This document provides information on setting up a private limited company in India. It explains that a private limited company requires a minimum of two shareholders and Rs. 100,000 in share capital. The steps to register include obtaining digital signatures, applying for director identification numbers, and filing SPICe forms. Private limited companies allow foreign companies to have wholly owned subsidiaries in India and provide benefits like limited liability. Tax rates for such companies include corporate income tax, surcharge, and cess.

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HOW TO SET UP A PRIVATE LIMITED COMPANY IN
INDIA
Foreign companies interested in establishing a wholly owned subsidiary in India can do so by setting up
a private limited company. As of 2016, there were over 10 million active private limited companies in
India. Regulations governing private limited companies originate in the Companies Act. A minimum of
two shareholders with non-transferable shares (and a maximum of 200) with a minimum share capital of
Rs 100,000 (approximately US$1,500) is required to form a private limited company. The Companies
Amendment Act of 2015 removed the minimum paid-up capital requirements for incorporating private
(as well as public) companies in India.
Non-Resident Indians (NRIs) and foreigners are allowed to establish or invest in private limited
companies in India.
BUSINESS STRATEGY & OPERATION ADVISORY
Unlike public limited companies, private limited companies are much smaller and do not seek funds from
the public; they instead operate using their own financial resources. This allows them to encounter fewer
regulatory procedures than their public counterparts.
Private limited companies can also go public after meeting certain requirements as laid down by
the Registrar of Companies (RoC).
STEPS TO REGISTER A PRIVATE LIMITED COMPANY IN
INDIA
In January 2018, the Ministry of Corporate Affairs made the process of incorporating a private limited
company free.
1. NAME APPROVAL
The latest Reserve Unique Name (RUN) portal allows two suggestions for proposed company names.
Another section of the portal allows viewers to check the names of already existing companies.Name
approval can also be sought while filing the SPICe (INC-32) form. This process requires the certification
(apostille) of the following documents:
 Resolution from parent company for the use of trademark/main name and intention to
incorporate an Indian subsidiary; and,
 Charter or certificate of incorporation of the foreign company in English.

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2. CREATE A DIGITAL SIGNATURE CERTIFICATE
A digital signature certificate (DSC) is an electronic copy of a director’s identity. It takes around three to
seven working days to obtain a DSC online from any of the specified Certifying Authorities (CAs).
All directors of the company should obtain a DSC, which is valid for a maximum of two years.
Foreign nationals and NRIs are required to submit self-attested copies of their passports, which have
also been notarized by the Indian embassy in their home country.
3. DIRECTOR IDENTIFICATION NUMBER (DIN)
A foreign firm will have to fill Form No. FC-1. The form asks for basic information of the foreign
company, and the DSC of the local representative or Director Identification Number (DIN).
Every director of a company must possess an eight digit DIN. An individual is allowed to possess only
one DIN, even if he/she is a director in multiple entities.
Once acquired, a DIN never expires and does not necessitate any further filings.
DIN applications must be signed electronically using a DSC. Here again, self-attested passport copies
and proof of address must be submitted along with passport photographs of the proposed directors.
Since 2018, a maximum of three proposed directors may apply for DINs by submitting the Simplified
Proforma for Incorporating Company Electronically (SPICe form INC-32) online.
4. SPICe FORM (INC-32, INC-33, AND INC-34)
INC-32 is an extremely detailed online form covering the application for DIN, reservation of company
name, and incorporation of a company.
It requires 21 documents to be attached at the time of filing. The attachments include the following:
 Memorandum of Association;
 Articles of Association;
 Copy of utility bills (not more than two months);
 Proof of office address (conveyance/lease deed/rent agreement with receipts);
 Copy of certificate of incorporation of the foreign body corporate and resolution passed;
 Proof of identity and address of all directors;
 Trademark registration certificate/approval from owner of the trademark;
 List of companies having the same registered office, if any; and,

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 Foreign directors/subscribers must submit an affidavit for not having a Permanent Account
Number (PAN card).
Form No. INC-33 provides the electronic format of the Memorandum of Association which outlines the
charter of a company.
Form No. INC-34 provides the electronic format wherein applicants input their Articles of Association
(internal regulations of the company).
Upon approval, the Registrar of Companies (RoC) assigns a company with a 21 digit Corporate Identity
Number (CIN).
TAX LIABILITY FOR PRIVATE LIMITED COMPANIES
Private limited companies set up by foreign companies are domestic companies according to the
Income-tax Act, 1961.
Here we outline the effective tax rates for such companies in India.
1. CORPORATE INCOME TAX (CIT) IN INDIA
A company, whether Indian or foreign, is liable to pay CIT under the country’s Income Tax Act, 1961.
While a resident company is taxed on its worldwide income, a non-resident (foreign) company is taxed
only on income that is received in India, or that arises, or is deemed to accrue in India.
2. SURCHARGE
The surcharge on domestic companies effectively increases the total tax paid by private limited
companies.
3. HEALTH AND EDUCATION CESS
It amounts to four percent of the CIT and surcharge for the financial year 2018-19 and assessment year
2019-20.

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4. MINIMUM ALTERNATE TAX
Companies having low or even no profits are subjected to a Minimum Alternate Tax (MAT) of 18.5
percent + surcharge + health and education cess.Below we show the tax liability for a private limited
company (also referred to as a wholly owned subsidiary) in India.
WHY OPT FOR A PRIVATE LIMITED COMPANY
Private limited companies allow for the creation of a shareholders’ agreement to demarcate different
interests. In case a company is not dong financially well then under the limited liability clause the
personal assets of the investors are protected.
Since the parent company controls 100 percent of the shares of its subsidiary, it can maintain strict
operational management of the private limited company in India.
In India, a private limited company is the most preferred business model that benefits from both good
branding as it retains the name of the parent company, while also gaining from the flexibility of being
able to diversify into new markets.
Although the process for establishing a private limited company in India has eased considerably in the
past few years, it still takes time to secure all the required approvals from regulatory authorities, which is
why it is advisable to employ the services of a professional firm.

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