The first year of business is when most compliance failures happen. Not because founders are unaware that compliance matters, but because the sequence of required actions across incorporation, taxation, banking, labour, and regulatory filings is rarely explained as a single connected timeline. Founders discover each obligation when it is already overdue.
A founder in Hyderabad incorporated a Private Limited Company in August. By March of the following year, he had not filed INC-20A (the Commencement of Business Declaration), which must be filed within 180 days of incorporation. The MCA suspended his company’s ability to commence business and froze access to banking facilities. He had also not held the four board meetings required under the Companies Act, 2013, had no minutes on record, and had not appointed a statutory auditor. Resolving all three gaps took two months and cost him significantly more in professional fees than a structured first-year compliance plan would have.
This guide covers every task in the first year of business for a company incorporated in India in 2026: the month-by-month compliance sequence, tax obligations, HR and labour requirements, brand protection, and the 2026-specific regulatory additions including the Digital Personal Data Protection Act enforcement and Income Tax Act 2025 transition.
Why the First Year of Business Determines Long-Term Compliance Health
Every compliance obligation missed in the first year of business compounds. A late INC-20A filing carries additional fees. A missed board meeting means minutes cannot be reconstructed retroactively. A delayed auditor appointment means the statutory audit cycle starts broken. A GST registration not obtained when turnover crossed the threshold means retroactive liability, interest, and penalty.
More critically, India’s government compliance systems are now integrated across the MCA, Income Tax Department, and GSTN. A mismatch between GST-reported turnover and income tax-reported revenue triggers automatic scrutiny. An unlinked bank account on the GST portal results in GSTIN suspension. Director DINs that are not KYC-verified get deactivated, freezing all MCA filings. The first year of business is the period when this integrated surveillance is most likely to catch gaps, because new registrations are actively monitored.
Treating the first year of business as a structured compliance exercise is the most effective way to avoid the corrective costs that most first-time founders face.
Things to Do in the First Year of Business: Month-by-Month Breakdown
Within the First 30 Days of Incorporation
Hold the first Board of Directors meeting. Under Section 173 of the Companies Act, 2013, the first board meeting must be held within 30 days of incorporation. This meeting covers: noting the Certificate of Incorporation, appointment of the first statutory auditor, designation of the registered office, noting the Memorandum of Association and Articles of Association, opening of the company bank account, and disclosure of director interests in Form MBP-1 under Section 184.
Appoint the first statutory auditor. The Board of Directors must appoint the company’s first statutory auditor within 30 days of incorporation under Section 139 of the Companies Act, 2013. File Form ADT-1 with the ROC to record this appointment within 15 days of the board resolution.
Issue share certificates. Under Section 56 of the Companies Act, 2013, share certificates must be issued to all subscribers within 60 days of incorporation.
Register under Shops and Establishments Act. Most states require registration under the Shops and Establishments Act within 30 days of commencing operations. The requirements vary by state. In Maharashtra, the online self-declaration under the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 must be completed on the Mahaeshram portal.
Within 45 to 90 Days of Incorporation
Open the company current account and deposit subscription money. The subscription money paid by shareholders at the time of incorporation must be deposited in the company’s bank account before filing INC-20A.
File INC-20A (Commencement of Business Declaration). Under Section 10A of the Companies Act, 2013, every company must file Form INC-20A within 180 days of incorporation. This form declares that each subscriber to the MOA has paid the value of shares agreed to be taken by them, and provides proof of the subscription money deposited in the bank account. Without filing INC-20A, the company cannot commence business, exercise borrowing powers, or access banking facilities freely. The penalty for non-filing is Rs. 50,000 on the company and Rs. 1,000 per day on directors in default.
Link bank account on the GST portal. If GST registration has been obtained, the bank account must be linked on the GST portal at https://www.gst.gov.in within 45 days of registration or before filing the first GSTR-1, whichever is earlier, under Rule 10A of the CGST Rules, 2017.
Begin TDS compliance from the first qualifying payment. TDS must be deducted from the very first payment that crosses the applicable threshold, not from the point when the business “becomes large enough.” Salary payments, rent above Rs. 2,40,000 per year, professional fees above Rs. 30,000, and contractor payments above Rs. 30,000 per transaction all trigger TDS deduction obligations. Deposit TDS with the government by the 7th of the month following deduction.
Register for Professional Tax. In Maharashtra, Karnataka, West Bengal, Andhra Pradesh, Telangana, and other applicable states, Professional Tax registration is required for the business as an employer. This is now allotted automatically through the SPICe+ process in Maharashtra, Karnataka, and West Bengal. For states not covered by SPICe+, register separately through the state’s professional tax authority.
Within 6 Months of Incorporation
Apply for GST registration if turnover threshold is reached. Register on the GST portal as soon as aggregate annual turnover is expected to cross Rs. 20 lakh for service businesses or Rs. 40 lakh for goods-only businesses. For inter-state supply, register from the first transaction regardless of turnover. A business that delays registration beyond the threshold liability date faces retrospective tax, interest at 18% per annum, and penalty up to 100% of the tax evaded.
Register for EPFO and ESIC. Once the headcount crosses 20 employees, EPFO registration becomes mandatory. ESIC registration is mandatory once 10 or more employees are on payroll. Registration is done through the Shram Suvidha portal. Contribution begins from the month in which the threshold is crossed.
Apply for DPIIT recognition. If the business is a Private Limited Company or LLP working on an innovative product, process, or service, apply for DPIIT recognition on the Startup India portal at https://www.startupindia.gov.in. Recognition is granted within two to three working days for most eligible startups and unlocks IPR fee rebates, self-certification under labour laws, and the pathway to Section 80-IAC tax exemption. The benefits available under this recognition are covered in detail in the guide Startup India: Eligibility, Tax Exemptions and Incentives: Complete Guide (2026).
File first GST returns. Monthly filers must file GSTR-1 (outward supplies) by the 11th and GSTR-3B (summary return with tax payment) by the 20th of the following month. Quarterly filers under the QRMP scheme file GSTR-1 quarterly and GSTR-3B also quarterly, with monthly payment obligations.
Register sector-specific licenses. Depending on the nature of business, additional licenses are required within the first few months. Food businesses must register or obtain licenses under the FSSAI. Import-export businesses must obtain the IEC from DGFT. Businesses dealing in chemicals, pharmaceuticals, or other regulated goods require applicable central or state approvals. Obtain all sector-specific licenses before commencing the regulated activity, not after.
By the End of the First Financial Year
Conduct the statutory audit. The statutory auditor appointed within 30 days of incorporation must audit the financial statements for the first financial year. The audit report is a mandatory attachment to Form AOC-4 (financial statements filed with the ROC).
Hold the Annual General Meeting. Under Section 96 of the Companies Act, 2013, the first AGM must be held within nine months from the close of the first financial year. For a company incorporated mid-year, the first financial year may be a shorter period ending March 31. The AGM approves the audited financial statements and declares (if any) dividends.
File Form AOC-4 (Financial Statements). Must be filed within 30 days of the AGM.
File Form MGT-7 (Annual Return). Must be filed within 60 days of the AGM. Non-filing for three consecutive years leads to automatic director disqualification for five years under Section 164(2)(a) of the Companies Act, 2013.
File DIR-3 KYC. Every director holding a DIN must file DIR-3 KYC annually to keep the DIN active. A deactivated DIN prevents all MCA filings.
Tax Compliance in the First Year of Business
GST Registration and Returns
Once GST-registered, monthly GSTR-1 and GSTR-3B returns must be filed without fail. Reconcile GSTR-2B (auto-populated inward supply statement) against purchase records every month. Unreconciled differences result in Input Tax Credit (ITC) reversals under Rule 37A of the CGST Rules, which in 2026 are flagged automatically by the GSTN system.
E-invoicing is mandatory for businesses with aggregate turnover above Rs. 5 crore from April 1, 2026. All B2B invoices must be registered on the Invoice Registration Portal (IRP) before issuance.
TDS Obligations
TDS returns must be filed quarterly: Form 24Q (salary TDS), Form 26Q (non-salary TDS), and Form 27Q (non-resident payments) by the 31st of the month following each quarter. Issue Form 16 (salary TDS certificate) to employees by June 15 of the following year. Issue Form 16A (non-salary TDS certificate) within 15 days of the TDS return due date.
From April 1, 2025, Section 194T requires TDS at 10% on payments to partners of partnership firms and LLPs exceeding Rs. 20,000 per financial year.
Advance Tax
Companies must pay advance tax in four installments: 15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15. Shortfall attracts interest under Sections 234B and 234C of the Income Tax Act, 1961.
HR and Labour Compliance in the First Year
Maintain written employment agreements for all employees covering compensation, role, confidentiality, and notice period. Maintain attendance, leave, and salary registers as required under applicable Shops and Establishments Acts. Where EPFO and ESIC apply, file monthly electronic challans by the 15th of each month. Non-payment of EPF contributions attracts damages at 5% per month under Section 14B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
Brand and IP Protection in the First Year
File trademark applications within the first six months. The application date establishes priority of rights. A trademark is valid for ten years and renewable indefinitely. Apply through the IP India portal. For novel products or inventions, a provisional patent application preserves the filing date while the complete specification is prepared, which is critical before the product enters the market.
Digital Compliance: DPDP Act 2023
The Digital Personal Data Protection Act, 2023 (DPDP Act) began phased enforcement through 2025-2026 and is now a mandatory compliance obligation for every business that collects, stores, or processes personal data of individuals in India.
Obligations include: obtaining specific, informed, and unambiguous consent before collecting data; notifying users of the collection purpose; enabling data access, correction, and consent withdrawal; implementing technical safeguards; and appointing a Data Protection Officer where required. Pre-ticked consent boxes and bundled consent are explicitly prohibited. Every digital business must update its privacy policy and consent mechanisms to comply.
2026 Specific Updates Affecting the First Year of Business
Company Fresh Start Scheme 2026 (CFSS 2026): Running from April 1 to September 30, 2026, CFSS 2026 allows companies to file overdue annual returns and other MCA filings with reduced additional fees. Companies that missed filings in their first year should use this window to regularise their status.
Income Tax Act 2025: The government has proposed a new Income Tax framework expected to gradually replace portions of the Income Tax Act, 1961, subject to legislative implementation.
GSTN data integration: GST return data is automatically matched against income tax returns. Discrepancies between GST-reported and ITR-reported turnover trigger automated scrutiny notices.
How Virtual Offices Supports Your First Year of Business
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Conclusion
The first year of business in India is the most compliance-intensive period in a company’s lifecycle. Nineteen distinct tasks must be completed across incorporation, banking, taxation, labour, and regulatory compliance, each with its own statutory deadline and penalty for non-compliance.
The month-by-month structure of things to do in the first year of business is: hold the first board meeting and appoint the auditor within 30 days, file INC-20A within 180 days, begin TDS compliance from the first qualifying payment, obtain GST registration before crossing the threshold, register for EPF and ESIC when headcount thresholds are crossed, apply for DPIIT recognition if eligible, and complete the statutory audit, AGM, AOC-4, and MGT-7 by end of year.
The 2026 additions to the first year compliance list include DPDP Act data protection obligations, e-invoicing for businesses above Rs. 5 crore turnover from April 1, 2026, and the Income Tax Act 2025 transition from FY 2026-27. The CFSS 2026 window (April 1 to September 30, 2026) provides a time-bound opportunity for companies with first-year filing gaps to regularise without full late fees.
Every task missed in the first year of business costs more to fix than it would have cost to complete on time.
Frequently Asked Questions
1. What is INC-20A and when must it be filed?
INC-20A is the Commencement of Business Declaration under Section 10A of the Companies Act, 2013. It must be filed within 180 days of incorporation. It declares that all subscribers have paid the value of their shares and provides bank proof of the deposited subscription money. Without this filing, the company cannot legally commence business or exercise borrowing powers.
2. When must the first board meeting be held in the first year of business?
Under Section 173 of the Companies Act, 2013, the first board meeting must be held within 30 days of incorporation. After the first meeting, except for OPCs, small companies, and dormant companies covered under Section 173(5), a minimum of four board meetings must be held every year with a maximum gap of 120 days between two meetings.
3. What is the penalty for not filing INC-20A?
The company faces a penalty of Rs. 50,000. Each director in default faces Rs. 1,000 per day of non-compliance. Additionally, without INC-20A, the ROC can initiate proceedings to remove the company from the register.
4. When must the first statutory auditor be appointed?
The first statutory auditor must be appointed by the Board of Directors within 30 days of incorporation under Section 139 of the Companies Act, 2013. Form ADT-1 must be filed within 15 days of the board resolution appointing the auditor.
5. What GST compliance is required in the first year of business?
GST registration when turnover is expected to cross Rs. 20 lakh (services) or Rs. 40 lakh (goods); monthly filing of GSTR-1 and GSTR-3B; monthly GSTR-2B reconciliation; and annual GSTR-9 filing. E-invoicing applies from April 1, 2026 for businesses with turnover above Rs. 5 crore.
6. When must EPF and ESIC registration happen in the first year?
EPF registration is mandatory once 20 or more employees are on payroll. ESIC registration is mandatory once 10 or more employees are on payroll and earning up to Rs. 21,000 per month. Registration must happen as soon as the threshold is crossed, and contributions begin from that month.
7. What is required under the DPDP Act 2023 in the first year of business?
Every business collecting personal data must obtain specific, informed, and unambiguous user consent before collection; notify users of the data’s purpose; enable data access, correction, and withdrawal of consent; and implement technical safeguards against unauthorized access. Pre-ticked consent boxes are prohibited. Enforcement began through 2025-2026.
8. What is CFSS 2026 and how does it help businesses with first-year compliance gaps?
The Company Fresh Start Scheme 2026 runs from April 1 to September 30, 2026. It allows companies with overdue MCA filings, including INC-20A, ADT-1, MGT-7, and AOC-4, to file them with reduced additional fees. Companies that missed first-year filings should use this window to regularise their compliance status before the scheme closes.
