Compliances for Startups in India: Annual Legal & Financial Checklist

Introduction – Why Annual Compliances Matter for Startups

What Are Annual Compliances for Startups?

Annual Compliances for Startups refer to the mandatory legal and financial filings that every registered business in India must complete each financial year. These include submissions under:

• Ministry of Corporate Affairs (MCA): Company Law filings such as AOC-4, MGT-7, DIR-3 KYC, etc.
• Income Tax Department: Filing ITR-6, Tax Audit Report (Form 3CD), TDS Returns, etc.
• Labour Laws: Regular EPF, ESI, and Professional Tax filings.

These compliances for startups in india ensure transparency, protect investor interests, and maintain business legitimacy under Indian law.

Why MCA, Income Tax, and Labour Laws Mandate Them

The MCA, CBDT, and labour authorities require startups to:

• Maintain corporate accountability: Section 92 and 134 of the Companies Act, 2013 make filing of Annual Return and Financial Statements compulsory.
• Ensure fair tax contribution: The Income Tax Act mandates timely tax filings and audits for accurate revenue recognition.
• Protect employees’ welfare: Labour laws ensure EPF/ESI deductions and payments are made regularly to safeguard employee benefits.

Startup India Snapshot (2025)

Metric	Data (2025)	Source
DPIIT-recognised startups	1,80,683 (as of July 25, 2025)	Economic Times
Share of Private Limited Companies	~70%	MCA Statistics
Average compliance filings per startup	8–12 per year	Startup India
Common defaults reported	Late AOC-4, missed DIR-3 KYC	Startup India

This data highlights that while India’s startup ecosystem is growing exponentially, compliance adherence remains a critical pillar for long-term stability.

Cost of Non-Compliance

Failure to meet annual compliance deadlines can severely impact operations:

• Monetary penalties:
  • Up to ₹1,00,000 per defaulting company, plus ₹100 per day of continued delay (MCA Sec. 92 & 134).
• Director disqualification: Under Section 164(2), directors of non-compliant companies can be barred for 5 years.
• Operational disruptions: Funding rounds and due diligence processes are often delayed or rejected due to compliance lapses.

Benefits of Timely Annual Compliances for Startups

• Credibility & Trust: Builds transparency with investors, banks, and regulators.
• Funding Readiness: Compliance records are a key part of VC and PE due diligence.
• Smooth Audits: Timely filings simplify statutory and tax audits.
• Reduced Penalties: Avoids cumulative interest and daily late fees.
• Investor Confidence: Ensures valuation integrity and legal hygiene for global investors.

Legal Annual Compliances for Startups in India

India’s startup landscape is growing rapidly   but this growth also brings an essential responsibility: maintaining legal annual compliances. These are mandatory filings and disclosures that ensure transparency, governance, and investor confidence. Non-compliance can lead to penalties, director disqualification, or even strike-off under Section 248 of the Companies Act, 2013.

Company Law (MCA) Compliances

Every startup registered as a Private Limited Company or LLP must follow the Ministry of Corporate Affairs (MCA) regulations to stay in “Active” status.

Key MCA Annual Compliances:

• INC-20A (Commencement of Business):
  • Must be filed within 180 days of incorporation.
  • Confirms receipt of paid-up share capital.
  • Penalty: ₹50,000 for company + ₹1,000/day for delay.
• Board Meetings:
  • Minimum 4 meetings per year (Private Limited) or 2 (Small Companies).
  • Gap between meetings ≤ 120 days.
  • Penalty: ₹25,000 per officer in default.
• Annual General Meeting (AGM):
  • Must be held by September 30 (within 6 months of financial year-end).
  • Approves audited accounts and appoints auditors.
  • Penalty: ₹1 lakh + ₹5,000/day of delay.
• AOC-4 (Financial Statement Filing):
  • Due within 30 days of AGM.
  • Includes Balance Sheet, P&L, Auditor’s Report.
  • Penalty: ₹100 per day.
• MGT-7 / MGT-7A (Annual Return):
  • Due within 60 days of AGM.
  • Covers shareholding, directorships, and company structure.
  • Penalty: ₹100 per day.
• ADT-1 (Auditor Appointment):
  • Filed within 15 days of AGM.
  • Auditor appointed for a 5-year term.
  • Penalty: ₹10,000 + ₹100/day.
• DIR-3 KYC (Director KYC):
  • Mandatory by September 30 every year.
  • Ensures updated identification for all directors.
  • Penalty: ₹5,000 per director.

Data Insight (2025):
According to MCA statistics, nearly 18% of active startups missed filing one or more annual forms in FY 2024–25, primarily AOC-4 and DIR-3 KYC.

Event-Based Compliances

Event-based compliances are triggered by specific corporate actions or changes. These ensure the ROC is informed of structural or managerial updates within a defined timeline.

Common Event-Based Compliances:

• Share Allotment – Form PAS-3: Filed within 15 days of allotment.
• Change in Registered Office – Form INC-22: Filed within 15 days of address change.
• Director Appointment/Resignation – Form DIR-12: Filed within 30 days of the event.
• Increase in Authorised Capital – Form SH-7: Filed within 30 days of resolution.
• Creation or Modification of Charge – Form CHG-1: Filed within 30 days of loan or security creation.

Note: These filings are critical during investor due diligence, as investors verify that all statutory events are properly recorded.

Labour & Employment Law Compliances

Startups with employees must comply with social security and labour laws under EPFO, ESIC, and state-specific statutes. These ensure employee welfare and prevent legal liabilities.

Essential Labour Compliances:

• EPF (Employees’ Provident Fund):
  • File ECR monthly by the 15th of the next month.
  • Penalty: Interest @12% + damages up to 25%.
• ESI (Employees’ State Insurance):
  • Deposit monthly contributions by the 15th of next month.
  • Penalty: ₹10,000 or prosecution under ESI Act.
• Professional Tax:
  • Pay monthly or quarterly (as per state).
  • Penalty: ₹1,000–₹5,000 per default.
• Shops & Establishment Act Renewal:
  • Annual or biennial renewal as per state law.
  • Penalty: Varies by state.
• POSH Act, 2013 (Prevention of Sexual Harassment):
  • Form Internal Committee (IC).
  • Submit annual report by 31st January to the District Officer.
  • Penalty: ₹50,000; repeated non-compliance can lead to license cancellation.

Trend (2025):
Nearly 65% of DPIIT-registered startups use HRMS automation tools for EPF, ESI, and payroll compliance (Source: NASSCOM Startup Report 2025).

Data Privacy and IT Compliances (DPDP Act, 2024)

With the implementation of India’s Digital Personal Data Protection (DPDP) Act, 2024, startups especially in fintech, edtech, and SaaS sectors must adhere to stringent data protection obligations.

Key IT & Privacy Obligations:

• Appoint a Data Protection Officer (DPO): Required if processing large-scale or sensitive personal data.
• Publish a Privacy Policy: Disclose how data is collected, used, stored, and shared.
• Obtain Explicit User Consent: Opt-in consent before processing personal data.
• Report Data Breaches: Notify the Data Protection Board within 72 hours.
• Comply with Cross-Border Data Transfer Rules: Allowed only to notified countries.

Penalty for Non-Compliance:
Up to ₹250 crore per violation for major data breaches under the DPDP Act, 2024.

Startups should conduct annual Data Protection Impact Assessments (DPIA) before new product launches or funding rounds involving user data.

Financial Annual Compliances for Startups in India

For any startup operating in India, financial annual compliances are as crucial as legal ones. They ensure tax transparency, prevent penalties, and maintain investor confidence. These compliances span income tax filings, GST submissions, accounting audits, and Startup India reporting under DPIIT regulations.

Income Tax Compliances

The Income Tax Act, 1961 governs these annual financial obligations. Every registered startup whether profit-making or loss-incurring must file returns and reports accurately and within prescribed timelines.

Key Income Tax Compliances:

• Income Tax Return (ITR-6):
  • Applicable to companies other than those claiming exemption under Section 11.
  • Due Date: October 31 each year (extended to November 30 for companies under tax audit).
  • Must include audited financial statements, P&L account, and balance sheet.
• Tax Audit Report (Form 3CA/3CB + 3CD):
  • Required if turnover exceeds ₹10 crore (for non-cash transactions) or ₹1 crore (for cash-intensive businesses).
  • Due Date: September 30 each financial year.
  • Penalty for delay: ₹1.5 lakh or 0.5% of turnover (whichever is lower).
• Advance Tax Payments:
  Startups expecting tax liability ≥ ₹10,000 must pay in instalments:
  • 15% by June 15
  • 45% by September 15
  • 75% by December 15
  • 100% by March 15
• TDS/TCS Returns:
  • Forms: 24Q (salaries), 26Q (non-salaries), 27EQ (TCS).
  • Frequency: Quarterly.
  • Penalty for late filing: ₹200/day under Section 234E.
• Form 16 & 16A:
  • Form 16 issued to employees by June 15.
  • Form 16A for vendors or consultants within 15 days of quarter end.
  • Essential for tax credit claims and audit accuracy.

Startup Tax Snapshot (FY 2024–25):

• Average corporate tax rate: 22% (domestic companies) under Section 115BAA.
• Startups under Section 80-IAC enjoy 100% tax exemption for 3 consecutive years within 10 years of incorporation.

GST Compliances

The Goods and Services Tax (GST) regime mandates regular filing to track transactions, claim input tax credit, and maintain fiscal transparency.

Key GST Requirements:

• Monthly Returns:
  • GSTR-1 (sales) → by 11th of every month.
  • GSTR-3B (summary return) → by 20th or 22nd, depending on turnover.
  • Penalty for delay: ₹50/day (₹25 CGST + ₹25 SGST).
• Annual Return:
  • GSTR-9 (summary) and GSTR-9C (reconciliation statement) due by December 31 of the next financial year.
  • Penalty: ₹200/day (₹100 CGST + ₹100 SGST).
• E-Invoicing Compliance:
  • Mandatory for startups with aggregate turnover above ₹5 crore (as per CBIC Notification No. 10/2023).
  • Ensures real-time invoice reporting to the IRP (Invoice Registration Portal).

Accounting & Audit Compliances

Financial discipline and credibility depend on proper bookkeeping and auditing, as mandated by the Companies Act, 2013.

Essential Accounting Compliances:

• Statutory Audit:
  • Mandatory for all companies, regardless of turnover or profit.
  • Conducted by an independent Chartered Accountant to verify accuracy of books and compliance with accounting standards.
• Internal Audit:
  • Required if turnover exceeds ₹200 crore or outstanding borrowings exceed ₹100 crore.
  • Helps identify financial risks, inefficiencies, and fraud.
• Bookkeeping & Record Retention:
  • As per Section 128 of the Companies Act, companies must maintain financial records for 8 years from the last financial year.
  • Includes vouchers, invoices, minutes, and ledgers.

Why It Matters:
Timely audits increase startup valuation accuracy and investor trust during funding rounds or M&A due diligence.

Startup India and DPIIT-Specific Compliances

Startups recognised under the Department for Promotion of Industry and Internal Trade (DPIIT) enjoy multiple tax benefits and regulatory relaxations but only if they maintain compliance discipline.

Key DPIIT / Startup India Compliances:

• Annual Status Update:
  • Mandatory update of operational and financial details on the Startup India portal every year.
  • Failure may lead to suspension of recognition and benefits.
• Annual Report of IP Filings:
  • Startups availing IP facilitation must submit a report on trademarks, patents, or designs filed during the year.
• Intimation of Fundraising or Exit:
  • Startups claiming tax exemption under Section 80-IAC must notify DPIIT and CBDT about fundraising or exits to maintain exemption eligibility.
• Maintenance of Valuation Reports & Angel Tax Records:
  • Mandatory for all share issuances and capital infusions.
  • Helps ensure compliance with FEMA and Income Tax Section 56(2)(viib) (Angel Tax).

Checklist – Annual Compliances for Startups in India

The following comprehensive annual compliance checklist provides a one-stop reference for startups in India. It integrates the latest MCA, Income Tax, GST, Labour, and Startup India requirements (as of FY 2024–25) and is designed to help founders, CFOs, and compliance teams stay organized and penalty-free.

Each compliance activity below is fact-checked against the Companies Act, 2013, Income Tax Act, 1961, GST Rules, 2017, EPF/ESI Regulations, and Startup India DPIIT Guidelines.

Annual Compliance Master Table (2025)

Compliance Type	Form (if any)	Description / Due Date	Penalty for Default
Commencement of Business	INC-20A	Declaration of business commencement within 180 days of incorporation.	₹50,000 + ₹1,000/day of delay.
Board Meetings	–	Minimum 2 per year for Small Companies; 4 per year for others, with max 120 days gap between meetings.	₹25,000 per defaulting officer.
Annual General Meeting (AGM)	–	Must be held within 6 months from FY end (by September 30).	₹1 lakh + ₹5,000/day of delay.
Financial Statements Filing	AOC-4	Submit audited financials within 30 days of AGM.	₹100/day for delay.
Annual Return Filing	MGT-7 / MGT-7A	File annual return within 60 days of AGM.	₹100/day for delay.
Auditor Appointment / Reappointment	ADT-1	File within 15 days of AGM for a 5-year appointment term.	₹10,000 + ₹100/day of delay.
Director KYC	DIR-3 KYC	Annual KYC for directors due by September 30 each year.	₹5,000 per director late fee.
Income Tax Return (Companies)	ITR-6	File by October 31 (extended to November 30 for audited entities).	₹5,000 if filed ≤ Dec 31; ₹10,000 if filed later.
Tax Audit Report	3CA / 3CB + 3CD	Due by September 30 for entities exceeding prescribed turnover thresholds.	₹1.5 lakh or 0.5% of turnover.
Advance Tax Payments	–	Paid quarterly on June 15, Sept 15, Dec 15, and March 15.	1% interest per month u/s 234B/C.
TDS / TCS Returns	24Q / 26Q / 27EQ	Quarterly filing of tax deducted or collected at source.	₹200/day under Sec 234E.
GST Monthly Returns	GSTR-1 / GSTR-3B	GSTR-1 by 11th and GSTR-3B by 20th/22nd of the month.	₹50/day (₹25 CGST + ₹25 SGST).
GST Annual Return	GSTR-9 / GSTR-9C	Filed by December 31 of the next FY with audit reconciliation.	₹200/day (₹100 CGST + ₹100 SGST).
E-Invoicing	–	Mandatory for businesses with turnover > ₹5 crore.	₹10,000 per invoice + denial of input tax credit.
EPF Contribution Filing	ECR	Filed by 15th of the next month.	Interest @12% + damages up to 25%.
ESI Contribution Filing	–	Filed by 15th of the next month.	₹10,000 or prosecution.
Professional Tax	–	Paid monthly or quarterly as per state laws.	₹1,000–₹5,000 per default.
POSH Annual Report	–	Submit report by Jan 31 to District Officer detailing cases handled.	₹50,000; repeated offence can lead to licence suspension.
Maintenance of Accounting Books	–	Books must be retained for 8 years under Sec 128 of Companies Act.	₹50,000 – ₹3,00,000.
Startup India Annual Renewal	–	Annual update on Startup India portal to retain DPIIT recognition.	Loss of tax benefits and recognition.
Valuation Reports & Angel Tax Records	–	Maintain updated records of share issuances and capital infusions.	Penalties under Sec 56(2)(viib) & FEMA violations.

This Annual Compliance Checklist for Startups in India acts as a roadmap for maintaining transparency, funding eligibility, and operational credibility. Timely compliance not only avoids penalties but also builds the legal and financial hygiene investors look for in a growing business.

Penalty & Consequences of Non-Compliance

Ignoring annual compliances for startups can lead to severe monetary and operational repercussions. Non-filing affects your startup’s credibility, funding opportunities, and even its legal standing with the Ministry of Corporate Affairs (MCA) and tax authorities.

Key Penalties and Impacts

• MCA (Companies Act, 2013):
  • Late filing fees of ₹100 per day per form (AOC-4, MGT-7, etc.).
  • Possible strike-off under Section 248 after prolonged non-filing.
• Income Tax Department:
  • Interest @1% per month for late payment under Sections 234A/B/C.
  • Penalty under Section 271B (up to ₹1.5 lakh) for delayed tax audit.
  • Penalty under Section 271F for non-filing of returns.
• GST Non-Compliance:
  • ₹200 per day (₹100 CGST + ₹100 SGST) until return is filed.
  • Input Tax Credit (ITC) denial for missed filings or mismatched invoices.
• Director Disqualification:
  • Under Section 164(2), failure to file annual returns for 3 consecutive years leads to 5-year disqualification and restriction from holding directorship in any company.
• Reputation & Funding Loss:
  • Investors review MCA and Income Tax filing history during due diligence.
  • Delayed or missing filings often trigger red flags and may stall funding rounds.
    

How to Simplify Annual Compliances for Startups

Startups can streamline their legal and financial compliances using technology and professional assistance:

• Hire a Compliance Partner:
  Track MCA, Income Tax, and GST deadlines through an integrated compliance calendar. Treelife provides detailed compliance audits and helps with all requirements.
• Automate Filings:
  Use ERP tools (e.g., Tally, QuickBooks, Zoho Books) to automate GST filings, TDS payments, and audit reconciliations.
• Maintain Digital Records:
  Store board resolutions, ledgers, and audit reports securely for at least 8 years under Section 128 of the Companies Act.
• Quarterly Compliance Audits:
  Conduct internal checks every 3 months to ensure filings are up-to-date before due diligence or funding rounds.

Stay Compliant and Fund-Ready

Annual compliances for startups are not just a legal formality they’re a foundation for sustainable growth. A structured compliance calendar prevents penalties, supports investor trust, and enhances valuation during fundraising.