HR Policies: Best Practices For Start-Ups In India

Jun 10, 2025
Private Limited Company vs. Limited Liability Partnerships

India’s startup ecosystem is one of the fastest-growing in the world. With innovation booming and young companies scaling rapidly, the need to build a strong foundation of people practices becomes critical. One key part of this foundation? HR policies.

For startups, setting clear HR policies early on can help shape a productive and inclusive work culture, prevent legal issues, and drive employee satisfaction- all of which contribute to long-term success. 

This blog explores why HR policies are important for Indian startups, which ones you must prioritise, and best practices to follow.

Table of Contents

HR Policy for Startups- An Overview

In the rush of building a product and acquiring customers, many Indian startups often overlook the importance of formal HR policies. However, these policies are not just about bureaucracy or paperwork. They are tools to ensure consistency, fairness, and legal compliance.

HR policies balance employee rights and company objectives. They prevent arbitrary decision-making, reduce disputes, and clarify expectations for both employers and employees. They also provide frameworks for discipline, rewards, grievance redressal, and professional conduct, creating a workplace where talent can thrive.

While startups face constraints in time, budget, and HR resources, basic HR policies can go a long way in promoting stability, scalability, and a positive employer brand.

Related Read: Templates for Startup Founders

Why HR Policies for Startups in India are Crucial?

Here’s why every Indian startup should prioritise HR policies from day one:

  • Builds a consistent work culture: Written HR policies foster consistency across teams and leadership, even as the company grows or experiences turnover.

  • Reduces misunderstandings: Policies help resolve or prevent conflicts between employees and employers by clearly communicating rights, responsibilities, and processes.

  • Protects against legal risks: Indian labour laws, workplace safety regulations, and anti-harassment laws require compliance; having HR policies ensures your startup stays compliant.

  • Drives employee morale and loyalty: Transparent policies around leave, performance, and compensation demonstrate that the company cares for its people, fostering trust and engagement.

  • Defines company values and culture: HR policies codify expected behaviour and ethics, reinforcing the cultural DNA you want your startup to embody.

  • Streamlines core HR functions: HR teams can better manage recruitment, onboarding, training, payroll, and performance reviews when guided by clear policy frameworks.

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Major HR Policies for Startups

Here are the key HR policies that Indian startups should prioritise:

Leave Policy

A Leave Policy outlines the various types of leave employees can avail themselves of, including:

  • Casual leave
  • Sick leave
  • Paid time off (PTO)
  • Maternity/Paternity leave
  • Public holidays

Clearly define leave eligibility, accrual, approval processes, and encashment rules to avoid confusion.

Menstrual Leave Policy

Many progressive startups in India now include a Menstrual Leave Policy offering additional flexibility to female employees. Typically, this includes:

  • A set number of days of paid leave per month or year specifically for menstrual health.
  • A simple, stigma-free process to request this leave.

Performance Management, Appraisal, Rewards & Recognition Policy

A well-defined Performance Management Policy ensures that employees understand how their work is evaluated and rewarded. Include:

  • Goal-setting frameworks (OKRs, KPIs)
  • Appraisal cycles and review processes
  • Criteria for promotions and salary hikes
  • Recognition mechanisms (awards, bonuses, public appreciation)

Code of Conduct

A Code of Conduct defines acceptable behaviour and ethical standards at the workplace. Cover aspects such as:

  • Professionalism and respect
  • Anti-discrimination
  • Anti-bribery and corruption
  • Use of company property
  • Conflict of interest
  • Disciplinary actions for violations

Employee Joining and Exit Policies

Clearly outline onboarding and offboarding procedures:

  • Documents and verification required upon joining
  • Probation period terms
  • Notice period during resignation or termination
  • Final settlement process
  • Exit interviews and knowledge transfer

Salary and Other Perks

Document your Salary and Benefits Policy, including:

  • Salary structure (CTC breakup)
  • Frequency of salary payment
  • Statutory benefits (PF, ESIC, gratuity)
  • Voluntary benefits (insurance, wellness programs, stock options)
  • Reimbursement policies (travel, meals, etc.)

Sexual Harassment in the Workplace Policy

It is mandatory under the POSH Act, 2013, for Indian companies with 10 or more employees to have an Anti-Sexual Harassment Policy. The policy should:

  • Define sexual harassment
  • Outline the complaints process
  • Establish the Internal Complaints Committee (ICC)
  • Ensure confidentiality and protection for complainants

Regular Working Hours

A Working Hours Policy defines:

  • Standard working hours
  • Flexible working options, if any
  • Remote work guidelines
  • Overtime policies (if applicable)
  • Break and meal times

Related Read: Startup India Scheme: Eligibility Criteria and Benefits

 Frequently Asked Questions

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Limited Liability Partnership
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  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
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  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

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  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
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1,499 + Govt. Fee
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  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

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  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What are HR policies in India?

HR policies in India are formal guidelines that govern how a company manages its people. They cover areas like leave, working hours, compensation, workplace conduct, harassment prevention (POSH Act compliance), equal opportunity, health and safety, and termination processes- all while ensuring compliance with Indian labour laws.

What does HR do in a startup?

In a startup, HR plays a critical role in building the team and culture from the ground up. Key responsibilities include:

  • Hiring and onboarding talent
  • Defining and implementing HR policies
  • Managing payroll and benefits
  • Driving employee engagement
  • Facilitating performance management
  • Handling employee relations and grievances
  • Ensuring legal and compliance requirements are met

In the early stages, HR often wears many hats and helps shape the company’s identity as an employer.

What are HR key tasks?

 Key tasks of HR typically include:

  • Recruitment and talent acquisition
  • Onboarding and orientation
  • Payroll and compensation management
  • Policy development and implementation
  • Performance management and appraisals

  • Employee engagement and retention
  • Learning and development programs
  • Legal compliance and reporting
  • Managing workplace conflicts and grievances
  • Offboarding and exit interviews

What is an HR tech startup?

An HR tech startup builds technology solutions that help companies manage their workforce more efficiently. These can include:

  • Applicant tracking systems (ATS)
  • Payroll management software
  • Employee engagement platforms
  • Performance management tools
  • Learning & development platforms
  • AI-driven HR analytics
  • End-to-end HRMS (Human Resource Management Systems)

In India, HR tech startups like Darwinbox, Keka, and Zoho People are popular examples.

How to set up an HR function?

To set up an HR function in a startup or small business:

  1. Define HR goals
  2. Draft basic HR policies
  3. Set up payroll and compliance processes
  4. Develop a hiring and onboarding process
  5. Implement performance management
  6. Communicate policies to employees
  7. Use HR software
  8. Hire HR talent or consultants

What are the 4 C’s of HR policies?

The 4 C’s often used to frame effective HR policies are:

  1. Clarity- Policies should be easy to understand and unambiguous.
  2. Consistency- Apply policies uniformly across the organisation to avoid bias.
  3. Compliance- Align policies with local labour laws and regulatory requirements.
  4. Communication- Actively share and educate employees about policies to ensure awareness and adoption.

Nipun Jain

Nipun Jain is a seasoned startup leader with 13+ years of experience across zero-to-one journeys, leading enterprise sales, partnerships, and strategy at high-growth startups. He currently heads Razorpay Rize, where he's building India's most loved startup enablement program and launched Rize Incorporation to simplify company registration for founders.

Previously, he founded Natty Niños and scaled it before exiting in 2021, then led enterprise growth at Pickrr Technologies, contributing to its $200M acquisition by Shiprocket. A builder at heart, Nipun loves numbers, stories and simplifying complex processes.

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Related Posts

Partnership Firm Tax Rate and Tax Return Filing Explained

Partnership Firm Tax Rate and Tax Return Filing Explained

A partnership firm is a business structure where two or more individuals come together to form a business entity. Each individual in the firm is referred to as a "partner." There are two types of partnership firms: registered and unregistered. A registered partnership firm obtains a registration certificate from the Registrar of Companies, while an unregistered firm does not have one.

Partnership firm e-filing involves submitting tax returns electronically using the Income Tax Department portal. In this article, we will focus on taxation for partnership firms, including partnership firm tax rate, deductions, ITR filing requirements, and the e-filing process. Whether you're a new partnership firm or an established one, this article will provide you with the essential information to navigate the partnership firm tax rate landscape with ease.

Table of Contents

Partnership Firm Tax Rate Explained

The income tax on partnership firms in India is levied at a flat rate of 30% on the total income earned by the firm. This rate applies irrespective of the quantum of income generated. Additionally, a surcharge of 12% is applicable if the total income exceeds ₹1 crore, effectively increasing the tax rate to 33.6%. Furthermore, a health and education cess of 4% is levied on the income tax (including surcharge, if applicable).

It's important to note that there is no basic exemption limit for partnership firms, unlike individual taxpayers. Moreover, partnership firms are not subject to Minimum Alternate Tax (MAT), which is applicable to companies.

Let's compare the tax rates for partnership firms with other business structures:

  • LLP Registration: Limited Liability Partnerships (LLPs) have the same base tax rate of 30% as partnership firms. However, the surcharge for LLPs kicks in only when the total income exceeds ₹1 crore, at a rate of 12%.
  • Companies: Companies have a flat base tax rate of 30% (25% for those with a turnover of up to ₹400 crore). However, companies are also subject to MAT.
  • Individuals: The peak tax rate for individuals earning over ₹15 lakhs annually is 30%, which is the same as the flat rate for partnership firms.

Here's a simple partnership firm income tax calculation example to illustrate:

  • Total income of partnership firm: ₹10,00,000
  • Base tax rate: 30%
  • Tax amount: ₹3,00,000 (30% of ₹10,00,000)
  • Education cess: ₹36,000 (12% of ₹3,00,000)
  • Health cess: ₹12,000 (4% of ₹3,00,000)
  • Total tax payable: ₹3,48,000 (₹3,00,000 + ₹36,000 + ₹12,000)

It's important to note that the share of profit received by partners from the firm is exempt from tax and excluded from their total income. However, partners have to pay tax on remuneration and interest income received from the firm.

Tax Deductions Allowed for Partnership Firms

Understanding deductions is crucial for reducing income tax liability for partnership firms. Deductions are allowed for specific firm expenses, such as:

  • Remuneration (salaries, bonuses, or commissions) paid to partners, subject to limits
  • Interest paid to partners on capital, subject to a maximum rate of 12% p.a.

For remuneration, the allowable deduction limit is:

Book Profit Deduction Limit
On first ₹3,00,000 90% of book profit or ₹1,50,000 (whichever is higher)
On balance book profit 60%

Any remuneration or interest paid to partners in excess of these limits is not tax-deductible for the firm. It's important to note that tax deductions will not apply to payments made to partners that are not in accordance with the partnership deed or for transactions made before the partnership deed is executed.

How to File Your Tax Return for a Partnership Firm Online?

A partnership firm must file its income tax return using Form ITR-5 on the Income Tax Department’s e-filing portal. Here’s a step-by-step guide:

1. Access the Income Tax Department's e-filing portal

  • Visit www.incometax.gov.in and log in using the firm’s PAN and password.

2. Gather Required Financial Information

  • Keep financial records ready, including:
    • Profit & Loss Account
    • Balance Sheet
    • Tax computation statements
    • GST and TDS details (if applicable)

3. Fill and Submit Form ITR-5

  • Select Form ITR-5 under the “Income Tax Return” section.
  • Enter income details, deductions, and tax payments.
  • Cross-check the information before submitting, as no attachments are required.

4. Verify the Return

Verification is mandatory and can be done using:

  • Digital Signature Certificate (DSC) – Class 3: Required for all partners if the firm is subject to audit.
  • Electronic Verification Code (EVC): OTP-based verification via Aadhaar, net banking, or Demat account.

5. Audit Applicability

  • If the firm’s turnover exceeds ₹1 crore (₹50 lakh for professional firms), a tax audit is mandatory.
  • The audit report must be e-filed before submitting ITR-5, and DSC is required.

6. Submission and Record-Keeping

  • Once submitted, download and keep the ITR-V acknowledgment for records.
  • Maintain supporting documents, including books of accounts, tax payments, and financial statements, for future reference.

Following this process will ensure smooth filing of your itr for partnership firm.

What are the Deadlines for Filing a Partnership Firm Tax Return?

The income tax return filing deadlines for partnership firms in India are based on audit requirements:

  • Firms not requiring an audit must file returns by 31st July
  • Firms requiring an audit must file by 31st October
    If the partnership firm fails to file the return by the due date, the following consequences may arise:
    • A late filing fee of ₹5,000 is applicable if the return is filed after the due date but before December 31st.
    • The late filing fee increases to ₹10,000 if the return is filed after December 31st.
    • Interest under Section 234A will be levied for the delay in filing the return.
    • Penalties under Section 271F may be imposed for non-filing of the return.

It's crucial to meet these deadlines to ensure compliance and avoid penalties. Keep in mind that deadlines may change, so it's advisable to check the official website or consult Razorpay for updates and timely filing.

Common Errors While Filing Tax Returns & How to Avoid Them

Some common mistakes made while filing partnership firm tax returns include:

  1. Not obtaining a Digital Signature Certificate (DSC) for e-filing
  2. Missing the filing deadline
  3. Incorrect or incomplete details of partners
  4. Mismatch in income and expenditure as per books vs. ITR
  5. Not reporting all income sources
  6. Errors in deductions and exemptions claimed
  7. Improper verification

To avoid these errors:

  • Ensure all partners obtain a valid DSC well in advance
  • Ensure you file your return by the applicable due date to avoid penalties.
  • Maintain accurate books of accounts and reconcile with ITR figures
  • Report all income from business, investments, capital gains, etc.
  • Claim only allowable deductions and exemptions as per limits
  • Cross-check all details before submitting the return
  • Ensure that all partners participate in the verification process using DSC or EVC.

Conclusion

Understanding the partnership firm tax rate and the filing process is essential for every partnership firm in India. E-filing tax returns for a partnership firm ensures a quick, efficient, and hassle-free process. Understanding firm types, taxation rules, eligible deductions, and filing procedures helps in accurate reporting and compliance. By staying informed about the applicable tax rates, deductions, and deadlines, you can ensure timely compliance and avoid penalties. Remember to maintain accurate records, file your ITR for partnership firm using ITR-5, and verify the return with the participation of all partners. With this comprehensive guide, you are now equipped with the knowledge to navigate the partnership firm income tax landscape confidently.

Frequently Asked Questions

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

How to file an income tax return for a partnership firm?

Partnership firms must file their income tax return using Form ITR-5. The return has to be filed electronically using a Digital Signature Certificate (DSC). Detailed income and expense statements, along with partner details, have to be provided in the return.

Can we file ITR-5 for a partnership firm?

Yes, ITR-5 is the designated form for filing income tax returns for partnership firms. It is specifically designed to capture the income details and tax computation of firms.

Is ITR-4 applicable for partnership firms?

No, ITR-4 is not applicable for partnership firms. ITR-4 is meant for individuals and Hindu Undivided Families (HUFs) having income from business or profession. Partnership firms must use ITR-5 for filing their tax returns.

Can a partnership firm file ITR-3?

No, a partnership firm cannot file ITR-3. ITR-3 is applicable for individuals and HUFs having income from business or profession. Partnership firms must file their return using ITR-5 only.

How much TDS is deducted on a partnership firm?

TDS (Tax Deducted at Source) rates for partnership firms are as follows:

  1. 10% on interest paid by banks and co-operative societies
  2. 10% on rental income exceeding ₹2,40,000 per annum
  3. 2% on payments to contractors exceeding ₹30,000 (1% if the contractor is an individual or HUF)
  4. 10% on commission or brokerage exceeding ₹15,000 per annum

Is partnership firm taxable income?

Yes, the income of a partnership firm is taxable. The firm is taxed as a separate entity at a flat base rate of 30% plus applicable cess. The share of profit received by partners is exempt, but they have to pay tax on remuneration and interest received from the firm.

Akash Goel

Akash Goel is an experienced Company Secretary specializing in startup compliance and advisory across India. He has worked with numerous early and growth-stage startups, supporting them through critical funding rounds involving top VCs like Matrix Partners, India Quotient, Shunwei, KStart, VH Capital, SAIF Partners, and Pravega Ventures.

His expertise spans Secretarial compliance, IPR, FEMA, valuation, and due diligence, helping founders understand how startups operate and the complexities of legal regulations.

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Advantages of One Person Company: OPC Benefits Explained

Advantages of One Person Company: OPC Benefits Explained

An OPC is a unique business structure introduced by the Companies Act 2013 in India. It allows a single individual to form and operate a company, combining the benefits of both a sole proprietorship and a private limited company. OPC's meaning is straightforward - it is a company with only one member who is the sole shareholder and director. 

The primary objective behind introducing the OPC concept was to encourage solo entrepreneurship and facilitate the corporatisation of micro, small and medium enterprises (MSMEs) in India.

Table of Contents

What is the Nature of a One Person Company in India?

As per the definition provided in the Companies Act 2013, an OPC is a private limited company with only one member. The sole shareholder of the OPC holds 100% of the company's shares and is entitled to all the profits generated by the business. The full form of OPC is "One Person Company," emphasising its single-member structure.

The importance of OPC lies in its ability to provide a formal corporate structure to sole proprietors and small business owners. By registering as an OPC, entrepreneurs can enjoy the benefits of a separate legal entity while maintaining complete control over their business operations. This unique combination of sole ownership and corporate features makes OPC an attractive choice for many budding entrepreneurs in India.

Benefits of OPC Company

Next up, let us understand why an OPC company will be right for you:

1. Benefits of Being Small Scale Industries

One of the key advantages of a one person company is its eligibility to be registered as a Micro, Small or Medium Enterprise (MSME). By obtaining MSME registration, OPCs can avail various benefits provided by the government, such as:

  • Priority sector lending from banks
  • Collateral-free loans up to ₹10 lakhs
  • Subsidy on patent registration
  • Reimbursement of ISO certification expenses
  • Concession on electricity bills
  • Exemption from excise duties

These MSME benefits can significantly reduce the financial burden on small businesses and help them grow faster.

2. Single Owner

Unlike partnership firms or private limited companies, an OPC has only one owner who holds all the shares and has complete control over the company's decision-making process. This streamlined ownership structure offers several benefits for OPC company, such as:

  • Faster decision-making without the need for consensus among multiple partners or directors
  • Flexibility to adapt quickly to changing market conditions
  • Ability to maintain confidentiality of business strategies and plans
  • Elimination of potential conflicts among partners or shareholders

3. Credit Rating

OPCs find it easier to obtain loans and credit facilities from banks and financial institutions than sole proprietorships. This is because OPCs have a separate legal identity and their financial statements are available in the public domain, allowing lenders to assess their creditworthiness more accurately. A good credit rating can help OPCs secure funding at competitive interest rates, providing a significant advantage over unregistered businesses.

4. OPC Benefits under Income Tax Law

OPCs enjoy certain one person company tax benefits under the Income Tax Act, 1961. Some of these advantages include:

  • Lower corporate tax rate of 25% for OPCs with an annual turnover of up to ₹250 crores.
  • Exemption from Minimum Alternate Tax (MAT) for OPCs with an annual turnover of up to ₹5 crores.
  • Ability to carry forward and set off losses for up to 8 years.
  • Deduction of up to ₹1.5 lakhs under Section 80C for investments made by the OPC owner.

These tax benefits can help OPCs optimise their tax liabilities and retain more profits for reinvestment in the business.

Received Interest Rate on any Late Payment

Under the MSME Development Act, 2006, OPCs registered as MSMEs are entitled to receive interest on delayed payments from their buyers. If a buyer fails to make payment within 45 days of accepting the goods or services, the OPC can charge an interest rate of three times the bank rate notified by the Reserve Bank of India (RBI). This provision helps ensure timely payments and improves the cash flow situation for small businesses.

6. Increase in Trust and Status

By registering as an OPC, small businesses can enhance their credibility and reputation in the market. The formal corporate structure and public disclosure of financial statements instil greater trust among customers, suppliers and other stakeholders. This increased trust can lead to better business opportunities, higher customer loyalty and improved bargaining power in commercial transactions.

7. Easy Funding

Apart from institutional funding, OPCs can also raise capital from individual investors. The Companies Act allows OPCs to issue shares to up to 200 shareholders, providing an alternative route for raising funds. This option can be particularly useful for OPCs with high growth potential, as they can attract angel investors or venture capitalists to fund their expansion plans.

8. Limited Liability

One of the most significant benefits of OPC is the limited liability protection it offers to the owner. Unlike sole proprietorships, where the owner's personal assets are at risk in case of business liabilities, an OPC provides a corporate veil that separates the owner's personal assets from the company's obligations. In the event of any legal disputes or financial losses, the liability of the OPC owner is limited to the extent of their investment in the company.

9. One Person Company Tax Benefits

In addition to the income tax benefits mentioned earlier, OPCs also enjoy several other tax advantages. For instance, OPCs with an annual turnover of up to ₹2 crores can opt for the presumptive taxation scheme under Section 44AD of the Income Tax Act. Under this scheme, the OPC is required to pay tax on only 8% of its total turnover, reducing the compliance burden and tax liability significantly.

10. MSME Benefits

As discussed earlier, OPCs registered as MSMEs are eligible for various government schemes and subsidies. Some additional benefits include:

  • Preference for government tenders
  • Assistance in marketing and export promotion
  • Subsidies for participating in international trade fairs
  • Skill development and training programs for employees
  • Access to credit guarantee schemes

These benefits can provide a much-needed boost to small businesses, helping them compete with larger players in the market.

11. Ease of Management

Managing an OPC is relatively simpler compared to other business structures. With a single owner and no board of directors, decision-making is faster and less complicated. 

Additionally, OPCs have fewer compliance requirements under the Companies Act. For instance, OPCs are not required to hold annual general meetings or prepare cash flow statements. This reduced compliance burden allows OPC owners to focus more on their core business activities.

Eligibility Criteria for OPC

To register as an OPC, the following eligibility criteria must be met:

  • The OPC must have only one member who is an Indian citizen and resident. This ensures that the business is managed by someone who understands local regulations and market conditions.
  • The sole member must be a natural person, not a company or an institution. This stipulation reinforces the OPC's structure as a personal enterprise.
  • The member should not be a minor to ensure legal competency in business dealings.
  • The member should be of sound mind and not be declared insolvent by any court. This criterion ensures that the individual can manage the company's affairs effectively.
  • The member should not have been convicted of any offence related to company formation or management in the past five years, which helps maintain the integrity of business practices.
  • The member should not be a nominee or shareholder in any other OPC.

OPC Registration Process

The OPC registration process involves the following steps:

The registration process for an OPC is streamlined and can be completed online through the Ministry of Corporate Affairs - MCA portal. Here are the essential steps involved:

  1. Obtain a Digital Signature Certificate (DSC): The first step is to acquire a DSC for the sole member, which is necessary for signing electronic documents during the registration process.
  2. Apply for Director Identification Number (DIN): Following the DSC, the next step is to apply for a DIN, which is required for the proposed director of the OPC.
  3. Name Approval: The applicant must submit an application for name approval using Part A of the SPICe+ form on the MCA portal. It is advisable to propose at least two names to ensure one can be approved.
  4. Prepare Necessary Documents: Essential documents include: 
  • Memorandum of Association (MoA) and Articles of Association (AoA)
  • Proof of registered office address
  • Consent from the nominee
  • KYC documents for both the member and nominee
  1. File SPICe+ Form: Once all documents are prepared, submit Part B of the SPICe+ form along with all necessary attachments to complete the application for incorporation.
  2. Payment of Fees: Pay the requisite registration fees online, which may vary based on the company's nominal share capital.
  3. Certificate of Incorporation: If all details are accurate and compliant with regulations, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, officially recognising the OPC as a legal entity.

This structured approach not only simplifies the registration process but also ensures that all legal requirements are met efficiently, making it easier for entrepreneurs to start their businesses as a One Person Company in India.

Conclusion

OPC offers a unique blend of sole ownership and corporate features, making them an attractive choice for solo entrepreneurs and small business owners in India. The benefits of an OPC company are numerous, ranging from limited liability protection and separate legal identity to tax advantages and easier access to credit. 

Additionally, the reduced compliance burden and simplified management structure make OPCs well-suited for individuals who want to focus on their core business activities without getting bogged down by excessive paperwork.

To register as an OPC, an individual must meet certain eligibility criteria and follow the prescribed registration process. Once incorporated, an OPC can enjoy various benefits available to MSMEs and small-scale industries, helping them compete effectively in the market.

In conclusion, the One Person Company is a progressive business structure that encourages solo entrepreneurship and facilitates the growth of small businesses in India. By providing a formal corporate framework with minimal compliance requirements, OPCs have opened up new avenues for aspiring entrepreneurs to turn their ideas into successful ventures.

Benefits of OPC - FAQs

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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What is a one person company?

A one person company is a type of private limited company that has only one member who is the sole shareholder and director of the company. It was introduced in India by the Companies Act 2013, to encourage solo entrepreneurship and facilitate the corporatisation of small businesses.

What are OPC benefits in India?

Some of the key advantages of one person company in India include:

  • Limited liability protection for the owner
  • Separate legal identity from the owner
  • Easier access to credit and funding
  • Lower tax rates and tax benefits
  • Reduced compliance requirements
  • Simplified management structure
  • Eligibility for MSME benefits and schemes

However, OPCs also have certain limitations, such as restricted capital infusion and dependency on a single individual for decision-making. Together, these broadly sum up the advantages and disadvantages of a one person company. 

Who is eligible for OPC?

To be eligible for OPC registration, an individual must:

  • Be an Indian citizen and resident
  • Be a natural person, not a company or institution
  • Not be a minor or declared insolvent by any court
  • Not have been convicted of any offence related to company formation or management in the past five years
  • Not be a nominee or shareholder in any other OPC

What is the limit of OPC?

An OPC can have a maximum of one member and one director, who should be the same person. The paid-up share capital of an OPC is limited to ₹50 lakhs, and its average annual turnover should not exceed ₹2 crores in the immediately preceding three financial years. If an OPC crosses these thresholds, it must convert into a private or public limited company.

What is the importance of OPC?

The one person company concept is important because it provides a formal corporate structure to sole proprietors and small business owners, allowing them to enjoy the benefits of a separate legal entity while maintaining complete control over their business operations. OPCs help promote entrepreneurship, facilitate the growth of MSMEs and contribute to the country's overall economic development.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

Read more
Can a Foreign National Register an OPC in India? Updated Rules 2025

Can a Foreign National Register an OPC in India? Updated Rules 2025

India is becoming an increasingly attractive destination for global entrepreneurs and investors. With a rapidly growing economy, digital-first policies, and a supportive startup ecosystem, many foreign nationals are exploring business opportunities here. However, when it comes to choosing a business structure, not all options are open to them, particularly the One Person Company (OPC). 

In this blog, we’ll explore whether a foreign national can register an OPC in India, the updated rules for 2025, and the alternatives that are available.

Table of Contents

Why Start a Business in India as a Foreigner?

India offers a compelling value proposition for global business owners:

  • Fast-growing economy: India is among the top emerging markets with consistent GDP growth.

  • Large consumer base: With over 1.4 billion people and a rising middle class, the domestic market is vast and varied.

  • Startup-friendly policies: Programs like Startup India, Make in India, and Digital India support new ventures with tax benefits, funding access, and ease of registration.

  • Improved ease of doing business: Recent reforms have simplified company incorporation, tax filing, and compliance.

  • Strategic location: India’s proximity to other Asian markets makes it a strong base for regional operations.

  • Skilled talent: A large English-speaking, tech-savvy workforce makes it easier to scale.

  • Cost-effective operations: Lower labour and operational costs compared to many developed markets.

Additionally, FDI relaxations across sectors like tech, manufacturing, and services have made India a preferred destination for companies like Amazon, IKEA, and Walmart.

Popular Business Structures for Foreigners in India

Foreign nationals looking to start a business in India can choose from a few key structures:

  • Private Limited Company (Pvt Ltd): Most preferred structure; allows 100% FDI in most sectors.
  • Limited Liability Partnership (LLP): Suitable for service businesses and professional firms; FDI permitted in select cases.
  • Liaison Office: Ideal for companies wanting to explore or represent without full operations.
  • Branch Office: Allows foreign companies to conduct full-scale business in India.
  • Project Office: Meant for foreign companies executing specific projects.

Note: One Person Company (OPC) and sole proprietorships are not allowed for foreign nationals or NRIs due to FDI restrictions.

Looking to register a business in India? Explore private limited company or LLP options with expert help today.”

Type of Company that NRIs and Foreign Nationals Can Register

While OPC is off the table, foreign nationals and NRIs can register the following:

  • Private Limited Company
  • Public Limited Company
  • Limited Liability Partnership (LLP) – subject to FDI conditions

Under automatic FDI routes, many sectors do not require prior government approval for investment. However, some sectors are still under the approval route or have FDI caps.

The Private Limited Company remains the most flexible and founder-friendly choice, especially for technology, services, and product-based businesses.

Can a Foreigner Own 100% of an Indian Company?

Yes! Foreign nationals can own 100% of equity in Indian companies, provided the business operates in a sector under the automatic FDI route. This means:

  • No need for government approval in most sectors.
  • A resident Indian director is mandatory (must stay in India for at least 182 days in a financial year).
  • Some sectors like defence, telecom, and insurance have FDI caps or require prior approvals.

Pre-requisites for Registration of a Private or Public Limited Company

Private Limited Company:

  • Minimum 2 shareholders and 2 directors
  • At least 1 Indian resident director
  • Registered office address in India
  • Digital Signature Certificate (DSC) for all directors
  • Company name approval from the MCA

Public Limited Company:

  • Minimum 7 shareholders and 3 directors
  • Other requirements same as above

For foreign nationals, documents must be apostilled or notarised as per regulatory norms.

Documents Required for Foreign Directors & Shareholders

Foreign nationals need to submit the following documents:

  • Passport (identity proof): notarised/apostilled
  • Address Proof (bank statement, utility bill, not older than 2 months)
  • Passport-size photograph
  • Digital Signature Certificate (DSC) application form, duly signed
  • Board resolution or power of attorney (in case of a foreign entity shareholder)

If applicable:

  • PAN Card (mandatory for directors earning income in India)

 Process to Register a Company in India as a Foreigner

  1. Obtain DSCs for all proposed directors
  2. Apply for name approval on the MCA portal
  3. Draft incorporation documents (MoA, AoA, declarations, etc.)
  4. File incorporation application online via SPICe+ form
  5. Receive Certificate of Incorporation from MCA
  6. Apply for:
    • PAN & TAN
    • GST Registration (if applicable)
    • Bank account in the company’s name

Note: One resident Indian director is compulsory.

Taxation for Foreign-Owned Companies in India

Companies registered in India (even if foreign-owned) are treated as domestic companies for tax purposes:

  • Corporate Tax: 25% (plus cess and surcharge) if turnover ≤ ₹400 crore

  • GST: Mandatory if turnover exceeds ₹20 lakh (or if interstate services are provided)

  • TDS: Deduction obligations apply when making payments to employees, contractors, or foreign entities

  • Transfer Pricing Regulations: Apply for transactions with foreign affiliates or holding companies

India has Double Tax Avoidance Agreements (DTAAs) with many countries to reduce tax burden.

Company Types for Foreign Nationals

Features Partnership Firm Limited Liability Partnership (LLP)
Legal Identity Not a separate legal entity A separate legal entity
Liability of Partners Unlimited Limited to the extent of the contribution
Registration Optional Mandatory under MCA
Compliance Burden Low Moderate
Perpetual Succession No Yes
Number of Partners Minimum 2, Maximum 50 Minimum 2, No Maximum
Foreign Investment (FDI) Not permitted Permitted under the automatic route

Conclusion

While foreign nationals cannot register an OPC in India due to FDI restrictions, there are multiple flexible options available with the Private Limited Company being the most recommended. With the right legal support and compliance, India offers a rich, growth-oriented environment for foreign entrepreneurs to launch and scale their ventures.

rize image

Register your Business at just 1,499 + Govt. Fee

Register your business
rize image

Register your Private Limited Company in just 1,499 + Govt. Fee

Register your business
rize image

Register your One Person Company in just 1,499 + Govt. Fee

Register your business
rize image

Register your Business starting at just 1,499 + Govt. Fee

Register your business
rize image

Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Do I need a business visa to start a company in India?

Yes, foreign nationals planning to start or manage a business in India must obtain a valid Business Visa. This visa allows you to engage in business activities, attend meetings, and oversee operations legally.

Can a foreign resident be a director of an Indian company?

Yes, a foreign resident can be appointed as a director in an Indian company. However, at least one director must be a resident Indian (i.e., has stayed in India for at least 182 days in the previous calendar year).

Can a foreigner register a Private Limited Company in India?

Yes, foreigners can register a Private Limited Company in India. 100% foreign ownership is allowed in most sectors under the automatic route, provided compliance with FEMA and FDI guidelines.

Can an NRI register an OPC in India?

No, NRIs and foreign nationals are not eligible to register a One Person Company (OPC) in India. OPCs are reserved for Indian citizens who are also residents of India.

Can a foreign citizen be a nominee in an OPC?

No, a foreign citizen cannot be appointed as a nominee in an OPC. Both the sole member and nominee must be Indian citizens and residents.

Can a foreign company do business in India without registration?

No, a foreign company must register its presence in India to conduct business legally. This can be through a subsidiary, branch office, liaison office, or project office- each with specific registration and compliance norms.

Can a foreigner become a shareholder in an Indian company?

Yes, foreign nationals can become shareholders in an Indian company. Shareholding is allowed under the FDI policy, subject to sector-specific limits and compliance with FEMA regulations.

Akash Goel

Akash Goel is an experienced Company Secretary specializing in startup compliance and advisory across India. He has worked with numerous early and growth-stage startups, supporting them through critical funding rounds involving top VCs like Matrix Partners, India Quotient, Shunwei, KStart, VH Capital, SAIF Partners, and Pravega Ventures.

His expertise spans Secretarial compliance, IPR, FEMA, valuation, and due diligence, helping founders understand how startups operate and the complexities of legal regulations.

Read more

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Smooth onboarding, seamless incorporation and a wonderful community. Thanks to the #razorpayrize team! #rizeincorporation
Dhaval Trivedi
Basanth Verma
shopeg.in
Exciting news! Incorporation of our company, FoxSell, with Razorpay Rize was extremely smooth and straightforward. We highly recommend them. Thank you Razorpay Rize for making it easy to set up our business in India.
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Dhaval Trivedi
Prakhar Shrivastava
foxsell.app
We would recommend Razorpay Rize incorporation services to any founder without a second doubt. The process was beyond efficient and show's razorpay founder's commitment and vision to truly help entrepreneur's and early stage startups to get them incorporated with ease. If you wanna get incorporated, pick them. Thanks for the help Razorpay.

#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
TBS Magazine
Hey, Guys!
We just got incorporated yesterday.
Thanks to Rize team for all the Support.
It was a wonderful experience.
CHEERS 🥂
#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
Nayan Mishra
https://zillout.com/
Smooth onboarding, seamless incorporation and a wonderful community. Thanks to the #razorpayrize team! #rizeincorporation
Dhaval Trivedi
Basanth Verma
shopeg.in
Exciting news! Incorporation of our company, FoxSell, with Razorpay Rize was extremely smooth and straightforward. We highly recommend them. Thank you Razorpay Rize for making it easy to set up our business in India.
@foxsellapp
#razorpayrize #rizeincorporation
Dhaval Trivedi
Prakhar Shrivastava
foxsell.app
We would recommend Razorpay Rize incorporation services to any founder without a second doubt. The process was beyond efficient and show's razorpay founder's commitment and vision to truly help entrepreneur's and early stage startups to get them incorporated with ease. If you wanna get incorporated, pick them. Thanks for the help Razorpay.

#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
TBS Magazine
Hey, Guys!
We just got incorporated yesterday.
Thanks to Rize team for all the Support.
It was a wonderful experience.
CHEERS 🥂
#entrepreneur #tbsmagazine #rize #razorpay #feedback
Dhaval Trivedi
Nayan Mishra
https://zillout.com/