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 RECOMMENDED SIMPLE PROCEDURES FOR INCORPORATION OF A COMPANY IN INDIA

1. Name approval for the proposed company (Click Here For More >>)

2. Memorandum of Association (MOA) and the Articles of Association (AOA) of the company (Click Here For More >>)

3. Documents required to be executed for incorporation (Click Here For More >>)

4. Certificate of Incorporation (Click Here For More >>)

5. Obtaining Director Identification Number (Click Here For More >>)

6. Commencement of Business (Click Here For More >>)

7. Compliance with the legal formalities when the Directors are not stationed in India. (Click Here For More >>)

8. Opening of Bank Account (Click Here For More >>)

9. Application for Tax deduction Account Number (TAN) and Permenent Account Number (PAN) . (Click Here For More >>)

10. Applicability of Foreign Exchange Management Act. (Click Here For More >>)

11. General Permission of RBI under FEMA (Click Here For More >>)

12. Other approvals required for foreign investor in India. (Click Here For More >>)

13. Dividend. (Click Here For More >>)

14. Other Statutory Governance. (Click Here For More >>)

15. Annual Statutory Requirements (Click Here For More >>)


    
 Summary of the Simplified Procedures for Incorporation of a Company in India


1. Minimum Capital (Click Here For More >>)

2. Minimum Member (Click Here For More >>)


1. Name approval for the proposed company

An application in Form No. 1A needs to be filed with the Registrar of Companies (ROC) of the state in which the Registered Office of the proposed Company is to be situated. The application is required to be signed by one of the promoters. The details to be state in the said application are as follows:

  1. Four alternative names for the proposed company. (The name can be coined names from the objects of the proposed company or the names of the directors, etc. but should definitely be indicative of the main object of the company. Justification for the name needs to be specified along with the application


  2. Names and addresses of the promoters (Minimum 7 for a public company while 2 for private company


  3. Authorized Capital of the proposed company (minimum Rs. 1 Lac. capital)


  4. Main objects of the proposed company.


  5. Names of other group companies. On submitting the application, the ROC scrutinizes the same and sends the approval / objections in about 10 days to the applicant. On fulfilling of the objections a formal letter of name approval is issued


2. Memorandum of Association (MOA) and the Articles of Association (AOA) of the company


On receipt of the name approval letter from the ROC the MOA and the AOA are required to be drafted. The MOA states the main, ancillary / subsidiary and other objects of the proposed company. The AOA contains the rules and procedures for the routine conduct of the proposed company. It also states the authorized share capital of the proposed company and the names of its first / permanent directors. After the MOA and AOA are required to be stamped.


3. Documents required to be executed for incorporation


MOA and AOA - These are required to be executed by the promoters in their own hand in the presence of a witness in quadruplicate stating their full name, father's name, residential address, occupation, number of shares subscribed for, etc.

  1. Form No. 1 - This is a declaration to be executed on a non-judicial stamp paper of INR 20 by one of the directors of the proposed company or other specified persons such as Attorneys or Advocates, etc. stating that all the requirements of the incorporation have been complied with.


  2. Form No. 18 - This is a form to be filed by one of the directors of the company informing the ROC the registered office of the proposed company.


  3. Form No. 29 - This is a consent obtained from all the proposed directors of the proposed company to act as directors of the proposed company. (Not required in case of private company


  4. Form No. 32 - This is a form stating the fact of appointment of the proposed directors on the board of directors from the date of incorporation of the proposed company and is signed by one of the proposed directors.


  5. Name approval letter in original.


  6. Power of Attorney signed by all the subscribers of MOA authorizing one of the subscribers or any other person to act on their behalf for the purpose of incorporation and accepting the certificate of incorporation


  7. Power of Attorney in case of a subscriber who has appointed another person to sign the MOA on his behalf.9. Filing fees as may be applicable


  8. Fees for filing Forms and documents with ROC

Form No. 1A
Rs. 500
Form No. 18
Rs. 500
Form No. 29
Rs. 500
Form No. 32
Rs. 500
Form No. 20
Rs. 500
Memorandum and Articles
Rs. 500
Power of Attorney
Rs. 100
9.Registration Fees

Nominal Share Capital (Authorised)
 Registration Fees (Rs.)
1
Not exceeding Rs. 1 lac.
Rs. 4000
2
Above 1 lacs and upto 5 lacs
4000 + Rs. 300 for every 1000 or part thereof above 1 lac.
3
Above 5 lacs and upto 50 lacs
16000 + Rs. 200 for every 10,000 or part thereof above 5 lacs.
4
Above 50 lacs and upto 1 crore
1,06,000 + 100 for every 10,000 or part thereof above 50 lacs.
5
Above 1 crore and upto 397.96 crore
1,56,000 + 50 for every 10,000 or part thereof 1 crore.
6
Rs. 397.96 crores and above
Rs. 2,00,04,000
     


4. Certificate of Incorporation


After the above documents are filed, the ROC calls the attorney on a specific date for scrutiny and making the corrections in the MOA and AOA filed. On complying with the same, the certificate of incorporation is granted to the attorney.


5. Obtaining Director Identification Number

  1. First and foremost identify the Directors of the Company. Minimum of two directors need to present and Maximum of 8 is allowed.


  2. All Directors should have DIN (Directors Identification Number). If you do not have one you can apply DIN online at http://www.mca.gov.in/. FAQ on DIN http://www.mca.gov.in/MinistryWebsite/dca/faq/faq1.html


Documents required for DIN


A.Identity Proof (Any one of the following)

  • PAN Card


  • Driving License


  • Passport


  • Voter ID Card


  • Others (to be specified)


B.Residence Proof (Any one of the following)

  • Driving License


  • Passport


  • Voter ID Card


  • Telephone Bill


  • Ration Card


  • Electricity Bill


  • Bank Statement


  • Others (to be specified)


6. Commencement of Business

On receipt of the certificate of incorporation, the public company has to complete certain other legal formalities such as a statutory meeting (within 6 months), statutory report, etc. On completion of the said formalities and on filing of the statutory report with the ROC the ROC issues the certification of commencement of business to the company. Thereafter, the Public Company can start the business operations. The Private Company can start its business immediately on incorporation.


7. Compliance with the legal formalities when the Directors are not stationed in India.

Power of Attorney can be given to a person to sign the documents on behalf of the Directors. After the Company is incorporated, Alternate Directors can be appointed, to function on behalf of the Director, while they are not in India. But at least once, the Director should be in India within one month of the incorporation of the Company. There can be one meeting of Board of Directors during the Directors’ stay in India and all other formalities including those of appointment of Alternate Directors can be complied with.


8. Opening of Bank Account

Once the company has been incorporated, a Current account can be opened in any of the leading banks for carrying out the operations. A copy of Certificate of Incorporation, Memorandum of Association and PAN (Permenent Account Number) should be submitted along with Board resolution to open the bank account.


9. Application for Tax deduction Account Number (TAN) and Permenent Account Number (PAN) The Company has to apply for TAN and PAN .

https://tin.tin.nsdl.com/pan/form49A.html

https://tin.tin.nsdl.com/tan/form49B.html


10. Applicability of Foreign Exchange Management Act.

It is mandatory for foreign investors to obtain governmental approval for incorporating in India or forming a joint venture in India. In some sectors certain restrictions apply.

Foreign Direct Investment (FDI) in activities not covered under the automatic route requires prior Government Approval and are considered by the Foreign Investment Promotion Board (FIPB). Approvals of composite proposals involving foreign investment/ foreign technical collaboration are also granted on the recommendation of the FIPB.

Application of all FDI cases, except Non-Resident Indian (NRI) investments and 100% Export Oriented Units (EOUs), should be submitted to the FIPB Units, Department of Economic Affairs (DEA), Ministry of Finance.

Applications for NRI and 100% EOU cases should be presented to Secretary of Industrial Assistance in Department of Industrial Policy and Promotion.

Application can also be submitted with Indian Missions abroad who forward them to the Department of Economic Affairs for further processing.

Application can be made in Form FC-IL, which can be downloaded from http://www.dipp.gov.in. Plain paper applications carrying all relevant details are also accepted. No fee is payable.


Foreign direct investments in India are approved through two routes:


1. Automatic approval by Reserve Bank of India:

The Reserve Bank of India accords automatic approval within a period of two weeks (provided certain parameters are met) to all proposals involving:

  • Foreign equity up to 50% in 3 categories relating to mining activities.
  • Foreign equity up to 51% in 48 specified industries.
  • Foreign equity up to 74% in 9 categories.

Investments in high-priority industries or for trading companies primarily engaged in exporting are given almost automatic approval by the RBI.


FDI in India on automatic route is not allowed in the following sectors:

  • Proposals that require an industrial license and cases where foreign investment is more than 24% in the equity capital of units manufacturing items reserved for the small scale industries.
  • Proposals in which the foreign collaborator has a previous venture/tie-up in India.
  • Proposals relating to acquisition of shares in an existing Indian company in favour of a Foreign/Non-Resident Indian (NRI)/Overseas Corporate Body (OCB) investor; and
  • Proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted and/or whenever any investor chooses to make an application to the Foreign Investment Promotion Board and not to avail of the automatic route.

2. FIPB Route:

Foreign Investment Promotion Board (FIPB) is a competent body to consider and recommend foreign direct investment, which do not come under the automatic route. Normal processing time of an FDI proposal in FIPB is 4 to 6 weeks. FIPB is located in the Department of Economic Affairs, Ministry of Finance. Its constitution is as follows:

  • Secretary, Department of Economic Affairs (Chairman)
  • Secretary, Department of Industrial Policy & Promotion (Member)
  • Secretary, Department of Commerce (Member)
  • Secretary, (Economic Relation), Ministry of External Affairs (Member

11. General Permission of RBI under FEMA

Indian companies having foreign investment approval through FIPB do not require any further clearance from RBI for receiving inward remittance and issue of shares to foreign investors.

The companies are required to notify the concerned Regional Office of the RBI of receipt of inward remittances within 30 Days of such receipt and within 30 days of issue of shares to foreign investors or NRIs.

12. Other approvals required for foreign investor in India.

Generally, prior approval is required from the RBI before investing in India. Some categories of businesses are covered under automatic approval process. However, one has to apply for the same. There are some post-incorporation filing formalities after the remittance of capital from overseas to India and on issue of shares.

13. Dividend.

Dividend can be declared out of profits of the current year, accumulated profits or out of moneys provided by Central / State Government, subject to the provisions of Sec. 205, and Rule 2 of Companies (Transfer of Profits to Reserves), Rules 1975.

14. Other Statutory Governance.

A. Labour Laws

a. Laws related to Industrial Relations

  • 1. The Trade Unions Act, 1926
  • 2. The Industrial Employment (Standing Orders) Act, 1946
  • 3. The Industrial Disputes Act, 1947

b. Laws related to Wages

  • 1. The Payment of Wages Act, 1936
  • 2. The Minimum Wages Act, 1948
  • 3. The Payment of Bonus Act, 1965

c. Laws related to Working Hours, Conditions of Services and Employment

  • 1. The Factories Act, 1948
  • 2. The Contract Labour (Regulation & Abolition) Act, 1970
  • 3. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
  • 4. The Shops and Establishments Act

d. Laws related to Equality and Empowerment of Women

  • 1. The Maternity Benefit Act, 1961
  • 2. The Equal Remuneration Act, 1976

e. Laws related to Deprived and Disadvantaged Sections of the Society

  • 1. The Bonded Labour System (Abolition) Act, 1976
  • 2. The Child Labour (Prohibition & Regulation) Act, 1986
  • 3. The Children (Pledging of Labour) Act, 1933
  • 4. The Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995

f. Laws related to Social Security

  • 1. The Workmen’s Compensation Act, 1923
  • 2. The Employees’ State Insurance Act, 1948
  • 3.The Employees’ Provident Fund & Miscellaneous Provisions Act, 1952
  • 4. The Payment of Gratuity Act, 1972

g. Laws related to Employment & Training

  • 1. The Apprentices Act, 1961

h. Others.

  • 1. The Personal Injuries (Compensation Insurance) Act, 1963
  • 2. The Labour Laws (Exemption from Furnishing Returns and Maintaining Register by Certain Establishments) Act, 1988

B. Tax Laws

1. Income Tax

1Foreign nationals working in India are generally taxed only on their Indian income. Income received from sources outside India is not taxable unless it is received in India. The Indian tax laws provide for exemption of tax on certain kinds of income earned for services rendered in India. Further, foreign nationals have the option of being taxed under the tax treaties that India may have signed with their country of residence.

Remuneration for work done in India is taxable irrespective of the place of receipt. Remuneration includes salaries and wages, pensions, fees, commissions, profits in lieu of or in addition to salary, advance salary and perquisites. Taxable payments include all allowances and tax equalisation payments unless specifically excluded. The stock options granted by the employer are taxable as capital gains at the time of sale of shares acquired due to exercise of options.

  • Corporate Tax- 33.99% on the Taxable profit of the company.
  • Fringe Benefit Tax- 33.99% on the value Fringe Benefit as defined U/s.115WB of the Income Tax Act.
  • Tax Deducted at Source (withholding taxes). It is the tax to be deducted on various services rendered U/s 194 of the Income Tax Act.
  • Dividend Distribution Tax-15.45% on the dividend declared.


2. Wealth Tax

It is an annual levy on the net wealth of the company at the rate of 1% over and above the limit of Rs. 15 lacs, upto that is exempt.


3. Service Tax

Service Tax is payable on the gross amount of taxable services rendered and to be rendered at the rate as may be specified under Service Tax Rules or any other law for the time being in force which is presently 12.36%.


4. Customs Act

Customs duty is on imports into India and exports out of India. Sec. 12 of Customs Act, provides that duties of Customs shall be levied at such rates as may be specified under “ the Customs Tariff Act, 1975”, or any other law for the time being in force, on goods imported into or exported from, India.


5. Central Sales Tax and Value Added Tax (VAT)

Sales Tax on inter state sale is levied by Central Government, while sales tax on intra state sale (sale within the state), is levied by state government. Central Sales Tax is payable on inter state sale, while Value Added Tax (state sales tax), is payable on sale within the state.


15. Annual Statutory Requirements

A. Audit

  • 1. Statutory Audit under Section 227 of the Companies Act, 1956.
  • 2. Tax Audit under section 44AB of the Income Tax Act, 1956 if the gross turnover exceeds Rs. 40 Lacs.
  • 3. Internal Audit, if the paid up capital and reserves exceeds Rs. 50 lacs or turnover exceeds Rs. 5 crores for 3 consecutive years.
  • 4. Secretarial Audit, if the paid up capital exceeds Rs. 2 crores.

B. Annual Returns

1. Statutory Returns to be filed by a Company.

S. No.
Class of Companies
What to file
When to file

1

Companies having share capital.

Annual return in Schedule V

If Annual General Meeting (AGM) is held within 60 days from the date of every AGM. If no AGM is held within 60 days from the date on which the AGM ought to have been held.

2

ompanies not having share capital

Annual Return in Form No.21A

-- DO --

3

Private Limited companies

Balance Sheet (Form. 23AC) and Profit & Loss A/c (Form 23ACA) separately.

If AGM is held within 30 days from the date of AGM. If no AGM is held, within 30 days from the date on which the AGM ought to have been held.

4

Companies having paid up capital of Rs.10 lacs or more but less than Rs.2 crores.

Secretarial compliance certificate

-- DO --

5

Income Tax Return

Form ITR 6

On or before 31st October of the succeeding year.

6

Quarterly TDS Return

Form 26Q, 24Q

15th of the succeeding month of the previous quarter.

7

Half yearly Service Tax Return

Form SD 3

20th October and 30th March.

8

VAT Return

Form

 


Summary of the Simplified Procedures for Incorporation of a Company in India

  1. Obtain digital signature of the promoters of the company


  2. Form 1A name availability –4 names to be suggested connected with the objects of the company


  3. Main objects pursued by the proposed company Pan card of the promoters


  4. Details of the companies in which the promoters are directors in Indian companies & Foreign Companies


  5. Copies of registered trade mark of any


  6. Drafting of memorandum and articles of association


  7. Submission of the above document to ROC Chennai along with DD for fees for Authorized capital


  8. Minimum capital Rs 5, 00,000 in case of Public limited company


  9. Obtaining the certificate of incorporation from ROC


  10. PAN number and TAN for the newly incorporated company to be applied and obtained from income tax department


  11. Opening the bank account along with the above documents in the designated bank


Minimum Capital

  1. Minimum authorized subscribed capital


  2. In the case of Private Limited Company Rs 1, 00,000


  3. In the case of public limited company Rs 5, 00,000
 


Minimum Member

  1. In case of Public limited company minimum number of members is seven


  2. In case of private limited company minimum number of members is two and maximum of fifty


  3. Bank accounts can be opened in India only after the Indian Company incorporated and obtaining permanent account number (PAN)


  4. Taxes paid by an Indian Company
    • Income Tax

    • Tax deducted at source – income tax


    • Professional Tax


    • Provident Fund – employers contribution if applicable


    • Employees State Insurance - employers contribution if applicable


    • Value added tax (VAT)


    • Service tax


    • Fringe Benefit tax
  5. To facilitate the operations of the company and to deal with all local matters, statutory or otherwise, an Indian director is a requirement