Private Limited Company · Chapter 7
Authorised vs paid-up capital
In short
Authorised capital is the maximum value of shares a company may issue, as stated in its MoA; paid-up capital is what shareholders actually pay in. A PVT. LTD. has no minimum for either.
Authorised capital is the maximum value of shares a company is allowed to issue, as written in its MoA; paid-up capital is the value of shares actually issued and paid for by shareholders. A Private Limited Company has no minimum for either — many start with ₹1 lakh or less paid-up.
"How much capital do I need to start a company?" is one of the most common questions. The short answer: there is no minimum. The useful answer needs these two terms.
What is authorised capital?
Authorised capital is the ceiling — the maximum value of shares the company is allowed to issue. It is written in the MoA. It is not money you have to bring in — it is a limit. If you later want to issue more shares than it allows, you increase it with shareholder approval and a filing (Form SH-7), paying the additional fees and stamp duty.
What is paid-up capital?
Paid-up capital is the value of shares actually issued and paid for by shareholders. It can be modest — many small companies start with ₹1 lakh or less. This money belongs to the company, goes into its bank account, and is used for the business. Within 180 days of incorporation, the company files Form INC-20A declaring that every subscriber has paid for their shares.
Is there a minimum capital for a Private Limited Company?
No. The earlier minimum paid-up capital of ₹1 lakh for private companies was removed by the Companies (Amendment) Act, 2015. Founders decide both numbers based on the business's needs.
Authorised vs paid-up capital: an example
| Amount | |
|---|---|
| Authorised capital | ₹10,00,000 (1,00,000 shares of ₹10) |
| Paid-up capital | ₹1,00,000 (10,000 shares of ₹10) |
| Room to issue more shares without changing MoA | 90,000 shares |
If two founders split the paid-up shares 60:40, one holds 6,000 shares (₹60,000) and the other 4,000 shares (₹40,000).
Authorised vs paid-up capital: the difference at a glance
| Point | Authorised capital | Paid-up capital |
|---|---|---|
| Meaning | Maximum shares the company may issue | Shares actually issued and paid for |
| Where it appears | Capital clause of the MoA | Share records, balance sheet |
| Money brought in? | No — it is only a limit | Yes — deposited in the company's bank account |
| Affects Registration fees and stamp duty? | Yes | Stamp duty on share issue only |
| Rule | Always equal to or more than paid-up capital | Can never exceed authorised capital |
How do you decide the numbers?
- Keep paid-up capital at what the founders can actually bring in, in the proportion they will own.
- Keep authorised capital with some headroom for future share issues — but remember government fees and stamp duty rise with it.
- Face value of ₹10 per share is common and easy to work with.
- Paid-up capital also counts towards the small company limit of ₹10 crore (applicable from 1 December 2025), so very large capital changes the compliance picture.
How does capital affect fees and stamp duty?
Registration fees payable to the MCA and stamp duty on the MoA and AoA depend on authorised capital and on the state of the registered office. For a company incorporated through SPICe+ with authorised capital up to ₹15 lakh, the MCA charges no Registration fee; stamp duty is still payable to the state. Above ₹15 lakh, the MCA fee rises with authorised capital. Check the current fee schedule on the MCA portal and the stamp duty for your state before finalising.
Key takeaways
- No minimum capital is prescribed for a PVT. LTD.
- Authorised = the limit; paid-up = what is actually brought in.
- Leave headroom, but don't inflate authorised capital without reason.
Frequently asked questions
What is the minimum paid-up capital for a Private Limited Company?
There is no minimum paid-up capital for a Private Limited Company in India. The requirement of ₹1 lakh was removed by the Companies (Amendment) Act, 2015. Many companies start with small paid-up capital, such as ₹10,000 or ₹1 lakh, based on what the founders can put in. The amount should be realistic for the business's early needs.
Can paid-up capital be more than authorised capital?
No. Paid-up capital can never exceed authorised capital, because authorised capital is the maximum value of shares the company is allowed to issue under its MoA. If a company wants to issue shares beyond that limit, it must first increase its authorised capital with shareholder approval and file Form SH-7 with the Registrar, paying the extra fees and stamp duty.
How do I increase the authorised capital of a company?
The company passes a resolution of its shareholders, as allowed by its AoA, to alter the capital clause of the MoA. It then files Form SH-7 with the Registrar within 30 days, paying the government fee and the stamp duty on the increase, both of which depend on the amount of increase and the state of the registered office.
Is there any MCA fee for a company with authorised capital up to ₹15 lakh?
The Ministry of Corporate Affairs does not charge a Registration fee for incorporating a company with authorised capital up to ₹15 lakh through SPICe+. Stamp duty on the MoA and AoA is still payable to the state and varies from state to state. Above ₹15 lakh, the MCA fee rises with the amount of authorised capital.
What happens to the paid-up capital money after Registration?
Shareholders deposit their share money into the company's bank account. It belongs to the company, not to the founders, and can be used for business expenses such as rent, salaries and stock. The company must file Form INC-20A within 180 days, declaring that every subscriber has paid for their shares, with the bank statement as proof.
