Authorised vs Paid-Up Capital: the Difference That Decides Your Stamp Duty

Two numbers sit in the capital clause of every company's memorandum, and picking the wrong one costs real money on day one. Authorised capital is the ceiling. Paid-up capital is the money actually in. The Registrar's fee and your state stamp duty follow the ceiling, not the money — which is why the money mechanics of a private limited company deserve ten minutes before SPICe+ is filed, not after.

The two definitions, in the Act's own words

Section 2(8) of the Companies Act, 2013 defines authorised capital — the Act also calls it nominal capital — as "such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company". It is a permission, written into the memorandum of association (MoA). Nothing about it says any money has moved.

Section 2(64) defines paid-up share capital as the aggregate amount credited as paid-up, equal to the amount actually received in respect of shares issued. This one is about money that has genuinely arrived — the subscription amount your shareholders paid into the company against the shares allotted to them.

Picture a water tank. The authorised capital is the size of the tank you are permitted to build. The paid-up capital is the water actually in it. You may build a 10,000-litre tank and fill 1,000 litres. You may never fill it past the rim — paid-up capital can equal authorised capital, but it can never cross it.

Two neighbours complete the picture. Issued capital is the portion of the authorised figure the company has actually offered as shares, and subscribed capital is the portion investors have agreed to take. In a small founder-owned company the four numbers often collapse into two in practice: you authorise a round figure, and the founders subscribe and pay for part of it at incorporation.

There is no minimum paid-up capital

Founders of a certain vintage still believe a private limited company needs ₹1 lakh of paid-up capital before it can exist. That rule died a decade ago. The Companies (Amendment) Act, 2015 removed the minimum paid-up capital requirement altogether, for private and public companies alike.

So the paid-up figure is your choice, driven by what the business honestly needs in its bank account at the start. ₹10,000 of paid-up capital is lawful. So is ₹1 lakh. What is not sensible is paying in a large sum purely so the MCA master data looks impressive — banks and investors read your financials, not your incorporation-day capital, and money put in as share capital is not casually withdrawn later.

The subscription money is declared after incorporation in Form INC-20A, the commencement declaration due within 180 days, which confirms the subscribers have paid for the shares they agreed to take. Our note on the INC-20A due date and penalty covers that filing and what a delay costs.

Cost one: the MCA fee follows authorised capital

At incorporation, the MCA's own filing fee is the friendly part. Rule 38(2) of the Companies (Incorporation) Rules, 2014 — inserted by G.S.R. 180(E) with effect from March 2019 — charges no fee for incorporating a company whose authorised capital does not exceed ₹15 lakh. Most new companies sit under that line and pay the MCA nothing for the SPICe+ filing itself.

Above ₹15 lakh, and whenever the fee table is applied, the charge follows the Table of Fees under Rule 12 of the Companies (Registration Offices and Fees) Rules, 2014. The structure that matters:

Read the last row again if you plan a large authorised figure at birth. The ₹36,000 base is not a typo — it is the table's price for stepping past ₹10 lakh outside the small-company scale, before the per-slab additions begin. The zero-fee window at incorporation up to ₹15 lakh softens this for SPICe+ filings, but the same table returns with full force when you increase capital later, which is the next cost founders forget.

Cost two: stamp duty follows authorised capital — and your state

Stamp duty on the MoA and AoA is a state charge. The Union does not set it, the MCA does not set it, and no all-India table exists. The state of your registered office sets it, and in most states the duty is computed on the authorised capital — because the MoA's capital clause is the document being stamped.

Three verified examples show how wide the spread runs. All three are for a company at incorporation:

Now stretch the authorised figure and watch Karnataka. At ₹1 crore of authorised capital, the AoA duty alone is ten slabs of ₹5,000 — ₹50,000 — plus ₹5,000 on the MoA. The same company in West Bengal still pays ₹360 in total, because its duty never looks at the capital figure. Delhi at ₹1 crore pays ₹200 plus 0.15% of ₹1 crore, which is ₹15,200 in total. Same company, same business, three very different cheques — decided entirely by the registered office state and the number you wrote in the capital clause.

Two cautions. State schedules change — Karnataka raised its rates in February 2024 — and SPICe+ computes the duty at filing from the schedule then in force; if the portal's figure differs from any table, the portal's figure is what you pay. And choose your registered office for genuine business reasons; the duty saving from a paper address in a cheap state evaporates the first time a notice or a bank asks you to operate from it.

Raising the ceiling later: SH-7

Authorised capital is not a life sentence. When a funding round or a large allotment needs headroom, Section 61 lets a company limited by shares increase its authorised capital by ordinary resolution, provided its articles allow the alteration — if they do not, the articles are altered first. Section 64 then requires notice of the increase to the Registrar in Form SH-7 within 30 days of the resolution.

SH-7 is not free, and this is where the fee table returns. Under item 3 of the same Table of Fees, the charge on an increase is the difference between the fee payable on the new authorised capital and the fee payable on the existing authorised capital, both worked out at the rates in force on the filing date. A jump from ₹10 lakh to ₹1 crore is priced as a jump, in full. Delay makes it worse: the table charges additional fee at 2.5% per month on the increase fee for a delay of up to six months, and 3% per month beyond that. Section 64(2) separately sets a penalty of ₹500 for every day the notice is late, capped at ₹5 lakh for the company and ₹1 lakh for the officer in default.

Stamp duty on the increase is charged by some states on the increased amount and not by others — West Bengal, for instance, charges nothing on an SH-7 increase, while Delhi charges 0.15% of the increase, capped at ₹25 lakh. There is no shortcut around checking your own state's article before you pass the resolution.

The documents side of incorporation — what each founder hands over before any of these numbers are filed — is set out in our checklist of documents required for private limited company registration.

How much authorised capital should you actually declare?

My advice to most founders is dull and it works. Authorise a little more than your near-term plan needs — for most early companies, somewhere between ₹5 lakh and ₹15 lakh — and pay up only what the business will use in its first months. Staying at or under ₹15 lakh keeps the MCA incorporation fee at nil. A modest ceiling keeps the stamp duty modest in the percentage and slab states. And when an investor's cheque genuinely needs a bigger ceiling, SH-7 raises it in a routine filing whose cost you can compute in advance from the difference rule.

The vanity version — ₹1 crore authorised on day one "to look serious" — buys nothing. Investors check the cap table and the bank balance. Nobody sane checks authorised capital for seriousness, but the stamp duty is paid in real money either way.

If you want the numbers run for your state and your planned capital before you file, our private limited company registration service works out the MCA fee and the stamp duty on your exact figures first, in writing, before the SPICe+ goes in. Tell us the state and the ceiling you have in mind, and we will tell you what that ceiling costs.