Incorporating a company in India

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Starting a Business in India takes some time and involves a lot of paperwork, procedures and costs. Given below is a simplified step by step process for incorporating a business (private ltd. Company) followed in most cities in India.

These are standard procedures but in some cities there are some additional (or lack of) processes that need to be followed.

The costs and time required for each step are averaged and may vary for each city.

The steps are:

  1. Obtaining the Director Identification Number (DIN).
  2. Time: 1 day
    Cost: INR 100

    The company's proposed Indian and Foreign directors must get an identification number – DIN by filing an application form DIN-1 online on the Ministry of Corporate Affairs (MCA) portal.

    The provisional DIN is immediately issued which must be printed, signed and sent for approval along with identity and residence proofs. The approval of all the documents may take about 4 weeks after which the permanent DIN is issued.

  3. Obtaining the Digital Signature Certificate (DSC).
  4. Time: 3 days
    Cost: INR 1,500

    The company must obtain a Class-II Digital Signature Certificate for the use of the new electronic filing system. It can be obtained from a private agency authorized by the MCA. The company directors have to submit the prescribed application form along with identity and residence proofs. Each agency charges a fees ranging from INR 400-2650.

  5. Reserving the company name with the Registrar of Companies (ROC) and getting the Memorandum and Articles of Association.
  6. Time: 2-4 days
    Cost: INR 500

    The Company name approval is done electronically after its availability is checked from the ROC website. A company can give more than one suggested name. A name should be available and conform to the naming standards established by the Company Act, only then it is selected.

    The Memorandum and Articles of Association, vetted by the ROC are received and printed by the company.

  7. Stamping of the company documents at the State Treasury or an authorized bank.
  8. Time: 1 day
    Cost: INR 1,300

    The Company requests for stamping of the incorporation documents and submits unsigned and clean copies of the Memorandum and Articles of Association, and the payment receipt.

    After the documents have been stamped, they must be signed and dated by the company promoters and duly witnessed. It should include all information about the company like name, description of its activities and purpose, number of shares subscribed etc.

    The rate of stamp duty is governed by the Article 10 and Article 39 of the Indian Stamp Act (1899), but varies from state to state.
    • Articles of Association: INR 1000/- for every INR 500,000/- of share capital (or part thereof), subject to a maximum of INR 50,000,000;
    • Memorandum of Association: INR 200;
    • Form-1 (declaration of compliance): INR 100.

  9. Getting the Certificate of Incorporation from the ROC.
  10. Time: 7 days
    Cost: INR 14,100

    The company needs to fill the following forms electronically on the MCA website:

    e-form 1; e-form 18; and e-form 32.The consent copies of the directors as well as those of the signed and stamped form of the Memorandum and Articles of Association must be attached to Form 1.A copy of all these documents must be submitted to the ROC.

    The registration fees can be paid to the ROC by credit card or in cash at a certain authorized bank.
    • The registration fees are decided according to the company’s authorized capital.

    • INR 1, 00,000 or less: INR 4,000. If the nominal share capital is over INR 100,000, additional fees based on the amount of nominal capital apply to the base registration fee of INR 4,000 ranging from INR 300 for capital up to INR 5, 00,000 to INR 50 for capital up to 10, 00,000.

      The Registrar filing fees for the articles and other forms is as:

    • INR 200 for share capital of more than INR 100,000 but less than INR 500,000;
    • INR 300 for a company with nominal share capital of INR 500,000 or more but less than INR 2,500,000;
    • INR 500 for a company with nominal share capital of INR 2,500,000 or more.

    The certificate of incorporation is sent to the company's registered office automatically by rush mail.

  11. Making a seal.
  12. Time: 1 day
    Cost: INR 350

    A company seal is required to issue share certificates and other documents, though it is not legally biding to make one. The cost depends on the number of engraved words, the number of seals required and the delivery time period. The cost may vary from INR 300 to INR 500.

  13. Obtaining a Permanent Account Number (PAN) from an authorized franchise or agent appointed by the National Securities Depository Ltd. (NSDL) or the Unit Trust of India Investors Services Ltd. (UTIISL).
  14. Time: 7 days
    Cost: INR 67

    The Central Board of Direct Taxes (CBDT) proposed the Income Tax Act, 1961, which ensures that each person must quote his or her PAN for tax payment purposes.The PAN is a 10-digit alphanumeric number issued by the Income Tax Department. Form 49A is the PAN application form supplied by PAN Service centers. A certified copy of the certificate of registration, identity and residence proofs is used along with Form 49A for applying for a PAN.

    Processing the PAN application is subjected to a fee of INR 60 + taxes.After obtaining PAN from the Income Tax department, UTIISL or NSDL will print and deliver the PAN card.

  15. Obtaining a Tax Account Number (TAN) for income taxes deducted at source from the Assessing Office in the Income Tax Department.
  16. Time: 7 days
    Cost: INR 57

    Section 203A of the Income Tax Act requires all persons to apply for TAN who deduct or collect tax at the source. This section also makes it mandatory for persons to quote their all tax-deducted-at-source (TDS) and tax-collected-at-source (TCS) returns, all TDS/TCS payment challans, and all TDS/TCS certificates issued.

    TAN is a 10-digit alphanumeric number required by anyone responsible for deducting or collecting tax.Form 49B is used to apply for TAN and is submitted at TAN service centers.The processing fee for TAN applications is INR 50 + taxes.

    After verification of the application, the Income Tax Department issues the TAN.The hard copy of the application must be physically filed with the NSDL after the payment of the processing fee.

  17. Registering under the Shops and Establishment Act with the Office of Inspector.
  18. Time: 2 days
    Cost: INR 6,500

    Under the Section 7 of the Bombay Shops and Establishments Act - 1948, the establishment must be registered as follows:
    • Section 7(4) - The employer must register the establishment within 30 days of the opening of the business.
    • Section 7(1) - The establishment must submit Form A and the establishment registration fees to the local shop inspector.
    • Section 7(2) - The correctness of the statement on the form is audited after Form A and the prescribed fees are received. Form D issues the certificate for the registration of the establishment.

    The fees for the registration of the establishment are as follows:
    • 0 employees: INR 100;
    • 1 to 5 employees: INR 300;
    • 6 to 10 employees: INR 600;
    • 11 to 20 employees: INR 1000;
    • 21 to 50 employees: INR 2000;
    • 51 to 100 employees: INR 3500;
    • 101 or more employees: INR 4500
    For 50 employees the cost will be INR 6,500 (INR 2000 + 3 times registration fee for trade refuse charges)

  19. Registering for Value-Added Tax (VAT) at the Commercial Tax Office.
  20. Time: 12 days
    Cost: INR 5,100

    Form 101 is used for registering for VAT which replaced sales tax from April 1, 2005. The applicant submits to the Sales-Tax Office all the required documents which include:
    • Certified copy of the memorandum and articles of association of the company;
    • Residential address proof;
    • Business place proof;
    • Applicant's recent passport sized photograph.
    • A copy of the pan card and the income tax assessment order.Form 210's payment challan.
    After the verification of form 101 and other documents, a Tax Identification Number (TIN) is generated; this completely registers the company to pay taxes. However, the VAT registration certificate may be received by mail within 10 and 15 days.

    The cost for VAT registration includes a registration fee of INR 5000 and a stamp duty of INR 100.

  21. Registering for Profession Tax at the Profession Tax Office.
  22. Time: 2 days
    Cost: Nil

    Under section 5 of the Profession Tax Act, every employer (not being a government officer) is liable to taxation and shall obtain a certificate of registration using Form 1 from the prescribed registering authority.

    The application should be accompanied by documents such as:
    • Address proof
    • Details of company registration number under the Indian Companies Act (1956)
    • Head office details of the company
    • Company deed and other certificates.

  23. Registering with Employees’ Provident Fund Organization.
  24. Time: 12 days
    Cost: Nil

    All establishments which employ 20 or more persons and engaged in any of the listed 183 industries throughout India (excluding the State of Jammu and Kashmir) are entitled to obey the Employees Provident Funds and Miscellaneous Provisions Act – 1952.

    The applicant needs to provide all necessary information to the concerned Regional Provident Fund Organization (RPFO) in a prescribed manner for allotment of Establishment Code Number.

    It’s compulsory for all eligible employees to become members of the Fund so that they can be provided with individual account numbers. Generally, applicants receive the intimation letter with the code number in 12 to 15 days.

  25. Registering for medical insurance at the regional office of the Employees’State Insurance Corporation (ESIC).
  26. Time: 9 days
    Cost: Nil

    Employer must submit Form 01 to the ESIC (General) for registration.Employer Code Number is issued within a week after which it is mailed to the employer.The registration makes every employer and every paid employee identifiable for insurance purposes and their individual records are set up for them.

    The Employees' individual insurances are a separate process which is initiated by the employer registration process. The employer is responsible for submitting the required declaration form and employees are responsible for providing correct information. The employee temporary cards (ESI Cards) are issued immediately but permanent ESI card may be issued in 4-5 weeks.