZs have been converted to SEZ from NOV 1, 2000. Approval has also been given by the Govt for setting up SEZ at Nanguneri (Tamil Naidu) , Positra (Gujrat) , Kulpi(West Bangol), Paradeep(Orissa), Bhadohi (Utter Pradesh), Kakinada (Andhra Pradesh), and Dronagiri (Maharashtra)

Overseas Company
A foreign company is one, which has been incorporated outside India and conducts business in India. These companies are required to comply with the provisions of the Companies Act, 1956.

A foreign company planning to set up business operations in India can do so as under:

• As a foreign company through a Liaison Office/Representative Office, Project Office or a Branch Office. The opening and operation of such offices is regulated by the Foreign Exchange Management Act (FEMA). An approval of the Reserve Bank of India (RBI) is required for the opening of such offices.

• As an Indian company through a Joint Venture or a Wholly Owned Subsidiary. Incorporation of Companies is controlled by the Registrars of Companies in various states in India.