How to do business in India

Very frequently asked question from visitors, especially NRIs and foreigners, who want to start Business in India.

Here is a detailed standard procedure (Followed in the most of the cities, in some cities there may be some more or less processes) will take to start business in India, the paperwork involved and procedures for starting a company in India.

Steps involved in starting business in India

Registration Requirements:

1. Director identification number (DIN) by applying online from the Ministry of Corporate Affairs portal (National)
2. Digital signature certificate by applying online from agency authorized by the Ministry of Corporate Affairs (National)
3. The company name can be reserved by applying online with the Registrar of Companies (ROC) (National)
4. Stamp the company documents at the State Treasury (State) or authorized bank (Private)
5. The Certificate of Incorporation from the Registrar of Companies, Ministry of Corporate Affairs (National)
6. Make a seal (Private)
7. Get a Permanent Account Number (PAN)
8. Get a Tax Account Number (TAN) for income taxes
9. Registration with the Office of Inspector, Shops, and Establishment Act (State/Municipal)
10. Registration for Value-Added Tax (VAT) at the Commercial Tax Office (State)
11. Registration for Profession Tax at the Profession Tax Office (State)
12. Registration with Employees’ Provident Fund Organization (National)
13. Registration for medical insurance at the regional office of the Employees’ State Insurance Corporation (National)

Detailed Steps and Explanation of procedure to start Business in India

Procedure 1: Director Identification Number (DIN)

• The process to obtain the Director Identification Number (DIN) is as follows:
• Provisional DIN by filing application Form DIN-1 online. This form is on the Ministry of Corporate Affairs 21st Century (MCA 21) portal. The provisional DIN is immediately issued.
• Printed and signed application need to send for approval to the ministry by courier along with identity and address proof:
  1. Identity proof (any of the following):
     • Permanent Account Number card,
     • driver’s license,
     • passport,
     • Voter card.
  2. Residence proof (any of the following):
     • Driver’s license,
     • passport,
     • voter card
     • telephone bill,
     • ration card,
     • electricity bill,
     • Bank statement
• The concerned authority verifies all the documents and, upon approval, issues a permanent DIN.

Procedure 2: Digital Signature Certificate

The electronic filing system under MCA 21, the applicant must obtain a Class-II Digital Signature Certificate.

• The digital signature certificate can be obtained from six private agencies authorized by MCA 21.
• Company directors submit the prescribed application form along with proof of identity and address.

Procedure 3: Company Name

Company name approval must be done electronically.

• Under e-filing for name approval, the applicant can check the availability of the desired company name on the MCA 21 web site.

1. The ROC in Mumbai has staff members working full time on name reservations.
2. A maximum of 6 suggested names may be submitted.
3. They are then checked by ROC staff for any similarities with all other names in India.

• The MCA receives approximately 50-60 applications a day. After being cleared by the junior officer, the name requests are sent to the senior officer for approval.

1. Once approved, the selected name appears on the website. Applicants need to keep consulting the website to confirm that one of their submitted names was approved.

Procedure 4: Stamp the Company Documents

The request for stamping the incorporation documents should be accompanied by unsigned copies of the Memorandum and Articles of Association, and the payment receipt.

• The company must ensure that the copies submitted to the Superintendent of Stamps or to the authorized bank for stamping are unsigned and that no promoter or subscriber has written anything on it by hand.
• The Superintendent returns the copies, one of which is duly stamped, signed, and embossed, showing payment of the requisite stamp duty.

Once the memorandum and articles of association have been stamped, they must be signed and dated by the company promoters, including the company name and the description of its activities and purpose, father-“s name, address, occupation, and the number of shares subscribed. This information must be in the applicant’s handwriting and duly witnessed.

Procedure 5: Get the Certificate of Incorporation from the Registrar of Companies, Ministry of Corporate Affairs (National)

The following forms are required to be electronically filed on the website of the Ministry of Company Affairs:

• e-form 1
• e-form 18
• e-form 32
• Following must be attached to Form 1

1. Scanned copies of the consent of the initial directors.
2. Signed and stamped form of the Memorandum and Articles of Association

The registration fees paid to the Registrar are scaled according to the company’s authorized capital (as stated in its memorandum):

• INR 100,000 or less: INR 4,000. If the nominal share capital is over INR 100,000, additional fees based the amount of nominal capital apply to the base registration fee of INR 4,000:
• For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 1,00,000, up to INR 500,000: INR 300;
• For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 500,000, up to INR 5,000,000: INR 200;
• For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 5,000,000, up to INR 1 10,000,000: INR 100;
• For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 10,000,000: INR 50.

The payment of fees can be made offline as well as online.

Schedule of Registrar filing fees for the articles and for the other forms (l, 18, and 32):

• INR 200 for a company with authorized 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.

Procedure 6: Make a seal (Private)

Although making a company seal is not a legal requirement for the company to be incorporated, companies require a seal to issue share certificates and other documents.

Procedure 7: Permanent Account Number (PAN)

• Under the Income Tax Act, 1961, each person must quote his or her Permanent Account Number (PAN) for tax payment purposes and the Tax Account Number (TAN) for depositing tax deducted at source.
• The Central Board of Direct Taxes (CBDT) has instructed banks not to accept any form for tax payment (challan) without the PAN or TAN, as applicable.

UTI Investor Services Ltd and the National Securities Depository Limited (NSDL) are authorized to set up and manage IT PAN Service Centers in all cities where there is an Income Tax office.

Procedure 8: Tax Account Number (TAN)

• The provisions of Section 203A of the Income Tax Act require that all persons who deduct or collect tax at the source must apply for a TAN.
• The section also makes it mandatory for the TAN to be quoted in all tax-deducted-at-source (TDS) and tax-collected-at-source (TCS) returns, all TDS/TCS payment challans, and all TDS/TCS certificates issued.
• The application for a TAN can be made online through the NSDL website (www.tin-nsdl.com) or can be made offline.
• After payment of the fee by credit card, the hard copy of the application must be physically filed with the NSDL.

Procedure 9: Register with the Office of Inspector, Shops, and Establishment Act (State/Municipal)

• A statement containing the employer-“s and manager-“s names and the establishment’s name (if any), postal address, and category must be sent to the local shop inspector with the applicable fees.
• According to Section 7 of the Bombay Shops and Establishments Act,-(1948), the establishment must be registered as follows: –
  1. Under Section 7(4), the employer must register the establishment in the prescribed manner within 30 days of the opening of the business.
  2. Under Section 7(1), the establishment must submit to the local shop inspector Form A and the prescribed fees for registering the establishment.
  3. Under Section 7(2), after Form A and the prescribed fees are received and the correctness of the statement on the form is satisfactorily audited, the certificate for the registration of the establishment is issued on Form D, according to the provisions of Rule 6 of the Maharashtra Shops and Establishments Rules of 1961.

• Since the amendments in the Maharashtra Shops and Establishment (Amendment) Rules, 2003 dated 15th December 2003, the Schedule for fees for registration and renewal of registration (as per Rule 5) is:
  1. 0 employees                            : INR 100
  2. 1 to 5 employees                     : INR 300
  3. 6 to 10 employees                   : INR 600
  4. 11 to 20 employees                 : INR 1000
  5. 21 to 50 employees                 : INR 2000
  6. 51 to 100 employees               : INR 3500
  7. 101 or more employees           : INR 4500

• Hence in the given case the registration fees would be INR 2000, as there are 50 employees In addition, an annual fee (three times the registration and renewal fees) is charged as trade refuse charges (TRC), under the Mumbai Municipal Corporation Act,-(1888).

Procedure 10: Register for Value-Added Tax (VAT) at the Commercial Tax Office (State)

• The authorized representative signing the application must be available at the Sales-Tax Office on the day of application verification.
• The Documents will be verified on submission.
• In addition to Form 101, other accompanying documentation includes:

1. Certified true copy of the memorandum and articles of association of the company
2. Proof of permanent residential address,at least 2 of the following documents:

• Copy of passport
• Copy of driver’s license
• Copy of election photo identity card
• Copy of property card
• Latest receipt of property tax from the Municipal Corporation
• Copy of latest paid electricity bill in the name of the applicant

1. Proof of place of business (for an owner, in the case of Doing Business): Proof of ownership of premises viz. copy of property card, ownership deed, agreement with the builder or any other relevant documents
2. One recent passport-sized photograph of the applicant
3. Copy of Income Tax Assessment Order with PAN or copy of PAN card
4. Challan on Form No. 210 (original) showing payment of registration fee at INR 5000 (in case of voluntary RC) and INR 500 (in other cases).

Procedure 11: Register for Profession Tax at the Profession Tax Office (State)

• According to section 5 of the Profession Tax Act, every employer is liable to taxation and shall obtain a certificate of registration from the prescribed authority. The company is required to apply to the registering authority using Form 1.
• Depending on the nature of the business, the application should be supported with such documents as proof of address, details of company registration number under the Indian Companies Act (1956), details of the head office (if the company is a branch of company registered outside the state), company deed, certificates under any other act, and so forth.

Procedure 12: Register with Employees’ Provident Fund Organization (National)

• The Employees Provident Funds and Miscellaneous Provisions Act (1952) applies to an establishment, employing 20 or more persons and engaged in any of the 183 industries and classes of business establishments.

1. The applicant fills in an application and is then allotted a social security number.
2. The Provident Fund registration focuses on delinquent reporting, underreporting, or non reporting of workforce size.
3. Provident Fund registration is optional if the workforce size is not more than 20.
4. The employer is required to provide necessary information to the concerned regional Provident Fund Organization (EPFO) in the prescribed manner for allotment of Establishment Code Number. No separate registration is required for the employees.

• All eligible employees are required to become members of the Fund and individual account number is allotted by the employer in the prescribed manner.

Procedure 13: Register for medical insurance at the regional office of the Employees’ State Insurance Corporation (National)

• As per the Employees’ State Insurance (General), Form 01 must be submitted by the employer for registration, for the Employer Code Number to be issued.

1. The Employee’s individual insurance is a separate process that is initiated upon the employer’s registration.
2. The employer is responsible for submitting the required declaration form and employees are responsible for providing correct information to the employer.
3. The employee temporary cards (ESI Cards) are issued on the spot by the local offices in many places.