Setting up a business in India Key immigration and cultural considerations

Setting up a business in India: Key immigration and cultural considerations

Setting up a business in India: Key immigration and cultural considerations before you leave

Having the world’s tenth largest economy by nominal GDP and being globally recognised as a centre for information technology and other rising market sectors, India is increasingly becoming a very attractive place to start or expand a business.

However, planning and organisation is crucial before successfully establishing a company in India, particularly in relation to remaining compliant with immigration laws and understanding the local culture. Hudson McKenzie assists entrepreneurs and companies of all sizes establish themselves in India. Based upon our experiences we have provided some preliminary advice below.

Cultural aspects people should be aware of when starting business in India

Due to a shared history between the UK and India, both nations largely have an understanding of the cultural ins and outs of doing business together and benefit from this close historic relationship.

In general, Indian businessmen prefer to form a relationship with someone before they enter into business together. These relationships are built on mutual respect and trust, so using common connections to make introductions is often the best way to meet with the people you would like to engage in business. For this reason, time and care should be taken to get to know people and develop relationships. You should not expect decisions to be made fast. Also, do not expect to talk business immediately at the start of your conversation.

The traditional Indian business structure associated with hierarchical, family-run businesses still dominates the Indian economic landscape, but some emerging industries are practicing western management styles. In negotiations, decisions are generally made at the top level.

India has many languages and cultures, and many customs are unique to certain ethnic or religious groups. It is very important to show respect to senior and older people. Religion is also very important in India, so you should be aware of this and take the trouble, for instance, to check on particular local religious festivals and customs.

 Business visa or work permit – which is required?

Sending employees to India from the UK to meet clients, visit colleagues or for other business purposes can be very beneficial for a business, but it can also cause a headache when deciding which visa is required for each business trip and costly if punished for an incorrect decision.

The length of the trip and the scope of activities undertaken are key when considering these two Indian visa options. Business visitor visas (B visas) are granted to individuals carrying out permissible business activities for visits with a maximum duration of 6 months. Permissible activities include attending conferences, visiting customers, attending meetings, negotiating contracts, purchasing or selling commercial or industrial products and other legitimate activities of a commercial or professional nature. When used properly, business visitor visas are a valuable resource for an employer sending an employee to India because it effectively bypasses the red-tape and costs typically associated with work permit applications.

If the intention of a business visitor is to undertake activities outside the prescribed permissible activities for a business visitor visa, then it is likely that you will need to obtain a work permit (E visa). This visa option will take longer to apply for, but it will give you a much larger scope of permissible activities once there.

Key advice to consider when applying for a work permit in India:

  • In order to be granted a work permit, an applicant must have a sponsoring entity in India. Therefore a company should already be established in India before sending an employee on a work permit to conduct business.
  • The applicant will need to apply for a work permit to the Indian diplomatic post in their country of citizenship, rather than their country of current domicile unless the applicant has resided there as a permanent resident for at least two years. This is important to consider when a company wants to send an employee who is working for the company as a foreign national in their current office location.
  • There are certain criteria that need to be satisfied before an Indian work permit is granted. These criteria include a salary of at least $25,000, educational qualifications, work experience, technical qualifications and/or specialist skills qualifying the applicant for the proposed role. Applications are subject to pre or post verification checking to see whether any adverse information is available or not, so it is important not to embellish information because the consequences for the employee and employer can be severe. An example of this can be seen when our firm was recently contacted by an individual who was a junior employee for a British company and had overstated his experience and qualifications when making an application for a work permit in India. The Indian authorities became aware that he was furnishing false information, cancelled his work permit application and blacklisted him, which banned him from future entry into India.
  • Foreigners entering India on a work permit which is longer than 180 days duration are required to register with the local Foreigners Regional Registration Officer (FRRO) within 2 weeks from the date of arrival. This is a very important requirement to adhere to because failure to do so is a serious breach of the rules set out by the Indian authorities.
  • As shown by the example above, non-compliance with India immigration rules can create serious consequences. Employers caught by the Indian authorities employing a foreign worker who does not have the requisite work authorisation can be forced to pay large fines. Foreign workers who do not comply with the immigration or tax laws of India can be detained, deported, fined or imprisoned, therefore being aware of the rules and remaining compliant is imperative.

With all of this this in mind, India does offer attractive opportunities for entrepreneurs and companies looking to expand into the country, but employers and employees must be careful to avoid complacency of their compliance with local immigration laws, or they can face serious consequences.