How to Start a Construction Company: A Step-By-Step Guide

What is a Patent?

A patent is a legal right granted by a government authority to an inventor or assignee. It provides exclusive rights to make, use, sell, or license the invention for a fixed period, typically 20 years from the filing date (in the case of utility patents).

In India, patents are granted by the Indian Patent Office under the Indian Patent Act, 1970. Once granted, the patent gives the owner the legal authority to prevent others from commercially using the invention without consent.

In simple terms, a patent:

• Protects original inventions
• Offers a time-bound monopoly
• Encourages innovation by offering a return on investment

Types of Patent

There are three main types of patents recognised globally (India primarily follows the utility patent framework):

1. Utility Patent

Covers new processes, machines, or compositions. These are the most common patents.
Example: A new smartphone battery technology.

Protection Duration: 20 years from the filing date.

2. Design Patent

Protects the unique visual appearance of an object, not its function.
Example: The contour design of a Coca-Cola bottle.

Protection Duration: 15 years (in countries where design patents are recognised separately).

3. Plant Patent

Covers new, asexually reproduced plant varieties.
Example: A genetically modified rose variety.

Protection Duration: 20 years (not commonly filed in India).

Related Read: Types of Patent 

Types of Patent Applications

In India, there are four primary types of patent applications, each serving a distinct purpose:

1. Provisional Application

A temporary application filed to secure a priority date while the invention is still being finalised. It is valid for 12 months (must file a complete specification within this period).

2. Complete Application

It contains the full invention description, claims, and drawings. Can be filed directly or after a provisional application. It's the final and examinable document.

3. Divisional Application

It is filed when a single application contains multiple inventions. It allows the applicant to split them into separate applications while retaining the same priority date.

4. Additional Application

It is filed for improvements or modifications of an already filed invention. It must be linked to the main patent and cannot stand alone.

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Importance of a Patent

Patents are more than just legal documents; they are strategic assets for innovation-driven businesses. Here’s why they matter:

• Protects Innovation: Prevents unauthorised use or duplication of your invention.
• Drives Research: Encourages R&D by granting exclusivity.
• Public Disclosure: Adds to the pool of technical knowledge through public databases.
• Market Advantage: Offers a monopoly that helps recover R&D investments.
• Licensing Revenue: Can be monetised via licensing deals or sales.
• Investor Confidence: Adds credibility and attracts funding.
• Eligibility for Government Support: Many startup schemes and grants favour IP-holding firms.

What Can Be a Patent?

Under Indian law, an invention is patentable if it meets the following criteria:

• Novelty: It must be new and not disclosed anywhere else.
• Inventive Step: It must involve technical advancement or economic significance.
• Industrial Applicability: It should be capable of being made or used in an industry.

Patentable Categories:

1. Processes (e.g., water purification method)
2. Machines (e.g., robotic arms)
3. Articles of Manufacture (e.g., ergonomic chairs)
4. Compositions of Matter (e.g., pharmaceutical formulations)
5. Improvements on existing inventions (e.g., a faster version of a known algorithm)

What Cannot Be Patented?

Under Sections 3 and 4 of the Indian Patent Act, certain inventions are not patentable, even if they are novel.

Key Exclusions:

• Frivolous or contrary to natural laws (e.g., perpetual motion machine)
• Scientific theories or mathematical methods
• Methods of agriculture or horticulture
• Traditional knowledge (e.g., turmeric for healing wounds)
• Medical treatments or surgical methods
• Business methods or algorithms
• Mental acts or abstract ideas
• Atomic energy-related inventions (under Section 4)

These exclusions maintain ethical, cultural, and practical boundaries in IP law.

Patent Examples

Here are a few real-world patent examples that transformed industries:

1. Wright Brothers' Airplane (1906):
   The first powered aircraft patent. Paved the way for modern aviation.
   
2. Apple’s Slide-to-Unlock (2009):
   A design feature that defined smartphone interaction.
   
3. Pfizer’s Lipitor (1993):
   A cholesterol-lowering drug that became one of the best-selling medications.
   
4. Dyson Vacuum Cleaner (1986):
   Innovative cyclone technology with no loss of suction.

How Much Does a Patent Cost in India?

The total cost of obtaining a patent in India varies based on complexity, legal support, and the size of the entity. The cost includes:

• Government Fees
• Professional Charges
• Examination Request Fee
• Additional Costs: Translation, drawings, office actions, renewals

Patent protection lasts for 20 years, subject to annual renewal fees after grant.

Content of a Patent

A patent document includes several structured sections that describe and define the invention:

1. Title of the Invention
2. Bibliographic Details (applicant name, filing date, etc.)
3. Background / Prior Art
4. Detailed Description (technical specifications and working)
5. Drawings or Diagrams
6. Claims 

Unlike academic writing, patent specifications are precise, technical, and legal in tone. Many researchers prepare their own drafts, but expert assistance ensures compliance with formal requirements and claim strength.

Procedure for Getting a Patent in India

Here’s a step-by-step overview of the Indian patent filing process:

1. Document the Invention: Maintain detailed records, diagrams, and experimental data.
2. Conduct a Patent Search: To check if similar inventions exist.
3. Draft a Provisional or Complete Specification.
4. File the Application at the Indian Patent Office (offline or online).
5. Publication: The application is published after 18 months unless early publication is requested.
6. Request for Examination (RFE): Must be filed within 48 months.
7. Examination Report & Objections: Respond to objections and make amendments, if needed.
8. Grant of Patent: If approved, the patent is granted and published in the journal.
9. Renewals: Pay annual renewal fees to maintain validity.

Difference Between Patents vs. Trademarks vs. Copyrights

Frequently Asked Questions

Overview of Taxation for Proprietorships in India

In India, proprietorships are taxed as individual taxpayers under the Income Tax Act. The business income is added to the proprietor's total income and taxed according to the applicable individual tax slabs. Proprietors typically file their income tax returns using:

• ITR-3: For individuals and HUFs having income from a proprietary business or profession
  
• ITR-4 (Sugam): For those opting for the presumptive taxation scheme under sections 44AD, 44ADA, or 44AE
  

Taxpayers can choose between the old tax regime (with deductions and exemptions) or the new one (with lower tax rates but no exemptions).

Do Proprietorship Firms Need to File Income Tax Returns?

Yes, proprietors are legally obligated to file ITRs if their total income exceeds the basic exemption limit, which for FY 2024-25 is:

• ₹2.5 lakh for individuals below 60 years
  
• ₹3 lakh for senior citizens (60-80 years)
  
• ₹3.5 lakh for super senior citizens (above 80 years)
  

Even if the income is below the exemption limit, filing returns is necessary to carry forward business losses, to claim TDS refunds and if there are any foreign assets or income involved.

Importance of Filing Income Tax Returns for Proprietorship Firms

Beyond legal compliance, filing ITR offers several advantages:

• Financial Credibility: Enhances your chances of securing loans, credit lines, or business investments
  
• Business Growth: Essential for bidding in tenders and expanding operations
  
• Avoiding Penalties: Non-filing attracts penalties and interest under the Income Tax Act
  
• Refund Claims: Enables claiming refunds on excess TDS deducted
  

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Tax Audit for Proprietorship

A tax audit is a review of accounts to ensure accuracy and compliance with tax laws. For proprietorships, audit requirements apply if:

• Turnover exceeds ₹1 crore (business)
  
• Gross receipts exceed ₹50 lakh (profession)
  
• Turnover exceeds ₹10 crore if 95% of payments and receipts are digital
  

Non-compliance with tax audit provisions can attract a penalty under Section 271B, which can be up to 0.5% of turnover or a maximum of ₹1.5 lakh.

Presumptive Taxation Scheme: A Simplified Option for Small Proprietors

To ease compliance for small taxpayers, the Income Tax Act offers presumptive taxation schemes:

• Section 44AD: For small businesses with turnover up to ₹2 crore (to be extended to ₹3 crore from AY 2025-26 if cash transactions are below 5%)
  
• Section 44ADA: For professionals with receipts up to ₹50 lakh
  
• Section 44AE: For those involved in the business of transportation
  

ITR Guidelines for Proprietorship Firms – Union Budget 2024–25 Insights

The Union Budget 2024 brought several important changes aimed at easing compliance, promoting transparency, and offering relief to taxpayers, especially for salaried individuals and businesses.

Here's a quick overview of key updates relevant to individual taxpayers and proprietorships:

1. Increased Standard Deduction Under the New Tax Regime

To offer more relief to salaried individuals, the standard deduction under the new tax regime has been increased from ₹50,000 to ₹75,000.

2. Reduced TDS Rates on Specified Payments

The budget has also reduced the Tax Deducted at Source (TDS) rates on certain specified payments to improve ease of doing business and simplify compliance for both payers and recipients. This change will benefit small and mid-sized businesses by easing their cash flow and lowering the burden of upfront tax deduction.

3. Government Scheme for First-Time Entrepreneurs

The Union Budget 2024 introduced a new loan scheme to support first-time entrepreneurs. The scheme aims to promote inclusive entrepreneurship and boost India’s startup ecosystem.

Proprietorship Tax Rate & Surcharge AY 2025-26 | FY 2024-25

Under the New Regime

Under the Old Tax Regime

Deadline for Proprietorship ITR Filing

• Non-audited firms: July 31st of the assessment year (AY)
  
• Audited firms: October 31st of the assessment year (AY)
  

For AY 2025-26:

• Non-audited deadline: July 31, 2025
  
• Audited deadline: October 31, 2025
  

List of Documents Needed for Proprietorship Income Tax Return Filing

• PAN card of the proprietor
  
• Aadhaar card
  
• Bank account statements
  
• Profit & Loss statement
  
• Balance sheet
  
• GST returns (if registered)
  
• TDS certificates (Form 16A/26AS)
  
• Sales invoices and purchase bills
  
• Expense receipts
  
• Investment proofs for claiming deductions (under the old regime)
  

How to File an Income Tax Return for a Proprietorship (Step-by-Step Guide)

Here's a simple, step-by-step guide to help you file accurately and on time:

Step 1: Choose the Right ITR Form

• ITR-3: For proprietors with regular business or professional income
  
• ITR-4: For those opting for the Presumptive Taxation Scheme under Sections 44AD, 44ADA, or 44AE
  

Step 2: Prepare Financial Information

• Compile key documents
  
• Calculate your total income and tax liability
  
• Claim eligible deductions (only under the old regime).
  
• Verify TDS credits and advance tax paid.
  

Step 3: Log into the Portal

• Visit the Income Tax e-Filing portal
  
• Log in using your PAN and password.
  

Step 4: Submit the Return

• Select Assessment Year 2025–26 and the appropriate ITR form (ITR-3 or ITR-4)
  
• Enter all relevant details—income, deductions, taxes paid, etc
  
• Validate and submit the return
  
• E-verify using Aadhaar OTP, bank account, or DSC
  

Step 5: Download

• Download the acknowledgement (ITR-V) and save it for your records.
  

Conclusion

Running a proprietorship already comes with a long to-do list, and filing your income tax return might feel like just another box to check. But here’s the truth: Filing your ITR on time helps you stay on the right side of the law, but it also unlocks serious advantages like improved loan eligibility, smoother business expansion, and better financial credibility.

That’s why choosing the right ITR form (like ITR-3 or ITR-4), keeping your documents ready, and understanding your tax regime can save you a lot of future headaches.

Don’t wait until the last minute- start organising your financials today and file your ITR on time to stay ahead, stay compliant, and build a more credible, growth-ready business.

Frequently Asked Questions

What is Udyog Aadhaar?

Udyog Aadhaar was introduced as a unique identification number for MSMEs to simplify the registration process. It replaced the older Small Scale Industries (SSI) registration system, allowing businesses to register with just a single-page form.

The primary purpose of Udyog Aadhaar was to ease the bureaucratic burden on small businesses and provide them with access to government schemes, subsidies, and financial assistance. This simplified registration made it easier for MSMEs to establish credibility and seek funding opportunities.

What is Udyam Registration?

Udyam Registration is the updated and more comprehensive registration system for MSMEs under the Ministry of Micro, Small, and Medium Enterprises.

Unlike Udyog Aadhaar, Udyam Registration is mandatory for businesses to avail themselves of government benefits after 2020. The online registration allows businesses to self-certify their classification as micro, small, or medium enterprises.

The Udyam Registration Certificate is an official document issued by the Ministry of Micro, Small, and Medium Enterprises (MSME) to businesses that successfully register under the Udyam portal. This certificate serves as legal proof of a business’s MSME status and contains a unique Udyam Registration Number.

Since the entire process is online and paperless, businesses can obtain their Udyam Registration Certificate quickly, ensuring seamless access to financial aid and growth opportunities.

Difference Between Udyog Aadhaar and Udyam Registration

Here is the difference between Udyog Aadhaar and Udyam Registration:

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Top 5 Benefits of Udyog Aadhaar

1. Access to Government Schemes and Subsidies

• Udyog Aadhaar holders could apply for various MSME support programs, including credit-linked subsidies and financial aid.
  

2. Easier Loan Approvals

• Banks and financial institutions provided loans at lower interest rates to Udyog Aadhaar-registered businesses.
  

3. Enhanced Business Credibility

• Registration helped businesses gain recognition and build trust with customers, investors, and suppliers.
  

4. Simplified Government Tender Applications

• Businesses could easily apply for government tenders, increasing their opportunities in public sector projects.
  

5. Tax Rebates and Concessions

• Udyog Aadhaar allowed businesses to benefit from various tax exemptions, reducing operational costs.
  

5 Key Benefits of Udyam Registration

1. Official Recognition and Credibility

• Udyam Registration serves as proof of a business’s legal status, making it easier to secure partnerships and attract investors.
  

2. Better Financial Support

• MSMEs registered under Udyam get easier access to bank loans, credit facilities, and government funding programs.
  

3. Simplified Access to Government Schemes

• Registered businesses can avail themselves of subsidies, grants, and financial incentives tailored for MSMEs.
  

4. Tax Benefits

• Udyam-registered MSMEs enjoy tax rebates and exemptions, reducing their overall financial burden.
  

5. Priority Access to Government Contracts

• Udyam Registration ensures that businesses get priority consideration in public sector tenders, helping them grow through government contracts.
  

How to Migrate to Udyam Registration?

With Udyam Registration now mandatory for government benefits, MSMEs registered under Udyog Aadhaar must migrate to the new system. The migration process is straightforward:

1. Visit the Udyam Registration Portal
   • Go to the official Udyam Registration website.
2. Enter Udyog Aadhaar Details
   • Provide your Udyog Aadhaar number along with Aadhaar-linked mobile details.
3. Submit PAN and GSTIN
   • Enter PAN and GSTIN details for verification.
4. Complete Self-Declaration
   • Fill in business classification details based on investment and turnover.
5. Receive Udyam Registration Certificate
   • After successful verification, the Udyam Registration certificate is generated.

Migrating to Udyam Registration ensures businesses continue to enjoy financial aid, easier access to credit, and government compliance.

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Conclusion

Understanding the differences between Udyog Aadhaar and Udyam Registration is essential for MSMEs to stay compliant and competitive.

While Udyog Aadhaar served as a stepping stone for MSMEs, Udyam Registration is now mandatory for accessing government benefits, funding opportunities, and enhanced business credibility.

Migrating to Udyam Registration ensures businesses remain eligible for financial support and government schemes, enabling them to grow and thrive in India’s evolving economic landscape. If you haven't yet migrated, now is the time to secure your business's future with Udyam Registration!

Frequently Asked Questions