Buyer Guides · 7 MIN
How to choose a software company in India: a buyer's checklist
Verify the legal entity, GST status, IP assignment, payment terms and delivery process before you sign with an Indian software company. A checklist for local and foreign buyers.
To choose a software company in India, verify the legal entity on the Ministry of Corporate Affairs register, confirm its GST registration, get intellectual property assigned to you in writing, test the team on a small real task, and agree payment milestones tied to working software. Brand names and portfolios matter less than these five checks.
- Check that the vendor is a registered company or LLP, and that its GSTIN is active on the government taxpayer search.
- Under Indian copyright law, work is not automatically yours just because you paid for it, so insist on a written assignment.
- An assignment that omits a period or territory can be read narrowly, so name both.
- Pay against working software, not against hours or time elapsed.
- Foreign buyers pay no Indian GST on exported services when the vendor holds a valid Letter of Undertaking, and Indian buyers pay 18 percent GST on software services.
- Nactore is an AI-native product engineering team in Mumbai that builds, ships and supports products under written IP assignment, scoped to each client.
How do you verify that an Indian software company is real?
Start with public records, because they take ten minutes and filter out a surprising number of pitches. In India a software business is usually a private limited company, a limited liability partnership (LLP), or occasionally a proprietorship.
- Company or LLP registration. Look up the entity by name or CIN or LLPIN in the Ministry of Corporate Affairs Master Data Services service. Confirm status is active and check the incorporation date and registered address.
- GST registration. The GST portal has a public taxpayer search. Confirm the GSTIN is active and that the legal name matches the contract. An Indian buyer who pays GST to a vendor with a cancelled registration may lose the input tax credit.
- Who signs. Contracts should be signed by a director or designated partner, and the signatory should match the registry.
- Real people. Ask to meet the engineers who will do the work, not only the sales lead. Check public work histories.
A vendor that resists any of these checks has told you what you need to know.
What should the contract say about who owns the code?
This is the check most foreign buyers skip, and it matters more in India than in many countries. Under the Indian Copyright Act, 1957, the first owner of a work is generally its author. Work by a company's own employees usually belongs to the employer, but work by a contractor or a separate firm does not automatically pass to the client because you paid the invoice.
Under Section 19 of that Act, an assignment is valid only if it is in writing and signed by the assignor or an authorised agent. Two default rules deserve attention. If the assignment does not state a period, it is deemed to be five years from the date of assignment. If it does not state a territory, it is presumed to extend within India. A contract that says "all rights assigned" without those details can leave a global product with a weak claim.
So ask for a clause that assigns all rights in the deliverables to you, worldwide and in perpetuity, effective on payment, and for the vendor to get matching assignments from its own employees and subcontractors. Also ask what open source and third-party components are in the build. For related terms, see IP and data terms for AI projects.
What does it cost in tax and how are you invoiced?
The tax treatment depends on which side of the border you sit on.
| Situation | What to expect |
|---|---|
| Indian buyer, Indian vendor | The vendor charges GST on software services, normally at 18 percent. You deduct tax at source (TDS) on fees where the Income-tax Act requires it, and pay the net amount. |
| Foreign buyer, Indian vendor with LUT | The vendor invoices without Indian GST as an export of services and you pay the invoice amount in foreign currency. |
| Foreign buyer, vendor without LUT | The vendor may charge IGST and later claim a refund, which raises your cost. Ask early. |
Read India's GST LUT for export of services for the foreign-client mechanics. Tax rates and TDS thresholds change, so confirm the current position with your chartered accountant before you sign.
How do you test an Indian software team before committing?
Portfolios show what a team has shipped for others. They do not show how the team will work with you. Better evidence comes from a small, paid, real task.
- A scoped trial. Pick one bounded feature or audit with clear acceptance criteria and see how the team asks questions, estimates and reports.
- A code or architecture review. Ask them to explain a past design decision and what they would change.
- A communication check. Do they send written updates without being chased? Do they disagree with you when you are wrong?
- A reference call. Speak to a client in your country or industry, and ask what went wrong and how it was handled.
To see which signals matter most when hiring for AI work, read red flags when hiring AI developers.
How should you structure payments?
Tie money to working software. Time-based billing is fine for open-ended support, but for a build it moves the risk to you.
- Milestones. Pay in stages, each linked to something you can run and test.
- Acceptance. Define how long you have to test a delivery and what counts as a defect.
- Holdback. Keep a final share until handover of source code, documentation and credentials.
- Currency and proof. Foreign buyers pay by international bank transfer, and the vendor's bank issues an inward remittance advice that the vendor needs for its own records. See paying an Indian software vendor from abroad.
Ask the vendor to put a named senior engineer on your account in the contract. Many disputes start when the people who sold the project are not the people who build it.
What are the real trade-offs of working with an Indian team?
An honest buyer's guide names them. The upside is deep engineering talent, strong experience with global clients and a working day that overlaps with many time zones. The costs are real too.
- Time zone. India Standard Time is UTC+5:30 with no daylight saving, so overlap with the US shifts twice a year as the US changes its clocks.
- Management effort. You need clear written specifications and a weekly rhythm. A team that is far away cannot read your mind.
- Enforcement. Disputes with an Indian counterparty are easier to settle through arbitration than through foreign courts, so choose the seat and rules in the contract.
- Variation in quality. India has excellent teams and weak ones. The checks above exist to tell them apart.
Frequently asked questions
Is a private limited company better than an LLP as a vendor?
Neither is a quality signal on its own. Both are registered legal entities that can sign contracts and issue GST invoices. What matters is that the entity is active, the signatory is authorized and the contract names the right party.
Do I need an Indian lawyer to contract with an Indian software company?
For a small project a clear template and a chartered accountant may be enough. For a long engagement, IP-heavy work or regulated data, a local lawyer is worth the cost. This article is general information, not legal advice.
Should I choose the cheapest quote?
Rarely. The cheapest quote often leaves out testing, documentation or the senior review that prevents rework. Compare what is included, not only the number.
How do I know the team is not just reselling to someone else?
Ask who writes the code, where they sit and whether any part is subcontracted. Put the answer in the contract, along with a right to approve subcontractors.
Choose on evidence
A good Indian software company will welcome these checks. Verify the entity, secure the IP in writing, test the team on a real task and pay for working software. For a view on a Mumbai-based option, see the best software development company in Mumbai.
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