Consulting & Professional Services Setup in India
India's consulting industry is witnessing robust growth, driven by digital transformation, regulatory complexity, and the need for specialized expertise. The professional services market includes management consulting, IT consulting, financial advisory, legal services, and specialized domain consulting.
This comprehensive guide covers the optimal business structures, registration process, tax implications, and compliance requirements for setting up consulting and professional services companies in India.
Industry Overview and Opportunities
Market Statistics
- • Consulting market: $18+ billion
- • IT consulting: 45% of market share
- • Strategy consulting: 15% CAGR
- • Financial advisory: $2+ billion
- • Professional services: $250+ billion
Growth Drivers
- • Digital transformation demand
- • Regulatory complexity increase
- • Startup ecosystem growth
- • Global capability centers
- • Specialization needs
Choosing Business Structure
Limited Liability Partnership (LLP)
Most popular structure for consulting firms due to flexibility and lower compliance.
- ✓ Lower compliance burden
- ✓ No mandatory audit below ₹40L
- ✓ Tax benefits (no DDT)
- ✓ Partner liability limited
- ✗ Cannot raise VC funding
Private Limited Company
Better for firms seeking external investment or planning rapid scaling.
- ✓ Can raise VC/PE funding
- ✓ ESOPs for employees
- ✓ Better brand perception
- ✓ Easy exit options
- ✗ Higher compliance costs
Step-by-Step Registration Process
Choose and Register Entity
Register as LLP or Private Limited based on long-term goals. LLP takes 15-20 days, Pvt Ltd takes 10-15 days. Obtain PAN and TAN for the entity.
GST Registration
Mandatory if turnover exceeds ₹20 lakhs (₹10 lakhs for special states). Consulting services attract 18% GST. Inter-state supply requires immediate registration.
Bank Account Opening
Open current account in company's name. Required documents: Certificate of Incorporation, PAN, address proof, and board resolution.
Professional Indemnity Insurance
Obtain professional indemnity insurance to protect against claims arising from professional negligence or errors. Recommended for all consulting firms.
Service Agreement Templates
Draft standard service agreements, NDAs, and engagement letters. Include scope of work, payment terms, IP ownership, liability limitation, and termination clauses.
Taxation for Consulting Services
GST on Consulting
Most consulting and professional services attract 18% GST. This includes management consulting, IT consulting, financial advisory, and technical consulting.
TDS Requirements
- • 10% TDS on professional fees exceeding ₹30,000 per transaction
- • 2% if payee is engaged in business (Section 194C)
- • Deductor must deposit TDS and file quarterly TDS returns
- • Consultants can claim TDS credit in ITR
Presumptive Taxation (Section 44ADA)
Professionals with gross receipts up to ₹50 lakhs can opt for presumptive taxation. Declare 50% of gross receipts as income and pay tax accordingly. No need to maintain detailed books or get audit done.
Export of Services
Consulting services exported from India are treated as zero-rated supplies under GST, meaning no tax is payable on exports, and input tax credit can be claimed.
Export Benefits
- • Zero-rated GST (no output tax)
- • Input tax credit refund
- • LUT for tax-free exports
- • SEIS benefits (if applicable)
Export Compliance
- • FIRC (Foreign Inward Remittance)
- • Export invoice with 'Supply meant for export'
- • Bank realization certificate
- • LUT filing for tax-free exports
Foreign Consulting in India
Foreign consultants can provide services in India through various establishment options, each with different compliance requirements.
| Entity Type | Permitted Activities | Key Requirements |
|---|---|---|
| Liaison Office | Market research only | RBI approval, no commercial activity |
| Branch Office | Consulting with RBI approval | RBI approval, remit profits net of taxes |
| Project Office | Specific project execution | Project contract from Indian company |
| Indian Subsidiary | Full consulting operations | Company registration, 100% FDI allowed |
Ongoing Compliance
Monthly/Quarterly
- ☐ GST Returns (GSTR-1, GSTR-3B)
- ☐ TDS Returns (Form 26Q)
- ☐ Professional Tax payments
- ☐ Client invoicing and payments
Annual
- ☐ Income Tax Return
- ☐ Annual Return (for Pvt Ltd)
- ☐ Financial Statements (if audited)
- ☐ DIR-3 KYC for directors
Government Schemes and Benefits
Start-up India
Consulting startups can avail tax exemptions, self-certification compliance, and funding support under Start-up India initiative.
SEIS Scheme
Service Exports from India Scheme offers duty credit scrips for eligible service exports, including consulting services.
MSME Benefits
Register under Udyam for access to collateral-free loans, credit guarantee, and government tender preferences.
Key Takeaways
Structure Recommendation
- ✓ LLP for most consulting firms
- ✓ Pvt Ltd if seeking VC funding
- ✓ Consider presumptive taxation if eligible
- ✓ Professional indemnity insurance
Tax Optimization
- ✓ LUT for tax-free exports
- ✓ Claim input tax credit on expenses
- ✓ TDS compliance for client payments
- ✓ SEIS benefits for exports