Ahlawat & Associates

   In order to provide major impetus to employment and job creation in India, the government liberalized its foreign direct investment strategy in June 2016. Changes introduced in the policy include an increase in sectoral caps, bringing more activities under automatic route and easing of conditionalities for foreign investment. These amendments seeked to further simplify the regulations governing FDI in the country and make India an attractive destination for foreign investors. These reforms have largely remained in place through 2026, with a few further relaxations. Below we summarize the original 2016 changes (many of which remain relevant) and highlight major updates through 2026.  Food Products and Retail Trade In 2016, it was decided to permit 100% FDI under government approval route for trading, including through e-commerce , in respect of food products manufactured or produced in India. The government has continued to allow 100% FDI (under government approval) in...

  For German SMEs eyeing India's booming market, the excitement of new revenues from a new India market entry can quickly turn into a compliance nightmare. Many companies unknowingly create a Permanent Establishment (PE) which is a taxable presence under the Indian law, without ever opening an office. A distributor who negotiates too freely, an engineer visiting too often, a subsidiary used the wrong way: each can silently trigger Indian corporate tax liability stretching back years, with penalties up to 200% (two hundred percent) of tax evaded. What Is a Permanent Establishment Under the India-Germany DTAA? The presence of a PE in India acts as a taxable nexus, triggering source-based taxation — it is the demarcation line between non-taxable and taxable presence. Under Article 5 of the India-Germany Double Taxation Avoidance Agreement (DTAA), in force since 1996, a PE arises through a fixed place of business, a dependent agent, sustained service delivery, or a construction proje...