Start Business in India

Starting a business in India can be a daunting task, but it can also be an exciting and profitable adventure for those who are willing to take the plunge. India is a land of diverse cultures, rich history, and significant economic growth that makes it a promising global marketplace for entrepreneurs. Whether you are a seasoned entrepreneur or a first-time business owner, India offers a wide range of opportunities and a supportive ecosystem for starting and scaling your business. In this article, we will explore the benefits of starting a business in India and share some tips to help you navigate the complexities of doing business in this vibrant country.

1. Entrepreneurial Opportunities in India

India, with its growing population and increasing demand for goods and services, offers a plethora of entrepreneurial opportunities. The country’s agricultural sector has enormous potential, with low levels of processing in perishable foods such as fruits, vegetables, milk products, meat, poultry, and marine products. Entrepreneurs can add value to these produce with proper management and marketing initiatives. The processed food market opens a great potential for entrepreneurs be it fast food packaged food or organic food. Additionally, as more companies open their offices in India, there will be a good demand for formal attire, and those who can meet this demand in a cost-effective way can make a good business. The corporate gifting industry is also growing in India, which presents a unique business opportunity to explore in the growing urban culture.

Moreover, India is well known for its herbal and Ayurvedic products. With increasing awareness about the ill-effects of allopathic medicines, there will be a huge demand for cosmetics, natural medicines, and remedies in the coming time. Organic farming, which has been in practice in India for a long time, is also gaining significance due to an increasing number of consumers, especially foreigners, who are preferring organic products. Therefore, prospective entrepreneurs can focus on business opportunities in this promising sector of the country.

Furthermore, the media industry has tremendous opportunities to offer to young entrepreneurs, with its rapid growth in television advertising, print, and digital media. The growing demand for safe and good quality toys, as Chinese toys face accusations of toxins, and rising medical tourism, also provide opportunities for entrepreneurs. The biotechnology sector, which has a major impact on agricultural productivity, is another industry that offers enormous potential for entrepreneurs in India. Additionally, with the increasing demand for stronger and better internet throughout India, starting an internet infrastructure business can have a lot of positive impact. 

2. The Importance of a Business Vision

Having a clear and inspiring vision for a business is crucial for its success. This vision serves as a guide and motivates people within the organization to work towards a common goal. It gives direction to the business, allows it to stay focused on its purpose, and sets it apart from competitors. A business vision is not just some words on a wall, but rather a powerful tool that helps shape the company’s strategy, culture, and operations.

A well-crafted business vision should be ambitious, specific, and relevant to the industry and market the business operates in. It should communicate the company’s values, future aspirations, and the impact it aims to create. When the vision is compelling and inspiring, it attracts like-minded people who share the same values and passion. This creates a sense of purpose and belonging within the organization and helps build a strong brand identity. A clear vision also enables decision-making and prioritization of resources towards achieving the long-term goals of the business.

Having a business vision is especially critical for start-ups, where the future is uncertain, and chaos is the norm. In such situations, a shared vision serves as an anchor that helps the team stay united and aligned. It keeps the team focused on the big picture and prevents them from getting bogged down by daily challenges or distractions. A great example of a business vision is Google’s, ‘to organize the world’s information and make it universally accessible and useful.’ This vision was inspiring, specific, and relevant, and it gave Google a purpose that went beyond creating a search engine.

To conclude, a business vision is a crucial part of any successful organization. It sets the tone for strategy, culture, operations, and brand identity. An inspiring business vision guides decision-making, prioritization, and resource allocation. It unites the team, attracts like-minded people, and creates a sense of purpose and belonging. In essence, a business vision provides direction, motivation, and inspiration to the stakeholders of the organization, and therefore, it is essential to have one. 

3. Choosing the Right Business Entity

Selecting the right business entity in India is crucial as it can impact various factors such as tax efficiency, operational matters, and compliance. Business owners must carefully consider their residential status and intended control over the business while choosing a suitable business structure. The available options for residents and non-residents include sole proprietorship, one-person company, partnership firm, limited liability partnership, and private and public limited companies. It is essential to understand the personal liability of the owner and the ability to raise or borrow money, as different business structures offer different benefits in these areas. Additionally, regulatory compliance and the tax structure also vary depending on the business entity chosen. Therefore, making a wise decision at the outset can save a business owner from complexities involved in changing the structure at a later stage.

Choosing the right business entity is crucial for entrepreneurs setting up a business in India. Different business entities offer various benefits related to tax, liability, regulation, and funding, among others. Single proprietorship is apt for service-oriented companies or businesses with low investment needs, whereas limited liability partnership or private and public limited companies offer more compliance and regulatory burden. Before registering a company, it is essential to consider factors such as the number of owners, desired compliance level, and the business structure’s impact on taxation and investor perspective. The right business entity allows a business to run efficiently, meet its goals, and comply with legal obligations.

Selecting the right business structure in India is a crucial decision that can impact a company’s success. The business entity chosen determines the company’s taxation, regulatory compliance, liability, funding, and investor perception, among other factors. Therefore, entrepreneurs must carefully consider the available options and their requirements related to ownership, control, liability, and compliance. Choosing the wrong business entity can lead to issues, such as legal liabilities, financial loss, and regulatory penalties. Therefore, it is advisable to seek professional advice and make a wise decision based on factual data before registering a company in India. 

4. Opening a Bank Account for Your Business

Opening a bank account is a crucial step in establishing a business in India. It helps separate personal and business finances and facilitates all financial activities, including accounts payable and employee payroll. A business bank account is also essential for establishing the credibility of the business in the marketplace. The process of opening a corporate bank account in India is highly regulated and digitized, with the need to adhere to KYC norms as prescribed by the Reserve Bank of India (RBI). The bank may ask for additional documents and information as per its internal regulations. However, it is advisable to choose a bank with a less cumbersome process and low fees to run the business with minimal collateral.

When opening a bank account, individuals must establish their identity and address by providing acceptable identity proof documents. For proprietorship firms, the business’s registration certificate or certificate/license issued by municipal or tax authorities, along with income tax returns and utility bills in the business’s name, must be submitted. For partnership firms, legal names, addresses of partners, and telephone numbers of the firm must be provided, along with registration certificates and power of attorney documents. Similarly, companies must submit a certificate of incorporation, resolution of the board of directors, and memorandum & articles of association, among other documents. Trusts, societies, and foundations must provide names of trustees, settlors, and the trust deed or memorandum & articles of association for account opening.

While establishing a business bank account, several factors must be considered, such as the bank’s fees and fee waivers, minimum deposit requirements, account features, and accessibility. Business banking is designed to assist corporations and businesses in making the best financial decisions based on their current balances and creditworthiness. Banks provide additional support for small business bank accounts, including special incentives. Therefore, it is never too early to open a corporate bank account in India. A business bank account is safer and more fraud-resistant, safeguarding the company’s status and legitimacy and providing additional services such as small-term loans, low-interest credit allowances, spending management advisory, and payroll administration.

5. Nationalized Banks for Business Loans

Starting a business in India can involve a significant amount of capital investment, making it challenging for entrepreneurs with limited resources. However, with the government’s support, entrepreneurs can now avail business loans from nationalized banks. These banks offer various loan schemes tailored to the different needs of startups and MSMEs, ranging from collateral-free loans to loans for green energy technology businesses.

The government has also rolled out several startup business loan schemes, such as the National Small Industries Corporation (NSIC) and Micro Units Development and Refinance Agency (MUDRA) schemes. These loans have lower interest rates compared to those offered by private banks, encouraging entrepreneurs to start their businesses. Notably, the SIDBI, in collaboration with various banks, offers loan schemes to directly fund startups and MSMEs operating in the service or manufacturing sectors.

Nationalized banks extend loans up to INR 40 to 50 lakhs, and some banks charge a processing fee of up to 0.99% of the loan amount. The repayment tenure can range from 3 to 4 years, and loan amounts up to INR 75 lakhs are available. To avail of these loans, entrepreneurs must meet the eligibility criteria, including a sound business plan, credit score, and repayment capacity.

Entrepreneurs can benefit from digital platforms that ease loan application processes and offer loans of up to INR 10 lakhs for Mudra loans and INR 5 crores for MSME loans. The loan amounts can be used to start a new business, expand an existing one, or even for personal and home loans. With these loan schemes and bank initiatives, entrepreneurs can take the first step in realizing their business dreams and contribute positively to India’s economic growth.

6. Tax Registrations for a Business in India

Starting a business in India is an excellent decision, considering the government’s business-friendly policies and the nation’s rising demand for new products and services. However, it is necessary to take care of several administrative tasks to keep the business legal and operational. One such task is tax registration, mandatory for all businesses operating in India. Business owners must know when to register for taxes and which types of taxes apply to their business.

The first tax registration required for businesses in India is the Goods and Services Tax (GST). GST is a single tax on goods and services, applied by the government of India to replace all previous indirect taxes. Businesses are required to register for GST when their annual turnover exceeds INR 40 lakhs. Service providers must register for GST when their annual turnover exceeds INR 20 lakhs. Failure to register for GST can result in heavy penalties.

The next tax registration required for businesses is the Income Tax registration. Any individual or business entity earning income above INR 2.5 lakhs per annum is required to have a Permanent Account Number (PAN). Business owners must obtain a PAN before starting their operations. Moreover, businesses with annual turnover exceeding INR 1 crore are required to be audited by a certified chartered accountant.

Apart from these two registrations, some businesses may require obtaining other registrations such as Professional Tax, State Level Tax Registration, and Value Added Tax (VAT). Professional Tax registration is necessary for businesses with employees on the payroll. The State Level Tax Registration is required for businesses that have opted for the composition scheme. Companies engaging in manufacturing activities must register for VAT.

Business owners can register for taxes online by visiting the official website of the respective tax agencies. They need to provide required details and documents to complete the registration process. Once registered, businesses must file monthly, quarterly, or annual returns as per their obligation. It is essential to ensure timely and accurate filing of returns to avoid penalties and legal issues.

7. GST Registration

Indian businesses can start registering for the Goods and Services Tax (GST) online through the government website gst.gov.in. Any dealer with an annual turnover exceeding Rs.20 lakh must register for GST. It is important to note that the threshold may vary depending on the state and type of supplies. With the latest updates, from 1st January 2022, the CBIC made aadhaar authentication mandatory for applying revocation of cancelled GST registration under CGST Rule 23 in REG-21. If the GST registration gets cancelled based on CGST Act’s section 29(2) clause (b) or (c), taxpayers can request an extension of up to 30th September 2021 to revoke their cancelled GST registration. The process can be completed in two parts: Part-A and Part-B. In Part-A, businesses must fill in the basic information about their PAN, name, email, mobile number, etc., and receive a temporary reference number (TRN). In Part-B, businesses must fill in additional details in 10 sections and attach necessary documents like proof of address, PAN, Aadhaar authentication, etc. Once the submission is complete, applicants can expect the registration certificate in Form GST REG-06.

8. TAN Registration

In India, every company that is responsible for deducting tax at source needs to obtain a Tax Deduction and Collection Account Number (TAN). This is a unique 10-digit alpha numeric number that all tax deductors and collectors must obtain. Failure to apply for a TAN number, quoting an incorrect TAN, or not quoting the TAN number at all can lead to a penalty of Rs. 10000. Therefore, it is essential to follow the correct procedure to obtain a valid TAN number. The first three characters of a TAN number represent the city or state where it was issued, and the fourth character is the tax deductor’s initial letter. The next five characters consist of system-generated numeric numbers, followed by an alphabetic check digit. There are two modes of acquiring a valid TAN number – offline and online registration.

9. ESI Registration

ES Registration is an essential certification required by almost all companies in India providing social security benefits such as medical, maternal, and disablement benefits to their employees. This certification is mandated by the Employee State Insurance Act of 1948, which ensures benefits to employees during sickness, maternity, and employment injury. Employers with over ten employees (twenty in some states) and maximum salaries up to Rs. 21,000 per month and minimum wages of 6.5% x wages x 6 need to obtain ESIC Registration. The employer must contribute 3.25% of the total monthly salary, while the employee needs to contribute only 0.75% of their monthly salary. The employee without a salary of less than Rs. 176 per day is exempted from contributing.

10. Costs of Starting a Business in India

India presents a compelling market for foreign businesses and investors due to its impressive economic growth and status as the world’s largest democracy. However, companies looking to establish themselves in India must navigate a range of challenges. To do so successfully, they should plan strategically, perform due diligence, and commit to the process.

One crucial factor that foreign investors must consider when starting a business in India is the associated costs. The fees for registering a company in India vary depending on the type of business and the nominal proportion capital held by the company. Different types of company registration incur varying costs, including government fees and professional fees. For instance, the fees may start from INR 1500 and reach up to INR 15000, depending on the complexity of projects, state taxes, and other factors.

While registration fees can be high, they offer several advantages and benefits. For example, registered companies benefit from increased legitimacy, which helps attract more customers, procure bank credit, and secure investments from reliable investors. Additionally, company registration shields the firm from personal liability and other risks or losses, such as those caused by natural disasters. Registered companies also enjoy greater capital contribution, stability and an increased capacity to grow.

The fees for registering small and One Person Companies start at INR 2000 if the nominal proportion capital is below INR 1000000 and at INR 156000 if it is above INR 5000000 but within INR 1 crore. Whereas, companies without a share capital have a set fee of INR 2000 for up to 20 members and INR 5000 for up to 200 members. For businesses with nominal proportion capital above INR 1 crore, the fees can reach up to INR 206000, with additional charges of INR 75 for every increase of INR 10000 of nominal share capital, up to a maximum of INR 250 crore.

Starting a business in India involves many considerations and challenges, including costs. It’s helpful to consult with legal and financial experts to navigate the process most effectively. Proper planning, research, and due diligence will ensure that any prospective company can take advantage of India’s strong economic growth and vast market potential.