India budget: new start-up and residency rules a boost for property-seeking expats

New Delhi outlines post-pandemic budget to draw in investment from India's huge non-resident diaspora

Office workers walk past a digital screen showing Indian Finance Minister Nirmala Sitharaman delivering the budget speech in parliament, at the Bombay Stock Exchange (BSE) in Mumbai on February 1, 2021. / AFP / Punit PARANJPE
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In a major push to attract overseas investment, India's federal government has allowed the country's expats to set up one-person companies.

Indian Finance Minister Nirmala Sitharaman announced the move on Monday in parliament in New Delhi, when presenting the federal budget.

She said the move would benefit start-ups and innovators.

The government has reduced the minimum time an Indian entrepreneur has to spend in the country each year from 182 days to 120 days.

Vijay Valecha, chief investment officer at Century Financial, a financial services company, said the decision would benefit Indian expats to conduct businesses in their home country and increase the number of people seeking NRI status.

He described the new budget proposals that allow no restriction on paid up capital and turnover to incentivise incorporation of one-person companies as a major boost for NRI investments in India.

“The move is especially likely to benefit the Indian real estate sector which typically attracts lots of investment and interest from Gulf and Middle East based expat population,” Mr Valecha said.

“Recent price correction in certain pockets of India real estate clusters coupled with the new budget moves would likely act as huge trigger for fresh impetus to this sector. More expat investors are likely to use this opportunity for investing even in smaller amounts at the start.”

The total investments by the India expat population in the real estate sector is expected to exceed $13.1 billion in 2021 marking a 5 per cent annual growth, he said.

“The provision for one-person company will allow many NRIs who want to relocate to India, to start fresh venture and earn a living, while adding to India’s growth,” said Dr Azad Moopen, founder of Aster DM Healthcare.

When the one-person company scheme was introduced in India in 2019, non-resident Indians were excluded.

This refers to a company formed with a single person as a member as against the customary practice of at least two members.

To be eligible, the member and nominee had to be a resident of India living in the country for more than 182 days. This requirement has now been reduced to 120 days that will encourage overseas Indians to enter the market.

Other takeaways for NRIs were elimination of double taxation on foreign retirement funds and a reduction in the time period of tax assessments.

The proposed doubling of healthcare and wellbeing spending to $30 billion and relaxing the investment cap for foreigners in the insurance sector from 49 per cent to 74 per cent were  budget highlights.

“Priority has been given to strengthen healthcare infrastructure and increase access to healthcare facilities, especially in rural areas, which is the need of the hour,” Dr Moopen said.

Dixit Jain, managing director of Tax Experts DMCC, said reducing the time for reopening of tax assessment cases from six years to three years would would reduce litigation and uncertainty.

“It will be a relief to NRIs that we don’t have to maintain the  documents for six years,” he said.

The focus on industries and the agriculture sectors was expected to spur growth.

“If we look at incentives given to healthcare, agriculture sectors and the airlines, they have been given liquidity," he said.

India plans to provide more farm loans worth $226 billion from April to ease farmers’ financial stress.

The government's announcement comes as farmer groups have been camping on border of New Delhi demanding a withdrawal of new laws they say will hurt their incomes.

The budget also announced building 100 airports for regional flights and launch of a flight scheme so farmers could transport their produce with subsidised rates.