Starting an IT or Software Company in Kerala: Registration and Compliance

Thiruvananthapuram and Kochi have a large and growing technology sector, from established firms in Technopark and Infopark to small product startups and freelance teams serving clients abroad. Setting up an IT or software business is simpler than most industries in terms of licences, but the choices made at the start on structure, export compliance and intellectual property have lasting effects.

This article sets out the registrations and points that usually apply to an IT, software or SaaS business in Kerala.

Choosing the structure

Structure	Suited to
Private limited company	Product companies, startups planning to raise investment, and businesses that will grant ESOPs
LLP	Service firms and consultancies with a few partners and no plans for equity investors
Proprietorship	Individual freelancers in the early stage

Most technology businesses that expect investors choose a private limited company from the start, since investors invest in shares and converting later adds cost. See company registration in Kerala and LLP registration in Kerala.

Registrations that usually apply

• Incorporation of the company or LLP, with PAN and TAN
• GST registration, once turnover crosses the threshold or if required by clients; see GST registration
• Shops and establishments registration under the Kerala Shops and Commercial Establishments Act, 1960, and professional tax
• Udyam registration as an MSME
• DPIIT startup recognition and Kerala Startup Mission registration, where the business is eligible; see Kerala Startup Mission and startup recognition

Export of software services

• Services supplied to clients abroad, with payment received in convertible foreign exchange, generally qualify as export of services and are zero-rated under GST.
• Exports can be made without payment of IGST under a Letter of Undertaking (LUT), filed online each financial year.
• Export proceeds must be realised within the time allowed under FEMA, and banks issue the foreign inward remittance details used as proof.
• Units in Technopark, Infopark or other SEZs, or registered with STPI, have their own approvals and reporting.

Intellectual property and contracts

• Ensure that code and other work created by founders, employees and freelancers is assigned to the company in writing.
• Register the brand name and logo as a trademark. See trademark registration.
• Use written client agreements covering scope, acceptance, payment, IP ownership and limitation of liability. See indemnity and limitation of liability.
• Where the business handles personal data, plan for the obligations under the Digital Personal Data Protection Act, 2023.

Frequently asked questions

Can foreign clients or investors invest in the company?

Yes. Foreign investment in IT and software is permitted under the automatic route, subject to FEMA pricing and reporting. See FDI in private limited companies.

Is a separate licence needed to develop software?

No specific licence is required for software development. The registrations above, and any approvals for SEZ or STPI units, are usually sufficient.

Can an IT company work from a residence?

Yes, with the address proof and owner’s no-objection for the registered office. Local body rules and the terms of any lease should be checked.

ചുരുക്കം (Summary in Malayalam)

കേരളത്തിൽ IT അല്ലെങ്കിൽ സോഫ്റ്റ്വെയർ ബിസിനസ് തുടങ്ങാൻ നിക്ഷേപം പ്രതീക്ഷിക്കുന്നുവെങ്കിൽ പ്രൈവറ്റ് ലിമിറ്റഡ് കമ്പനിയാണ് ഉചിതം; സേവന സ്ഥാപനങ്ങൾക്ക് LLP മതിയാകും. GST, ഷോപ്സ് ആൻഡ് എസ്റ്റാബ്ലിഷ്മെന്റ്സ് രജിസ്ട്രേഷൻ, പ്രൊഫഷണൽ ടാക്സ്, ഉദ്യം, അർഹതയുണ്ടെങ്കിൽ സ്റ്റാർട്ടപ്പ് അംഗീകാരം എന്നിവ വേണം. വിദേശ ക്ലയന്റുകൾക്കുള്ള സേവനം കയറ്റുമതിയായി GST-യിൽ സീറോ റേറ്റഡ് ആണ്; LUT ഫയൽ ചെയ്യണം. സ്ഥാപകരും ജീവനക്കാരും വികസിപ്പിക്കുന്ന കോഡിന്റെ ഉടമസ്ഥാവകാശം കമ്പനിക്ക് എഴുതി നൽകണം.

This article gives a general overview of setting up a technology business in Kerala. Laws, procedures and thresholds are revised from time to time; for accurate and current requirements, refer to the laws and the authorities concerned. The article is not advice on any particular case.