IT & Software Company Registration in India: A Comprehensive Guide
India has emerged as the global hub for Information Technology and software development, contributing significantly to the country's GDP and employment. With over 5 million professionals employed in the sector and exports exceeding $150 billion annually, India continues to attract both domestic entrepreneurs and foreign investors looking to establish IT and software companies.
This comprehensive guide covers everything you need to know about registering an IT or software company in India, from choosing the right business structure to availing government incentives like STPI benefits, SEZ advantages, and Startup India benefits. Whether you're planning a product company, IT services firm, or a Software-as-a-Service (SaaS) startup, this guide will help you navigate the regulatory landscape efficiently.
Why Register an IT Company in India?
Global Talent Pool
India produces over 1.5 million engineering graduates annually, providing access to skilled developers, designers, and IT professionals at competitive costs compared to Western markets.
Government Incentives
STPI offers 100% tax exemption on export profits until 2031. SEZ benefits, Startup India tax holidays, and state-level IT policies provide substantial financial advantages.
Ease of Doing Business
Online company registration through SPICe+, simplified GST compliance for exports, and single-window clearances for STPI/SEZ make setup hassle-free.
Thriving Ecosystem
Presence of global tech giants, vibrant startup ecosystem, numerous incubators/accelerators, and strong investor network create ideal conditions for growth.
Choosing the Right Business Structure
| Structure | Best For | Key Benefits |
|---|---|---|
| Private Limited | Product startups, funded companies | Easy funding, ESOPs, high credibility |
| LLP | IT consulting, small teams | Lower compliance, tax efficiency |
| OPC | Solo founders, freelancers | Single owner, limited liability |
| Subsidiary | Foreign companies entering India | 100% FDI allowed, same benefits |
Step-by-Step Registration Process
Company Registration (SPICe+)
Register your company through SPICe+ form on MCA portal. This integrated form provides PAN, TAN, EPFO, ESIC, and bank account opening in one go. Private Limited is recommended for product companies planning to raise funding.
GST Registration
Register for GST on the GST portal. IT services attract 18% GST, but software exports are zero-rated (0% GST with input tax credit). Obtain LUT (Letter of Undertaking) for export benefits.
STPI Registration (Optional but Recommended)
Register with Software Technology Parks of India for 100% tax exemption on export profits until March 31, 2031. Benefits include duty-free imports, single-window clearance, and relaxed labor laws.
Bank Account and Payment Gateway
Open a current account with any bank. For SaaS and e-commerce businesses, integrate payment gateways (Razorpay, Stripe, PayPal) for accepting domestic and international payments.
Trademark and IP Protection
Register your brand name, logo, and software products under trademark. Consider copyright registration for source code. Patent protection can be sought for innovative algorithms.
Startup India Registration
If eligible, register on Startup India portal for 3-year tax holiday, self-certification compliance, fast-track patent examination, and access to government funding schemes.
STPI Registration and Benefits
What is STPI?
Software Technology Parks of India (STPI) is an autonomous society under MeitY that facilitates export of software services. STPI units enjoy significant tax benefits and operational flexibility.
Key Benefits:
- ✓ 100% Tax Exemption: On export profits under Section 10(15A) of Income Tax Act (extended till March 31, 2031)
- ✓ Duty-Free Imports: Import capital goods, software, and hardware without customs duty
- ✓ Domestic Tariff Area Sales: Can sell up to 50% in domestic market (subject to conditions)
- ✓ Single Window Clearance: Simplified approvals and compliance
- ✓ Relaxed Labor Laws: Flexibility in work hours for software professionals
- ✓ Infrastructure Support: Access to data centers and incubation facilities
Registration Process:
- 1. Apply online at stpi.in with company details
- 2. Submit project report and business plan
- 3. Obtain approval from STPI director
- 4. Execute bond for duty-free imports (if applicable)
- 5. File monthly returns (softex form) for exports
Taxation for IT Companies
Direct Taxes
- Income Tax: 25% (if turnover < ₹400 Cr), else 30%
- STPI Benefit: 100% exemption on export profits
- Startup India: 3 consecutive year tax holiday
- Section 80JJAA: Deduction for new employee recruitment
- R&D Deduction: Weighted deduction for in-house R&D
Indirect Taxes
- GST Rate: 18% for software services
- Export Services: Zero-rated (0% with ITC)
- LUT Filing: Required for export without IGST
- Import of Software: IGST on reverse charge basis
- SaaS Hosting: 18% GST on cloud services
Compliance Requirements
Monthly Compliance
- • GST Returns (GSTR-1, GSTR-3B)
- • TDS payments and returns
- • Payroll processing and PF/ESI contributions
- • STPI Softex filing (if STPI registered)
Annual Compliance
- • Financial statement audit
- • Income tax return filing
- • Annual return (MGT-7) and financial statements (AOC-4)
- • GST annual return (GSTR-9)
- • DIR-3 KYC for directors
Event-Based Compliance
- • Change in directors (DIR-12)
- • Share allotment (PAS-3)
- • Registered office change (INC-22)
- • Charge creation (CHG-1)
Government Schemes and Incentives
Startup India
Tax exemption for 3 years, self-certification, fast-track patent examination, funding support, and incubation network access. DPIIT recognition required.
MSME Benefits
Udyam registration provides collateral-free loans, 50% fee subsidy for patent registration, ISO certification reimbursement, and priority in government tenders.
Patent Reimbursement
MSMEs can get up to 50% reimbursement of patent filing costs. Startups get 80% rebate on patent filing fees under Startup India.
SEZ Scheme
Software units in SEZs enjoy 100% tax exemption on export income for first 5 years, 50% for next 5 years, and 50% for ploughed-back export profits.
Cost and Investment Breakdown
| Item | Cost (₹) |
|---|---|
| Company Registration (Pvt Ltd) | ₹6,000 - ₹15,000 |
| GST Registration | Free |
| STPI Registration | Free (if eligible) |
| Trademark Registration | ₹4,500 - ₹9,000 |
| Annual Compliance | ₹15,000 - ₹30,000 |
| Office Setup (Co-working) | ₹5,000 - ₹25,000/month |
| Software Licenses/Tools | Varies by requirements |
Frequently Asked Questions
Can a foreign company set up an IT company in India?
Yes, foreign companies can register a wholly-owned subsidiary in India with 100% FDI allowed under the automatic route. They enjoy the same benefits as Indian companies, including STPI benefits, provided they meet export obligations.
Is STPI registration mandatory for IT companies?
No, STPI registration is optional but highly recommended for companies engaged in software exports. The 100% tax exemption on export profits makes it financially beneficial for most export-oriented IT companies.
What is the difference between STPI and SEZ?
STPI units can be set up anywhere in India and offer 100% export profit exemption until 2031. SEZs are designated geographic areas with infrastructure support. Both offer similar tax benefits, but STPI is more flexible in location.
Do I need to register for GST if I only export software?
Yes, GST registration is mandatory if your turnover exceeds ₹20 lakhs, even if you only export. However, exports are zero-rated, meaning you charge 0% GST and can claim input tax credit on expenses.
Key Takeaways for IT Entrepreneurs
Registration Strategy
- ✓ Choose Private Limited for funding
- ✓ Register under STPI for tax benefits
- ✓ Get Startup India recognition
- ✓ Obtain LUT for GST export benefits
Growth Path
- ✓ Focus on export markets initially
- ✓ Build IP through patents/trademarks
- ✓ Leverage government incentives
- ✓ Maintain strict compliance