India is one of the fastest-growing countries in IT and software development, thanks to its highly qualified workforce, affordable solutions, and expanding digital market. The country hosts a large number of software companies and tech giants, that serve both local and global markets. The software industry is divided into two major parts: Service-based companies that provide IT solutions and development services and product-based companies that develop and sell their software products.
Starting a software company in India requires several important steps. This guide offers a straightforward, step-by-step process for registering a software company targeted at technology owners who aspire to grow their business in this sector. It serves as the ideal starting point.
Types of Software Companies in India:
Software companies in India can be categorized based on their area of expertise:
- Service-based software companies: This category primarily focuses on providing custom software development, IT services, and consulting rather than selling their own software products. Some best product-based software companies in India are Amazon, Microsoft, Adobe, Google, etc.
- Product-based software companies: These companies invest heavily in research and development, these companies focus on innovation and sell software products. For eg: Wipro, Infosys, Tata consultancy services, Tech Mahindra, etc.
- Software company as a ‘back office for your foreign company’: These companies basically employ programmers in India at a very reasonable cost compared to global standards and make use of low-cost operations in India.
Process to Start a Software Company in India:
To setup a software company in India, the following procedure should be followed:
Choosing the right business structure:
Based on your business goals choose the structure for your software company and register it legally with your business name. Below are some of the business structures that you must know:
- Private Limited Company
- Limited Liability Partnership (LLP)
- Liaison office (applicable only to category 3 above)
- Sole Proprietorship
- Partnership Firm
- One-person company (OPC)
Obtain DSC and DIN:
Ensure you acquire a Digital Signature Certificate (DSC) and a Director Identification Number (DIN) for all directors following Indian Law.
Prepare MOA and AOA:
Submit proposed names for approval, draft the Memorandum of Association (MOA) and Articles of Association (AOA), and obtain the Certificate of Incorporation from the Ministry of Corporate Affairs (MCA).
Apply for PAN and TAN:
Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (PAN) for your company’s tax requirements.
Apply for GST registration:
GST registration is mandatory if your turnover exceeds the threshold or if you provide services across state lines.
Open a Business bank account:
Opening a bank account in the name of a software company is a simple process. Firstly identify and select a bank, and submit all necessary documents with the application form. I.e. Software companies address proof, government-issued ID cards, etc.
Hiring the Right Team:
Building a strong team is vital for your company's success. To manage your workload, you can hire full-time or part-time employees, freelancers, or outsource specific tasks.
Apply to the Reserve Bank of India (RBI)
for permission to set up a liaison office for backend operations and liaise with various vendors/programmers. This will involve transfer pricing guidelines and a cost-plus markup model.
For expert guidance and assistance in setting up a software company in India, feel free to contact enquire@kdpaccountants.com
Documents required to set up a software company in India:
- MOA & AOA certificate.
- Digital Signature Certificate (DSC) of authorized directors.
- Identity proof of both directors/promoters.
- Address proof of both directors/promoters.
- Company Incorporation certificate
- PAN & TAN
- GST registration certificate
Why KDP Accountants for Starting a Software Company in India?
Starting a software company in India presents excellent opportunities for both growth and innovation. However, proper planning and understanding of the legal requirements can be challenging aspects of the rapid growth in the software sector.
At KDP Accountants, we have years of experience assisting businesses in setting up companies in India. Our professional team of experts provides end-to-end solutions, from choosing the right business structure to ensuring all legally required documents are in order. We offer complete support to entrepreneurs and businesses.
Frequently asked questions:
Is a software company profitable in India?
Yes. Registering a software company in India can be profitable but it requires proper business planning, innovation, and execution.
How can one start a software company in India?
With proper business planning, selecting the right business structure, and ensuring all required documents, you can start a software company in India.
What is the process for registering a software company in India?
To register a company in India, select the perfect business structure, obtain a DSC and DIN, and apply forms like MOA and MCA. For more information, contact us at enquire@kdpaccountants.com.
Can one person start a software company in India?
Yes, one individual can start a software company in India as a Sole Proprietorship or One Person Company (OPC).
What documents are necessary to start a software company in India?
You should have a business plan including the MOA & AOA certificate, a PAN card, a bank account, a certificate of incorporation, and more.
The above note is subject to further study and clarification. This note does not form an opinion from our end and before taking any decision based on the above, it is recommended to consult our experts on the subject. Kamdar, Desai & Patel will not be liable for any damages (including, without limitation, damages for loss of business projects, or loss of profits) arising in contract, tort, or otherwise from the use of or inability to use this article or any of its contents, or from any action taken (or refrained from being taken) as a result of using this article or any such contents.
