Business

Filing income‑tax returns online has become easier, but many taxpayers still make avoidable mistakes that lead to notices, delays or refunds getting stuck.

This step‑by‑step checklist is designed for small business owners, professionals and salaried individuals filing returns in 2026.

Step 1: Collect documents

Before you log in, keep ready:

• Form 16 (for salaried individuals)
• Form 26AS and AIS/TIS
• Bank statements for the year
• Details of business or professional income
• Capital gains statements (especially for mutual funds and shares)
• Details of deductions (80C, 80D, etc.) where applicable

Step 2: Choose the correct ITR form

Selecting the wrong ITR form is a common reason for defective returns. Check whether you:

• Have business or professional income
• Have capital gains
• Are an NRI or resident

Match your situation with the correct ITR form for the year.

Step 3: Reconcile income with AIS and 26AS

Before final submission:

• Compare reported income with entries in AIS and Form 26AS
• Ensure TDS credits match

Where there are mismatches, add explanations or corrections as appropriate.

Step 4: Verify and e‑verify

After submitting the return:

• Ensure it is **successfully verified** within the allowed time—through Aadhaar OTP, netbanking or other methods.
• Keep acknowledgement and computation copies safely.

Failure to e‑verify can render the return invalid.

Online filing is now standard, but the quality of the data you feed into the system still determines outcomes. A structured checklist reduces errors and protects you in case of future scrutiny.

For Indian founders, a private limited company remains the most common structure for building a scalable business. But the registration process now sits inside a more digital, document‑heavy regime than it did a few years ago.

This guide gives a practical 2026‑ready checklist for private limited company registration in India, especially for technology, services and consulting businesses.

Step 1: Decide basic structure

Before you file any forms, clarify:

• Proposed company name (with 2–3 backups)
• Main business activity (object clause)
• State of registered office
• Shareholding pattern and authorised capital

Think through founder roles, board composition and early ESOP plans—these will influence your articles and shareholder agreements later.

Step 2: Director KYC and digital signatures

You will need:

• Valid PAN, Aadhaar and address proof for each proposed director
• Recent passport‑size photographs
• Class‑III digital signatures (DSC) for directors who will sign forms

Keep mobile numbers and email IDs updated—MCA uses OTP‑based verification at multiple stages.

Step 3: Name reservation and incorporation forms

Under the SPICe+ system, much of the process is consolidated. In practice:

1. File **Part A** of SPICe+ to reserve name (if not doing name approval and incorporation together).

2. Prepare **MoA and AoA** in electronic form (e‑MoA, e‑AoA) with appropriate clauses for your business.

3. Complete **Part B** for incorporation, including capital structure, registered office and subscriber details.

Supporting documents usually include identity proofs, address proofs, NOC from premises owner and utility bills for the registered office.

Step 4: PAN, TAN and bank account

Current processes allow automatic allotment of PAN and TAN along with incorporation. After the certificate of incorporation is issued:

• Apply for a **current account** in the company name with a bank that understands startup needs.
• Align KYC and account opening documents with the information used in incorporation—avoid mismatches.

Many banks offer startup‑focused accounts with bundled services, but check charges and minimum balance conditions.

Step 5: Immediate post‑incorporation compliance

Within the first few weeks, founders should:

• Hold the first board meeting and record key resolutions.
• Issue share certificates to subscribers and update the register of members.
• File any required declarations regarding commencement of business (INC‑20A, where applicable).
• Set up accounting, invoicing and basic compliance tracking (GST, TDS, PF/ESI if applicable).

Getting these right early makes future fundraising, diligence and exits smoother.

For tailored support on company registration, documentation and post‑incorporation compliance, FastLegal can help you set up a clean, investor‑ready structure from day one.

Income tax rules for NRIs under new regime in India are a frequent search topic for Indians working abroad, overseas citizens of India, and foreign nationals with income from India. This post explains key income tax rules for NRIs under new regime in India, focusing on residential status, taxable income, TDS and compliance.

Who is an NRI under income tax rules for NRIs under new regime in India

The term NRI for tax purposes is linked to residential status and not just citizenship or FEMA status. Under income tax rules for NRIs under new regime in India, an individual is treated as non resident for a financial year if they do not satisfy the tests for being resident in India under the new income tax act.

Important points are:

• Day wise presence in India during the financial year.
• Cumulative stay in India across a block of previous years.
• Special relaxations or tighter rules for Indian citizens and persons of Indian origin.

Because the tests may change under the new regime, always refer to the latest bare act provisions before concluding your NRI status.

What income is taxable for NRIs

Income tax rules for NRIs under new regime in India generally tax NRIs on income that:

• Is received or deemed to be received in India.
• Accrues or arises or is deemed to accrue or arise in India.

Common examples are:

• Rental income from property in India.
• Capital gains on sale of shares, securities and property in India.
• Interest on NRO bank accounts and certain deposits.
• Salary for services rendered in India or for employment exercised in India.

Usually, foreign income that has no link with India is not taxable in India for NRIs, but double tax avoidance agreements may still need to be examined.

TDS obligations and lower deduction certificates

For most payments to NRIs, income tax rules for NRIs under new regime in India require higher TDS rates than for residents. Payers should:

• Verify residential status and obtain updated overseas address and tax identification numbers.
• Deduct TDS at the rate prescribed for NRI payments such as on property sale or interest.
• Collect necessary declarations and documents where a lower rate or treaty benefit is claimed.

NRIs who expect their final tax liability to be lower than standard TDS may apply for a lower or nil deduction certificate from the assessing officer. This is especially useful in cases of large property sales or redemption of investments.

Using tax treaties and foreign tax credit

Many NRIs are tax residents in countries that have a double tax avoidance agreement with India. Under income tax rules for NRIs under new regime in India, a treaty can:

• Reduce the tax rate on certain types of income such as interest, dividends and royalties.
• Allocate taxing rights between India and the country of residence.
• Provide methods to claim foreign tax credit.

To claim treaty benefits, NRIs must usually obtain a tax residency certificate and meet limitation of benefits conditions. Records of tax paid abroad and related documents should be preserved carefully.

Compliance steps for NRIs

Key compliance requirements under income tax rules for NRIs under new regime in India include:

1. Obtaining PAN if you have taxable income or specified transactions in India.

2. Filing income tax return if income exceeds the basic exemption limit or where filing is otherwise mandatory.

3. Disclosing foreign assets and bank accounts in the return where required for certain residents.

4. Maintaining bank accounts correctly, with separate NRE, NRO and resident accounts.

5. Updating KYC for investments and bank accounts when residential status changes.

Missing these steps can delay refunds and trigger notices.

Official resources and practical help

To stay updated on income tax rules for NRIs under new regime in India, you should regularly check:

• Income Tax Department e filing portal for NRI specific FAQs and help documents.
• CBDT circulars on NRI taxation, residential status and treaty relief.
• RBI and FEMA related guidelines on bank accounts and remittances.

FastLegal can assist NRIs with residential status review, return filing and responses to notices under the new income tax law.

Related: Residential status and global income for NRIs under new income tax law (link: /blog/residential-status-global-income-nri)

Related: Tax implications of selling property in India for NRIs (link: /blog/nri-selling-property-india-tax)

Related: NRE vs NRO vs resident bank accounts tax treatment (link: /blog/nre-vs-nro-vs-resident-account-tax)

New income tax act for small businesses in India is a key change that every proprietor, partnership, LLP and small company needs to understand. In this post, we look at how the new income tax act for small businesses in India impacts tax rates, presumptive taxation, compliance burden and record keeping.

Who is a small business under new income tax act for small businesses in India

Under the new income tax law, small businesses are typically identified based on turnover, nature of activity and legal form. Broadly, these include:

• Proprietorship and individual businesses.
• Partnership firms and LLPs.
• Small private limited companies.
• Professionals such as doctors, lawyers, consultants and freelancers.

Each category may have different tax rates and options but the underlying objective is to simplify compliance for genuine small taxpayers.

Tax rates and regimes for small businesses

The new income tax act for small businesses in India may offer multiple options such as normal tax, concessional rates or presumptive schemes. While the exact numbers will be defined in the bare act and annual Finance Acts, small businesses should understand:

1. Whether they fall under standard corporate or firm tax rate.

2. Whether a lower rate is available subject to certain conditions like turnover limit and no incentives.

3. Whether presumptive taxation is permitted for their line of business.

Choosing the right regime can reduce total tax and compliance costs over time.

Presumptive taxation under new income tax law

Presumptive taxation allows eligible small businesses to declare income at a fixed percentage of turnover instead of maintaining detailed books. Under the new income tax act for small businesses in India, presumptive schemes may be available for:

• Trading and manufacturing businesses upto a certain turnover limit.
• Professionals whose gross receipts do not cross a specified threshold.

Key points to evaluate include:

• Turnover or gross receipt limits.
• Presumptive income percentage.
• Requirement to maintain minimal records and make digital payments.
• Impact on ability to claim deductions for partners remuneration or depreciation.

Small businesses should compare actual profit margins with presumptive rates before deciding.

Compliance and return filing for small businesses

Even with simplified regimes, the new income tax act for small businesses in India will expect timely compliance. Typical requirements are:

• Obtaining PAN, TAN and timely registration on the income tax portal.
• Regular payment of advance tax or self assessment tax.
• Deducting TDS where required on payments to contractors, professionals and rent.
• Filing annual income tax returns in the correct form.
• Maintaining basic books of accounts or presumptive records.

Digital compliance is likely to increase with pre filled data and cross linking with GST, TDS and other databases.

Record keeping and audits

Small businesses must resist the temptation to ignore documentation just because they use presumptive schemes. Under the new income tax act for small businesses in India, records will still be important for:

• Explaining cash deposits and bank transactions.
• Responding to queries on high value expenses or investments.
• Proving genuineness of loans, capital and related party dealings.

Tax audit applicability thresholds and conditions will be defined in the rules. Businesses close to the limits should track turnover carefully and plan for timely audit where required.

Practical tips for FastLegal small business clients

For FastLegal clients and other small businesses, here are some practical steps to prepare for new income tax act for small businesses in India:

1. Map your business structure and turnover to identify which regime options apply.

2. Reconcile books with GST returns, bank statements and vendor records on a monthly basis.

3. Use basic accounting software to maintain income and expense records.

4. Review TDS obligations and create a simple TDS calendar.

5. Schedule a year end tax planning review a few months before 31 March each year.

These steps reduce the risk of notices and help in smoother assessments.

Official references for small business taxation

To stay updated on new income tax act for small businesses in India, follow:

• Income Tax Department portal for bare act, rules and e filing utilities.
• CBDT circulars and FAQs on presumptive taxation and small business schemes.
• Relevant notifications on changes to tax audit limits and digital payment requirements.

In case of doubt, always refer back to the bare act PDF and official utilities rather than informal summaries.

Related: Presumptive taxation for small businesses under new income tax law (link: /blog/presumptive-taxation-small-business-new-law)

Related: Tax planning checklist for small businesses in India (link: /blog/tax-planning-checklist-small-business-india)

Related: Difference between proprietorship, partnership and LLP for tax purposes (link: /blog/proprietorship-vs-partnership-vs-llp-tax)

TDS on salary under new income tax act in India is one of the most common areas where employers and employees interact with the tax department every month. This guide explains how TDS on salary under new income tax act in India is expected to work, what employers must do, and what salaried employees should check in their payslips and Form 16.

Why TDS on salary under new income tax act in India matters for employers and employees

For employers, TDS on salary under new income tax act in India is a core compliance responsibility. The employer must deduct tax at the time of payment, deposit it to the government, file quarterly TDS returns and issue Form 16 correctly. For employees, correct TDS on salary prevents large tax dues at the time of filing returns and avoids notices.

Because the new income tax act and rules may bring changes to rates, slabs and procedures, HR and payroll teams must update their systems and processes in advance.

Basic mechanics of TDS on salary

Although the fine print will follow the new income tax rules, the broad mechanism of TDS on salary remains similar:

1. Estimate annual taxable salary income for the employee based on cost to company structure.

2. Consider the employee declaration for exemptions and deductions allowed under the new regime.

3. Compute estimated annual income tax liability for the financial year.

4. Divide the tax across remaining months and deduct TDS from monthly salary.

5. Deposit TDS to the Central Government and file quarterly TDS return.

Employers should keep written records of declarations and proofs to support the working under any scrutiny.

Employer responsibilities under new income tax act

Under TDS on salary under new income tax act in India, employers should focus on:

• Timely deduction and deposit of TDS every month.
• Correct quoting of PAN and other identifiers of employees.
• Proper configuration of new tax regimes, rebates and surcharge in payroll software.
• Issuance of Form 16 in the prescribed format for the year.
• Reconciliation of TDS as per books with TDS returns and Form 26AS or AIS.

Non compliance can lead to interest, late fees and penalties, along with disallowance of salary expense in extreme cases.

What salaried employees should check

Employees should not rely blindly on payroll. For TDS on salary under new income tax act in India you should:

1. Verify that your PAN and personal details are correct in HR and payroll records.

2. Submit investment and deduction declarations at the start of the year and proofs before the cut off date.

3. Check your payslip each month to see whether TDS on salary is being deducted consistently.

4. Download your Form 26AS and AIS from the income tax portal to verify credit of TDS.

5. Compare Form 16 figures with actual salary credited and make sure there are no large mismatches.

If you change jobs during the year, provide previous employer salary and TDS details to your new employer so that overall TDS on salary under new income tax act in India remains accurate.

Special situations in salary TDS

Some common special situations that need careful handling are:

• Employees opting between old and new tax regime where both are allowed.
• Variable pay, bonuses and ESOPs which are paid in certain months only.
• Perquisites such as rent free accommodation, car, stock options or tax equalisation.
• Employees who become non resident or return to India during the year.

The new income tax rules will contain detailed valuation methods and examples. Payroll teams should read the rules and CBDT circulars in full and update internal help documents for employees.

Filing returns and reconciling TDS

At year end, employees must still file their income tax return even where TDS on salary under new income tax act in India is correctly deducted. While filing:

• Pick the correct ITR form for salaried individuals.
• Import pre filled data from the income tax portal.
• Cross check TDS figures with Form 16 and Form 26AS or AIS.
• Report any additional income such as interest, capital gains or freelance income.

If there is a shortfall or excess TDS on salary, it will be adjusted at the time of return filing. Always keep soft copies of Form 16, salary slips and computation records.

Official resources and utilities

For accurate and updated information on TDS on salary under new income tax act in India, refer to:

• Official income tax portal for TDS circulars and FAQs.
• TRACES portal for TDS statements, Form 16 download utilities and correction statements.
• CBDT notifications on TDS rates, thresholds and new procedures.

These official sources should be treated as the final reference point, especially in the first few years of the new law.

Related: Payroll compliance checklist under new income tax law in India (link: /blog/payroll-compliance-new-income-tax-law)

Related: Choosing between old and new income tax regime for salaried employees (link: /blog/old-vs-new-tax-regime-salaried)

Related: Common TDS mistakes employers should avoid (link: /blog/common-tds-mistakes-employers)

Residential status under new income tax law in India is one of the most important starting points for any individual planning tax for a year. This post explains how residential status under new income tax law in India is determined, why it matters for your income, and what practical steps you should take at the beginning of a financial year.

Why residential status under new income tax law in India matters for you

Your residential status under new income tax law in India decides whether your global income is taxable in India or only income that arises in India. It also affects:

1. Which income is taxed (salary, business, capital gains, foreign income).

2. Eligibility for various exemptions and deductions.

3. Which disclosure and reporting requirements apply for foreign assets and bank accounts.

For individuals and NRIs, getting residential status wrong can lead to double taxation, interest, and penalties.

Key categories of residential status under new income tax law in India

Under the new income tax law in India an individual is generally classified into three broad categories for a financial year:

1. Resident and ordinarily resident (ROR).

2. Resident but not ordinarily resident (RNOR).

3. Non resident (NRI for income tax purposes).

The detailed tests look at how many days you stay in India in the current and past years, your citizenship, and your ties with India. As the new income tax law and rules are notified, always refer to the latest official guidance on the Income Tax Department portal before taking a final view.

Day count tests for residential status

While the exact day count tests may be refined in the new income tax act and rules, in practice the department looks at:

• Number of days you were physically present in India during the current financial year.
• Number of days you were present in India during a block of previous years.
• Whether you are an Indian citizen or person of Indian origin.
• Whether you are leaving India for employment or coming to India on a visit.

You should maintain basic evidence of travel like passport copies, boarding passes and tickets. In case of doubt, get your day wise stay checked against the current provisions.

How residential status affects your scope of income

Once your residential status under new income tax law in India is fixed for a financial year, your scope of income is determined broadly as follows:

• Resident and ordinarily resident: Generally taxable on global income, subject to relief under double tax avoidance agreements.
• Resident but not ordinarily resident: Typically taxable on income received or deemed to be received in India, income accruing or arising in India, and certain foreign income that has a business or profession controlled from India.
• Non resident: Usually taxable only on income that is received or deemed to be received in India or which accrues or arises in India.

Because the new act may change definitions and deeming rules, always cross check with the bare act and notified rules before finalising your position.

Practical steps for NRIs and frequent travellers

If you are an NRI or frequent traveller, here are practical steps for managing residential status under new income tax law in India:

1. Prepare a simple Excel sheet tracking every day of presence in India.

2. Compare your day count with the latest tests in the new income tax act and rules.

3. Keep all passport pages and immigration stamps safely scanned.

4. If you risk becoming resident because of additional days in India, evaluate advance tax and TDS impact early.

5. Discuss tie breaker rules under applicable tax treaties with your advisor where you are dual resident.

These steps help you avoid last minute surprises during return filing or assessment.

Common mistakes in determining residential status

Some common errors we see in residential status under new income tax law in India are:

• Using the wrong financial year or calendar year for counting days.
• Ignoring short trips to India that break up long periods outside India.
• Assuming that being an NRI under FEMA automatically means non resident under income tax.
• Not reviewing status when working from India for foreign employers.

The new income tax act is expected to clarify several cross border situations, but it is still important to document your position carefully.

Compliance and documentation

To support your claim of residential status under new income tax law in India, maintain:

• Passport copies and travel records.
• Employment contracts and secondment letters.
• Details of foreign tax residency certificates, where applicable.
• Any correspondence or rulings from the tax department.

In high value or complex cases, consider obtaining a written opinion or advance ruling based on the new law.

Useful official references

For the latest legal text and utilities on residential status under new income tax law in India, refer to:

• Bare act and rules as published on the official Income Tax portal (for example, income tax e filing portal and the e Gazette website).
• CBDT circulars and FAQs on NRI taxation and residential status.
• Utilities and calculators released by the department for residential status once available.

Always rely on the latest PDF and notification versions rather than older summaries.

Related: Residential status and NRI tax planning under new income tax law in India (link: /blog/residential-status-nri-new-income-tax-law)

Related: Taxability of foreign income for residents and NRIs under new regime (link: /blog/foreign-income-resident-nri-new-regime)

Related: Guide to filing income tax return for NRIs in India (link: /blog/itr-filing-nri-india)

GST input tax credit for service businesses in India is one of the most important features of the GST system. When used correctly, input tax credit helps reduce the overall tax cost. When misused, it can lead to notices and penalties. This guide explains the basics of GST input tax credit for service businesses in India, eligibility conditions and common mistakes to avoid.

What is GST input tax credit for service businesses in India

Input tax credit (ITC) is the credit of GST paid on purchases or expenses that you can set off against your output tax liability on sales.

For example, if a marketing agency charges you GST on services and you charge GST on your services to clients, you may be able to claim credit for the GST paid on the marketing invoice against the GST you collect from clients.

GST input tax credit for service businesses in India is governed by the Central Goods and Services Tax Act and related rules. Official information is available on the GST portal at https://www.gst.gov.in.

Basic eligibility conditions for claiming ITC

To claim GST input tax credit for service businesses in India, certain basic conditions must be satisfied:

1. You must be a registered person under GST.

2. You must have a tax invoice or debit note issued by a registered supplier.

3. You must have received the goods or services.

4. The supplier must have reported the invoice in their returns and paid the tax to the government.

5. You must have filed your GST returns.

If any of these conditions are not met, your ITC claim can be denied or restricted.

Time limits and documentation

Time limit for availing ITC

There is a time limit for availing GST input tax credit for service businesses in India:

• ITC should normally be availed by the due date for filing the return for the month of September following the end of the financial year, or
• The date of filing the annual return, whichever is earlier.

Always check the latest law and notifications, as time limits can change.

Supporting documents

Keep these documents in order:

• Tax invoices and debit notes.
• Proof of payment to suppliers.
• GST returns and reconciliations.
• Vendor wise ITC reconciliation reports from your accounting software.

Good documentation helps you respond quickly if you receive a notice related to GST input tax credit for service businesses in India.

Common ineligible ITC items

Some expenses are blocked or restricted under GST law. Service businesses should be careful while claiming ITC on:

• Personal expenses.
• Motor vehicles and related expenses in certain cases.
• Food and beverages, club membership, health and fitness services (subject to exceptions).
• Works contracts for construction of immovable property (with some exceptions).

Review Section 17 of the CGST Act and related rules for detailed list of ineligible credits.

Reconciliation of ITC with GSTR 2B

A key compliance task for GST input tax credit for service businesses in India is reconciling your purchase register with GSTR 2B.

• GSTR 2B is a static statement showing ITC available for a given period.
• Mismatches between your books and GSTR 2B can lead to ITC restrictions.

Regular reconciliation helps you:

• Identify missing invoices.
• Follow up with vendors who have not filed returns.
• Correct errors before they lead to notices.

Common mistakes service businesses make

Some frequent mistakes related to GST input tax credit for service businesses in India are:

• Claiming ITC on invoices where vendor GSTIN or your GSTIN is incorrect.
• Claiming ITC on invoices not reflected in GSTR 2B for a long time.
• Not reversing ITC when payment to vendor is not made within 180 days (where applicable).
• Missing time limits for availing ITC.

These mistakes can result in demands, interest and penalties.

Practical tips to manage ITC effectively

• Use reliable accounting and GST software that can import GSTR 2B and perform reconciliations.
• Set internal cut off dates for booking purchase invoices every month.
• Train your finance and accounting team on basic ITC rules.
• Review high value ITC items manually.

GST input tax credit for service businesses in India is a powerful tool when managed well. With the right processes, you can reduce tax costs and avoid unnecessary disputes with tax authorities.

Related: GST registration guide for service providers in India (link: /blog/gst-registration-service-providers-india)

Related: Common GST notices received by small service businesses in India (link: /blog/common-gst-notices-service-business-india)

Related: How to respond to GST ITC mismatch notices in India (link: /blog/respond-gst-itc-mismatch-notices-india)

Section 44ADA presumptive taxation in India is a popular option for individual professionals and consultants who want simpler tax compliance. This guide explains who can use Section 44ADA, how income is computed, and practical points to keep in mind.

Who can use Section 44ADA presumptive taxation in India

Section 44ADA applies to resident individuals, Hindu undivided families (HUF) and partnership firms (not LLP) who are engaged in specified professions.

Specified professions include:

• Legal
• Medical
• Engineering
• Architectural
• Accountancy
• Technical consultancy
• Interior decoration
• Other notified professions

To use Section 44ADA presumptive taxation in India, your total gross receipts from the profession should not exceed the prescribed limit (commonly 75 lakh rupees, but always check the latest limit on the Income Tax Department portal at https://incometaxindia.gov.in).

How income is computed under Section 44ADA

Under Section 44ADA presumptive taxation in India, your taxable income from the profession is presumed to be a percentage of your gross receipts, instead of computing actual profit after expenses.

• Normally, 50 percent of gross receipts is deemed to be income.
• You can voluntarily declare a higher income if you wish.

For example, if your gross professional receipts are 50 lakh rupees in a year, your deemed income under Section 44ADA would be 25 lakh rupees (50 percent), unless you choose to declare more.

Expense claims and books of account

If you opt for Section 44ADA presumptive taxation in India:

• You are not required to maintain detailed books of account as per Section 44AA, and
• You cannot claim further deduction for business expenses against the presumptive income.

In simple words, the 50 percent deemed income is treated as your net profit after expenses.

Conditions and consequences of opting out

Once you opt for Section 44ADA presumptive taxation in India, you should understand the rules for opting out.

• If you declare lower income than 50 percent of gross receipts and your total income exceeds the basic exemption limit, you may be required to maintain books and get a tax audit done under Section 44AB.
• Before opting out, consider the impact on compliance requirements.

It is important to review the latest provisions and clarifications on the Income Tax Department website or consult a tax professional.

Advance tax and TDS under Section 44ADA

Even when you use Section 44ADA presumptive taxation in India, you may still have to take care of advance tax and tax deduction at source (TDS).

• If your estimated tax liability for the year is above the threshold, you may need to pay advance tax.
• Clients may deduct TDS on your professional fees under Section 194J or other applicable sections.

Make sure you account for TDS credits while computing your final tax liability.

Benefits and limitations of Section 44ADA

Benefits

• Simpler compliance, especially for solo professionals and small firms.
• No need to track every small expense for tax purposes.
• Predictable tax planning based on gross receipts.

Limitations

• If your actual expenses are very high, deemed income at 50 percent may be higher than your real profit.
• You cannot claim further deductions for professional expenses (except certain deductions under Chapter VI A like section 80C, etc.).
• The scheme is not available to LLPs or companies.

Practical tips for professionals

When considering Section 44ADA presumptive taxation in India, professionals and consultants should:

• Compare tax liability under normal provisions versus presumptive taxation before deciding.
• Keep basic records of invoices and receipts even if detailed books are not mandatory.
• Track payments received and TDS deducted through Form 26AS or Annual Information Statement on the Income Tax e filing portal at https://www.incometax.gov.in.
• Review their choice annually, especially if turnover or expense pattern changes.

Section 44ADA presumptive taxation in India can be a useful option if your professional practice has moderate expenses and you value simplified compliance.

Related: Section 44AD presumptive taxation for small businesses in India (link: /blog/section-44ad-small-business-india)

Related: Tax planning tips for freelancers and consultants in India (link: /blog/tax-planning-freelancers-consultants-india)

Related: How to file income tax return under presumptive taxation in India (link: /blog/file-return-presumptive-taxation-india)

A clear and well drafted founders agreement in India can prevent disputes and misunderstandings between co founders. This guide explains what a founders agreement is, why it matters, and the key clauses every Indian startup should consider before they raise funds or scale.

What is a founders agreement in India and why it matters

A founders agreement in India is a contract between the founders of a startup that records their roles, responsibilities, shareholding, decision making process and exit terms. It sets expectations early and provides a reference point when conflicts arise.

Without a written founders agreement, common problems include:

• Disagreement on who owns what percentage of the company.
• Confusion around roles and time commitment.
• Difficulty handling a founder who wants to exit.
• Disputes over intellectual property ownership.

A founders agreement is often one of the first key business agreements a startup signs, even before investment documents.

Basic structure of a founders agreement

While formats vary, a typical founders agreement in India will cover:

1. Parties and background.

2. Purpose of the business.

3. Capital contribution and shareholding.

4. Roles and responsibilities of each founder.

5. Vesting and lock in for shares.

6. Decision making and voting.

7. Intellectual property.

8. Exit events and transfer of shares.

9. Confidentiality and non compete.

10. Dispute resolution and governing law.

Key clauses to include in a founders agreement

Shareholding and capital contribution

The agreement should clearly state:

• How many shares each founder holds.
• How much money, assets or sweat equity each founder is contributing.
• Whether there is any unpaid capital commitment.

This clarity is essential when you prepare your cap table for investors.

Roles, responsibilities and time commitment

A good founders agreement in India does not just talk about shares. It should also record:

• Designation and primary responsibilities of each founder.
• Minimum time commitment expected (full time or part time).
• Expectations regarding other business interests.

Vesting and lock in

Investors usually expect founders to have vesting and lock in on their shares. Even before funding, founders can agree that:

• Shares will vest over a period (for example 3 to 4 years).
• If a founder leaves early, some unvested shares will be forfeited or bought back.
• Shares may be locked in for a certain minimum period.

This ensures long term commitment and fair treatment of remaining founders.

Intellectual property ownership

The founders agreement in India should clearly assign ownership of intellectual property (IP):

• All IP created by founders in connection with the business should belong to the company.
• Founders should assign any pre existing IP that the business relies on, or grant a licence.
• Confidential information should be protected even after a founder leaves.

Decision making and deadlock resolution

Important decisions can be defined as “reserved matters” requiring consent of all or a majority of founders. The agreement should:

• List key decisions like raising funds, issuing shares, changing business line, etc.
• Set voting thresholds for different categories of decisions.
• Provide a mechanism for resolving deadlock, such as mediation or casting vote.

Exit, transfer and valuation of shares

The founders agreement should define what happens if a founder wants to leave or is forced to leave:

• When can a founder sell shares.
• Rights of remaining founders or the company to buy those shares.
• Basic valuation mechanism for buyback or sale.

This reduces uncertainty and helps avoid sudden exits that harm the business.

Relationship with company documents and investor agreements

A founders agreement in India usually exists alongside the companys Articles of Association (AOA) and later, shareholders agreements with investors.

• Ensure that the founders agreement is consistent with the AOA.
• When investors come in, some provisions of the founders agreement may be superseded by the shareholders agreement.
• It is good practice to review and update the founders agreement at the time of funding.

Practical drafting tips for Indian startups

• Keep the language simple and practical instead of overly legalistic.
• Address real life scenarios such as a founder moving abroad, starting another venture, or having a health issue.
• Include a simple dispute resolution clause specifying governing law (usually India) and place of jurisdiction or arbitration.
• Make sure all founders sign the agreement and keep executed copies safe.

A thoughtful founders agreement in India can save time, money and relationships by providing clarity and a roadmap when things do not go as planned.

Related: Key legal documents every startup in India needs (link: /blog/legal-documents-startups-india)

Related: Differences between founders agreement and shareholders agreement in India (link: /blog/founders-vs-shareholders-agreement-india)

Related: How to structure ESOPs for Indian startups (link: /blog/esop-structure-startups-india)

Many professionals in software development and consulting want to set up an IT services company in India, but are unsure about the legal structure, registrations and tax implications. This guide gives a practical checklist to help you set up an IT services company in India with minimum confusion.

Decide the right business structure

For most small and mid sized IT services businesses, these are the common options:

1. Proprietorship.

2. Partnership firm.

3. Limited Liability Partnership (LLP).

4. Private limited company.

Factors to consider while choosing

When you set up an IT services company in India, evaluate these points:

• Number of founders.
• Whether you plan to raise investment.
• Whether clients (especially foreign clients) prefer dealing with a company.
• Tax rates and compliance costs.
• Limited liability requirement.

Many export oriented IT services companies prefer private limited companies or LLPs because of limited liability and better acceptance by foreign clients.

Basic registrations for an IT services business

Once you decide the structure, you will need basic registrations. Some are mandatory, others depend on your turnover and client requirements.

PAN, TAN and bank account

• PAN (Permanent Account Number) for the business.
• TAN (Tax Deduction and Collection Account Number) if you will deduct TDS on payments.
• Current account in the business name.

GST registration for IT services

IT services are generally treated as services under GST law. You should consider GST registration when you set up an IT services company in India if:

• Your aggregate turnover is likely to cross the threshold limit (commonly 20 lakh or 40 lakh rupees depending on state and category), or
• You provide services to clients outside India and want to treat them as export of services, or
• Your clients insist on a GST invoice.

GST registration is done online at https://www.gst.gov.in.

Shops and establishment registration or professional tax

Many states require a shops and establishment registration for offices. Some states also levy professional tax on employees and professionals. Check your state specific requirements on the state labour department website.

Legal agreements for IT services companies

When you set up an IT services company in India, do not ignore the importance of written contracts. At a minimum, consider:

• Master Service Agreement (MSA) with clients.
• Statement of Work (SOW) templates.
• Non disclosure agreements (NDA) with clients and vendors.
• Employment agreements with employees.
• Independent contractor agreements with freelancers.

Key clauses to focus on

• Scope of work and deliverables.
• Payment terms and milestones.
• Intellectual property ownership and licence.
• Confidentiality and data protection.
• Limitation of liability and indemnities.
• Termination and notice period.

Proper agreements help avoid disputes and protect your business when dealing with both Indian and foreign clients.

Tax and compliance considerations

Running an IT services company in India requires you to follow both direct tax and indirect tax rules.

Income tax aspects

• Maintain proper books of account and records of invoices and expenses.
• Deduct TDS where required, for example on salaries, professional fees, rent, etc.
• File quarterly TDS returns.
• File annual income tax return for the entity.

For export of services, you may also need to consider provisions related to foreign remittances and FEMA, especially if you receive payments in foreign currency.

GST aspects

• Charge GST on invoices to domestic clients at the applicable rate.
• For exports, examine if your supply qualifies as zero rated supply.
• File monthly or quarterly GST returns depending on your scheme.
• Reconcile GST returns with books of account.

Refer to the GST portal at https://www.gst.gov.in for official notifications and updates.

Data protection and cross border issues

Many IT services companies in India handle client data from multiple countries. When you set up an IT services company in India that works with overseas clients, keep in mind:

• Data processing requirements in client contracts.
• Confidentiality obligations and security measures.
• Cross border data transfer clauses.

You may also need to align with data protection laws of the client jurisdiction.

Practical startup tips for IT service founders

• Start lean with essential registrations and scale up compliances as you grow.
• Use accounting and invoicing software to track revenue and expenses.
• Build standard templates for NDAs, MSAs and SOWs to reduce drafting time.
• Review your contracts with a professional before signing long term deals.

Setting up an IT services company in India is manageable if you follow a structured checklist and keep compliance in mind from day one.

Related: Choosing the right business structure for Indian startups (link: /blog/business-structure-startups-india)

Related: Key clauses in IT service agreements for Indian companies (link: /blog/it-service-agreement-clauses-india)

Related: GST on export of IT services from India (link: /blog/gst-export-it-services-india)