One of India’s most trusted legal & finance firms for Startups & Investors

Introduction to Trademark Registration in India

In today’s competitive market, building a strong brand identity is vital for success. It is in this context that trademarks become a critical asset to distinguish a business’ products or services from others, ensuring they stand out and are instantly recognizable to a consumer. Consequently, protection of the trademark through trademark registration in India is a crucial step for businesses aiming to protect their brand identity and establish legal ownership over their logos, names, and symbols – all of which constitute intellectual property of the business. As a result, whether it’s a logo, name, slogan, or unique design, registering a trademark provides legal protection against infringement of intellectual property and legitimizes the brand’s ownership of such intellectual property.

In India, the process of registering a trademark is governed by the Trade Marks Act, 1999, and is overseen by the Trade Marks Registry. The Trade Marks Registry was established in 1940, and was followed by the passing of the Trademark Act in 1999. The Head Office of the Trade Marks Registry is located in Mumbai and regional offices in Ahmedabad, Chennai, Delhi, and Kolkata.

A registered trademark offers exclusive rights of use to the owner, preventing unauthorized use of the mark by others and providing a legal mechanism to pursue recourse against infringement. Additionally, registration helps avoid potential legal conflicts or claim of the mark by a third party, and protects the business from unfair competition.

The answer to question – How to Register Trademark in India? is relatively straightforward, but it requires careful attention to detail to ensure compliance with legal requirements. It involves several steps, including a trademark search, filing the application, examination, publication, and ultimately the issuance of the registration certificate. Throughout this process, it is crucial to ensure that the trademark is distinct, does not conflict with existing marks, and is used in a way that is representative of the business’ activities.

What is Trademark Registration?

Trademark registration is a legal process that grants exclusive rights to a brand or business to use a specific mark, symbol, logo, name, or design to distinguish its products or services from others in the market. A registered trademark becomes an integral part of a company’s intellectual property portfolio, offering both legal protection and a competitive edge.

In India, trademarks are governed by the Trade Marks Act, 1999, which provides the framework for registering, protecting, and enforcing trademark rights. 

Definition of a Trademark

A trademark is a distinct sign, symbol, word, or combination of these elements that represents a brand and differentiates its offerings from others. Trademarks are not just limited to logos or names; they can include slogans, colors, sounds, or even packaging styles that uniquely identify a product or service. In India, trademarks are protected under the Trade Marks Act, 1999, offering exclusive rights to the owner.

For example:

• The golden arches of McDonald’s are a globally recognized logo trademark.
• The tagline “Just Do It” is an example of a registered “wordmark” by Nike.

Trademarks are classified into 45 trademark classes, which group various goods and services to streamline the registration process. Businesses must choose the relevant class that aligns with their offerings during registration.

Intellectual Property Rights Symbols and Their Significance: ™, ℠, ®

Understanding the symbols associated with trademarks is crucial for businesses and consumers alike:

1. ™ (Trademark):
   • This symbol indicates that the mark is being used as a trademark, but it is not yet registered.
   • It signifies intent to protect the brand and discourages misuse.
2. ℠ (Service Mark):
   • Used for service-based businesses to highlight unregistered marks.
   • Common in industries like hospitality, consulting, and IT services.
3. ® (Registered Trademark):
   • Denotes that the trademark is officially registered with the government.
   • Provides legal protection and exclusive rights to use the mark in its registered category.

Using the correct symbol helps businesses communicate their trademark status while deterring infringement and ensuring legal enforceability.

Importance of Trademark Registration

Trademark registration is essential for businesses looking to secure their brand identity. It ensures legal protection and provides exclusive rights to the owner to use the mark for their goods or services. Key reasons why trademark registration is important include:

1. Brand Protection: Prevents competitors from using similar names, logos, or designs that could mislead customers.
2. Legal Recognition: Grants official ownership under Indian law, ensuring your rights are safeguarded.
3. Customer Trust: A trademark adds credibility to your brand, making it easier for customers to identify and trust your products or services.
4. Asset Creation: Registered trademarks are intangible assets that can be licensed, franchised, or sold for business growth.
5. Global Reach: Trademark registration in India can facilitate international trademark recognition, helping businesses expand globally.

Benefits of Registering a Trademark in India

The benefits of trademark registration extend beyond legal protection. Here are the key advantages:

1. Exclusive Rights: Registration provides exclusive rights to the owner, ensuring the trademark cannot be legally used by others in the registered class.
2. Competitive Edge: A trademark helps establish a distinct identity in the market, giving your business a competitive advantage.
3. Prevention of Infringement: Protects against unauthorized use of your brand name, logo, or design.
4. Market Goodwill: Builds trust and goodwill with customers, enhancing brand loyalty.
5. Ease of Business Expansion: A registered trademark facilitates licensing or franchising, opening doors for business growth.
6. Strong Legal Position: In the event of disputes, a registered trademark provides a strong legal standing.

Brief Overview of the Trademark Registration Process in India

The procedure for trademark registration in India is systematic and straightforward. Here’s a quick overview:

1. Trademark Search: Conduct a trademark registration search to ensure the desired trademark is unique and not already registered.
2. Application Filing: Submit the trademark application online or offline with all required documents, including ID proofs, business registration details, and the logo (if applicable).
3. Examination and Review: Authorities review the application and may raise objections, which must be addressed within the stipulated time.
4. Publication: The trademark is published in the Trademark Journal, allowing for public objections.
5. Approval and Registration: If no objections are raised or resolved satisfactorily, the trademark is approved and the trademark registration certificate is issued.

Registering a trademark not only provides legal protection but also secures your brand’s future, ensuring long-term growth and recognition in the market.

Types of Trademarks in India

Trademarks in India are categorized into general and specific types, each serving different purposes to protect distinct aspects of a brand’s identity.

General Trademarks

1. Generic Mark: Refers to common terms or names that describe a product or service. These marks are not eligible for registration as they lack uniqueness (e.g., “Milk” for dairy products).
2. Suggestive Mark: Indicates the nature or quality of the goods or services indirectly, requiring imagination to connect with the product (e.g., “Netflix” suggests internet-based flicks).
3. Descriptive Mark: Describes the product or service but must acquire distinctiveness to qualify for registration (e.g., “Best Rice”).
4. Arbitrary Mark: Uses common words in an unrelated context, making them distinctive (e.g., “Apple” for electronics).
5. Fanciful Mark: Invented words with no prior meaning, offering the highest level of protection (e.g., “Google”).

Specific Trademarks

1. Service Mark: Identifies and protects services rather than goods (e.g., logos of consulting firms).
2. Certification Mark: Indicates that the product meets established standards (e.g., ISI mark).
3. Collective Mark: Used by a group of entities to signify membership or collective ownership (e.g., “CA” for Chartered Accountants).
4. Trade Dress: Protects the visual appearance or packaging of a product, such as color schemes or layouts (e.g., Coca-Cola bottle shape).
5. Sound Mark: Protects unique sounds associated with a brand (e.g., the Nokia tune).

Other types include Pattern Marks, Position Marks, and Hologram Marks, which add further layers of protection to unique brand elements.

Who can Apply for Trademark?

Anyone can apply for trademark registration, including individuals, companies, and LLPs. The person listed as the applicant in the trademark registration form will be recognized as the trademark owner once the registration is complete. This process allows businesses and individuals to protect their brand identity under trademark law.

Procedure for Online Trademark Registration in India

Trademark registration in India involves a detailed and systematic process that ensures legal protection for your brand. Below is a step-by-step guide to the procedure:

Step 1: Choose a Unique Trademark and Conduct a Trademark Registration Search

• Begin by selecting a unique and distinctive trademark that effectively represents your brand. It could be a logo, wordmark, slogan, or even a combination of elements.
• Ensure your trademark aligns with your business’s trademark class. There are 45 classes under which trademarks can be registered:
  • Classes 1-34 cover goods.
  • Classes 35-45 cover services.
• Conduct a trademark registration search using the Controller General of Patents, Designs, and Trademarks’ online database. This ensures your chosen mark isn’t already in use or similar to an existing trademark, avoiding potential objections or rejections.

Step 2: Prepare and Submit the Application (Online/Offline)

• Application Form: File Form TM-A, which allows registration for one or multiple classes.
• Required Documents:
  • Business Registration Proof (e.g., GST certificate or incorporation document).
  • Identity and address proof of the applicant (e.g., PAN, Aadhaar).
  • A clear digital image of the trademark (dimensions: 9 cm x 5 cm).
  • Proof of claim, if the mark has been used previously in another country.
  • Power of Attorney, if an agent is filing on your behalf.
• Filing Options:
  • Manual Filing: Submit the form at the nearest Trademark Registry Office (Delhi, Mumbai, Kolkata, Chennai, or Ahmedabad).
    • Acknowledgment takes 15-20 days.
  • Online Filing: Faster and efficient, with instant acknowledgment via the IP India portal (https://ipindia.gov.in/).

• Government Fees for Trademark Registration (as on date):
  • ₹4,500 (e-filing) or ₹5,000 (manual filing) for individuals, startups, and small businesses.
  • ₹9,000 (e-filing) or ₹10,000 (manual filing) for others.

Step 3: Verification of Application and Documents

• The Registrar of Trademarks examines the application to ensure compliance with the Trademark Act of 1999 and relevant guidelines.
• If any issues arise, such as incomplete information or similarity with an existing mark, the Registrar raises an objection and sends a notice to the applicant.
• Applicants must respond to objections within the stipulated timeframe, providing justifications or additional documentation.

Step 4: Trademark Journal Publication and Opposition

• Once cleared, the trademark is published in the Indian Trademark Journal, inviting public feedback.
• Opposition Period:
  • Third parties have four months to file an opposition if they believe the trademark conflicts with their rights.
  • If opposition arises, both parties present their evidence, and the Registrar conducts a hearing to resolve the matter.

Step 5: Approval and Issuance of Trademark Registration Certificate

• If there are no objections or oppositions (or they are resolved), the Registrar approves the trademark.
• A Trademark Registration Certificate is issued, officially granting the applicant the right to use the ® symbol alongside their trademark.

Additional Points to Note

• The entire trademark registration process in India can take 6 months to 2 years, depending on the objections or oppositions.
• During the registration process, you can use the ™ symbol to indicate a pending trademark application. Once the certificate is issued, switch to the ® symbol, denoting a registered trademark.

By following this step-by-step guide, businesses can protect their brand, build trust, and enjoy exclusive rights to their trademark in India. Ensure proper documentation and legal assistance for a smoother registration process.

Documents Required for Trademark Registration in India

To successfully register a trademark in India, specific documents must be submitted. These documents establish the applicant’s identity, business details, and trademark uniqueness. Here’s a concise list with key details:

1. Business Registration Proof

• Sole Proprietorship: GST Certificate or Business Registration Certificate.
• Partnership Firm: Partnership Deed or Registration Certificate.
• Company/LLP: Incorporation Certificate and Company PAN card.

2. Identity and Address Proof

• Individuals/Sole Proprietors: PAN Card, Aadhaar Card, or Passport.
• Companies/LLPs: Identity proof of directors/partners and registered office address proof.

3. Trademark Representation

• A clear digital image of the trademark (logo, wordmark, or slogan) with dimensions of 9 cm x 5 cm.

4. Power of Attorney (Form TM-48)

• A signed Power of Attorney authorizing an agent or attorney to file the trademark application.

5. Proof of Prior Usage (If Applicable)

• Evidence such as invoices, advertisements, or product labels showing prior use of the trademark.

6. Udyog Aadhaar or MSME Certificate

• Required for startups, small businesses, and individuals to avail reduced trademark registration fees.

7. Class-Specific Details

• Declaration of the class of goods or services (from 45 available trademark classes).

8. Address Proof of Business

• Recent utility bills, lease agreements, or ownership documents as proof of the business location.

By ensuring all these documents for trademark registration are complete and accurate, applicants can avoid delays and simplify the registration process. Proper documentation is key to protecting your brand identity in India.

Costs and Fees for Trademark Registration in India

Understanding of the costs involved in trademark registration in India is needed for businesses and individuals planning to protect their intellectual property. Here’s a detailed breakdown:

1. Government Fees for Trademark Registration (as on date)

• Individuals, Startups, and Small Enterprises:
  • ₹4,500 for e-filing.
  • ₹5,000 for physical filing.
• Others (Companies, LLPs, etc.):
  • ₹9,000 for e-filing.
  • ₹10,000 for physical filing.

2. Additional Costs for Professional Services

• Hiring a trademark attorney or agent may involve additional charges depending on the complexity of the application and services provided.

3. Factors Affecting Trademark Registration Costs

• Number of Classes: Registering under multiple trademark classes increases the fees.
• Type of Trademark: Filing for a collective trademark or series mark incurs higher costs.
• Opposition Proceedings: If objections are raised, handling opposition can add to the expenses.

Planning your trademark registration carefully can help you manage costs effectively while ensuring maximum protection for your brand.

How to Check Trademark Registration Status

After filing your application, it’s essential to monitor its status regularly to avoid delays. Here’s how you can do it:

1. Online Methods to Check Trademark Status

• Visit the official website of the Controller General of Patents, Designs, and Trademarks.
• Navigate to the “Trademark Status” option or visit https://tmrsearch.ipindia.gov.in/eregister/eregister.aspx .
• Enter your application number or trademark details.
• View the current status, including examination, opposition, or registration updates.

2. Common Reasons for Delays

• Incomplete Documentation: Missing or incorrect documents can lead to processing delays.
• Objections or Oppositions: Objections raised by the Trademark Office or third-party oppositions require resolution, prolonging the process.
• Backlog at Trademark Office: High volume of applications can slow down the approval process.

3. Resolving Delays

• Ensure that all documents are complete and accurate during submission.
• Respond promptly to objections or opposition notices.
• Seek professional assistance to expedite the process.

By staying informed about the trademark registration status and addressing issues proactively, you can secure your trademark efficiently and avoid unnecessary complications.

Common Grounds for Refusal of Trademark Registration in India

When applying for trademark registration in India, the application may be refused based on certain grounds. It’s essential to understand these absolute grounds for refusal to avoid issues during the process.

1. Absolute Grounds for Refusal

These are the reasons that may lead to the rejection of a trademark application even if no other parties oppose it. They include:

• Lack of Distinctiveness: A trademark must be unique and capable of distinguishing the goods or services of one entity from another. Generic or descriptive marks are often refused.
• Deceptive or Misleading Marks: Trademarks that mislead consumers about the nature or quality of the goods or services are not eligible for registration.
• Conflict with Public Order or Morality: Trademarks that go against public morality or religious beliefs can be refused.
• Confusion with Existing Trademarks: Trademarks that are too similar to an already registered mark or a pending application will be rejected.

2. Examples of Trademarks That May Be Rejected

• Descriptive Marks: For example, “Sweet Cake” for a bakery.
• Generic Terms: Words like “Apple” for computer-related products or “Coffee” for coffee-related services.
• Marks That Resemble Flags, Emblems, or National Symbols: Trademarks that resemble state or national flags or symbols.

By understanding these grounds, applicants can avoid common mistakes and improve their chances of approval.

Renewing a Trademark in India

Once your trademark is registered, it remains valid for a specific period. However, it must be renewed to continue enjoying protection under the law.

1. Validity Period of a Trademark

In India, a trademark is valid for 10 years from the date of registration. After this period, the trademark owner must renew the registration to maintain its exclusive rights.

2. Procedure and Timeline for Trademark Renewal

• Filing for Renewal: The application for renewal must be filed before the expiration of the 10-year validity period. It can be done within 6 months before or after the expiration date.
• Online Filing: The process can be done through the official website of the Controller General of Patents, Designs, and Trademarks. You need to fill out the appropriate form (Form TM-R) and pay the renewal fees.
• Timeline: The renewal process is typically completed within 1–2 months, depending on the workload of the Trademark Office.

3. Costs Involved in Trademark Renewal

• The renewal fees for individuals, startups, and small businesses are typically ₹4,500 for e-filing and ₹5,000 for physical filing.
• For companies, LLPs, and other organizations, the renewal fees are ₹9,000 for e-filing and ₹10,000 for physical filing.

By renewing your trademark on time, you ensure continued protection and exclusive rights to your brand name and logo in India. Regular renewal is key to maintaining the integrity of your intellectual property and protecting your business identity.

Hence, trademark registration in India is essential for businesses aiming to protect their intellectual property and strengthen their brand presence. Registering a trademark provides exclusive rights to your brand name, logo, or symbol, preventing unauthorized use and offering legal protection. The trademark registration process is simple, starting with a trademark search, followed by filing an application and addressing any objections or oppositions. Renewing your trademark ensures ongoing protection and secures your brand’s identity for years to come. With trademark registration in India, businesses, whether startups or established companies, can build trust, create valuable assets, and safeguard their brand in the competitive market.

Frequently Asked Questions (FAQs) on Trademark Registration in India

1. Is trademark registration mandatory in India?
No, trademark registration is not mandatory in India. However, registering your trademark provides several benefits, such as legal protection, exclusive rights to use the mark, and the ability to take legal action in case of infringement. It also prevents others from using a similar mark and adds value to your brand by enhancing its credibility.

2. Who can apply for trademark registration in India?
Any individual, business entity, or legal entity claiming to be the proprietor of the trademark can apply for registration. The application can be filed either on a “used” or “proposed to be used” basis. Trademark applications can be filed online through the official IP India portal or at one of the regional trademark offices located in Delhi, Mumbai, Ahmedabad, Kolkata, or Chennai.

3. What are the benefits of trademark registration in India?
Trademark registration offers exclusive rights to use the trademark for the registered goods or services. It protects your brand from unauthorized use, provides legal backing in case of infringement, and allows you to use the ™ and ® symbols. It also enhances brand recognition and helps in building a trustworthy reputation in the market.

4. How long does it take to register a trademark in India?
Trademark registration in India typically takes between 8-15 months. This duration may vary depending on the complexity of the case and whether any objections or oppositions are raised during the process. If there are no complications, registration is usually completed within this time frame.

5. What documents are required for trademark registration in India?
Key documents required include a clear representation of the trademark (logo or wordmark), proof of business registration, identity and address proof (e.g., PAN, Aadhaar), and relevant certificates (for startups or small enterprises). If filing through an agent, a Power of Attorney may also be required.

6. How much does trademark registration cost in India?
The trademark registration fee varies based on the type of applicant. For individuals, startups, and small enterprises, the fee is ₹4,500 for e-filing and ₹5,000 for physical filing. For others, the fee is ₹9,000 for e-filing and ₹10,000 for physical filing. Additional professional fees may apply if you choose to hire legal assistance.

7. Where do I apply for trademark registration in India?
Trademark registration applications can be submitted online through the official IP India website or filed at one of the regional trademark offices in Delhi, Mumbai, Ahmedabad, Kolkata, or Chennai. E-filing provides instant acknowledgment, while physical filing may take 15-20 days to receive acknowledgment.

8. Why should I register my trademark if it’s not mandatory?
Although not mandatory, trademark registration offers several advantages, including legal protection, exclusive rights to your mark, and the ability to use the ® symbol. It also boosts your brand’s credibility and safeguards your intellectual property against infringement.

9. What is the typical timeline for trademark registration in India?
Trademark registration generally takes 8-15 months in uncomplicated cases. However, if objections or oppositions arise, the process may take longer due to the need to resolve these issues.

10. How can I check the status of my trademark registration application?
You can easily check the status of your trademark registration online through the IP India website. It will provide updates on the status of your application, including any objections or progress on its approval.

11. What are common reasons for the refusal of trademark registration?
Trademarks may be refused on absolute grounds if they are too generic, descriptive, offensive, or conflict with an already registered trademark. Marks that lack distinctiveness or mislead the public may also face rejection by the authorities.

12. How do I renew my trademark in India?
Trademark registration in India is valid for 10 years. To renew your trademark, you need to file a renewal application before the expiry date and pay the renewal fee. Renewing your trademark on time ensures continued protection of your intellectual property rights.

In today’s competitive business landscape, protecting intellectual property is crucial for building a strong brand and maintaining a competitive edge. Trademark registration is one of the most effective ways to safeguard your brand’s identity, ensuring that it remains unique and protected from infringement. In India, where the economy is booming with startups, small businesses, and large corporations alike, understanding the importance of trademark registration is paramount.

What is a Trademark?

A trademark is a unique symbol, word, phrase, logo, design, or combination thereof that identifies and distinguishes the goods or services of one entity from others. It is a vital aspect of branding and helps create a distinct identity in the minds of consumers.

For instance, iconic logos like the golden arches of McDonald’s or the swoosh of Nike are registered trademarks that symbolize their respective brands globally. Similarly, Indian brands like Tata, Reliance, and Flipkart rely heavily on trademarks to maintain their market dominance and consumer trust.

Why is Trademark Registration Important in India?

1. Legal Protection Against Infringement

Trademark registration provides legal protection under the Trademarks Act, 1999. If another business attempts to use your registered trademark without authorization, you can take legal action against them. This protection ensures that your brand’s identity remains intact and safeguarded.

2. Exclusive Rights

A registered trademark grants the owner exclusive rights to use the trademark for the goods or services it represents. It also prevents competitors from using similar marks that could confuse consumers.

3. Brand Recognition and Goodwill

A trademark acts as an asset that enhances brand recognition and builds consumer trust. Over time, a strong trademark becomes synonymous with quality and reliability, which contributes to long-term goodwill.

4. Market Differentiation

In a saturated market, a trademark helps distinguish your products or services from those of competitors. It establishes your brand’s unique identity and strengthens customer loyalty.

5. Asset Creation

A registered trademark is an intangible asset that can be sold, licensed, or franchised. This adds financial value to your business, making it an attractive proposition for investors or partners.

6. Global Expansion

Trademark registration in India can serve as the foundation for international trademark registration under treaties like the Madrid Protocol. This is especially important for businesses planning to expand globally.

Consequences of Not Registering a Trademark

Failure to register a trademark can expose your business to several risks:

• Risk of Infringement: Without registration, proving ownership of a trademark becomes challenging.
• Brand Dilution: Competitors might use similar marks, leading to loss of distinctiveness and consumer trust.
• Limited Legal Remedies: Unregistered trademarks are harder to defend in court.
• Missed Opportunities: A lack of trademark protection can hinder global expansion plans.

Steps to Register a Trademark in India

1. Trademark Search: Conduct a thorough search to ensure that the trademark is unique and not already registered by someone else.
2. Application Filing: Submit a trademark application with the necessary details, including the logo, class of goods or services, and owner details.
3. Examination: The Trademark Registry examines the application to ensure compliance with legal requirements.
4. Publication: The trademark is published in the Trademark Journal to invite objections, if any.
5. Registration Certificate: If no objections are raised, or if objections are resolved, the trademark is registered, and a certificate is issued.

Costs and Duration

Trademark registration in India is a cost-effective process. The official fees depend on the nature of the applicant, with reduced fees for startups, individuals, and small businesses. The registration process typically takes 12-18 months, but the protection is valid for 10 years and can be renewed indefinitely.

Key Industries Benefiting from Trademark Registration

1. E-commerce and Retail: Trademarks protect brand identity in a highly competitive digital marketplace.
2. Pharmaceuticals: Ensures safety and trust by preventing counterfeit products.
3. Technology Startups: Safeguards innovations and unique business models.
4. Food and Beverage: Builds trust and loyalty through distinctive branding.

Conclusion

Trademark registration is not just a legal formality but a strategic move to protect and enhance your brand’s value. In a thriving economy like India, securing a trademark ensures that your brand stands out, builds trust, and enjoys long-term growth.

Investing in trademark registration today is a step toward safeguarding your business’s future. Don’t wait for competitors to claim what’s rightfully yours. Secure your brand’s identity and take it to new heights with the power of trademarks. If you’re ready to register your trademark or need expert guidance, reach out to Treelife for a consultation today.

Introduction to Trademarks

A trademark is a unique term, symbol, logo, design, phrase, or a combination of these elements that distinguishes a business’s products or services from those of its competitors in the market. Trademarks can take the form of text, graphics, or symbols and are commonly used on company letterheads, service banners, publicity brochures, and product packaging. By creating a distinct identity, trademarks play a vital role in building customer trust, enhancing brand recognition, and establishing a competitive edge.

As a form of intellectual property, a trademark grants its owner the exclusive rights to use the registered term, symbol, or design. No other individual, company, or organization can legally use the trademark without the owner’s consent. If unauthorized use occurs, the trademark owner can take legal action under the Trade Marks Act of 1999.

Registering your trademark as per trademark classification not only safeguards your brand identity but also prevents third parties from using it without authorization. It is a straightforward process in India, allowing businesses to protect their intellectual property and ensure their products or services stand out in the market.

Trademarks are categorized into various classes based on the goods or services they represent. Understanding the classification system is crucial to ensure proper protection. In this article, we will explore the legal framework for trademarks, the classification system, and the online tools available to identify the correct trademark class for your registration.

Background of Trademarks in India

The Trade Marks Registry, established in 1940, administers trademark regulations under the Trademarks Act of 1999 in India. This Act aims to protect trademarks, regulate their use, and prevent infringement. Registering a trademark is essential for businesses to safeguard their name, reputation, and goodwill, as well as to strengthen brand identity and build customer trust. Trademarks can be in the form of graphics, symbols, text, or a combination, commonly used on letterheads, service banners, brochures, and product packaging to stand out in the market.

The Trade Marks Registry has offices in Mumbai, Ahmedabad, Chennai, Delhi, and Kolkata to handle trademark applications. To apply for protection, businesses must classify their products or services under the NICE Classification (10th edition), a global system that ensures clarity in trademark registration.

The importance of trademark classification was emphasized in the Nandhini Deluxe v. Karnataka Co-operative Milk Producers Federation Ltd. (2018) case, where the Supreme Court clarified that visually distinct trademarks for unrelated goods or services are not “deceptively similar” and may be registered, even if they fall under the same class.

What is a Trademark Class?

Trademark classes are the categories into which goods and services are classified under the NICE Classification (NCL), an internationally recognized system created by the World Intellectual Property Organization (WIPO). This classification system is essential for businesses seeking trademark registration, as it ensures that each trademark application accurately reflects the nature of the goods or services it represents.

Types of Trademark Classes

The NICE Classification divides goods and services into 45 distinct trademark classes:

• Goods: Classes 1 to 34.
  Goods type trademark classes, numbered 1 to 34, categorize products based on their nature. ¹ This classification system helps businesses protect their brands by ensuring clear identification and preventing confusion in the marketplace.
• Services: Classes 35 to 45.
  Trademark classes 35-45 are dedicated to services, ranging from advertising and business management to education, healthcare, and legal services.

Each class represents a specific category of goods or services. For example: Class 13 for Firearms and explosives. Class 36 for Financial and insurance services.

How to Choose the Right Trademark Class?

When filing a trademark application, the applicant must carefully select the correct class that corresponds to the goods or services their business offers. This choice is crucial for avoiding potential trademark infringement and conducting effective trademark searches. During the trademark registration process, specifying the trademark classes or categories of products and services for which the trademark will be used is essential. It defines the mark and determines its usage in the industry, acting as an identifier for the mark. Choosing the right category and classification for a trade name is highly beneficial. The applicant can also apply for protection of the same mark under multiple classes if applicable.

Services are typically identified from the alphabetical list provided, using the divisions of operations indicated in the headers and their explanatory notes. For instance, rental facilities are categorized in the same class as the rented items.

Multiple Classes for Comprehensive Protection

Applicants can file for trademark protection under multiple classes if their goods or services span across different categories. For example, a business dealing in both clothing (Class 25) and retail services (Class 35) should register under both classes to ensure complete coverage.

Importance of Trademark Classification

The significance of a trademark class search to safeguarding a business’ intellectual property and brand cannot be overstated. In 2018, the Hon’ble Supreme Court highlighted the significance of categorizing trademarks under different classes in a landmark case involving the popular dairy brand “Nandhini Deluxe”¹ in Karnataka. The court observed that two visually distinct and different marks cannot be called deceptively similar, especially when they are used for different goods and services. The Court also concluded that there is no provision of law that expressly prohibits the registration of a trademark which is similar to an existing trademark used for dissimilar goods, even when they fall under the same class.

Benefits of Classification

• Preventing Conflicts: Using a trademark class search makes it easier to find already-registered trademarks that could clash with your intended mark. This averts any legal conflicts and expensive lawsuits.
• Registration Success: You increase the likelihood of a successful registration by classifying your trademark correctly. The possibility of being rejected by the trademark office is reduced with an appropriate categorization.
• Protection of Brand Identity: You may operate with confidence knowing that your brand is protected within your industry by registering it in the correct class.
• Market Expansion: When your company develops, you may use a well-classified trademark to launch additional goods and services under the same way.

Trademark Classification List

The trademark class list consists of two types :-  

1. Trademark Classification for Goods 
2. Trademark Classification for Services

1. Trademark Classification for Goods

This trademark registration class of goods contains 34 classes.

• If a final product does not belong in any other class, the trademark is categorized according to its function and purpose. 
• Products with several uses can be categorized into various types based on those uses. 
• The categories list is classified according to the mode of transportation or the raw materials if the functions are not covered by other divisions. 
• Based on the substance they are composed of, semi-finished goods and raw materials are categorised. 
• When a product is composed of many components, it is categorized according to the substance that predominates.

2. Trademark Classification for Services

This trademark registration class of services contains 10 classes.

• The trademark class for services is divided into branches of activity. The same categorization applies to rental services. 
• Services connected to advice or consultations are categorized according to the advice, consultation, or information’s subject.

Search Trademark Classes in India

List of Trademark Classes of Goods in India (1-34 Classes)

List of Trademark Classes of Services in India (35-45 Classes)

Online Tools available for Classifying Trademarks

Classifying products and services accurately is a crucial step in the trademark registration process in India. Several reliable online tools are available to simplify the trademark categories listing process:

1. NICE Classification Tool: Developed by the World Intellectual Property Organization (WIPO), this tool provides a comprehensive guide to the classification of goods and services under the NICE system.
2. TMclass Tool: Offered by the European Union Intellectual Property Office (EUIPO), TMclass helps users determine the appropriate trademark class for their goods or services with ease.

Trademark classification is vital for the Trademark Registry to understand the scope of the trademark, its market segment, and the target audience it aims to address. It establishes the trademark’s value in the competitive market and serves as a unique identifier for the registrant.

Conclusion

Trademark classification is a foundational step in the trademark registration process, ensuring that a business’s intellectual property is accurately categorized and effectively protected. By adhering to the NICE classification system, businesses can prevent conflicts, enhance brand identity, and expand their market presence with confidence. Proper classification streamlines the registration process, minimizes legal risks, and safeguards brand equity. As trademarks play a pivotal role in defining a company’s market presence, leveraging expert guidance for classification is vital for long-term success.

FAQs on Trademark Classification in India

1. What is trademark classification, and why is it important?

Trademark classification is a system that organizes goods and services into 45 specific categories under the NICE classification. It is essential for ensuring accurate registration, avoiding conflicts, and securing protection for a business’s intellectual property in its relevant industry.

2. How are goods and services categorized under trademark classification?

Goods fall under the first 34 classes, and services fall under classes 35 to 45. The classification is based on the function, purpose, or material of the goods and the activity or purpose of the services.

3. Why is trademark classification essential during the registration process?

Proper classification:

• Helps prevent conflicts by identifying existing trademarks that may clash with the new mark.
• Ensures the trademark application is correctly filed, reducing the likelihood of rejection.
• Protects brand identity by categorizing trademarks accurately within their industry.

4. Can a trademark be registered under multiple classes?

Yes, businesses can register their trademark under multiple classes if their goods or services span across different categories. This ensures comprehensive protection.

5. What tools are available for trademark classification in India?

The following online tools are helpful:

• NICE Classification Tool by the World Intellectual Property Organization (WIPO).
• TMclass Tool by the European Union Intellectual Property Office.

6. How does trademark classification help prevent legal conflicts?

By conducting a trademark class search, businesses can identify existing trademarks in the same category and avoid conflicts, reducing the risk of legal disputes and costly lawsuits.

7. What is the significance of the NICE classification system?

The NICE classification, created by the World Intellectual Property Organization (WIPO), standardizes the categorization of goods and services worldwide. It streamlines trademark registration processes and ensures consistency.

8. What are the benefits of correct trademark classification?

• Prevention of Conflicts: Avoids disputes by identifying existing trademarks in the same class.
• Enhanced Brand Identity: Safeguards the brand within its industry.
• Streamlined Registration: Increases the likelihood of successful trademark registration.
• Market Expansion: Facilitates the introduction of new products and services under the same brand.

9. What happens if someone infringes my registered trademark?

• You can take legal action to stop the infringement and seek damages.
• Registration makes legal enforcement easier and more effective.

10. Where can I find more information and resources on trademark registration?

• The Controller General of Patents, Designs and Trademarks website: https://ipindia.gov.in/
• Start-up India resources: https://www.startupindia.gov.in/
• Consult a trademark attorney for personalized guidance.

References:

1. [1]  Nandhini Deluxe v Karnataka Co-operative Milk Producer Federation Ltd. 2018 (9) SCC 183
   ↩︎

Business Overview

A health-tech company operating a digital clinic under the brand name ‘Proactive For Her’, providing a digital platform to offer accessible, personalized, and confidential healthcare solutions for women.

Project Undertaken

• Review of accounting records and tax filings on a monthly basis
• Compliance assistance for fundraising

How We Helped?

Review of Accounts and Tax Filing:

• Treelife conducted a thorough review of the monthly accounting books to ensure accuracy and completeness, helping the company maintain precise financial records.
• We ensured GST payments and returns were filed timely and accurately, reducing the risk of non-compliance and potential penalties for the company.
• Our team streamlined and regularized tax returns, annual filings, and other statutory compliances according to applicable due dates, ensuring the company met all regulatory requirements promptly.

Fundraising (Compliance Advisor):

• Treelife provided compliance advisory services for the company’s fundraising efforts, ensuring that all financial records and compliance requirements were up-to-date.
• We assisted with the timely updating of accounting entries and filings, completing requisite regulatory compliances efficiently.
• Our involvement ensured a reduction in the turnaround time (TAT) for payments and MIS processing, facilitating smoother financial operations and improved investor confidence.

By leveraging our expertise in financial and compliance advisory, Treelife enabled ‘Proactive For Her’ to maintain accurate financial records, meet all compliance requirements, and support its fundraising activities. Our comprehensive support helped the company focus on its core mission of providing accessible and personalized healthcare solutions while ensuring robust financial and compliance management.

Treelife played a pivotal role in helping an Indian private limited company transition to a US-headquartered structure. By setting up an LLP in India and guiding the investment process under the ODI route, we ensured compliance with FEMA and income-tax regulations. Our strategic approach enabled the company to raise funds from foreign investors and expand globally with minimal tax implications.

Business Overview

Indian individual promoters had established a private limited company in India and sought to expand their business globally. They aimed to raise funds from foreign investors and transition to a US-headquartered structure.

Project Undertaken

• Setting up an LLP in India
• Investment in a newly incorporated US entity under the ODI route
• Acquisition of Indian entity shares by the US entity from the promoters

Structure Mechanics:

• Indian individual promoters set up an LLP in India.
• The LLP makes investments in a newly incorporated US entity under the ODI route.
• The US entity acquires the shares of the Indian entity from the promoters, adhering to FEMA and income-tax regulations.
• A benchmarking study is undertaken for all ongoing transactions between the US entity and the Indian entity.

Parameters:

• The gift structure used under the erstwhile ODI rules was no longer possible, as Indian resident founders can now receive gifts of shares from their relatives.
• Recently revamped ODI rules by RBI do not permit a foreign company to set up an Indian subsidiary where the Indian promoters control such a foreign company.
• Any transaction between the offshore company and its Indian subsidiary needs to be benchmarked from a transfer pricing perspective.
• Minimal income-tax implications and adherence to FEMA pricing norms.

Facts:

• Indian promoters aimed to expand their business globally and raise funds from foreign investors.
• They sought to move to a US-headquartered structure to facilitate this expansion.

By strategically structuring the investment and ensuring compliance with the latest ODI rules and FEMA pricing norms, Treelife enabled the company to achieve its global expansion goals. Our financial advisory services provided the necessary support to navigate complex regulatory landscapes and optimize tax implications, ensuring a smooth transition for the company’s international growth.

In just a few weeks, Treelife transformed the financial infrastructure of an innovative SaaS company. We set up efficient accounting systems, ensured seamless bookkeeping, and provided critical fundraising support. Discover how our strategic approach reduced their operational burden and enhanced their financial management.

Business Overview

An innovative insurance-tech company using technology and innovation to transform the traditional insurance model. The company offers a cloud-based platform that connects distributors to the insurance ecosystem.

Project Undertaken

• Setting up systems for HR, accounting, and payroll
• Ongoing bookkeeping, tax compliance, and payments
• Fundraising and due diligence support

How We Helped?

Setting Up:

• Treelife took ownership and set up the entire accounting system for the company from inception using Zoho Books and Zoho Payroll.
• Assisted in migrating from Zoho Payroll to Keka, ensuring a smooth transition.
• Effective implementation of software and processes reduced the time and effort required by the founders.

Bookkeeping and Accounting:

• Timely updating of accounting entries and filing, ensuring compliance with regulatory requirements.
• Completion of requisite regulatory compliances, reducing TAT for payments and MIS processing.

Fundraising & Vendor Due Diligence:

• Represented the company during the due diligence process conducted by investors, assisting them in understanding the business model and transaction workflow.
• Submitted data in the requisite formats and seamlessly resolved queries from the diligence team regarding finance and tax-related areas promptly.

By leveraging our expertise in financial management, Treelife significantly improved the company’s operational efficiency and supported its growth journey. Our comprehensive services ensured that the company was well-prepared for investor scrutiny and ongoing financial challenges.

IFSCA listing regulations requires debt securities to adhere to international standards/principles to be labelled as “𝐠𝐫𝐞𝐞𝐧”, “𝐬𝐨𝐜𝐢𝐚𝐥”, “𝐬𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐢𝐥𝐢𝐭𝐲” 𝐚𝐧𝐝 “𝐬𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐢𝐥𝐢𝐭𝐲-𝐥𝐢𝐧𝐤𝐞𝐝” 𝐛𝐨𝐧𝐝.

As of September 30, 2024, the IFSC exchanges boasted a listing of approximately USD 14 billion in ESG-labelled debt securities, a significant chunk of the total USD 64 billion debt listings in a short period. This rapid growth highlights the growing appetite for sustainable investments among global investors.

Certain investors, particularly institutional ones like pension funds and socially responsible investment (SRI) funds, explicitly state in their investment mandates that they can only invest in ESG-labeled securities. To encourage and promote ESG funds, the IFSCA has waived fund filing fees for the first 10 ESG funds registered at GIFT-IFSC, to incentivise fund managers to launch ESG-focused funds.

However, this rapid growth also comes with a significant risk of “greenwashing” where companies or funds exaggerate or falsely claim their environmental and sustainability efforts.

𝐖𝐡𝐚𝐭 𝐢𝐬 “𝐆𝐫𝐞𝐞𝐧𝐰𝐚𝐬𝐡𝐢𝐧𝐠”?

However, with this rapid growth comes a significant risk: greenwashing. Greenwashing occurs when companies or funds exaggerate or fabricate their environmental and sustainability efforts to project a greener image and attract investors. It’s essentially a deceptive marketing tactic that undermines the true purpose of sustainable investing.

IFSCA’s Consultation Paper: Mitigating Greenwashing

Recognizing the threat of greenwashing, the IFSCA has released a consultation paper seeking public comment on a draft circular titled “Principles to Mitigate the Risk of Greenwashing in ESG labelled debt securities in the IFSC.” This circular outlines principles that companies and funds issuing ESG-labelled debt securities on the IFSC platform must adhere to.

Refer link for consultation paper: https://ifsca.gov.in/ReportPublication?MId=8kS3KLrLjxk= 

Karnataka, a state in India known for its vibrant tech industry, has recently unveiled its Global Capability Centres (GCC) Policy 2024-2029. This ambitious policy aims to solidify Karnataka’s position as a leading hub for GCCs in India and propel the state’s tech ecosystem to even greater heights.

What are Global Capability Centres (GCCs)?

For those unfamiliar with the term, GCCs are specialized facilities established by companies to handle various strategic functions. These functions can encompass a wide range of areas, including:

• Information Technology (IT) services
• Customer support
• Research and development (R&D)
• Analytics

By setting up GCCs, companies can streamline operations, reduce costs, and tap into a pool of talented professionals. This allows them to achieve their global objectives more efficiently.

Why is Karnataka a Major Hub for GCCs?

India is a powerhouse for GCCs, boasting over 1,300 such centers. Karnataka takes the lead in this domain, housing nearly 30% of India’s GCCs and employing a staggering 35% of the workforce in this sector. Several factors contribute to Karnataka’s attractiveness for GCCs:

• Vast Talent Pool: Karnataka is home to some of India’s premier educational institutions, churning out a steady stream of highly skilled graduates in engineering, technology, and other relevant fields.
• Cost-Effectiveness:India offers a significant cost advantage for setting up and operating GCCs, compared to other global locations.

Key Highlights of Karnataka’s GCC Policy 2024-2029

The recently unveiled GCC Policy outlines a series of ambitious goals and initiatives aimed at propelling Karnataka to the forefront of the global GCC landscape. Here are some of the key highlights:

• Establishment of 500 New GCCs: The policy sets a target of establishing 500 new GCCs in Karnataka by 2029. This aggressive target signifies the government’s commitment to significantly expanding the state’s GCC footprint.
• Generating $50 Billion in Economic Output: The policy envisions generating a staggering $50 billion in economic output through GCCs by 2029. This substantial economic contribution will be a boon for Karnataka’s overall development.
• Creation of 3.5 Lakh Jobs: The policy aims to create 3.5 lakh (350,000) new jobs across Karnataka through the establishment and operation of new GCCs. This significant job creation will provide immense opportunities for the state’s workforce.
• Centre of Excellence for AI in Bengaluru: Recognizing the growing importance of Artificial Intelligence (AI), the policy proposes establishing a Centre of Excellence for AI in Bengaluru. This center will focus on driving research, development, and innovation in the field of AI, fostering a robust AI ecosystem in Karnataka.
• AI Skilling Council: The policy acknowledges the need to equip the workforce with the necessary skills to thrive in the AI-driven future. To address this, the policy proposes the creation of an AI Skilling Council. This council will be responsible for developing and delivering AI-related training programs, ensuring Karnataka’s workforce is well-prepared for the jobs of tomorrow.
• INR 100 Crore Innovation Fund: The policy establishes an INR 100 crore (approximately $12.3 million) Innovation Fund. This fund will support joint research initiatives between academia and GCCs, fostering a collaborative environment that fuels innovation and technological advancements.

The GCC Policy has a clear and ambitious goal: for Karnataka to capture 50% of India’s GCC market share by 2029. Read more about the policy here.

In recent years, a significant number of Indian startups have chosen to incorporate their businesses outside India, primarily in locations like Delaware, Singapore  and other global locations. This trend, known as “flipping,” offered advantages like easier access to foreign capital and tax benefits. However, the tide is starting to turn. We’re witnessing a growing phenomenon of “reverse flipping,” where these startups are now shifting their bases back to India.

This shift back home is driven by several factors, including a booming Indian market, attractive stock market valuations, and a desire to be closer to their target audience – Indian customers. To further incentivize this homecoming, the Ministry of Corporate Affairs (MCA) has recently introduced a significant policy change.

MCA Streamlines Cross-border Mergers for Reverse Flipping

The MCA has amended the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016, to streamline the process of cross-border mergers. This move makes it easier for foreign holding companies to merge with their wholly-owned Indian subsidiaries, facilitating a smooth transition for startups seeking to return to their roots.

Key Takeaways of the Amended Rules

Here’s a breakdown of the key benefits for startups considering a reverse flip through this streamlined process:

• Fast-Track Mergers: The Indian subsidiary can file an application under Section 233 read with Rule 25 of the Act. This rule governs “fast-track mergers,” which receive deemed approval if the Central Government doesn’t provide a response within 60 days.
• RBI Approval: Both the foreign holding company and the Indian subsidiary need prior approval from the Reserve Bank of India (RBI) for the merger.
• Compliance with Section 233: The Indian subsidiary, acting as the transferee company, must comply with Section 233 of the Companies Act, which outlines the requirements for fast-track mergers.
• No NCLT Clearance Required: This streamlined process eliminates the need for clearance from the National Company Law Tribunal (NCLT), further reducing time and complexity.

The Road Ahead

The MCA’s move represents a significant positive step for Indian startups looking to return home. This policy change, coupled with a thriving domestic market, is likely to accelerate the trend of reverse flipping. This not only benefits returning companies but also strengthens the overall Indian startup ecosystem, fostering innovation and entrepreneurial growth within the country.

DOWNLOAD PDF

Environmental, Social, and Governance (ESG) principles have evolved from being a global framework for responsible business practices into a cornerstone of sustainable and ethical growth. In India, the prominence of ESG is rapidly increasing, with the total assets under management (AUM) of ESG funds reaching substantial growth of USD 1.17 billion (INR 9,753 crores) in March 2024. In fact, ESG could represent approximately 34% of the total domestic AUM by 2051. 

These principles originated as a response to growing concerns on climate change, social equity, and corporate accountability. Today, they are critical for businesses aiming to align with international sustainability goals. Startups are uniquely positioned to integrate ESG frameworks into their operations from the outset, contributing to global sustainability objectives while enhancing financial performance. Improved risk management, operational efficiencies, and stronger stakeholder trust are among the many benefits of embedding ESG practices. Furthermore, companies with strong ESG performance are increasingly favored by investors, reflecting a global shift toward sustainable financing and prioritizing climate action.

India’s ESG evolution mirrors international trends while addressing domestic opportunities and challenges. Initiatives such as the Business Responsibility and Sustainability Report (BRSR) framework and increasing green finance options have propelled India into the global spotlight. Startups can leverage these developments to scale responsibly, align with India’s international commitments, and position themselves as leaders in the evolving ESG landscape.

Tailored for practical insight, this handbook focuses on individual contributions to ESG as the building blocks for collective progress, enabling startups to align their practices with India’s international commitments and sustainability objectives, and to: (i) scale responsibly; (ii) contribute to global sustainability goals; and (iii) position themselves as leaders in India’s evolving ESG landscape. 

This handbook is developed as a comprehensive look into the ESG framework in India covering the evolution of ESG in corporate governance, key components, the Indian regulatory landscape, accounting and reporting standards, and market trends. With case studies on Tata Power, Zomato and IKEA, the handbook also addresses challenges, investment opportunities, and the future of ESG in India. This handbook provides startups with practical strategies to integrate ESG principles into their operations, enabling them to align with India’s global sustainability goals and unlock opportunities for responsible growth. For further guidance or inquiries, reach out to us at [email protected]

DOWNLOAD PDF

Overview

Alternative Investment Funds, often abbreviated as AIFs, have become a buzzword among sophisticated investors, especially High Net Worth Individuals (HNIs). As of November 2024, India has nearly 1,400 registered AIFs. This domain has witnessed remarkable growth, underscored by an almost 77% surge in commitments which escalated from Rs. 22.73 trillion in the fiscal year 2021-22 to a staggering Rs. 40.19 trillion in 2023-24. This growth translated to a substantial Rs. 17.46 trillion jump within two years! The total assets under management (AUM) of AIFs have grown at a CAGR (Compound Annual Growth Rate) of 28% between June FY19 and June FY24s. 

In light of the burgeoning AIF industry, its regulatory authority, the Securities and Exchange Board of India (SEBI), hasn’t remained a silent observer. SEBI has proactively been fortifying protocols to guarantee investor safety, heighten transparency, and ensure fair practices within the AIF guidelines.

So, the question arises, what exactly are AIFs? And how do they function within the Indian regulatory landscape? 

Understanding AIFs

An AIF is a privately pooled investment vehicle that gathers funds from investors, Indian or foreign, for investment as per a defined investment policy to benefit its investors. With their promise of high returns across diverse asset classes, AIFs are attractive for those aiming to diversify and enhance their portfolios.

Some key terms used in AIFs:

Carry
Carry or carried interest is akin to performance fees which is paid to the investment manager as a share of the AIF’s profits which the investment manager is entitled to if they exceed a specific threshold return. Carry is typically in the range of 15-20% of the profits earned by the AIF in excess of the specified threshold.

Hurdle / Preferred rate of return
Minimum percentage of returns that an investor earns before the Investment Manager can catch-up and charge carry to the investor.

Catch-up
Catch-up allows the investment manager to earn the hurdle rate of return on its investment in the AIF but only after the investors have received their investment along with the hurdle rate of return on such investment.

Distribution waterfall
Provides for an order of specified priority in which the distributions are made by AIF which includes the capital contributions, fees, hurdle, catch up (if any), carry, etc.

Closing
Closing is the date fixed by the Investment Manager as a cut-off date to obtain capital commitment from investors.

Regulatory Framework

In India, AIFs operate under the purview of the SEBI. Since their establishment in the late 1980s, Venture Capital Funds (VCFs) have been a significant focus for the government to bolster the growth of specific sectors and early stage companies. However, the desired outcomes in supporting emerging sectors and startups were not realized, largely due to regulatory uncertainties. Recognizing this challenge, in 2012, the Securities and Exchange Board of India unveiled the SEBI (AIF) Regulations. This was done to categorize AIFs as a unique asset class, similar to Private Equities (PEs) and VCFs.

Any entity wishing to function as an AIF must seek registration with SEBI. While there are various legal structures under which an AIF can be established – such as a trust, a company, an LLP, or a body corporate – trusts are the most commonly chosen form in India.

A typical AIF structure looks like the following –

The entities are:
● Settlor – Person who settles the trust with a nominal initial settlement
●Trustee – Person in charge of the overall administration and management of the Trust. In practice, this responsibility is then outsourced to the investment manager.
● Contributor – Investor to the Trust (AIF) and makes a capital commitment to the AIF
● Sponsor – Face of the AIF i.e. Person who sets up the AIF
● Investment Manager – Brain of the AIF i.e. Person who is appointed to manage the
investments.

It’s noteworthy that the roles of the Sponsor and Investment Manager can be unified, with one entity performing both functions.

Under the SEBI AIF Regulations, AIFs are classified into 3 distinct categories. Each category serves a unique purpose and is characterized by specific investment conditions and varying degrees of regulatory oversight. Below is an overview of the categories, highlighting their primary purpose and key conditions:

Apart from the categories mentioned above, any of the three categories of AIFs can be classified as a large-value fund (LVFs), provided that each investor is an “accredited investor” as per the AIF Regulations and invests a minimum of INR 70 crores in the AIF. LVFs have certain investment and compliance related exemptions.

Angel Funds also hold a distinct categorization under the AIF Regulations. These funds are a subcategory of Category I AIFs – VCFs, primarily designed to acknowledge and support the unique role of angel investors in the startup ecosystem. The key characteristics of Angel funds are summarized below:

Table 2: Angel Funds

Taxability of AIFs

Category I and II AIFs:

Category I and II AIFs are granted pass-through status from an income-tax perspective, whereby any income earned by these AIFs (other than profits or gains from business) is not taxed at the AIF level, but directly taxed as income at the hands of the investors as if these investors had directly received this income from the investments.

Unabsorbed losses (other than business losses) of the AIF may be allocated to the investors for them to set off against their respective individual incomes, subject to such investors having held the units in the AIF for at least 12 months. 

Further, the distributions from Category I and II AIFs are subject to a withholding tax of 10% in the case of resident investors, and at the rates in force in the case of non-resident investors (after giving due consideration to any benefit available to them under the applicable tax treaty).

Business income of Category I and II AIFs is chargeable to tax at the maximum marginal rate (MMR) i.e. 30% plus applicable surcharge and education cess at the AIF level as per the legal status of the AIF and once this tax is paid, no further tax on the same is payable by the investors.

Category III AIFs 

Category III AIFs have not been granted statutory pass-through status. Typically, they are set up as “determinate and irrevocable trusts.” This means the trusts have identifiable beneficiaries, and their respective beneficial interests can be determined at any given time. In such trusts, the trustee can discharge the tax obligation for the income of the trust on behalf of its beneficiaries (i.e., the investors) in a representative capacity. This is similar to the tax liability an investor would face if they had received the income directly. However, there’s an exception: trusts with any business income must pay tax at the MMR. As per income-tax law, tax authorities can recover tax either from the trustee or directly from the beneficiaries. Given this flexibility, a trustee might opt to pay the entire tax amount at the AIF level. Moreover, the law permits the trustee (acting as a representative assesses) to recover from investors any taxes it has paid on their behalf.

We have not covered tax implications for investment managers and sponsor entities above.

Key Documents

Private Placement Memorandum (PPM):

The PPM provides comprehensive details about the AIF. Contents include information about the manager, key investment team, targeted investors, proposed fees and expenses, scheme tenure, redemption conditions or limits, investment strategy, risk factors and management, conflict of interest procedures, disciplinary history, service terms and conditions by the manager, affiliations with intermediaries, winding up procedures, and any other relevant details helping investors make informed decisions about investing in an AIF scheme.

SEBI has introduced mandatory templates for PPMs (for and) which provides for two parts: 

Part A – section for minimum disclosures

Part B – supplementary section to allow full flexibility to the AIF in order to provide any additional information, which it may deem fit. 

There are two templates – one for Category I and II AIFs and the other for Category III AIFs. 

Angel Funds, LVFs and AIFs in which each investor commits to a minimum capital contribution of INR 70 crores are exempted from following the aforementioned template.

Indenture of Trust / Trust Deed:

This document is an agreement between the settlor and the trustee. It involves the settlor transferring an initial settlement (can be nominal) to the trustee to create the fund’s assets. The Indenture details the roles and responsibilities of the trustee. 

Investment Management Agreement:

This agreement is entered between the trustee and the investment manager. Here, the trustee designates the investment manager and transfers most of its management powers regarding the fund to them. However, certain powers retained by the trustee are outlined in the Indenture of Trust.

Contribution Agreement:

This agreement is between the contributor (investor), the trustee, and the investment manager. It mentions the terms of an investor’s participation in the fund, covering areas like beneficial interest computation, distribution mechanism, expense list to be borne by the fund, and the investment committee’s powers. SEBI mandates that the Contribution Agreement’s terms should align with the PPM and shouldn’t exceed its provisions.

How to get registered with SEBI?

This is the registration process if the Fund is set up as a Trust.

To register an AIF with SEBI, the fund needs to make an application to SEBI on its online portal. 

The trust deed i.e. incorporation document of the fund where it is set up as a trust, needs to be registered with the local authorities. Further, the PAN needs to be obtained before making the application to SEBI.

The application to SEBI has the following key documents to be submitted:

• Application form in Form A 
• Private Placement Memorandum (PPM)
• Trust Deed
• Declarations and KYC documents of the entities involved i.e. investment manager, sponsor, trustee (if the AIF is structured as a trust), and the AIF itself

Further, before submitting the application to SEBI, the AIF must engage a merchant banker who performs due diligence on the PPM and subsequently provides a certification that needs to be filed with SEBI. However, there’s an exemption for LVFs and Angel Funds for this requirement. 

Once the application is submitted, SEBI will evaluate the application. Generally, the entire setup and registration process, including SEBI’s assessment, spans around four to six months.
Broadly, the process flow looks as follows:

AIF Process Flow

Final Thoughts

With their ability to diversify investment portfolios and provide potential high returns, AIFs undeniably present an attractive avenue for investment in today’s dynamic market scenario. The regulatory framework, set by SEBI, ensures transparency, credibility, and alignment with global best practices, further instilling confidence among stakeholders.

However, AIFs can be tricky to understand because of the different types, how they are taxed, and the many documents involved. It’s like trying to put together a puzzle with lots of pieces.

For both potential AIF managers and investors, understanding this intricate ecosystem is crucial. It is recommended to talk to experts who know the details. They can guide you through the process, help you understand the rules, and make sure you’re making the best decisions. As the world of AIFs keeps changing, staying informed and getting the right advice will be key to success.

FAQs:

1. What is an Alternative Investment Fund (AIF)?

Answer: An AIF is a privately pooled investment vehicle that collects funds from investors, either Indian or foreign, to invest as per a defined investment policy, with the aim of benefiting its investors. It offers diversified asset classes and promises potentially high returns, making it an attractive choice for High Net Worth Individuals (HNIs) and other discerning investors.

2. How are AIFs regulated in India?

Answer: AIFs in India operate under the regulatory framework of the Securities and Exchange Board of India (SEBI). SEBI introduced the SEBI (Alternative Investment Funds) Regulations in 2012 to categorize AIFs as a distinct asset class. All entities desiring to function as an AIF must register with SEBI.

3. What are the different categories of AIFs?

Answer: SEBI classifies AIFs into three categories:

• Category I AIF: Focus on sectors or areas which are socially or economically desirable. Includes Venture Capital Funds, SME funds, and more.
• Category II AIF: Funds that do not fall under Category I or III and don’t undertake excessive leverage.
• Category III AIF: Funds employing diverse or complex trading strategies, often using leverage. Examples include hedge funds.

4. How is the taxability of AIFs determined?

Answer:

• Category I and II AIFs: Granted pass-through status, meaning income (other than business profits) is taxed directly in the hands of investors.
• Category III AIFs: Not granted a statutory pass-through. Typically, tax liability for trusts can be met by the trustee or the beneficiaries directly.

5. What are Angel Funds and how do they fit into the AIF landscape?

Answer: Angel Funds are a subcategory of Category I AIFs – specifically Venture Capital Funds. They are designed to support the crucial role of angel investors in the startup ecosystem. Angel funds have distinct features like a minimum ticket size of INR 25 lakhs and a minimum fund size of INR 5 crores.

6. How does one register an AIF with SEBI if set up as Trust?

Answer: To register with SEBI, the fund must make an online application. Prior to this, the trust deed must be registered locally, and a PAN should be obtained. Key documents like the PPM, Trust Deed, and relevant KYC documents must be submitted. The entire setup and registration process usually takes around four to six months.

7. What is the typical cost for setting up an AIF in India?

Answer: The typical cost for setting up an AIF in India ranges from INR 10 to 15 lakhs. The SEBI registration fees depend on the Category of AIF. However as per SEBI guidelines, the minimum investment in an AIF is Rs. 1 Crore.

Treelife Fintech Report 2024-25

DOWNLOAD PDF

India’s Fintech Report 2024-25 by Treelife provides a data-driven analysis of the fintech industry in India, highlighting key trends, growth drivers, and future opportunities. As the fintech market size in India continues to expand rapidly, this report offers a comprehensive view of how fintech companies and fintech startups in India are transforming the financial landscape.

A major highlight of the India Fintech Report 2024-25 is the transformative role of India Stack in shaping the fintech ecosystem. India Stack, a government-backed digital infrastructure, provides a suite of open APIs that enable seamless integration between private companies and government services, paving the way for digital financial inclusion on an unprecedented scale.

India Stack’s Four Layers

1. Identity (Aadhaar): A unique digital identity for over 1.3 billion Indians, facilitating secure, real-time identity verification. Aadhaar has been instrumental in enabling digital onboarding, reducing costs, and expanding access to financial services.
2. Payments (UPI, AEPS): The Unified Payments Interface (UPI) and Aadhaar-enabled Payment System (AEPS) provide a secure, real-time digital payments system, transforming digital payments in India and making it accessible to both urban and rural populations.
3. Paperless (DigiLocker): Digital management of documents through DigiLocker allows users to store, manage, and share official documents securely, supporting financial transactions and government interactions without physical paperwork.
4. Data (DEPA): The Data Empowerment and Protection Architecture (DEPA) framework empowers individuals to securely share personal and financial data with their consent, enabling innovative fintech services and fostering data privacy.

India Stack has been a game-changer for fintech companies in India, democratizing access to banking, insurance, lending, and wealth management services. It has supported the rapid expansion of fintech startups in India by reducing barriers to entry, lowering costs, and enabling interoperability across financial services.

Impact of India Stack on Fintech in India

The implementation of India Stack has not only increased the fintech market size in India but also boosted financial inclusion, particularly in rural areas where traditional banking access is limited. By facilitating over 63 billion Aadhaar authentications and enabling UPI to process billions of transactions annually, India Stack has become the backbone of India’s digital economy.

Key Insights from the Report

1. Market Growth: The fintech sector in India is projected to reach a valuation of $420 billion by 2029, with a compound annual growth rate (CAGR) of 31%. This growth is driven by digital innovations, increased internet penetration, and supportive regulatory frameworks. India has emerged as one of the top three fintech ecosystems globally, with over 3,000 fintech startups contributing to this growth.
2. Digital Payments in India: Digital payment systems in India have witnessed exponential growth, largely powered by the Unified Payments Interface (UPI) and RuPay cards. In FY 2023-24 alone, UPI processed over 131 billion transactions, representing more than 80% of retail digital payments. The UPI market size is expected to increase significantly as UPI expands globally, positioning India as a leader in digital payments.
3. Opportunities at GIFT IFSC: GIFT IFSC (Gujarat International Finance Tec-City) has become a key strategic location for fintech growth, offering a gateway to global markets. The report highlights the benefits for fintech firms establishing operations in IFSC GIFT City, including tax incentives and access to international markets. With over 55 fintech entities already operational in GIFT IFSC, it is fast becoming a preferred destination for new fintech startups in India.
4. Investment and Funding Trends: The fintech market in India has attracted significant investment, with total funding peaking at $9.6 billion in 2021. Although funding levels normalized to $6 billion in 2022 and $2.7 billion in 2023, the report indicates that investor interest remains high, particularly in areas like digital lending, payments, and insurance technology.
5. Fintech Job Market: The expansion of the fintech ecosystem has also spurred job creation. Fintech jobs in India are on the rise, with demand for talent in areas such as digital payments, data analytics, AI, and cybersecurity. This surge in job opportunities underscores the sector’s potential for sustained growth and innovation.
6. Public Market Performance and Leading Companies: The Report 2024-25 also examines the public market performance of key fintech companies in India and compares it with traditional financial institutions. The report discusses how fintech companies, such as Paytm and Angel One, have navigated the challenges of going public, highlighting trends in valuation and market perception. While new-age fintech firms are driving innovation and growth, they face scrutiny around profitability and sustainability, which can impact stock performance in the public market.
7. Top Companies in India’s Fintech Ecosystem: The report sheds light on leading players in the fintech sector in India, including Razorpay, PhonePe, Zerodha, and Cred, which are shaping the landscape across segments like digital payments, lending, and wealth management. These companies exemplify the rapid growth and transformative impact of fintech on India’s economy.
8. Investment Landscape and Major Investors: The investment landscape in India’s fintech market has attracted some of the biggest names in venture capital and private equity. Key investors, including Blume Ventures, Accel, Matrix Partners India, and Kalaari Capital, have played a vital role in funding the growth of fintech in India. In 2021, fintech funding peaked at $9.6 billion, and though it moderated to $6 billion in 2022, investor interest remains high, particularly in sectors like digital payments and LendingTech.

Types of Fintech Covered in the Report

The Treelife India Fintech Report 2024-25 covers a wide array of fintech segments that are driving innovation across the financial landscape in India:

• Digital Payments (PayTech): Exploring the growth of UPI and mobile wallets, which now dominate the digital payments system in India.
• LendingTech: Covering advancements in digital lending, Buy Now Pay Later (BNPL) models, and platforms providing seamless credit access to individuals and businesses.
• InsurTech: Examining technology-driven innovations in the insurance sector, including digital policy management and AI-powered risk assessments.
• WealthTech: Highlighting platforms that democratize investment, from robo-advisors to digital wealth management solutions.
• Fintech Infrastructure/SaaS: Analyzing backend technologies and SaaS solutions that support financial services, including Banking-as-a-Service (BaaS) and compliance tools.

Each of these segments plays a pivotal role in the fintech ecosystem, transforming how financial services are delivered and accessed in India.

Why Download the India Fintech Report?

The India Fintech Report 2024-25 by Treelife is a valuable resource for industry professionals, investors, and policymakers seeking in-depth insights into the growth of fintech in India. Covering all major segments of the fintech market in India, from digital payments to wealth management, the report provides essential data and analysis on the drivers, challenges, and future directions of this rapidly evolving sector.

Get the Treelife India Fintech Report 2024-25 to stay informed about:

• The transformative impact of UPI and RuPay cards on the digital payments landscape
• The role of GIFT IFSC in driving fintech globalization
• Key players, investment trends, and employment opportunities within the fintech industry in India

Download your copy today to explore the latest trends and stay ahead in the evolving fintech sector in India.