Minimum Legislative Compliance Requirements for a New Company

For incorporating a new company in India one needs to adhere to the following minimum laws:

  1. Companies Act, 2013: The entity would be formed under the Companies Act, 2013, as a Private Company. Minimum two Directors would be required to form the Board of Directors. One of the Directors needs to be an Indian resident. Formation of company typically takes 15 days to 20 days.
  2. Income Tax Act, 1961: Companies are subject to Tax @25% on Income earned. Also, for most of the expenditures done by the company, tax is to be withheld at specified rates. This process is called Tax Deducted at Source (TDS). Major expenditures covered under TDS are Salaries, payment to vendors like professionals and contractors. Similar on the lines of TDS is TCS, being Tax Collected on Source, which is to be collected on certain specified receipts and payable on certain expenditures. For all the above, quarterly and yearly compliances are required.
  3. Foreign Exchange and RBI: As is expected, the seed capital would flow from an offshore jurisdiction to the Indian company. There are compliance requirements with respect to information to Reserve Bank of India and relevant permission(s), if any.
  4. Goods and Service Tax (GST):  It is assumed that the entity would be exporting the services to its foreign parent company. Export of services does not attract any GST. However, compliance with GST would still be required as the company would seek refund of the GST paid by it alongwith payments to various vendors against the services/goods consumed by it.
  5. Social Security of Employees: Some of the laws applicable would be Employees Provident Fund Act, Employees State Insurance Act, Gratuity Act, Payment of Bonus Act, Minimum Wages Act, etc.
  6. Other Labour Laws: Some of the laws applicable would be Labour Welfare Fund Act, Equal Remuneration Act, Prevention of Sexual Harassment Act, Child Labour Act, Workmen Compensation Act, Contract Labour Act etc.
  7. Professional Tax: Many states in India collect Professional Tax for eg the sates of Maharashtra, Tamil Nadu etc. Hence, a registration in each state is required.

NOTE: The aforesaid is a gist of minimum compliances as per Indian law. There are further compliance requirements which may exist on case to case basis.