Doing Business in India 2026
Complete Compliance Guide
All six reform areas · Gratuity impact calculator · Action checklist · 18 pages
A Country Mid-Transformation
India's ease-of-doing-business story is genuinely impressive in trajectory — while still being a work-in-progress in execution. India improved its World Bank Doing Business ranking from 142nd in 2014 to 63rd in 2020, one of the fastest climbs globally (the World Bank has since discontinued that specific report). As of late 2025, more than 47,000 compliances have been reduced — 16,108 simplified, 22,287 digitised, 4,458 decriminalised, and 4,270 redundant compliances removed.
The number of active companies has nearly doubled — from 9.52 lakh as of March 2014 to 18.51 lakh as of March 2025. The government's reform strategy rests on three pillars: digitisation, decriminalisation, and consolidation — and each has delivered measurable wins alongside fresh complications.
Digitisation
SPICe+, AGILE PRO-S, C-PACE for company exits, and a centralised processing centre. Registration timelines have dropped dramatically. But state-level portals remain inconsistent.
Decriminalisation
Jan Vishwas Act 2023 decriminalised 183 provisions across 42 Acts. Jan Vishwas Bill 2025 proposes 355 more amendments. A genuine win for business owners facing criminal liability for paperwork lapses.
Consolidation
29 labour laws replaced by 4 Codes. GST slab rationalisation. Income Tax Bill 2025 streamlining. But transition ambiguities in all three areas are creating fresh compliance burden right now.
Structural Gaps
Land acquisition, state-level variance, judicial delays, and the EPF outlier (the 1952 Act still runs alongside new Labour Codes) remain genuinely hard to solve. Centre-State friction persists.
The Labour Codes & The Gratuity Bomb
On November 21, 2025, India implemented a historic overhaul of its labour law architecture. The four Labour Codes — Industrial Relations Code (2020), Occupational Safety, Health and Working Conditions Code (2020), Code on Wages (2019), and Code on Social Security (2020) — became enforceable, replacing 29 older labour statutes.
Since the Labour Codes became effective on November 21, 2025, any actuarial valuation with a measurement date on or after this date must incorporate these regulatory changes. Companies preparing March 31, 2026 financial statements must account for the gratuity impact now — under Ind AS 19, the entire increase must be recognised in P&L as Past Service Cost in the period when the law becomes effective.
There are two compounding triggers that create what we at our CA desk are calling "the gratuity bomb":
| Parameter | Pre-Nov 2025 (Old Law) | Post-Nov 2025 (Labour Codes) |
|---|---|---|
| Gratuity eligibility | 5 years continuous service | 1 year (for fixed-term employees) |
| Wage base for gratuity | Often 30–40% of CTC (basic) | Minimum 50% of total remuneration |
| Gig / platform workers | Not covered | Social security coverage mandated |
| Accounting treatment | Gradual provision | Immediate P&L impact (Past Service Cost) |
| State-specific rules | Central law applied uniformly | State rules awaited; interim ambiguity |
| EPF Act | Single framework | EPF 1952 Act still in force — dual compliance |
While the Codes are effective from November 21, 2025, final Central and State rules are yet to be fully notified. Draft Central Rules were published December 30, 2025 with a 45-day comment window. A company operating across Maharashtra, Tamil Nadu, and Telangana is effectively navigating three different compliance regimes simultaneously. How gratuity is computed for employees with multiple sequential fixed-term stints also remains unclear.
Gig economy note: Gig workers, platform workers, and contract staff now fall under social security protection. Expect to contribute 1–2% of annual turnover (capped at 5% of amounts paid to these workers) to their social security fund. Many tech companies and logistics platforms had not provisioned for this at all.
GST 2.0 and the Income Tax Bill 2025
India's GST Council introduced landmark reforms effective September 22, 2025, consolidating the tax structure into a simplified two-slab model of 5% and 18%, with a 40% demerit rate for tobacco and luxury goods. The elimination of the 12% tax slab addresses one of the most enduring areas of interpretive ambiguity in the GST regime.
GST 2.0 Win: Slab Simplification
The 12% slab elimination removes a persistent classification grey area. Businesses no longer need to argue whether goods fall at 12% or 18% — a source of enormous litigation and demand notices.
ITC System: Still a Pain Point
Input Tax Credit remains the biggest operational challenge. Courts have had to repeatedly intervene — whether a building qualifies as "plant," whether GSTR-3B returns can be revised. Practical resolution lags policy intent.
A backlog of over 40,000 pending cases built up because the GST Appellate Tribunal was postponed across several jurisdictions. The Tribunal is now being operationalised, but businesses have been waiting years for resolution on ITC reversals, demand notices, and interest disputes. Expect proceedings to accelerate — and to require active representation.
The Income Tax Bill 2025 was tabled in Parliament in February 2025. Its three guiding principles: textual and structural simplification, improved clarity and coherence, and no major policy changes — ensuring continuity. This is primarily a housekeeping reform, not a rate change. But the drafting clarity it brings should reduce litigation substantially over the next 3–5 years as it is tested in courts.
"GST 2.0 is the first genuinely consumer-friendly rationalisation of indirect tax in India since the original GST launch in 2017. The Income Tax Bill 2025 does for direct tax what the GST consolidation aimed to do — clear the jungle of cross-references and exceptions that kept every filing season unpredictable."
The DPDP Act — India's Long-Awaited Data Law Is Finally Live
The Digital Personal Data Protection Act (DPDP Act) received presidential assent in August 2023 but remained inactive for over two years as the government delayed implementation rules — creating a policy vacuum. India's Ministry of Electronics and Information Technology finally finalised the DPDP rules on November 13, 2025, ending a more than two-year wait.
Some rules took immediate effect, including those for establishing the Data Protection Board. Rules on consent managers apply 12 months after finalisation, and the remainder after 18 months. This rolling implementation gives businesses a compliance runway — but not an excuse to delay.
The DPDP Act does not impose a general restriction on cross-border data transfers, but it empowers the Central Government to notify countries to which transfers may be restricted. For IT/BPO companies, this is a board-level uncertainty that must be actively monitored. Sector-specific mandates are likely to follow.
Structural Bottlenecks That Reforms Haven't Reached
Despite all the reform momentum, several structural issues remain genuinely difficult — and materially affect investment decisions, particularly in manufacturing and large-scale infrastructure:
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Land Acquisition — The Land Acquisition Act 2013 remains complex, with social impact assessments, consent requirements, and compensation frameworks that vary significantly by state and land type. The Task Force on Compliance Reduction has identified Land Use as a priority area, but substantive changes are still awaited.
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State-Level Variance — Possibly the single most frustrating reality. A company's compliance burden in Rajasthan versus Tamil Nadu versus West Bengal can differ enormously in practice — on labour enforcement, land, building approvals, and utility connections — even when central laws appear harmonised.
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Judicial Delays in Contract Enforcement — India ranks poorly globally on resolving commercial disputes through courts, with average timelines running into years. The NCLT system for insolvency has improved dramatically under IBC but still faces capacity constraints.
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The EPF Outlier — In an ironic footnote to the Labour Code reform, the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 has not yet been repealed. As a result, the existing EPF Act and its provisions continue in force alongside the new Labour Codes — creating a dual compliance obligation in a reform exercise meant to eliminate exactly that kind of overlap.
Company Formation, Mergers & Cross-Border Restructuring
Registration has been dramatically streamlined. The Central Registration Centre has been operating since 2016 with SPICe+ and AGILE PRO-S enabling multiple registrations at a single point. The Centre for Processing Accelerated Corporate Exit (C-PACE), set up in 2023, allows time-bound striking off. The Central Processing Centre launched in 2024 handles centralised processing of select forms.
On restructuring: in August 2024, the government permitted equity swaps between Indian and foreign companies. September 2024 saw rules for fast-tracking inbound cross-border mergers of foreign holding companies with their wholly-owned Indian subsidiaries. The Ministry of Corporate Affairs in April 2025 proposed further amendments to streamline restructuring and expand the scope of fast-track mergers.
The Jan Vishwas (Amendment of Provisions) Act 2023 decriminalised 183 provisions across 42 Acts. The Jan Vishwas Bill 2025, before a Select Committee, proposes amendments to 355 further provisions — 288 for decriminalisation of business-related offences, 67 to facilitate ease of living. Environmental clearances under the Environment Protection Act and related legislation have also been rationalised from criminal to civil liability.
The Bottom Line for CFOs and Business Owners
India today is a genuinely improving environment for business — the digital infrastructure is world-class, startup support is robust, and the intent of reforms is clearly pro-enterprise. But the execution gap between central policy design and state-level ground reality, combined with transition ambiguities in landmark reforms like the Labour Codes and DPDP Act, means that compliance teams and CFOs are carrying higher uncertainty risk than the headline reform numbers suggest.
The gratuity restatement issue is the sharpest live example: a reform passed in 2020, implemented in November 2025, with rules still being finalised in early 2026 — forcing companies to book a 25–50% jump in a major balance sheet liability based on draft guidance and actuarial best estimates.
"The gap between what India's reform architecture looks like on paper and what compliance officers and CFOs experience on the ground is the central tension of doing business here in 2026. That gap is narrowing — but it has not closed."
For companies seeking immediate action steps, download our free PDF booklet below — it includes a six-area compliance checklist, a gratuity liability estimation framework, and our CA team's recommendations for approaching regulatory transition periods with confidence rather than paralysis.
Doing Business in India 2026 — Complete Guide
Labour Codes · GST 2.0 · DPDP · Corporate Law · Gratuity Action Checklist · 18 pages
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