Most of the International Information technology companies have a Development Center set-up in India. There are various reasons for that. However, if you are looking to set-up a development center or subsidiary of your foreign holding company in India. Here is what you all need to know.
The process of setting up an IT startup in India is quite easy these days, due to the recent changes in laws about Foreign investment, ease of doing business, etc.
Here is what you need to know about setting up an IT Start-up in India.
• Incorporation:
Incorporation of a company is the first step to set-up the IT stat-up in India, you will need to select the entity type for your company. And Private Limited Company will be the best suited entity for IT start-ups. It has following benefits.
- 100% FDI allowed through Automatic route in IT Sector
- Minimum 2 Directors are required of which 1 must be a resident Indian.
- Minimum 2 shareholders are required (can be Individuals and Corporate body)
- Minimum 2 Directors are required of which 1 must be a resident Indian.
- Adding a shareholder and allocating share is an easy process
Once you decide on the type of entity, if you want to make it as a subsidiary of the parent company than you will have to allocate most of the shares to the parent company. We at BBNC will be able to help you with the incorporation and other processes.
• Commencement of Business Compliance:
Commencement of business compliance is a certificate that you will receive form the Ministry of Corporate office. in this process the company will define the registered address of the company, along with that appoint an auditor to the company who will audit the company after the end of the financial year.
• FC-GPR + Valuation Certificate:
Foreign money that comes to India (form the shareholders or parent entity) in form equity investment in the Indian company. will be considered as a Foreign Direct Investment. This investment details needs to be informed to the Reserve Bank of India (RBI). This process of Informing is called as FC-GPR (Foreign Currency-Gross Provisional Return).
Valuation Certificate from a qualified Chartered Accountant needs to be obtained, to file the FC-GPR with the Reserve Bank of India.
• Professional Tax Registration:
Any Company who has 1 or more employees needs to get a professional tax registration. This is mandatory in most of states in India. Once acquired this registration the company needs to deduct a fixed amount every month from their employee’s salary. And file it with the respective department of the Government.
• GST Registration:
Goods and Service Tax is mandatory for companies who has its revenue more than INR 20 Lacs in the Financial Year. Every invoice that you raise to your customer in return of providing services. You will have to charge a fixed % of GST. Which differs form one industry to another but since we are talking about IT industry it is 18% as of Feb 2021.
• LUT Registration:
Letter of Undertaking needs to be filed with the government if you are exporting the services without paying tax. This registration saves the GST amount form each invoice which raised to a foreign entity or parent entity.
• Other Registration and Licenses:
Apart form the above 7 steps, there could be more, which depends on the nature and scale of business. Such as below
- ESI Registration: Employee state insurance is mandatory only if company has more than 10 employees
- Shops & Establishment: Shops and Establishment license is required only if the company has a commercial office set-up.
- PF Registration: Provident Funds Registration is required only if the company has more than 20 employees.
- Import Export Code: This registration is required only if company is in business of importing or exporting of goods.
- MSME Registration: Micro Small Medium Enterprise Registrant is required only if want to avail the benefits of MSME.
Conclusion:
Setting up an IT start-up company in India is quite easy if you follow the above process, the whole setup can be finished within 30 days of time. If all the required documents provided on time. At the time of incorporation soft copy of the documents will be enough.
In India due to recent policy changes with respect to company formation and FDI, it is getting quite easy to do business and setup a subsidiary of foreign company.
If you need any help with setting up your company in India, feel free to write to us at info@bbnc.in or reach out to us at BBNC.in/contact-us
