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NRI Problems: Why more companies have set up shop in India

H.P. Ranina/Dubai
Filed on July 18, 2021
Companies engaged in food and beverage are among the sectors that have boomed in India.

(Reuters)

New firms at around 150,000, 43% more than number of companies incorporated in previous financial year


With the Covid pandemic going through different waves, has there been any adverse impact on new businesses and startups?

Surprisingly, there has been an increase in economic activities, which is reflected in the large number of new companies that have been incorporated in India during financial year 2020-21. New companies that have been floated during this year are around 150,000; this is 43 per cent more than the number of companies incorporated in the previous financial year ended March 31, 2020. The new companies that have recorded substantial growth are in the fields of education, health and social services, food products and beverages, and activities allied to the agricultural sector. Companies in the entertainment and sports space recorded a four-fold increase.

One of the reasons being given for this positive trend in incorporating new companies is that highly-skilled employees who were earlier in full-time employment have turned entrepreneurs to take advantage of the new opportunities, which are created in the fields of education, healthcare, food processing and agricultural activities.

Independent directors are greatly in demand in India, which gives an opportunity to many NRIs who have worked in multinational companies to return to India and take up this position after retirement. What is the basic qualification required for this post and what steps need to be taken by a listed company while appointing such a person?

The Securities and Exchange Board of India requires the Nomination and Remuneration Committee (NRC) of the board of directors to determine the skills required for appointment of an independent director, which needs to be disclosed to the shareholders and the public at large. The NRC has to further disclose how the candidate who is appointed as an independent director fits into this skillset.

Listed companies are now required to pass a special resolution for appointing an independent director, which means that 75 per cent of the shareholders should approve such an appointment. Hence, non-promoter shareholders would now have a greater role to play in such appointments. In case the independent director resigns, the company is required to make public such a director’s letter of resignation. The demand for independent directors will now increase because two-thirds of the members of the NRC as well as the audit committee should comprise such directors.

My mother is in India and she is suffering from cerebral palsy. My brother who is working in India is looking after her medical needs and spending money on her. I also send money from time to time towards her medical expenses. I earn taxable income in India by way of rent from a house that I have temporarily let out. I am told that there is a deduction available under the tax law in respect of which I need some information.

Under section 80-DD of the Income-tax Act, where an individual incurs any expenditure for the treatment of a dependent person who has a disability, he would be entitled to claim a deduction of Rs75,000 from his gross total income. Hence, your brother, who is working in India, will be entitled to claim the medical expenses which he incurs on his mother as a deduction from his taxable income.

If the expenditure has exceeded Rs75,000 during a financial year, the deduction would be restricted to Rs75,000. Since your mother is suffering from cerebral palsy, it would be treated as a severe disability. In that case, your brother would be entitled to a deduction of the expenditure incurred by him to the extent of Rs125,000. In other words, for a severe disability as defined under a special law, the limit of deduction is increased from Rs75,000 to Rs125,000. However, this benefit of deduction is available only to a person resident in India. Since you are non-resident under the Indian tax law, you will not be entitled to the deduction under section 80-DD against your rental income, which is taxable in India.

H.P. Ranina is a practicing lawyer, specialising in tax and exchange management laws of India





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