How to Start a Business in India: Tax, Legal & Compliance Playbook for Founders

Introduction: Why India Attracts Founders Across the World

India is one of the world’s most powerful emerging markets - and founders from the US, Europe, Singapore, and the Middle East are rapidly choosing India for product development, R&D, engineering, and GTM expansion.

But while India offers massive opportunity, the incorporation journey is filled with important legal, tax, and FEMA compliance requirements. A single early mistake can lead to penalties, delays in fundraising, or restructuring.

This guide breaks down how to start a business in India the right way - whether you're an Indian founder or a global entrepreneur.

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Step 1: Choose the Right Business Structure

Private Limited Company
- Best For: SaaS & tech startups
- Benefits: ESOP-friendly, VC-friendly
- Drawbacks: Higher compliance

LLP (Limited Liability Partnership)
- Best For: Consulting & service businesses
- Benefits: Low maintenance, simple tax
- Drawbacks: Not ideal for VC funding

Wholly-Owned Subsidiary
- Best For: Foreign parent companies
- Benefits: 100% ownership allowed
- Drawbacks: FEMA reporting mandatory

OPC (One Person Company)
- Best For: Solo founders
- Benefits: Easy formation
- Drawbacks: Must convert after scale

Branch/Project Office
- Best For: Short-term operations
- Benefits: Quick entry
- Drawbacks: Higher tax liability

🔥 Pro Tip: For global founders → Wholly-Owned Subsidiary. For tech founders → Private Limited Company.

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Step 2: Incorporation Roadmap & Timelines

Incorporation Timeline

1. DSC & Name Approval
- Duration: 2–5 days
- Action: Digital signatures + name reservation

2. SPICe+ Filing
- Duration: 4–7 days
- Action: Submit MOA, AOA & incorporation forms

3. MCA Approval
- Duration: 5–12 days
- Action: Certificate of Incorporation issued

4. PAN/GST/TAN + Bank Account
- Duration: 5–10 days
- Action: Tax registrations + operational readiness

⏱ Total time required: 15–25 working days

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Legal Requirements You Must Complete

Before and immediately after incorporation:

✔️ Share capital documentation
✔️ Drafting MOA/AOA aligned with future expansion
✔️ Inter-company agreements (if a foreign parent exists)
✔️ IP, confidentiality & data protection agreements
✔️ Registered office setup
✔️ Bank account onboarding

A legally clean setup keeps investors, banks & acquirers comfortable.

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FEMA & FDI Compliance for Foreign Founders

If your business receives FDI (foreign shareholding) - following FEMA/RBI rules is mandatory.

FEMA Filing Requirements

Foreign Remittance Reporting
- Timeline: Within 30 days
FC-GPR Filing
- Timeline: Within 30 days of share allotment
Annual FLA Return
- Timeline: Every July
FC-TRS
- Timeline: Within 60 days (if share transfer occurs)

Non-compliance can block future VC rounds, ESOP issuance & international transfers ,so this step is critical.

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Tax Strategy & Repatriation Planning

Choosing the correct tax regime impacts profitability and compliance.

Tax Regime Comparison

115BAA
- Rate: 22%
- Best For: Most startups

115BAB
- Rate: 15%
- Best For: New manufacturing companies

Normal Tax Slab
- Rate: 25–30%
- Best For: Large or legacy businesses

Transfer Pricing applies for foreign-owned companies involving:
- Royalty fees
- Management fees
- Intercompany loans
- Shared service billing

Repatriation Options

Royalty / IP Fees
- Tax: 10–15%
- Best For: SaaS & tech companies

Interest on Parent Loan
- Tax: 5–10%
- Best For: Early-stage funding structures

Dividend
- Tax: ~20%
- Best For: Mature companies

Share Buyback
- Tax: ~20%
- Best For: Returning surplus capital

💡 Ideal early-stage structure: Royalty + Intercompany Loan mix.

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Compliance Calendar for Startups in India

Monthly
- GST filing
- TDS filing
- Payroll compliance

Quarterly
- Advance tax (if applicable)

Annual
- Statutory audit
- Tax audit
- ROC filings (AOC-4 + MGT-7)
- Transfer Pricing (3CEB report)
- RBI FLA return (if FDI exists)

FinLegal manages audit → tax → FEMA → payroll → ROC end-to-end so founders can scale without administrative drag.

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Conclusion: India Rewards the Well-Structured

Starting a business in India is high opportunity, high leverage - but smart founders win only when the structure is compliant, tax-efficient, and future-proof.

A right advisor :
- Faster setup
- Lower tax leakage
- Clean audits
- Smooth international operations

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🚀 Want to Set Up Your Business in India?

FinLegal supports founders with:

✔️ Company Incorporation
✔️ FEMA + FDI + RBI Reporting
✔️ Transfer Pricing & Cross-Border Tax
✔️ Accounting, Payroll & Statutory Compliance
✔️ CFO & Funding Support
👉 Book Your Strategy Call