Why Indian Startups Should Incorporate Locally: Insights from Kunal Bahl

As the startup ecosystem in India continues to evolve, there is growing debate on whether Indian founders should incorporate their businesses in foreign jurisdictions like the US or Singapore, or remain local. Kunal Bahl, co-founder of Snapdeal and judge on Shark Tank India, has provided a strong argument for why Indian startups should consider incorporating in India itself. In a recent post, Bahl called the practice of incorporating abroad “outdated,” urging entrepreneurs to rethink the advantages of establishing companies within India in 2025.

Key Insights

In his post on X (formerly Twitter), Kunal Bahl outlined three significant reasons why Indian founders should opt to incorporate their businesses in India:

Funding Advantage: Contrary to past beliefs, Bahl emphasized that Indian investors now fund Indian startups, including those in emerging sectors like DeepTech and AI. With the shift in investor mindset, local incorporation does not hinder fundraising.
Improved Regulatory Environment: India has made significant strides in creating a more startup-friendly environment. With favorable tax policies, DPIIT (Department for Promotion of Industry and Internal Trade) benefits, and simplified compliance, India has become a more attractive jurisdiction than foreign counterparts that often create double taxation issues.
Market Alignment: When a startup’s customers, revenue, and operations are based in India, local incorporation simplifies compliance, contracts, and access to government incentives. Incorporating abroad could create unnecessary complexities, especially when it comes to aligning with local regulations.

Bahl wrapped up his post by pointing out that global expansion is still possible for Indian companies. By setting up an overseas subsidiary, companies can expand their reach internationally while benefiting from the simplicity of local incorporation.

What Undercode Says:

Kunal Bahl’s call to action resonates deeply within the Indian startup ecosystem, highlighting a shift in both investment trends and regulatory environments that better serve entrepreneurs who choose to incorporate locally. Historically, many Indian startups leaned towards Singapore or the US for incorporation, seeking the perceived benefits of better access to international investors and easier exits. However, the landscape has significantly changed in recent years, making local incorporation a far more viable and, in many cases, advantageous option for founders.

Changing Investor Landscape

One of the most notable shifts in the Indian startup ecosystem is the change in investment preferences. International investors no longer view Indian entities as a red flag for funding. In fact, many of the leading venture capital firms and angel investors are actively funding Indian startups in a variety of sectors, from traditional e-commerce to cutting-edge DeepTech and AI. This trend has rendered the idea that one must incorporate in a foreign jurisdiction to access capital outdated.

Indian investors, including both domestic funds and international funds with Indian teams, are more than willing to support Indian entities directly. Bahl’s emphasis on this point is crucial, as it reassures founders that incorporating locally won’t impede their fundraising efforts.

Regulatory Benefits of Local Incorporation

Another compelling argument that Bahl presents is the evolution of India’s regulatory landscape. The government has taken steps to make the country more conducive to startups, implementing tax policies and incentives that benefit entrepreneurs. The of the DPIIT-recognized startup status, which offers perks like tax exemptions and easier compliance processes, has significantly improved the business environment. This is in stark contrast to the complexities faced by companies incorporated in the US or Singapore, where founders often deal with the burdens of double taxation and complex cross-border compliance.

While incorporating abroad may have once seemed like a path of least resistance for dealing with such issues, the improvements in India’s regulatory framework now make local incorporation not only possible but also highly advantageous.

Aligning Operations with Market Demands

For startups whose target customers, revenue, and operations are based in India, the advantages of local incorporation are clear. Having a business structure that is closely aligned with the operational realities of the Indian market simplifies day-to-day operations. Contracts are easier to execute with local partners, and compliance with government regulations is far more straightforward. Additionally, local businesses often have easier access to government incentives, which can provide a competitive edge for startups in the early stages of growth.

Bahl’s point about market practicality is an important one. By incorporating locally, startups avoid the potential headaches and legal complexities of cross-border operations, making it easier to scale domestically. Expanding globally remains a feasible option, as demonstrated by the success stories of companies like Infosys, which has effectively expanded worldwide while maintaining its Indian roots.

Fact Checker Results

1. Investment Trends:

Regulatory Changes: India has indeed implemented numerous startup-friendly policies, including the DPIIT recognition and tax incentives, making local incorporation more attractive.
Global Expansion: Incorporating in India does not hinder global expansion. Many successful Indian companies, such as Infosys, have expanded internationally while keeping their headquarters in India.

References:

Reported By: https://timesofindia.indiatimes.com/technology/tech-news/shark-tank-indias-kunal-bahl-gives-3-reasons-startups-are-returning-to-india-says-incorporating-in-india-isnt-just-patriotic-it-is-/articleshow/118761995.cms
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