Partnership Deed for Firms in India

Eligibility

• Should be recognised by DPIIT.
• Startups should not have received more than Rs 10 lakh of monetary support under other significant government schemes.
• The Startup shall have been in existence for no more than two years at the time of application.
• Should be using technology as its core product or service to create innovative solutions in different sectors.
• Must have a business idea to develop the product with a scope of scaling
• According to the Companies Act of 2013 and the SEBI (ICDR) Regulations of 2018, Indian promoters must own at least 51 percent of the company at the time of application to the incubator.
• The seed support is generally available in grants and debt/convertible debentures.

Application procedure for Startups

The application procedure for availing the seed fund from the incubators by the startups under the StartUp India Seed Fund Scheme is as follows:

Startup India Registration

• Go to https://seedfund.startupindia.gov.in/.
• On the top right side of the homepage, click the 'Login' button, then the 'Create an Account' option at the bottom of the "Login" tab.
• The ‘Startup India’ registration page will open.
• After filling out the form, click the 'Register' button.
• An OTP will be sent. Enter the OTP and click the ‘Submit’ button.

Startup India Seed Fund Application

• Go to the website again and click on the ‘Apply Now’ button on the right-hand side of the homepage.
• Click on the ‘Apply Now’ button under the ‘For Startups’ option and log in using the username and password registered.
• The application form will open. Put in all the details, upload the documents, and click on the ‘Submit’ button.
• The application will be submitted for the selection of the startup.

Selection of Startups for the Scheme

The Eligible Incubator will select startups for this scheme based on the following criteria:

• Idea
• Feasibility
• Novelty
• Fund Utilization Plan
• Business Plan
• Presentation
• Potential Impact

Benefits

To register a company in the U.S., several essential criteria must be met.

• Under this scheme, up to Rs 50 lakh in financial assistance will be provided to startups at an early stage through incubators.
• The incubator will disburse the seed fund to an eligible startup:
  - As a grant for validation of “prototype development, proof of concept or product trials”-  Up to Rs. 20 Lakh        
  - Investment for commercialization, market-entry, or scaling up through debt-linked instruments - Up to Rs. 50 Lakh
• Once incubated, physical infrastructure, testing support, mentoring for prototype or commercialization, human resources, and legal compliances are provided to the startups, all by the incubators.
• For eligible startups, income tax and capital gains tax exemptions are available.

Post funding process

Each incubator must track specific criteria for each beneficiary startup. Every beneficiary startup must present the reports to its incubators periodically. The data is submitted to Startup India in real-time via their web dashboards and further to the EAC quarterly. Each Startup’s return on investment is also reported by the designated incubator.

• Proof of concept
• Prototype development
• Progress of product development & field trials
• Turnover of startup
• Progress of market launch
• Quantum of loan, angel, or VC funding raised
• Jobs created by startup

Frequently Asked Questions

What is an LC (Letter of Credit)?

A Letter of Credit (LC) is a document issued by a bank that guarantees payment to a seller on behalf of a buyer, provided that certain conditions are met. This financial instrument ensures payment security and mitigates risks associated with cross-border transactions. The issuance of an LC involves specific conditions, like the submission of required documents, which the bank reviews before releasing funds. It provides bank guarantees and incurs fees that are essential for its operation.

Examples of Letters of Credit

International Trade Example: A U.S. company wants to buy machinery from an Indian exporter. The U.S. company requests its bank to issue an LC to the Indian exporter. Once the exporter ships the machinery and presents the required documents to their bank, they receive payment from the issuing bank, ensuring trust and mitigating payment risk.

Domestic Transaction Example: A large retail chain uses an LC to purchase inventory from a local supplier. The LC guarantees that the supplier will receive payment as soon as they fulfill the delivery conditions outlined in the agreement.

Basics of a Letter of Credit Transaction

Applicant

The buyer who requests the LC from their bank. They initiate the process by applying for the LC and specifying the terms and conditions of the trade.

Beneficiary

The seller who receives payment through the LC. They must present all required documents correctly to receive payment.

Issuing Bank

The bank that issues the LC on behalf of the applicant. They verify the buyer's creditworthiness and commit to making the payment when conditions are met.

Negotiating Bank

The negotiating bank in LC that examines documents presented by the beneficiary and facilitates payment. They ensure all paperwork matches LC requirements perfectly.

The process begins when the applicant approaches their issuing bank for an LC. The issuing bank then coordinates with the negotiating bank to establish terms and verify documents before releasing any funds.

Importance of Letters of Credit

Secure Payments

They ensure that sellers receive payments without requiring advance payments, reducing risk for both parties involved in the letter of credit.

Facilitate Cross-Border Transactions

LCs simplify complex international transactions by providing a standardised payment mechanism across different countries.

Secure Business Funding

They provide businesses with necessary funding while verifying creditworthiness, helping companies maintain healthy cash flow.

Financial Assurance

LCs offer security when buyers cannot pay, acting as a guarantee backed by reliable banking institutions.

Advantages of Letters of Credit

Ease International Trade: Simplifies complex transactions across borders by providing a structured framework for payment and documentation.

Foster Global Business Connections: Builds trust between trading partners by removing payment uncertainty and providing bank-backed guarantees.

Provide Flexibility: Customisable terms to suit various transaction needs, including payment timing, shipping requirements, and document presentation.

Parties to Documentary Credit

Commercial/Trade Parties: The buyer and seller form the core of the transaction, initiating and completing the trade deal.

Banks: Issuing and advising banks serve as intermediaries ensuring secure payment and proper documentation.

Related Entities: Shipping lines and insurers support the transaction by handling logistics and risk management aspects.

Types of a Letter of Credit

Sight Credit

A Sight Credit allows instant payment upon presenting the correct documents, providing immediate access to funds for sellers. For example, if a businessman needs quick access to cash after shipping goods, they can use this type of credit.

Acceptance Credit/Time Credit

Acceptance or Time Credit involves bills that are accepted upon presentation and paid on specified due dates. This type allows sellers to receive payments after a set period.

Revocable Letter of Credit

A Revocable Letter of Credit can be canceled or modified by the issuing bank without beneficiary consent, which limits its reliability in ensuring secure transactions.

Irrevocable Letter of Credit

An Irrevocable Letter of Credit guarantees payment once certified by the exporter’s bank. This type provides security for international transactions and is often preferred by exporters due to its reliability.

Confirmed Letter of Credit

A Confirmed Letter of Credit involves both issuing and confirming banks. The confirming bank guarantees payment to the beneficiary, holding equal liability as the issuing bank, ensuring that payments will be honored upon proper presentation.

Back-to-Back Letter of Credit

This type involves issuing a second LC based on the security provided by the first LC. It is commonly used to secure payments for suppliers in international trade transactions.

Transferable Letter of Credit

A Transferable Letter of Credit allows the primary beneficiary to transfer credit partially or fully to another beneficiary, typically a supplier. However, once transferred, the second beneficiary cannot transfer it further.

Restricted Letter of Credit

A Restricted Letter of Credit specifies a particular bank responsible for payment, limiting its scope compared to unrestricted LCs. This type is often used when specific banks are preferred due to their reliability.

Revolving Letter of Credit

A Revolving Letter of Credit allows reuse after payments or drawings are made. This flexibility is beneficial for businesses requiring multiple shipments or ongoing transactions under one credit arrangement.

Precautions to be Taken

Verify Bank Reliability: The issuing bank must be reliable and well-known to both parties of the letter of credit. This helps minimise risks and ensures the LC will be honored when presented.

Local Bank Verification: It's essential to advise through an Indian bank and confirm the authenticity of the LC. The local bank can verify the legitimacy of the foreign bank and ensure all documents meet local regulations.

Clarify Financial Terms: Make sure to clearly establish who covers all bank charges and confirm freight payment terms as specified in contract agreements. This prevents disputes and unexpected costs during the transaction process.

Import Export Code

The Import Export Code (IEC) is a mandatory document required for all businesses involved in international trade. This code streamlines customs clearance, enables duty benefits, and ensures regulatory compliance. Through platforms like Razorpay Rize, businesses can obtain their IEC within 6-7 days which makes the process efficient and straightforward.

Frequently Asked Questions

Why Start Your Own Freelancing Business in India?

Freelancing is much more than just escaping the 9-to-5 grind. It’s a path to professional freedom and personal growth. Here’s why many choose to start their freelance business in India:

• Independence: You control your schedule, projects, and clients.
• Earning Potential: With the right skills, you can earn more than a fixed salary, often in foreign currency.
• Learning Curve: Freelancing pushes you to learn business skills, client management, negotiation, and personal branding that regular jobs may not offer.
• Creative Freedom: You get to work on diverse projects across industries, honing your skills and building a versatile portfolio.
• Work-Life Balance: Freelancers often have more flexibility to balance personal and professional commitments.

If you value autonomy and are willing to take charge of your career, freelancing can be a rewarding and liberating choice.

Turn your freelance hustle into a registered business—get started with expert-led Company registration today.

What Are the Benefits of Freelancing in India?

Freelancing in India comes with tangible benefits that extend beyond financial gains:

1. Flexibility and Remote Work

Work from anywhere, anytime. Freelancers aren’t tied to office spaces or strict schedules, making it easier to balance other life priorities.

2. Access to Global Clients

With platforms like Upwork, Fiverr, LinkedIn, and direct outreach, Indian freelancers have access to clients worldwide and often earn in USD, EUR, or GBP.

3. Diverse Projects and Skill Growth

You can work on multiple projects across different industries, which accelerates skill development and keeps work exciting.

4. Building a Personal Brand and Network

Freelancing pushes you to market yourself, opening doors to collaborations, partnerships, and a professional network that can lead to bigger opportunities.

5. Control Over Earnings

Unlike fixed salaries, freelancing income has the potential to grow as your skills, client base, and rates increase.

Freelancer’s Tax in India

As a freelancer, you’re considered a self-employed professional under Indian tax laws. Here’s what you need to know about taxes:

GST for Freelancers

If your annual turnover exceeds ₹20 lakh (₹10 lakh for Northeastern states), GST registration is mandatory under the GST Act. GST applies at 18% for most professional services, but you can claim Input Tax Credit on business-related expenses.

Freelance Income Tax

Freelancers are taxed under the “Profits and Gains from Business or Profession” head. You are subject to regular income tax slabs applicable to individuals.

Freelance Contract

A written agreement between a freelancer and a client that clearly outlines the scope of work, payment terms, deadlines, and other important conditions of the project. It helps protect both parties by setting clear expectations and serves as a legal safeguard in case of disputes.

Key Clauses to Include in a Freelance Contract:

1. Scope of Work: Define the exact services you will provide. Include deliverables, timelines, and expectations.
   
   
2. Payment Terms: Payment amount, mode, currency, and schedule. Specify advance payments, milestones, and late fees.
   
   
3. Confidentiality Clause: Protect sensitive client information and intellectual property rights.
   
   
4. Termination Clause: Define under what circumstances either party can terminate the contract.
   
   
5. Revision & Change Requests: Set clear terms for additional work or revisions.
   
   
6. Dispute Resolution: Choose a method for resolving disagreements (e.g., mediation, arbitration).
   
   
7. Jurisdiction Clause: State the legal jurisdiction under which the contract will be governed (Indian Contract Act, 1872).

Frequently Asked Questions (FAQs)