Nepal vs. India: Where Should You Incorporate Your South Asia Business?

South Asia is an increasingly attractive region for foreign businesses seeking new markets, affordable operations, and access to high-growth sectors. But one key question for investors is: Should you choose Nepal or India for company incorporation?

While India often steals the spotlight with its massive economy, company incorporation in Nepal offers surprising strategic advantages for specific industries and investment styles. This guide compares Nepal and India on key incorporation metrics—costs, regulations, taxes, labor, and investor experience—so you can make an informed decision for your South Asia expansion.

Overview: Company Incorporation in Nepal vs. India

1. Ease of Doing Business

Nepal:

• Incorporation requires approvals under the Foreign Investment and Technology Transfer Act (FITTA).

• A two-step process: First, investment approval; second, company registration.

• Certain sectors are restricted or conditional for foreign investment.

India:

• Online registration portal (MCA 21) simplifies company setup.

• FDI allowed in most sectors under automatic route, except defense, real estate, and print media.

• Single-window clearances in startup hubs like Bangalore, Mumbai, and Hyderabad.

Verdict: India has a faster and more digitalized incorporation process, but Nepal offers flexibility for long-term investors willing to navigate approval stages.

2. Taxation and Financial Compliance

Nepal:

• Corporate Tax Rate: 20% (general), 25% (financial institutions and tobacco/alcohol)

• VAT: 13%

• Tax Holidays for investments in Special Economic Zones (SEZs) and certain export industries

• Profit repatriation allowed with proper documentation and Nepal Rastra Bank approval

India:

• Corporate Tax Rate: 22% for domestic companies (without exemptions), 30% for others

• GST: 5% to 28% depending on sector

• Special reduced rates for new manufacturing companies (15%)

• Extensive Double Taxation Avoidance Agreements (DTAAs)

Verdict: Nepal offers a lower corporate tax baseline for many sectors, especially for SEZ or export-oriented businesses. However, India's tax framework is broader with more DTAAs.

3. Labor Market and Operating Costs

Nepal:

• Average monthly salary for skilled labor: USD 250–400

• Growing IT, finance, and accounting talent pool

• Strong English proficiency, especially among the younger generation

• Favorable outsourcing destination

India:

• Higher wages, especially in metro cities

• Access to top-tier talent in IT, engineering, and financial services

• Mature startup and innovation ecosystems

Verdict: Nepal is more cost-effective and ideal for labor-intensive services like BPO, accounting, and software development, whereas India offers deeper specialization.

4. Real Estate and Land Access

Nepal:

• Foreigners and foreign companies cannot own land

• Long-term leases available for up to 50–75 years for approved business projects

• Office rentals significantly lower than in Indian cities

India:

• Foreign companies can own land, subject to sector-specific rules

• Higher property and rental costs in Tier-1 cities

Verdict: If land ownership is critical (e.g., for manufacturing or real estate), India is more favorable. For leased office or industrial space, Nepal offers better value.

5. Industry-Specific Opportunities

Nepal:

• Strong in hydropower, tourism, IT/BPO, agro-processing, and education

• Untapped markets and favorable government policies for early entrants

• SEZs with tax holidays and import/export facilitation

India:

• Dominant in fintech, pharmaceuticals, manufacturing, and e-commerce

• Large, scalable market with a strong consumer base

• Global supply chain integration

Verdict: Choose Nepal for lean operations, outsourcing, or sector-specific projects. Opt for India if you're targeting large-scale production, mass retail, or tech innovation.

6. Foreign Exchange and Repatriation

Nepal:

• Must repatriate via formal banking channels with NRB approval

• Requires tax clearance and proof of profit distribution

India:

• Governed under FEMA (Foreign Exchange Management Act)

• Repatriation is allowed for dividends, interest, and capital gains with fewer bureaucratic steps

Verdict: India offers more predictable and structured repatriation, though Nepal permits it with documentation under FITTA.

So, Where Should You Incorporate?

Conclusion

Company incorporation in Nepal is increasingly worth considering in 2025 for foreign businesses that prioritize cost-efficiency, niche markets, and sustainable growth. While India remains a powerhouse for mass-scale and high-tech operations, Nepal presents unique advantages for BPOs, education, energy, and tourism—especially for early movers.

Choosing between Nepal and India doesn’t always have to be either/or. In fact, many savvy investors incorporate in both, using Nepal as a cost-efficient base and India as a scaling destination.