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Since you are here reading this article, most probably you have decided to go ahead with company incorporation in India because of availability of economical resources and the huge market.
However, there are some obligations that you must discharge for setting up the entu=ity in India. The Indian company incorporation process is as per the Companies Act, 2013.
Setting up a business entity in India can be less tedious and time-consuming if you let us, a reputed registered filing agent, to assist you. A foreigner wanting to start a business in India need to get help from local business registration provider as they are not allowed to self-register a new company in India. We have an affordable combo incorporation package for you.
Company should be registered in India for following reasons:
- If you want to hire employees in India
- If you are a IT company and want to setup a back office in India
- Want to open a marketing office in India
- Want to open and sales and support office in India
- Want to outsource admin and other back office functions in India
What type of business entity should you form in India?
Type of company depends on the nature of your business.
IT and Manufacturing Companies
Private Limited Company is the best suited and the only option available for IT and Manufacturing companies. Private Limited company can be setup in 15 working days and bank account can be opened in another 15 days. So you can get running in 30 days.
After sales support office
Branch or Liason office is suited for this type of business.
Banking and Airline companies
Branch or Liason office is suitable for this type.
Costs to setup a business entity in India:
Before setting up a company in India its important to consider all the costs associated with setting a company:
Office space rentals in India
The office space rent will depend on the number of employees. Its a bit higher in cities like Delhi and Mumbai compared to smaller cities like Bangalore, Hyderabad and Pune. The rental charges is as follows –
Delhi/Mumbai – USD 150 – 200 per set/month
Bangalore/Pune/Hyderabad – USD100 – 120/seat/month
For virtual office its USD 350/year incase you are just planning to register a company and not hire employees.
Legal fees for company formation in India along with necessary registrations
The legal fees to register a company in India with 2 directors and 2 shareholders is approximately USD 700 including the government fees. Apart from this for tax registrations like GST, professional tax and import export is approximately USD 200 including bank account opening.
Thus the total cost including the necessary registrations in India will be approximately $900 for 1 lakh share capital and 2 directors including the registrations.
Monthly compliance cost including payroll, tax filing and all other mandatory filings
For a company with around 10-20 employees the payroll and other compliance cost will be as follows:
- Payroll for 10 to 20 employees – USD 100/month
- Book Keeping in Quickbooks – USD 200/month
- Audit, Tax Filing and Secretarial compliance – USD 100/month
Taxation in India
With the recent amendments the tax structure in India the income tax rates are as follows:
1) Manufacturing Companies – 17% tax on profits
2) IT Companies – 25% tax on profits
Prerequisites to start in India
- You need to appoint a minimum 2 directors and should be resident of India.
- You can have anywhere between 2-200 shareholders and all can be foreign nationals
- You need a local registered address for company office in India.
- You need to appoint a statutory auditor within 30 days from the date of company incorporation.
- You need paid-up initial capital of minimum S$1.
Basic steps for setting up a business entity in India
Certificate of Incorporation
The Registrar of Companies, i.e. will send an email confirming the successful incorporation of the company. It includes the company registration number. This soft copy is treated as the official certificate of incorporation in India.
Bank Account opening
Opening a corporate account in any of the banks in India is mandatory after company incorporation in India. The major banks you may consider are HSBC, DBS,, Citi Bank, Standard Chartered, HDFC, etc. Nowadays to fulfill the norms of KYC, many banks demand the physical presence of the company stakeholders for opening a corporate bank account.
Obtain Business Licenses and Permits
It all depends on the company’s business activities whether you need to obtain one or more business licenses and permits for your newly incorporated company. It is notable that licenses must be obtained before commencing the business operations. Not all companies require licenses. Luckily, only a few business activities such as restaurants, cleaning business, educational institutes, travel agencies, financial services, import/export of goods need to secure the business license.
Goods and Service Tax (GST) Registration
If the expected annual turnover of your new company is more than Rs 2 Million per annum, your company must register for GST. It is an indirect tax levied on the consumption of goods and services. In many other countries, GST is also called as VAT (Value Added Tax).
After the registration of your new company, you need to take care of following items or documents:
- Company’s Stamp: The company’s rubber stamp is mandatory to certify the company documents company’s document. It has the name and registration number of the company engraved on it
- Share Certificates: The company secretary must issue share certificates to each of the shareholders. It serves as the proof of their ownership in the company and shows how share has been distributed among the shareholders.
- First Board Resolution: The resolution to appoint directors and other company officials like an auditor, the company secretary, etc.
Compliance for India Companies
Each India-incorporated company must fulfil a set of annual filing requirements to stay compliant with the law.
Accounting Requirements: All Indian companies must maintain their accounting books in order. Be it the general ledger, accounts payable and account receivables, or fixed asset ledger; every account must be maintained on a timely basis. The annual financial statement must be prepared and audited by a chartered accountant.
Convening of AGM: It is a mandatory requirement for every company to hold its AGM in every calendar year. The financial statements of the company are tabled for shareholder’s approval.
Annual Returns Filing: Filing of Annual Returns has to be done after one month from the date of AGM of the company.
Corporate Tax Filing: The last dates of tax filing for companies are 30th September
About Rohit Lohade
Rohit Lohade is a Chartered Accountant with 15+ years of experience. He has assisted more than 300 Gobal Companies with India Entry Strategy