Tuesday , September 18 2018

Starting New Business in India A Step-by-Step Guide for You [2016]

Starting New Business in India A Step-by-Step Guide for You [2016]

Want to start a business in India? This can be a major hassle because of two facts. First, when it comes ‘Ease of Doing Business’, India ranks 142 in the entire world and when it comes to ‘Ease of Starting New Business’, India’s position is even worse. She ranks 158 in world! That’s something new and existing entrepreneurs really don’t like.

Indian government is very much aware of this problem and hence, MCA or Ministry or Corporate Affairs has come up with a plan of at least simplifying the process. The introduction of INC-29 form has helped in simplifying the process to some extent and hence, it is expected that India’s position in global stage will improve over time.

Starting New Business in India A Step-by-Step Guide for You

But what precisely is INC-29. The INC-29 is a form that clubs 5 different forms. These 5 different forms that are clubbed in this single form are:

  1. Form for DIN Allotment.
  2. Form for Name Reservation.
  3. Form for Incorporation.
  4. Form for PAN as well as TAN.
  5. Form for ESIC Registration.

Though the form has clubbed the 5 different forms, you need to understand that PAN and TAN as well as ESIC registration are only initiated by this form and you will, as before, be required to provide all necessary information and documents in its support. These documents are to be submitted through the e-biz portal of MCA. The link to this portal can be found here. It is not really clear why the government asks for details for PAN, ESIC, TAN but it is possible that the government wants to integrate these details sometime later.

The good thing about the INC-29 form is that it has simplified the entire process. In case you have already registered a company before 2015 May and now you are trying to register a new one, you will immediately understand the difference between then and now. It is way simpler than before.

In case you want to know the steps that are involved now, continue reading this article. Read between the lines as you will be greeted with loads of information and you will need so time to process the same.

Step I:

Here, there are three things you need to keep in mind. You need to get a Digital Signature Certificate. You will have to wait for 2 to 5 days to get the intended certificate and finally, you need to pay a fee for the certificate. The certificate is not free.

A company will have a director or multiple directors. One of the directors will have to get the Digital Signature Certificate of Class II. This certificate cannot be obtained for anywhere and everywhere you want. There are specific agencies that have been authorized by the Ministry of Corporate Affairs. The certificate you obtain will be valid only and only if the certificate has been issued from one of the authorized agencies. In case the certificate has been obtained from some other agency, it will not be accepted as a valid one.

Also, remember that the electronic filing system of Ministry of Corporate Affairs will accept only those certificates that have been issued by the authorized agencies. In total, there are only 6 such authorized agencies. Of those three, the three most popular ones are TCS or Tata Consultancy Services, n-Code and e-Mudhra.

Weird part however is that the amount charged by these agencies actually differ. The charges can be as low as INR 400 and can be as high as INR 2650. Irrespective of the amount charged by each agency, the total cost will include the cost of the certificate as well as a physical USB token. The entire process of issuing the certificate will take 2 days to 5 days. The number of days that will be required will depend on how fast the documents you send reaches the agency that you have selected.

In order to get a Class II Digital Signature Certificate, you need to send the following documents:

  • In case you are an Indian: You need to send the completed form for Class II Digital Signature Certificate and a copy of your PAN. The copy should be self-attested.
  • In case you are a foreign national: You need to send the completed form for Class II Digital Signature Certificate. Along with this, you need to send a copy of your passport.

You may also be asked for a self-attested copy of your Aadhar Card, latest utility bill like Electricity Bill, Water Bill etc., Ration Card, Voter ID or Driver’s License.

Step II:

Step II starts after the Digital Signature Certificate is obtained. In this step, you will need to prepare INC-29. The estimated time for completion of this step is 1-3 days. You need to pay a fee for this as well. The amount of fee you need pay here is the company secretary fees.

In this step, you will be filing the INC-29 form. However, it is not that easy. The form consists of 8 pages and requires quite a bit of information. You need to provide all information accurately. The likelihood of making mistakes is very high and hence, you need to be very careful. You will need several documents and those documents will require signature of company secretary.

In case you make mistakes, you can actually resubmit the form but such resubmission is allowed only once. In case you need make mistakes again, you will be allowed to file again but only this time, you have to pay a filing fee. Any money or government fee that you have paid earlier will be refunded but you will have to apply for such refund. So, before you even start filing the INC-29, you need to make sure that all documents are in place.

Application for Director Information Number of DIN

Directors of a company need to have DIN or Director Information Number. The INC-29 will allow up to three directors to apply for DIN directly through the form during application. However, in case there are more than 3 directors, additional directors need to apply for DIN separately. They cannot do so through INC-29.

The question is, ‘what really is DIN?’ DIN or Director Information Number is a unique identification number given to directors of companies. The MCA or Ministry of Corporate Affairs use this DIN to identify the director of a company. In order to obtain a DIN, a director needs to provide the following documents:

  • Scanned copies of recently clicked colored passport sized photographs.
  • Scanned copy of passport in case the director is of a foreign nationality. In case the director is an Indian, a scanned copy of his or her PAN will suffice.
  • In addition to passport (for foreign national) or PAN (for Indian), the director also needs to provide a copy (scanned) of latest utility bill, voter ID card or driver’s license. In case of Indian national, these copies should be self-attested. In case of foreign national, these copies need to be properly notarized by the respective Indian embassy in addition to the copies being self-attested. In case the foreign national belongs to a country which is not a part of the Commonwealth, the documents must be apostilled in addition to being notarized and self-attested.

Company Name Approval

Your business or company needs to have a name. You need to have that name registered properly. In the old system (that is system before the introduction of the INC-29), there was an option of providing 6 names for the company and that these 6 options should be placed in order of preference. However, once INC-29 was introduced, thing became a bit difficult because now only two names can be given.

Any one of these two names should be approved by MCA. Thus, it is very crucial that business owners ensure that they are naming their companies within the strict guidelines set by the MCA. In case the guidelines are not followed, the likelihood of MCA not approving the names increases significantly. Here are the set of rules that one needs to keep in mind if they want to get their name application approved:

  • Check the mca.gov.in website thoroughly and find out whether the proposed name has already been registered or not. If yes, find another name.
  • Once you have checked the availability of the name, you now need to head towards the website ipindia.nic.com. This is where you need to check whether the proposed name of the company has not already been taken up by another business entity as a Trademark. In case there is an existing trademark, there are two options for you. The first option is to find another name for your company which is neither used as a business name and nor as a trademark. The second option is to contact with the trademark owner and request permission for using the trademark as a name for your company. This means that the trademark owner needs to issue an NoC. This NoC will give you the necessary authorization to use the trademark as your company name.
  • The name that you select should have its first half completely unique. This means that you cannot just have its first name used anywhere else by anyone else. It has to be completely unique and never before used. There are a few things that you need to avoid in order to ensure that the name gets approved. First thing first, using generic terms, abbreviations and geographical references is absolutely not allowed. Again, in case you are using the words like bank, stock exchange or exchange, you will need a prior approval from SEBI and RBI. Without their approval, you simply cannot use those words.
  • Make sure that the second half of the name that you are selecting is actually describing the field in which your company will be entering or is already working in that field.

Just selecting the name is not all. Once the name has been properly selected, you will have to describe its significance in a sentence or two. You will be required to submit this significance into the name approval form.

Article of Association and Memorandum of Association

When you are filling up the INC-29 form, you will be required to attach two documents. These documents are Article of Association or AoA and Memorandum of Association or MoA. Without these two documents, you cannot get your INC-29 form approved. There are two ways of getting these documents. First, you hire a company secretary who will draft it for you and sign it. Second, you create these articles and then get a company secretary to sign the documents. Remember that the signature of a company secretary is absolutely necessary.

The MoA is a document which will outline your business’ primary objects. It is very important for you to understand that you need to outline the document in such a way that the objects of your business do not spill over to an alternative or better put, unrelated sector. Just remember that many businesses are not approved because of a problem in MoA.

The Article of Association or the AoA is a different document. It will outline the job responsibilities of all directors in your company as well as the means that will be used by company shareholders for exerting control over the directors or better said, board of directors. Both AoA and MoA are vital and the cost of getting these documents will vary depending on the company secretary you hire. Choose wisely.

Documents for Verification of Registered Office

Get it straight. If you are opening a business, you will need an office space. There are four possible options for you:

  • You get a commercial office space.
  • You use your house as your office space.
  • You rent a residential house for your office space.
  • You purchase a residential house for your office space.

Whatever the case be, you need a proper address and a physical property which serves an office space. This address needs to be verified by the authorities and hence, you will need proper documents.

Depending on whether it is a rental or an owned property, you will have to provide either of the following:

  • Rental Agreement along with NOC from owner of the property from whom you rented the property.
  • Sales Deed in case you have purchased the property.

Declarations and Appointment Letters

For this, you will have to provide various documents. Though these documents should be self-attested, there is one vital requirement. A declaration needs to be separately given by a company secretary. This separate declaration by company secretary is meant for authenticity verification of declarations you give. Here are the documents you need to attach along with INC-29:

  • Appointment letters for managers, CEO and directors.
  • In the form named DIR-2, a declaration by managing director and appointee director.
  • In the form named INC-9, a declaration by company’s first director.

Step III:

In this step, you will have to file the INC-29 form. Once you file, the filing completes within a day and you will have to pay the appropriate fee amount for the completion of filing. The amount of money that you need pay is INR 2000. In addition to this, you need to pay the stamp duty and the fee for authorized capital.

In order to file INC-29, you will have to ensure that all necessary documents have been attached properly with the form. You may accidently miss something and in that case, the registrar will actually ask for a resubmission. In case you commit some error after resubmission, your application will be totally rejected.

Once you are confident that all documents are in place and you have made no mistakes, you need to file the form. Once you do that, you will have to pay the necessary fee. For this, you will be directed to a payment gateway where you need to make an online payment. You can use net banking or debit card or credit card for the same. You will have options. Choose the one that works best for you. However, do remember that the stamp duty amount is actually dependent on your location. So, you may pay more or less stamp duty sitting in Mumbai compared to a friend of yours who is registering a new company somewhere else in India.

Good thing is that stamp duty is nearly the same in all states in India except Kerala and Punjab. These two states have higher stamp duty than every other state in India.

Now, you need to know the fee for authorized capital. For this, let us make use of a table which will help you remember the fee easily.

Authorized Capital Increment Slab Fee Amount
INR 1 lakh (100,000) Not applicable INR 5 thousand (5000)
Up to 5 lakhs (500,000) For every additional INR 1 lakh INR 4 thousand (4000)
Up to 50 lakhs (50,00,000) For every additional INR 1 lakh INR 3 thousand (3000)
Up to 100 lakhs (100,00,000) For every additional INR 1 lakh INR 1 thousand (1000)
Over INR 100 lakhs (100,00,000) For every additional INR 1 lakh INR 750

Now, how about an example? The question is, what if you are opening a new business in Mumbai and you have authorized capital of 4 lakhs. How much fee will you pay? The table below will give you a rough idea:

Fee For Fee Amount Explanation (If Any)
AoA or Article of Association INR 300 NA
MoA or Memorandum of Association INR 2000 NA
Fee for Authorized Capital INR 5000 + INR 4000 + INR 4000 + INR 4000 = INR 17000 Fee for first 1 lakh is 5000 and then fee for every additional 1 lakh is 4000.
Stamp Duty INR 1300  
INC-29 INR 2000  
Total Fee to Pay INR 22600

Step IV:

In this step, the certificate of incorporation will be issued. It is claimed by the government that once the INC-29 is filed, the certificate will be issued within 2 days. There is no additional cost at this point because you have already paid everything that was needed.

What If…

OKAY… till now we discussed about the new unified form, that is INC-29. What about the old process? Is that still existent? Can you use it if you are not comfortable with the new one? Here are the answers you seek:

  • Yes, the old process is very much in place.
  • You can always use the old process if you want.

Just to help you understand the entire old process, we will give you a detailed write up. Stay put in your seat and grab a cup of coffee. It is going to take a while for you to read through this

The Old Process…

Please note that Steps 6 through 13 described below are same for the new process that has been described above.

Step 1: Obtaining DIN from MCA

This is the first step that you need to undertake. Obtaining Director Identification Number of Ministry of Corporate Affairs is important and the first step. The form that is used for this purpose is DIN-1. This application form needs to be downloaded from the online resource offered by the portal of Ministry of Corporate Affairs 21st Century or the MCA 21. As soon as you download this form, you will be handed over a provisional DIN. However, that’s over yet.

The downloaded form needs to be filled and then signed. The form then needs to be sent to MCA for approval. Necessary documents are to be attached along with the form. Failure to attach the documents will mean that your form/application will be immediately rejected. Here are the documents that you need to attach with the DIN-1 form:

  • Proof of Identity: For this purpose, you can use your Voter ID Card, your Passport, your Driver’s License, your PAN or Permanent Account Number. Not all be required. You can send any one of the documents mentioned.
  • Proof of Residence: For this purpose, you can use your Voter ID Card, your Passport, your Driver’s License, your Ration Card, your Electricity Bill, your Telephone Bill or your Bank Statement. Any one of the aforementioned documents will work. You need not send all documents.

Once the DIN-1 form reaches the ministry along will the necessary documents, the concerned authority in the MCA will then take about 4 weeks to complete the verification process. Once the process of verification is completed, you will be issued a permanent DIN number. In case there are multiple directors, each director has to follow the same step.

Step 2: Obtaining a Digital Certificate

You will need to get this certificate online. There are authorized agencies that issue this certificate. It is a Class-II certificate and should be obtained only and only from the agencies authorized by the MCA. For this you will have to use the MCA21 portal and you need to remember that each director of the company needs to have a digital signature and hence, each director will have to fill in the form made available online and then attach the proof of residence and proof of identity and submit the form. You are free to select any one agency from the 6 authorized agencies. However, you need to remember that their fee actually differs. The lowest fee is INR 400 and the highest fee is INR 2650. It takes about 3 days to get the Class-II digital certificates.

Step 3: Reserving the Name of the Company

Your company cannot exist without a name and hence, you will need to register one name. You need to register the name of the company with ROC or Registrar of Companies. The ROC is a national body and the total time it takes to register a name is about 2 days. The cost of this registration is INR 500. If you have a notion that registering a name will be simple and hassle-free, it is time that you fix your thought process. As a matter of fact, registering your company name is really difficult.

First thing that you need to know here is that the name of your company can be registered only and only through an online process. The ROC is located in Mumbai and there are permanent staff members who work fulltime to ensure that a name that has already been registered is not re-registered or an already taken trademark is not registered as a company name.

Having said that, you need to be careful about not selecting a name that has already been registered. For this, you will have to visit the MCA 21 website to find out whether the name you are looking for has already been registered or not. The registered names are displayed on the website so that you can scan through them and compare for duplicity.

You will be required to provide 6 names for your company. The employees of ROC will then cross check the names with the ones that have already been registered. In case no matches are found, one of the names will be approved by a junior officer of the ROC, the name will then be sent over to a senior officer. Once the senior office approves the name, it will be published on the website.

On an average, 50-60 name applications come in every day. The ROC employees need to check each application separately. This takes time. However, good thing is that these applications are all processed every day. Usually 2 days are required for clearance of a name. Of these 2 days, 1 day goes for checking duplicity and also in checking whether the naming standards and guidelines have been followed or not. The next day is required to make the name appear on the website. Hence, it is important that you keep checking the website of MCA to find out whether your company name has been approved or not.

Step 4: Stamping Company Documents at Authorized Private Banks or State Treasury

This is a very essential step. The documents for incorporation of a company must be stamped. However, for that to happen, it is necessary that unsigned copies of AoA and MoA are provided. Apart from that, a receipt of payment has to be furnished. Yes, you need to pay the necessary payments and you will receive a receipt against the same. The signing procedure takes 1 day to complete.

The fee to be paid includes 3 components. The fee for MoA or Memorandum of Association, fee for Article of Association for INR 500,000 of authorized share capital and also parts thereof. Final component is the cost of the stamp paper that will be used for Form 1 declaration.

You need to make sure that you are sending copies of MoA and AoA, which have nothing written by hand on them. No one should write anything. This ‘no one’ means subscriber or promoter can write anything by hand. These copies need to be unsigned. The copies of these documents are to be sent to Superintendent of Stamps or to a bank which has been authorized to carry out these activities. Once the Superintendent of Stamps receives the copy, he will sign, stamp and emboss the documents and show that the stamp duty has been paid.

After the documents have been stamped, company promoters need to sign and put date on the documents. However, simply signing and providing a date will not be enough. The promoters of the company also need to write down the name of the company and also outline its purposes and activities. Other information that the company promoters need to provide include name of father, occupation and address of the promoters and they also need to provide the exact number of shares that have been subscribed. This information should be written down by hand and in presence of witness. Presence of witnesses is absolutely necessary.

You need know that the stamp duty charge is different for different states. In case you are looking the detailed list of stamp duty in different states, here is a direct link to that.

Step 5: Getting Incorporation of Certificate from ROC

The ROC or Registrar of Companies is a body of Ministry of Corporate Affairs. It is a national body responsible for registering new companies. In order to get an Incorporation Certificate, you need to wait for 5 days after application.

The application has to be electronic. There are three forms that you need to file for this purpose. All these application forms can be found on MCA website. The three forms in question are:

  • e-form 1
  • e-form 18
  • e-form 32

Other documents are required as well. The other documents that you need to provide are:

  • Scanned copies of the letter of consent from initial directors.
  • Scanned copies of stamped and signed copies of Memorandum of Association attached to form 1.
  • Scanned copies of stamped and signed copies of Article of Association attached to form 1.

There will be a fee for this. You need to pay this fee either by visiting a bank that has been authorized to collect the fee or you can pay the fee online using a payment gateway. For online payment, you will have to use a credit card.

Though you need to file the application forms online, you also need to give certain documents to Registrar of Companies. These documents are to be physically handed over at ROC office. The documents that you need to provide are:

  • A copy of the Memorandum of Association.
  • A copy of the Article of Association.
  • A copy of Form 1.
  • A copy of Form 18.
  • A copy of Form 32.
  • The original letter of approval of name.
  • Copy of the letter of consent of the directors of the company.
  • Copy of the power of attorney. This copy must be stamped.

Once the Incorporation Certificate has been issued, the certificate will be mailed to the registered office address of the business. The mail can be sent through normal mail or through rush mail.

The registration fee that must be paid to the Registrar will depend on one factor – the Authorized Capital of the company. This capital is mentioned in the Memorandum of Association.

How to pay the fees?

In case you are worried about paying the fees for the Incorporation Certificate, you can do so by using two methods which are mentioned below:

The offline method: This method is semi online. You will first need to upload all documents related to the incorporation. Once you do so, you will be given a payment challan. You need to download the challan and get a print of the same. Now, with the challan in hand, you need to get a DD or Demand Draft. The DD should be in favor of “Pay and Accounts Office, Ministry of Corporate Affairs, New Delhi”. Funny part is that the DD will actually be payable not in Delhi but in Mumbai. There are specific branches that have been provided by the MCA. The DD will be accepted only in those bank branches which have been authorized to collect the payment. The payment will get cleared in about 7 days. Right after the payment is cleared, ROC will accept the documents you send and start the verification process.

The online method: In case you are not willing to undertake the hassle of visiting the bank physically, you can select for the online payment method. This is way easier than the offline method but there is a strict requirement. The payment cannot be made using any other mode other than a credit card. You cannot use debit card or internet banking. In case you are based in Mumbai, ROC will be asking for what is known as pre-scrutiny of the documents. This means that before you upload the documents, you will have to scrutinize the documents for any error and if you find any, you will have to rectify them before you upload them. Once you upload the documents after scrutiny, they will be approved quickly. For online filing and fee payment, you will have to upload only one copy of AoA, MoA and PoA where PoA is Power of Attorney.

Step 6: Getting a Seal

This is not really mandatory and neither is there any legal requirement stated anywhere in rules that a seal is required if a company is getting incorporated. However, every company will actually need a seal that it will be using for issuing several documents and share certificates. The cost of getting this seal will actually vary on the number of words that you will need on the seal. The cost will also be determined by the number of seal that you will be needing. You can do away with 1 seal but it is always advised that you have several seals in place so that if you end up misplacing one, you can immediately use another one. Having multiple seals is also important because if the original seal is misplaced, you may to have the exact the same copy of the original seal when you go for creation of another seal. Differences may come in. This is not really that serious an issue but can have negative impact on the image of the company. Making a seal usually takes a day but the actual amount of time that will be required will depend on several factors like the size and shape of the seal, number of words to be engraved and the number of seal that are to be made. The price will also depend on how quickly you will need the seals. The price for a single seal usually ranges between INR 300 and INR 500.

Step 7: Obtaining a PAN or Permanent Account Number

The PAN or Permanent Account Number is to be obtained from an authorized agent or a franchise of Income Tax Department of India. The two most popular franchises are NSDL or National Securities Depository Ltd. and UTI or Unit Trust of India Investors Services Ltd. It takes about 7 days to get a PAN and the total cost is INR 67. However, you may have to shell out another couple of hundred of rupees in case you are going for an authorized agent.

The question is, why do you need PAN? The Income Tax Act of 1961 says that:

  • A person needs to provide his / her PAN while paying taxes.
  • A person / organization needs to provide TAN or Tax Account Number while making TDS deposits.

The result is that CBDT or Central Board of Direct Taxes has actually instructed all banks in India that tax payments should NOT be accepted unless PAN or TAN (as applicable) is quoted. So, PAN is required!

Now, this PAN is actually a 10-digit number which is alpha-numeric by nature. This number is provided on a card which is known as the PAN Card. This card is a laminated card which contains the PAN, name of the person, age of the person etc. It basically serves as an identification document and also as age proof. This PAN or Permanent Account Number is actually issued by IT department’s assessing officer.

Initially, PAN was provided directly by the Income Tax Department. However, the system was slow and not that effective. To overcome the problem, IT department decided to outsource the work. The first authorized franchise was UTI Investor Services Ltd. This outsourcing happened in year 2003 in month of July. Interestingly, UTI was authorized to not only allot PAN but also issuing PAN cards. UTI was allowed to set up IT PAN Service Centers in each and every city in India where there was an office of Income Tax Department. Later came NSDL. NSDL or National Securities Depository Ltd. was allowed to set up what is known as TIN Facilitation Centers since June 2004. Ever since then, NSDL is also offering PAN allotment and PAN Card issuance services.

However, you need to understand that though it is said that UTI or NSDL allots the PAN, the actual issuance takes place from the Income Tax Department.

While PAN is made available to individuals who are earning, it is also made available for companies. The charges are same but the documents required differ. In case of a company, you will need to provide the following documents:

  • Company registration certificate that has been issued by ROC or Registrar of Companies.
  • A proof of address of the company for which the PAN application has been made.
  • Some personal identification document.

In order to apply for PAN, you will have to apply using Form 49A. This form can be downloaded directly from UTI website or from NSDL website. You can also collect the physical form from any of the centers that have been set up by the franchise. For collecting a physical form, you will have to pay an additional fee of INR 5.00.

Simply fill up the form and submit it to the office and collect the acknowledgement slip. UTI or NSDL will ask the IT department to issue a PAN and once the PAN is issued, UTI or NSDL will print the PAN Card and deliver the same to you.

Just remember that though the application for PAN is allowed to be made online, there is no way of completing the entire process online. The documents that are required for verification just be handed over to the authorities physically and hence, you should visit IT PAN Service Centers or TIN Facilitation Centers physically to hand over the documents. In case you want to save yourself the trouble of physically visiting the place, you can always go for an agent who might charge you some money for the services.

In case you want to get the form for PAN online, you can get the same from www.utiisl.co.in or www.tin.nsdl.co.in.

Step 8: Obtaining TAN or Tax Account Number

Just like PAN, you will also need TAN. Since you are opening up a new company, it is highly likely that you will be deducting tax at source or TDS from the employees or for several other purposes. By rule, if you are deducting or collecting tax at source, you will have to quote the TAN. If you fail to comply, there will be problems to deal with. So, TAN is necessary for TDS or TCS where TCS stands for Tax Collected at Source.

Now TAN or Tax Account Number is basically a 10-digit number similar to the PAN. TAN is alphanumeric by nature and is issued by the Income Tax Department. You need to know that if you fail to apply for TAN or if you are not complying with TAN rules as laid down by the Income Tax Department, you may have to pay a fine of up to INR 10,000. So, it is always wise to apply for TAN. It usually takes 7 days to receive the TAN after the application is made. The total cost involved is INR 57, which includes the actual application charge and the service tax.

The form that you need to fill for TAN application is known as the Form 49B. You can download this form online or you can collect this form directly from a TIN Facilitation Center operated by NSDL. NSDL is actually the authorized franchise of Income Tax Department. You need to submit the Form 49B at one of the TIN Facilitation Centers.

In case you are not aware of the physical centers, you can always look for them here and here. Always remember that the TAN is not issued by NSDL. NSDL will not receive the application and verify the details you have provided. Once the verification is complete, NSDL will send the application to Income Tax Department and then, the Income Tax Department will issue a TAN for you. Good thing is that the TAN application can be done both online and offline so that you can choose the one that suits you best. However, you still need to file the hard copy of the application with NSDL or National Securities Deposit Limited. NSDL will accept the copy only when you have paid the necessary fee for TAN application.

Step 9: Registering Business with Office of Inspector, Shops and Establishment Act

This step will take about 2 days to complete. The total charges that you need to bear for this is INR 6500. This amount includes the registration charges and trade refuse charges, which is three times the registration charges.

In order to complete this step, you will have to issue a statement which will contain the following details:

  • Name of the establishment (if any).
  • Name of the employer.
  • Name of the manager(s).
  • Postal address of the business.
  • Category of the business.

The 1948 Bombay Shops and Establishment Act’s section 7 states that all establishments should be registered in the following manner:

Section What is to be done
U/S 7(4) The establishment must be registered by the employer within 30 days from the date when the establishment opens. The registration must take place in the manner as prescribed by the law.
U/S 7(1): The employer must mandatorily submit Form A to the local shop inspector. The applicable fee must be provided along with the form in order for the establishment to be registered.
U/S 7(2): Once the local shop inspector gets the Form A and the fee for registration, a proper audit is to be conducted to gauge the correctness of the statement and when that is done, the registration certificate is issued. Form D is used for issuing this certificate for the establishment. The certificate must be issued according to provisions mentioned in 1961 Maharashtra Shops and Establishments Rules’ Rule Number 6.

Amendments were made to Maharashtra Shops and Establishment Rules on December 15, 2003. The fee structure for both registration and registration renewal, as mentioned in Rule 5 were changed in this amendment. The changed fee structure is given in the table below:

Employee count Fee for registration or registration renewal
0 employees INR 100
1-5 employees INR 300
6-10 employees INR 600
11-20 employees INR 1000
21-50 employees INR 2000
51 to 100 employees INR 3500
More than 100 employees INR 4500

The Mumbai Municipal Corporation Act of year 1888 states that the Trade Refuse Charges will be 3 times the charge of registration. So, if your company consists of say 38 employees, the amount that you need to pay for registering your business with Bombay Shops and Establishment Act is INR 2000 + 3 x (INR 2000) = INR 8000.

Step 10: Registering VAT for Your Business at State CTO or Commercial Tax Office

This takes about 12 days to complete. Of course, there will a fee associated with this. There will be a registration fee along with stamp duty.

Initially there was Sales Tax but this was replaced in 2005 by VAT. The replacement took place on April 1, 2005. Interestingly, VAT requires businesses to register for the same. Unless VAT registration is done, businesses cannot charge VAT. For registration, you will have to use Form 101. You need to authorize someone from your office to go and register for VAT. That person needs to physically visit the Office of Sales Tax on the day on which the application for VAT registration will be verified.

That person needs to walk up to the counter where the person at counter will check whether all documents are in place or not. Once that is verified, the person at counter, that is the clerk, will give a waiting number or a token number. After a while the token number will be called and that authorized person, who is actually your representative applicant (not necessary that you have to send someone else as you can yourself go) will have to go to the sales tax officer’s desk.

At the desk, the officer will manually enter all information that has been input in Form 101 into a system. This will take a while. Once the information is entered, it will take about 10 minutes for the system to generate TIN or Tax Identification Number. Once the TIN is registered, the company will be immediately eligible for paying taxes. Though the TIN is produced on the same day, the certificate of VAT registration will be sent after 10-15 days. This certificate will be sent through normal mail.

While you need to fill up Form 101 for VAT application, you will also have to provide a number of supporting documents. The list of the documents that you need to provide is given below:

  • You need to provide a true copy of the Memorandum of Association.
  • You need to provide a true copy of the Article of Association.
  • You have to provide a proof of your address of residence. One document will not suffice. You have to provide at least two of these document: driver’s license, passport, voter ID card, latest property tax receipt, property card, latest electricity bill. As mentioned, at least two of these documents should be provided.
  • A proof which shows the address of the business. In other words, a proof that the business establishment physically exists at a place. If you are the owner, you will have to provide a proof that own the premises. This can be done with a property card or a deed of ownership or an agreement you entered into with the builder of the property or any other document which proves that the place of business exists.
  • One recent colored passport sized photograph of the person who is applying for VAT – usually the business owner.
  • A copy of your PAN Card or alternately, you can also provide a copy of the Order of Income Tax Assessment, which shall have the PAN quoted on it.
  • You will also need to show the Challan on Form 210 which shows that you have paid the requisite fee for VAT registration. This challan should be original. The amount should be INR 5100, which contains INR 5000 as registration fee and INR 100 as stamp duty.

Since 2009, the VAT registration system went online. Though the system went online, a physical visit to the sales tax office is still mandatory. After the process went online, the system that came in place is:

  • Fill up Form 101 online and submit the same along with all necessary documents (scanned copies).
  • Pay the fee online and get a receipt.
  • Visit the sales tax office with all original documents so that the authenticity of the documents can be verified manually.

Despite the fact that you need to visit the sales tax office for document verification, the process has become very simple and saves a lot of time.

Step 11: Profession Tax Registration for Your Business

Registering your business for Profession Tax is also important. Profession Tax Act’s section 5 explicitly states that an employer, who is not a government officer, will be responsible for taxation. The employer is responsible for obtaining a registration certificate from the authority prescribed for the same. This employer will have to apply for the same using Form 1 to the relevant authority.

In case you (that is, your business) are based in Mumbai, you can find the registration authority at Mazgaon’s Vikarikar Bhawan. For the purpose of registration, you need to provide the following documents:

  • Address proof of the company office.
  • Registration number of the company as per 1956 Indian Companies Act.
  • Relevant details of the company’s head office provided that the company’s branch is applying for the Profession Tax Registration and that the head office is located in a different state.
  • Certificates that have been obtained as per various acts that have been defined by the Government of India.
  • The Company Deed and so on…

The robust list of all documents that will be required for the Profession Tax Registration will be provided from the office where the registration takes place.

The overall process takes 2 days for completion if you have all the necessary documents in place. Good news however is that you do not have to pay any fee for the Profession Tax Registration. Also, remember that the gamut of Profession Tax falls under the state government and not the central government.

Step 12: Registering the Company with EPFO

In case your company has 20 employees or more, you will have to register with EPFO or Employees’ Provident Fund Organization. Unlike the profession tax, EPFO is at national level and the 1952 Employees Provident Funds and Miscellaneous Provisions Act explicitly states that an establishment has to register with EPFO if:

  • The number of employees is 20 or more.
  • The company falls under any one of the 183 different industry categories defined in India excluding Jammu and Kashmir.

The applicant, in this case you or someone representing the company, will have to fill up the application form in the prescribed format. When the application is made, a social security number is provided to the applicant.

The primary focuses of the EPFO registration are:

  • Delinquent Reporting.
  • Non-reporting of the total size of the work force etc.

In case your company has less than 20 employees, you can still go for EPFO registration. This is purely optional in this case.

You, as the employer, will have to use a prescribed format to inform the regional Employees Provident Fund Organization about the necessary information. Once that is done, an Establishment Code Number is allocated for the organization. Good thing here is that separate registration for each individual employee is not required.

Despite the fact that individual employees are not required to be registered with the EPFO, it is mandatory that all employees become a part of the fund maintained by the company and that the company will be responsible for providing an account number to each individual employee. The account number cannot be just any random number that the company can decide on. The account number needs to follow the format prescribed by EPFO.

It is a rule that the Establishment Code Number is provided by the EPFO to the establishment or the company within 3 days from the date of application provided that the application is complete with no errors at all. Still, there are instances where such perfect applications did not receive the establishment code within 3 days. In fact, it actually takes up to 15 days for the code to be generated and provided to the business establishment. In case you are wondering whether there is an online option or not for EPFO registration, you are out of luck. There is no online option available as of now and you have to get this done manually.

Step 13: Registering the Company with Employees State Insurance Corporation

This thing will take up to 9 days for completion. Again, you don’t need to pay anything for registering with the Employees State Insurance Corporation. By this registration, the employer or the factory and every employee who is paid a salary will be identified for insurance needs. The Employees State Insurance Corporation will set up records for every individual.

As per rules, the employer needs to submit Form 01 for the purpose of registration. The Employees State Insurance Corporation will then take a maximum of 7 days (usually the corporation takes 3 days) to generate the Employer Code Number. Once the code is generated, the employer will receive a letter of intimation from the corporation. This letter is sent via normal mail and takes up to another 2-3 days to reach the employer.

Once the employer’s registration is completed, the corporation will then initiate a separate process for individual insurance for each employee. The employer will have to provide the declaration to the insurance company properly and the employees of the company will be responsible for providing correct information to the employer so that employer can hand over the same to the insurance company. If the employees give incorrect information, the responsibility of the same lies with the individual employees and not with the employer.

ESI Cards or employee temporary cards are often issued by many local offices on the spot. However, this may not be the case for you. Spot ESI Cards may be not be issued. The temporary cards remain valid for 13 weeks from the date when the employee joins the company. The permanent ESI cards are issued later and it may take up to 5 weeks to get the same.

That concludes all the necessary steps for the registration of a new company in India. In case you are having difficulty remembering the lengthy steps, here is a quick table that will summarize the steps at a glance.

Sl. No. Steps Procedure National or State Level Estimated Time for Completion
1 Step 1 Obtaining DIN. This has to be obtained from Ministry of Corporate Affairs National It takes a day’s time to complete the process – 1 day
2 Step 2 Obtaining Class II Digital Signature Certificate from one of the agencies authorized by the MCA or Ministry of Corporate Affairs National Takes up to 3 days for the process to complete
3 Step 3 Reserving the name of the establishment of the company with Registrar of Companies of ROC – a national body National This process takes up to 2 days to complete
4 Step 4 Getting the company documents stamped from the State Treasury. The documents can be stamped through an authorized bank as well Private This process usually takes a day.
5 Step 5 The Incorporation Certificate is to be obtained from the Ministry of Corporate Affairs’ Registrar of Companies National This process can take up to 5 days for completion
6 Step 6 Getting a company seal Private This can be completed within a day
7 Step 7 Getting company PAN from authorized agent or franchise of Income Tax Department. NSDL or National Securities Depository Limited and Unit Trust of India Investors Securities Ltd. are the two authorized agencies for the purpose. You can choose any one National This can take up to 7 days
8 Step 8 Getting company TAN from Income Tax Department. TAN stands for Tax Account Number and is necessary for TDS or TCS National This too can take up to 7 days for completion
9 Step 9 Registering the company with Office of Inspector, Shops and Establishment Act State (happens at Municipal level) This process takes up to 2 days to complete
10 Step 10 Registering the company for VAT certificate. This registration takes place from the Commercial Tax Office. It is a state level event State The process takes 12 days for completion
11 Step 11 Registering the company for Profession Tax. The registration takes place at the Profession Tax Office State This process requires 2 days for completion
12 Step 12 Registering the company with Employees Provident Fund Office. This registration is optional if the number of employees in the company is less than 20 and mandatory if the employee count exceeds 20 National This process takes up to 12 days for completion
13 Step 13 Registering the company with Employees State Insurance Corporation. This is meant for medical insurance only and not life insurance National This process takes up to 9 days for completion

That concludes all the steps that are required for starting a new business in India. Hopefully, the introduction of the unified INC-29 form will help to improve India’s rankings in “Global Ease of Doing Business Index”. Also, if the PAN and TAN registration are integrated with the company registration process, the entire process will be smoother than before.

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