For years, many Indian startup founders believed that incorporating their businesses in the US or Singapore made it easier to raise venture capital, manage international operations, and plan for exits. However, in 2025, this perception is rapidly changing as more startups recognize the advantages of incorporating in India.Kunal Bahl, co-founder and former CEO of Snapdeal, recently shared insights on why Indian incorporation is now the smartest choice for startups. As per the Hurun Global Unicorn Index 2024, India recorded its first decline in unicorn numbers since 2017, with 67 unicorns in 2023, compared to 68 in 2022. While the US and China continue to dominate with 703 and 340 unicorns, respectively, India remains one of the fastest-growing startup ecosystems in the world.Despite the slight dip, India's startup landscape is evolving, and local incorporation offers significant advantages in funding, taxation, compliance, and IPO potential.
 

Key Reasons to Incorporate Startups in India

1. Stronger Venture Capital (VC) Funding for Indian Entities

A major reason for Indian startups incorporating overseas was the ease of attracting venture capital (VC) funding. However, this is no longer a necessity in 2025.Bahl points out that "nearly all VCs are now funding Indian entities." Startups in high-growth sectors such as DeepTech, artificial intelligence (AI), and SaaS no longer need to register overseas to secure investments. Indian investors are now actively backing local startups, making it easier to raise funds from within the country.Additionally, Indian Alternative Investment Funds (AIFs), regulated by SEBI, require special approvals before investing in overseas startups. If a startup is incorporated abroad, it significantly reduces its chances of receiving Indian VC capital, as many institutional investors have restrictions on investing in foreign entities.
 

2. Startup-Friendly Tax Policies and Simplified Compliance

Incorporating overseas often leads to double taxation and complex legal requirements. India has introduced startup-friendly tax policies through the Department for Promotion of Industry and Internal Trade (DPIIT).

By incorporating in India, startups can avoid:

• Double taxation issues that arise from cross-border earnings
• High legal and regulatory costs associated with maintaining a foreign entity
• Restrictions on repatriating money back to India

Additionally, compliance requirements in India have improved, making it easier for startups to register and scale their operations without unnecessary legal complications.
 

3. India Is the Biggest Market for Indian Startups

If a startup’s core customers, revenue, and operations are based in India, incorporating locally makes practical sense. A domestic company can seamlessly handle:

• Government contracts and incentives
• Local tax benefits and compliance
• Easier transactions with Indian banks and investors

As Bahl explains, Indian startups do not need an overseas company to serve global markets. Instead, they can set up an international subsidiary just like Infosys and other Indian IT giants have done.
 

4. Success of Indian IPOs

Previously, many Indian startups considered listing on foreign stock exchanges like NASDAQ for better valuation and liquidity. However, the success of companies like Zomato, Nykaa, and Unicommerce has shown that Indian IPOs are now a viable exit strategy for startups.

For startups planning a public offering, incorporating in India from the beginning avoids the expensive and complicated process of “flipping” ownership back to India later.
 

5. Avoiding Overseas Regulatory Issues

While setting up a company in the US or Singapore may seem straightforward initially, long-term challenges often arise. These include:

• High legal costs for maintaining a foreign entity
• Complex compliance and taxation issues
• Difficulties in transferring profits back to India

By incorporating in India, startups avoid foreign regulatory hurdles and can focus entirely on scaling their business.
 

6. Indian Angel Investors Face Restrictions in Overseas Investments

Indian angel investors often prefer investing in locally registered startups due to the RBI’s Liberalised Remittance Scheme (LRS) restrictions. This makes it difficult for Indian angel investors to fund startups incorporated abroad.By choosing local incorporation, startups can attract Indian angel investors without facing LRS limitations.
 

7. Less Competition for Capital

When startups incorporate in the US, they compete with startups from across the globe for funding from US-based VCs. However, in India, they primarily compete with other Indian startups, increasing their chances of securing investments from domestic venture capitalists.Bahl emphasizes that fundraising becomes significantly harder when a startup is incorporated overseas, as they must prove themselves against well-established international companies.
 

The Future of Startup Incorporation in India

The Indian startup ecosystem is undergoing a transformation, with government support, local VC backing, and successful IPOs driving growth. With the ease of doing business improving and regulatory challenges reducing, more startups are realizing that incorporating in India is the best strategic move in 2025..For founders looking to scale globally, setting up international subsidiaries while keeping the parent company in India is the most efficient approach. As venture capital continues to strengthen in India, incorporating locally provides startups with better funding opportunities, regulatory ease, and long-term scalability.With these factors in mind, the notion that Indian startups must incorporate in Singapore or the US to succeed is now outdated. The future of India's startup success lies in its homegrown ecosystem, which is stronger than ever.