Why compliance matters more after funding
Before you raised, nobody was watching. Your CA filed annual returns. You paid salaries via bank transfer. Compliance was a checkbox exercise.
After funding, everything changes. Your investors have reporting obligations to their LPs. Your board expects quarterly MIS. Due diligence for your next round will scrutinize every filing, every TDS deposit, every PF return. A single compliance gap can delay a Series A by 3-6 months or kill the deal entirely.
This guide covers every statutory compliance obligation for an Indian Private Limited company that has raised venture funding. It is organized by category — company law, tax, employment, DPIIT, and FEMA — with specific form numbers, deadlines, and penalties.
In 2024-25, over 40% of seed-stage deals in India had compliance flags during due diligence. The most common: missed PAS-3 filings, late TDS deposits, and no PF registration despite having 20+ employees. Each flag adds 2-4 weeks to your fundraise timeline. Some kill the deal.
Company law compliance
As a Private Limited company registered under the Companies Act, 2013, you have ongoing filing obligations with the Ministry of Corporate Affairs (MCA).
Annual filings
| Filing | Form | Deadline | What it contains |
|---|---|---|---|
| Financial statements | AOC-4 | 30 days from AGM | Balance sheet, P&L, cash flow, notes |
| Annual return | MGT-7/MGT-7A | 60 days from AGM | Shareholding, directors, compliance certificate |
| Auditor appointment | ADT-1 | 15 days from AGM (when auditor is appointed) | Statutory auditor details |
Your AGM must be held within 6 months of the financial year end (i.e., by September 30 for a March 31 year-end). First AGM must be within 9 months of incorporation.
Board meeting requirements
Minimum 4 board meetings per year, with not more than 120 days between consecutive meetings. For funded startups, quarterly board meetings are standard — and your investors will expect them.
Each board meeting requires:
- 7-day advance notice (can be shorter with all directors' consent)
- Agenda circulated in advance
- Quorum: minimum 2 directors or one-third of total strength, whichever is higher
- Minutes recorded within 30 days and signed at the next meeting
Statutory registers
You must maintain these registers at your registered office:
- Register of Members (Form MGT-1)
- Register of Directors and KMP (Form MBP-4)
- Register of Charges
- Register of Contracts with related parties
- Register of Loans, Guarantees, and Investments
Most startups neglect these until due diligence exposes the gap. Bring them up to date immediately after funding.
Tax compliance
GST registration and filing
GST registration is mandatory if your annual turnover exceeds Rs 20 lakh (Rs 10 lakh for NE and special category states). For SaaS companies charging subscription fees, this threshold is reached quickly.
Once registered, you file:
- GSTR-1: Outward supplies — due by 11th of the next month
- GSTR-3B: Summary return with tax payment — due by 20th of the next month
- GSTR-9: Annual return — due by December 31 of the following year
Late filing penalty: Rs 50/day (Rs 25 CGST + Rs 25 SGST), capped at Rs 10,000 per return.
TDS on salaries (Section 192)
Every employer paying salaries must deduct TDS based on the employee's estimated annual income and applicable tax slab. This is not optional — it is your legal obligation as the employer.
- TDS must be deposited by the 7th of the following month
- Quarterly TDS returns: Form 24Q (salaries), due by 31st of the month following the quarter
- Issue Form 16 to employees by June 15 each year
TDS on rent, contractors, and professionals
| Payment type | Section | TDS rate | Threshold |
|---|---|---|---|
| Rent (land/building) | 194I | 10% | Rs 2.4 lakh/year |
| Contractor payments | 194C | 1% (individual) / 2% (company) | Rs 30,000 per payment or Rs 1 lakh aggregate |
| Professional/technical fees | 194J | 10% | Rs 30,000/year |
| Commission/brokerage | 194H | 5% | Rs 15,000/year |
If you pay freelancers, your office rent, or your CA firm — you are deducting TDS. Deposit by the 7th of the next month. File quarterly returns via Form 26Q.
Advance tax
If your estimated tax liability for the year exceeds Rs 10,000, you must pay advance tax in installments:
| Due date | % of estimated tax |
|---|---|
| June 15 | 15% |
| September 15 | 45% (cumulative) |
| December 15 | 75% (cumulative) |
| March 15 | 100% (cumulative) |
Shortfall attracts interest under Sections 234B and 234C. Your CA should estimate this quarterly.
Section 80IAC: Startup tax exemption
DPIIT-recognized startups can claim a tax holiday for 3 consecutive years out of the first 10 years from incorporation. Eligibility: turnover must not exceed Rs 100 crore in the relevant year, and the startup must be incorporated after April 1, 2016.
Apply through the Inter-Ministerial Board via the Startup India portal. The benefit is significant — zero corporate tax for 3 years. File on time.
Employment and labor law compliance
This is where most startups make the most mistakes. Employment compliance in India is complex because it spans central and state laws, with different thresholds and rates.
Provident Fund (EPFO)
Registration is mandatory once you have 20 or more employees. Voluntary registration is allowed at any size (and recommended, as covered in our post-funding checklist).
- Employee contribution: 12% of Basic + DA
- Employer contribution: 12% of Basic + DA (3.67% to EPF, 8.33% to EPS, subject to Rs 15,000 ceiling for pension)
- Monthly filing: ECR (Electronic Challan cum Return) by 15th of the following month
- Penalty for late payment: Interest at 12% per annum + damages up to 100% of arrears
PF is calculated on Basic + DA, not on total CTC. Structure salaries so Basic is at least 40-50% of gross. If Basic is set artificially low to reduce PF liability, EPFO can reassess and demand back-payments with interest. This has happened to several startups during EPFO audits.
ESI (Employee State Insurance)
Mandatory for establishments with 10 or more employees, for employees earning up to Rs 21,000/month gross (Rs 25,000 for employees with disability).
- Employee contribution: 0.75% of gross wages
- Employer contribution: 3.25% of gross wages
- Monthly filing: By 15th of the following month
- Coverage: Medical, sickness, maternity, disability, and dependent benefits
In practice, most startup employees earn above Rs 21,000/month, so ESI applies only to junior roles (office support, interns on stipend). Register anyway if you cross 10 employees — the obligation is at the establishment level, not per employee.
Professional Tax (state-wise)
Professional Tax is a state-level tax on employment. The employer deducts it from employee salaries and deposits it with the state government. Rates vary significantly:
| State | Monthly amount (max) | Filing frequency |
|---|---|---|
| Maharashtra | Rs 200/month (Rs 2,500/year) | Monthly |
| Karnataka | Rs 200/month | Monthly |
| West Bengal | Rs 150/month | Monthly |
| Tamil Nadu | Rs 208/month (half-yearly) | Half-yearly |
| Telangana | Rs 200/month | Monthly |
| Gujarat | Rs 200/month | Monthly |
| Madhya Pradesh | Rs 208/month | Monthly |
| Delhi | Not applicable | — |
| Rajasthan | Rs 200/month | Monthly |
Delhi does not levy Professional Tax. If your startup is headquartered in Delhi but has employees in Karnataka, you owe PT in Karnataka for those employees.
Shops & Establishment Act
Every commercial establishment must register under the state-specific Shops & Establishment Act within 30 days of commencing business. This applies even if you operate from a co-working space.
The registration governs: working hours, holidays, leave entitlement, employment conditions, and record-keeping. Penalty for non-registration: Rs 1,000-5,000 depending on state.
Payment of Gratuity Act, 1972
Applicable to every establishment with 10 or more employees. The obligation to pay gratuity exists from the day the Act applies to you, but payment is triggered when an employee completes 5 years of continuous service.
- Calculation: 15 days' wages (last drawn) for every completed year of service. Wages = Basic + DA.
- Maximum: Rs 20 lakh
- Accounting: Provision for gratuity as a liability from day one. Actuarial valuation is required for Ind AS compliance.
Start provisioning for gratuity in your books immediately. When due diligence happens for your next round, missing gratuity provisions are a common red flag.
Payment of Bonus Act, 1965
Applicable to establishments with 20 or more employees. Employees earning up to Rs 21,000/month are eligible for statutory bonus.
- Minimum bonus: 8.33% of wages
- Maximum bonus: 20% of wages
- Payment deadline: Within 8 months of closing the financial year
Maternity Benefit Act, 1961
Applicable to establishments with 10 or more employees. Women employees are entitled to 26 weeks of paid maternity leave (for the first two children; 12 weeks for subsequent children). Commissioning and adopting mothers get 12 weeks.
Employers with 50+ employees must also provide a creche facility.
POSH (Prevention of Sexual Harassment)
Every establishment with 10 or more employees must constitute an Internal Complaints Committee (ICC) under the Sexual Harassment of Women at Workplace Act, 2013.
- ICC must include an external member from an NGO or women's organization
- Annual report must be filed with the District Officer
- Awareness workshops should be conducted annually
Non-compliance penalty: Rs 50,000. Repeat non-compliance: cancellation of business license. This is not a nice-to-have. Set it up.
DPIIT and Startup India compliance
DPIIT recognition benefits
If you have not already obtained DPIIT recognition, do it immediately. It is free and takes 2-3 days via the Startup India portal. Benefits:
- Tax exemption under Section 80IAC (3-year tax holiday)
- Angel Tax exemption under Section 56(2)(viib)
- Self-certification under 6 labor laws and 3 environmental laws (exemption from inspections for 3 years)
- Fast-track patent examination at 80% fee reduction
- Government e-marketplace (GeM) access
Angel Tax exemption — Section 56(2)(viib)
When a startup issues shares at a premium (i.e., every priced round), the premium can be treated as "income" and taxed at 30% unless you qualify for exemption. DPIIT-recognized startups filing Form 2 with DPIIT are exempt.
Ensure your valuation report supports the issue price. If you raised at a Rs 50 crore post-money valuation, you need documentation showing why that valuation is justified. Keep the valuation report filed with your legal documents.
Self-certification under labor and environmental laws
DPIIT-recognized startups can self-certify compliance under these laws for the first 3 years (extendable to 5 years):
- The Industrial Disputes Act, 1947
- The Trade Unions Act, 1926
- The Building and Other Construction Workers Act, 1996
- The Inter-State Migrant Workmen Act, 1979
- The Payment of Gratuity Act, 1972
- The Contract Labour Act, 1970
This does not exempt you from compliance. It exempts you from inspections. You still need to follow the law — you just self-certify instead of being inspected.
FEMA compliance for foreign-funded startups
If you raised from a foreign VC, NRI angel, or any non-Indian entity, FEMA compliance is critical and non-negotiable.
FC-GPR filing
File within 30 days of allotment of shares to foreign investors. Submit through your Authorized Dealer (AD) bank to the RBI. Documents required:
- Board resolution for allotment
- Valuation certificate from a registered valuer or CA
- KYC of foreign investors
- FIRC (Foreign Inward Remittance Certificate) from the AD bank
- CS certificate confirming compliance with Companies Act
Annual Return on Foreign Liabilities and Assets (FLA)
Every company that has received FDI must file the FLA return with the RBI by July 15 each year. This reports your foreign liabilities (foreign-held equity, debt) and foreign assets (overseas subsidiaries, if any).
Missing the FLA filing is one of the most common FEMA violations among Indian startups. It is easy to overlook because it is an annual filing with no immediate consequence — until your next round's due diligence flags it.
Pricing guidelines
Shares issued to foreign investors must be priced at or above fair market value (FMV). For unlisted companies, FMV is determined by a registered valuer using either the DCF method or the NAV method (for non-convertible instruments). The valuation report must not be older than 90 days at the time of allotment.
Monthly compliance calendar
Pin this to your desk. Every month, these tasks must be completed:
| Date | Task | Details |
|---|---|---|
| 7th | TDS deposit | All TDS deducted in previous month (salary + non-salary) |
| 11th | GSTR-1 | Outward supplies return |
| 15th | PF payment + ECR | Employee + employer PF contribution |
| 15th | ESI payment | If applicable |
| 20th | GSTR-3B | Summary return with GST payment |
| End of month | Professional Tax | State-specific; some states allow quarterly |
| Quarterly (31st after quarter end) | TDS returns | Form 24Q (salary), Form 26Q (non-salary) |
| Quarterly | Advance tax | June 15, Sep 15, Dec 15, Mar 15 |
| Annually (Jul 15) | FLA return | RBI — foreign-funded companies only |
| Annually (Sep 30) | AGM | Approve financial statements, appoint auditor |
| Annually (within 30 days of AGM) | AOC-4 | Financial statements to MCA |
| Annually (within 60 days of AGM) | MGT-7 | Annual return to MCA |
How to automate statutory compliance
Here is the reality: if you have 10+ employees and you are managing PF, ESI, PT, TDS, payslips, and leave tracking manually, you will miss something. It is not a question of if, but when.
A compliance miss costs you in three ways: the penalty itself (typically Rs 1,000-50,000), the time to fix it (2-8 hours of your or your CA's time), and the reputation risk when your next investor's legal team flags it during due diligence.
Cohort26 automates all of this
Purpose-built for startups with 10-500 employees. Everything in one system:
- PF & ESI: Auto-calculate employee and employer contributions. Generate ECR-ready files.
- TDS on salaries: Slab-based computation under Section 192. Old regime and new regime support.
- Professional Tax: State-wise rates automatically applied based on employee work location.
- Payslips: Statutory breakdowns (Basic, HRA, PF, ESI, PT, TDS) generated every month.
- Leave management: Earned leave, sick leave, casual leave, comp-off — with balance tracking and accrual.
- Full & Final: Automated settlement computation for exits, including gratuity and leave encashment.
Set up in 7 days. Rs 499/employee/month (~$6). No setup fee.
The alternative is spreadsheets, manual calculations, and hoping your CA catches every edge case. For a seed-funded startup burning Rs 10-20 lakh/month, the cost of one compliance penalty plus the founder time wasted is worth 6 months of HRMS subscription.
Frequently asked questions
When does PF registration become mandatory?
When your establishment crosses 20 employees. However, once registered, you cannot de-register even if headcount drops below 20. We recommend registering voluntarily at 5-10 employees because the process takes 2-4 weeks and you do not want it blocking hires.
Do we need to comply with the Payment of Gratuity Act from day one?
The Act applies once you have 10+ employees. Payment is only triggered after an employee completes 5 years. But the provision should appear in your books from the date the Act applies. Actuarial valuation (required under Ind AS) can be done annually.
What happens if we miss a TDS deposit?
Interest of 1.5% per month (or part thereof) from the date of deduction to the date of deposit. If TDS is deducted but not deposited, the amount is disallowed as a business expense under Section 40(a)(ia). In extreme cases, prosecution under Section 276B (imprisonment up to 7 years).
Is GST required for SaaS companies selling to Indian customers?
Yes, SaaS subscriptions are classified as "Online Information Database Access and Retrieval Services" (OIDAR) and attract 18% GST. If you sell to customers outside India, it may qualify as an export of services (zero-rated) subject to conditions.
Can we claim input tax credit on cloud hosting costs?
Yes, if your cloud provider (AWS, GCP, Azure) charges GST on their invoice and you are registered for GST. Ensure you have proper tax invoices. For services imported from outside India (which is common with cloud), you may need to pay GST under reverse charge mechanism and then claim input credit.