Last month World Bank came out with Doing Business Rank and India stands at 132 among 183 economies [read detailed report here].
I thought I would come up with a post which would help readers who are aspiring entrepreneurs.
Let me tell you doing business in India is not easy as it involves your dedication, time, energy and effort, keeping money aside. Here I have taken the procedures and steps from Doing Business in India report of 2013. They have given a detailed process of incorporating a company (Pvt. Ltd) in Mumbai. In other parts of India this is more or less same.
On an average it takes a minimum of 20-24 days to start a business in Mumbai.
Here is the step-by-step procedure for the same:
|1||Obtain director identification number (DIN) on-line By a notification dated 27 March, 2011, the Ministry of Corporate Affairs (MCA) has revised the process for obtaining a Director Identification Number (DIN). Currently the process for obtaining DIN is as follows: 1) e-Form DIN-1 has to be submitted along with photograph and scanned copy of supporting documents i.e. proof of identity, and proof of residence as per the guidelines 2) Along with the supporting documents, the applicant has to attach a documents (verification) which contains the applicant’s name, applicant’s father’s name, applicant’s date of birth, text as specified and the physical signature of the applicant 3) The eForm has to be digitally signed and uploaded on MCA21 portal after which the fees for the same is paid 4) In case Form DIN 1 is signed by a practicing professional (i.e. Chartered Accountant/ Company Secretary/ Cost and Works Accountant) and details have not been identified as potential duplicate, approved DIN is generated and if the details have been identified as potential duplicate, Provisional DIN is generated 5) In the event of Form DIN 1 being signed by an applicant or by the Managing Director/ existing director of the company in which the applicant is a Director or the Company Secretary in full time employment of the company, or details being identified as a potential duplicate, a provisional DIN is generated 6) In case, DIN 1 gets certified by a practising professional ( i.e. Chartered Accountant/ Company Secretary/ Cost and Works Accountant in whole time practise), the DIN will be approved by the system immediately online (in case it is not potential duplicate) 7) In case DIN 1 is signed by any other signatory (i.e. director/ Managing Director/ Company Secretary of the company with which applicant is to be associated), the MCA DIN cell will examine the eForm DIN 1 and will approve the same within one or two days Scanned documents to be submitted: • Photograph of the applicant • Proof of identity • Proof of residence • Proof of date of birth • Proof of father’s name (not required in the case of foreign nationals) Identity Proof: The identity proof (issued by the Central or the State Government or an instrumentality of the State) must contain the following information: • Applicant’s name with photograph; • Father’s name; • Date of birth.||1 day||Rs 100|
|2||Obtain digital signature certificate on-line To use the new electronic filing system under MCA 21, the applicant must obtain a Class-II Digital Signature Certificate. The digital signature certificate can be obtained from one of six private agencies authorized by MCA 21 such as Tata Consultancy Services. Company directors submit the prescribed application form along with proof of identity and address. Each agency has its own fee structure, ranging from INR 400 to INR 2650. There are total seven Certification Agencies authorised by the Controller of Certification Agencies to issue the Digital Signature Certificates. The details of these Certification Agencies are available online at the Ministry of Corporate Affairs ).||1 day||Rs 400 to Rs 2650|
|3||Reserve the company name with the Registrar of Companies (ROC) on-line If the Form 1A is digitally certified by a practicing professional, then the MCA will grant the approval for the name immediately, i.e. within the same day. In case the signing is by any other signatory, then the e-Form would be examined and processed by the MCA and disposed off within one or two days. The guidelines briefly list out the conditions and norms that must be fulfilled while a name is selected for a company. Names that are offensive or are similar to already existing names would not be registered. The Name Availability Guidelines prescribe a time period of one to two days for registering the name of a company, however, due to the large number of applications received, typically this process takes upto 3 days. The MCA has amended the Name Availability Guidelines, 2011 by way of a circular dated 22 July, 2011 whereby the fee for registering the name of a company has been increased from INR 500 to INR 1,000.||2 days||Rs 1000|
|4||Pay stamp duties online, file all incorporation forms and documents online and obtain the certificate of incorporation As a result of MCA’s desire to further the e-governance’s initiatives, with effect from 1st of January 2010 it has been made compulsary to pay all stamp duties on incorporation documents online through the Ministry of Corporate Affairs (MCA) website. As a result of these reforms, the mode of payment of stamp duty through affixation of adhesive stamps on Articles of Association and Memorandum of Association has been replaced by e-payment of applicable stamp duty on Articles and Memorabdum of association through MCA portal. Further, certain forms: Form 1 (a primary form used in the incorporation process), Form 5 & Form 44 will also be stamped electonically through MCA Portal. Further, the reforms also provides that the documents on which e-stamping has been done, need not to be filed physically and electronic filing of the same would be sufficient. For registration, the following forms are required to be electronically filed on the website of the Ministry of Company Affairs:• e-form 1
• e-form 18
• e-form 32
Along with these documents, scanned copies of the consent of the initial directors, and also of the signed and the Memorandum and Articles of Association, must be attached to Form 1.
• The fees for registering a company can be paid online by using a credit card or by payment in cash at certain authorized banks;
• The certificate of incorporation is sent automatically to the registered office of the company by registered or speed post. The registration fees paid to the Registrar are scaled according to the company’s authorized capital (as stated in its memorandum):
• INR 100,000 or less: INR 4,000 If the nominal share capital is over INR 100,000, additional fees based the amount of nominal capital apply to the base registration fee of INR 4,000:
• For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 100,000, up to INR 500,000: INR 300 • For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 500,000, up to INR 5,000,000: INR 200
• For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 5,000,000, up to INR 1 10,000,000: INR 100
• For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 10,000,000: INR 50 The payment of fees has to be done online; the applicant makes the payment through credit cards and the system accepts the documents immediately. Please note that in Mumbai, RoC requests for pre-scrutiny of documents for any correction thereon, before the documents are uploaded, so that once the documents have been uploaded, it can be approved without any further correction. The online filing mechanism requires only one copy of scanned documents to be filed (including stamped MOA, AOA, and POA). Schedule of Registrar filing fees for the articles and for the other forms (l, 18, and 32):
• INR 200 for a company with authorized share capital of more than INR 100,000 but less than INR 500,000 • INR 300 for a company with nominal share capital of INR 500,000 or more but less than INR 2.500,000
• INR 500 for a company with nominal share capital of INR 2.500,000 or more According to Article 10 and Article 39 of the Indian Stamp Act (1899), the stamp duty payable on the memorandum and articles of association for company incorporation in Mumbai, Maharashtra, is as follows:
• Articles of association: INR 1,000/- for every INR 500,000/- of share capital (or part thereof), subject to a maximum of INR 5.000,000 • Memorandum of association: INR 200
• Form-1 (declaration of compliance): INR 100
|3 to 7 days||Rs 22,300|
|5||Make a seal Although making a seal is not a legal requirement for the company to be incorporated, companies require a company seal to issue share certificates and other documents.||1 day||Rs 350|
|6||Visit an authorized franchise or agent appointed by National Securities Depository Services Limited (NSDL) or Unit Trust of India (UTI) Investors Services Ltd to obtain a Permanent Account Number (PAN) Under the Income Tax Act, 1961, each person must quote his or her permanent account number (PAN) for tax payment purposes and the tax deduction and collection account number (TAN) for depositing tax deducted at source. The Central Board of Direct Taxes (CBDT) has instructed banks not to accept any form for tax payment (Chalan) without the PAN or TAN, as applicable. The PAN is a 10-digit alphanumeric number issued on a laminated card by an assessing officer of the Income Tax Department. In order to improve PAN related services, the Income Tax department (effective July 2003) outsourced their operations pertaining to allotment of PAN and issue of PAN cards to UTI Investor Services Ltd, which was authorized to set up and manage IT PAN Service Centers in all cities where there is an Income Tax office. The National Securities Depository Limited (NSDL) has also launched PAN operations effective June 2004, setting up TIN Facilitation Centers. The PAN application is made through the above mentioned service centers on Form 49A, with a certified copy of the certificate of registration, issued by the Registrar of Companies, along with proof of company address and personal identity. A fee of INR 94 (plus applicable taxes) applies for processing the PAN application. IT PAN Service Centers or TIN Facilitation Centers will supply PAN application forms (Form 49A), assist the applicant in filling up the form, collect filled form and issue acknowledgement slip. After obtaining PAN from the Income Tax department, UTIISL or NSDL as the case may be, will print the PAN card and deliver it to the applicant. The application for PAN can also be made online but the documents still need to be physically dropped off for verification with the authorized agent. For more details visit: www.incometaxindia.gov.in, www.utiisl.co.in, www.tin-nsdl.com||7 days||Rs 94 for Fee and Rs 5 for Application Form, (if not downloaded)|
|7||* Obtain a tax account number for income taxes deducted at source from the Assessing Office in the Mumbai Income Tax Department The tax deduction and collection account number (TAN) is a 10-digit alphanumeric number required by all persons responsible for deducting or collecting tax. The provisions of Section 203A of the Income Tax Act require that all persons who deduct or collect tax at the source must apply for a TAN. The section also makes it mandatory for the TAN to be quoted in all tax-deducted-at-source (TDS) and tax-collected-at-source (TCS) returns, all TDS/TCS payment Chalans, and all TDS/TCS certificates issued. Failure to apply for a TAN or to comply with any of the other provisions of the section is subject to a penalty of INR 10,000. The application for allotment of a TAN must be filed using Form 49B and submitted at any TIN Facilitation Center authorized to receive e-TDS returns. Locations of TIN Facilitation Centers are at www.incometaxindia.gov.in and http://tin.nsdl.com. The processing fee for both applications (a new TAN or a change request) is INR 60 (plus applicable taxes). After verification of application, the same is sent to Income Tax Department and upon satisfaction the department issues the TAN to the applicant. The national government levies the income tax. Since outsourcing, any authorized franchise or agent appointed by National Securities Depository Services Limited (NSDL) can accept and process the TAN application. The application for TAN can be made either online TAN can be through the NSDL website www.tin-nsdl.com or offline. However, after the payment of the fee by credit card, the hard copy of the application must beUpon payment of the fee through credit card, the hard copy of the application is required to be physically filed with NSDL.||7 days, simulta-neously with Procedure 6||Rs 60|
|8||* Register with Office of Inspector, Mumbai Shops and Establishment Act A statement containing the employer’s and manager’s name and the establishment’s name (if any), postal address, and category must be sent to the local shop inspector with the applicable fees. According to Section 7 of the Bombay Shops and Establishments Act, 1948, the establishment must be registered as follows: • Under Section 7(4), the employer must register the establishment in the prescribed manner within 30 days of the date on which the establishment commences its work • Under Section 7(1), the establishment must submit to the local shop inspector Form A and the prescribed fees for registering the establishment • Under Section 7(2), after the statement in Form A and the prescribed fees are received and the correctness of the statement is satisfactorily audited, the certificate for the registration of the establishment is issued in Form D, according to the provisions of Rule 6 of the Maharashtra Shops and Establishments Rules of 1961 Since the amendments in the Maharashtra Shops & Establishment (Amendment) Rules, 2003 dated 15th December 2003, the Schedule for fees for registration & renewal of registration (as per Rule 5) is as follows: • 0 employees: INR 100 • 1 to 5 employees: NR 300 • 6 to 10 employees: INR 600 • 11 to 20 employees: INR 1000 • 21 to 50 employees: INR 2000 • 51 to 100 employees: INR 3500 • 101 or more: INR 4500 Hence in the given case the registration fees would be INR 2,000, as there are 50 employees In addition, an annual fee (three times the registration and renewal fees) is charged as trade refuse charges (TRC), under the Mumbai Municipal Corporation Act, 1888.||2 days, simulta-neous with procedure 7||Rs 2,400 (registration fee) + 3 times registration fee for Trade Refuse Charges (Rs 7,200)|
|9||* Register for VAT online VAT online registration was introduced by the Commissioner of Sales Tax, Maharashtra State, Mumbai, Trade Circular No. 4T of 2009, dated January 23, 2009. According to Notification No. VAT/AMD-1009/ IB/Adm-6, dated 26th August 2009, application for registration of VAT by the founders who are required to obtain registration or those who voluntarily desire to get registration can be, as of 1st October 2009, filed electronically on the website. After the completed application form is submitted online, an acknowledgment containing the date and time for attending before the registering authority along with code/designation and address of registering authority is generated. The company should print a copy of the completed e-application and submit it along with the acknowledgement to the registration authority for verification and photo attestation on a given date and time along with relevant documents. If the application is correct and complete in all respect along with relevant documents then the registering authority will generate TIN after verification of the documents. Registration certificate will be printed and issued to the company on the appointed date. Usually, the appointment date is scheduled in the next 10 days.Other accompanying documentation includes:
• Certified true copy of the memorandum and articles of association of the company
• Proof of permanent residential address. At least 2 of the following documents must be submitted: copy of passport, copy of driving license, copy of election photo identity card, copy of property card or latest receipt of property tax of Municipal Corporation, copy of latest paid electricity bill in the name of the applicant
• Proof of place of business (for an owner, the case of Doing Business): Proof of ownership of premises viz. copy of property card or ownership deed or agreement with the builder or any other relevant documents
• One recent passport size photograph of the applicant
• Copy of Income Tax Assessment Order having PAN or copy of PAN card
• Chalan in Form No. 210 (original) showing payment of registration fee at INR 5000/in case of voluntary RC and INR 500/in other cases
|10 days,Simult-aneous with procedure 8||Rs 500 (Registration Fee) + Rs 25 (Stamp Duty) for compulsory VAT registration|
|10||* Register for profession tax According to section 5 of the Profession Tax Act, every employer (not being an officer of the government is liable to pay tax and shall obtain a certificate of registration from the prescribed authority. The company is required to apply in Form I to the registering authority. The registration authority for Mumbai Area is situated at Vikarikar Bhavan, Mazgaon in Mumbai. Depending on the nature of the business, the application should be supported with such documents as address proof, details of company registration number under Indian Companies Act (1956), details of head office (if the company is a branch of company registered outside the state), company deed, certificates under any other act, and so forth.||2 days, simult-aneous with procedure 9||No Charge|
|11||* Register with Employees’ Provident Fund Organization The Employees Provident Funds & Miscellaneous Provisions Act, 1952 applies to an establishment, employing 20 or more persons and engaged in any of the 183 Industries and Classes of business establishments, throughout India excluding the State of Jammu and Kashmir. The applicant fills in an application and is then allotted a social security number. The Provident Fund registration focuses on delinquent reporting, underreporting, or non-reporting of workforce size. Provident Fund registration is optional if workforce size is not more than 20. The employer is required to provide necessary information to the concerned regional Provident Fund Organization (EPFO) in prescribed manner for allotment of Establishment Code Number. No separate registration is required for the employees. Nevertheless all eligible employees are required to become members of the Fund and individual account number is allotted by the employer in prescribed manner. As per an internal circular, the code number is to be allotted within 3 days from the date of submission, if the application is complete in all respects. However, in many cases applicants have received the intimation letter with the code number in 12 to 15 days.||12 days, simult-aneous with procedure 8||No Charge|
|12||* Register for medical insurance (ESIC) Registration is the process by which every employer/factory and every employee employed for wages are identified for the purpose of the medical insurance scheme and their individual records are set up for them. As per the Employees’ State Insurance (General), Form 01 is the form required to be submitted by Employer for registration. It takes 3 days to a week for the Employer Code Number to be issued. The “intimation letter” containing the Code Number is sent by post to the employer and that takes an additional couple of days. The Employee’s individual insurance is a separate process and occurs after Employer’s registration. The Employer is responsible for submitting the required Declaration Form and employees are responsible for providing correct information to the employer. The employee temporary cards (ESI Cards) are issued on the spot by the local offices in many places. The temporary cards are valid for 13 weeks from the date of appointment of the employees. It takes about 4 to 5 weeks to get a permanent ESI card. In order to insure that all the insured persons receive their identity cards to enable them to receive cash and medical benefit, the identity cards will be delivered to the insured persons directly by the ESI Corporation rather than through the employers.The ESI Act applies to all establishments employing 20 or more persons. The ESI Act provides for sickness benefits, medical relief, maternity benefits for women workers, compensation for fatal and other employment injuries, etc. Every employee who receives wages up to Rs. 15,000 per month is covered by this Act.||9 day, simult-aneous with procedure 10||No Charge|
* Takes place simultaneously with another procedure.
Source: Doing Business database.