How to Start a Tax Consultancy Firm Legally and Profitably (Complete Step-by-Step Guide)

Starting a tax consultancy firm is one of the best career options for CA students, newly qualified CAs, tax practitioners, and even finance graduates who understand taxation. You do not need a big office, heavy investment, or a strong English background. What you need is clear tax knowledge, legal setup, discipline, and trust-building skills.

What Is a Tax Consultancy Firm?

A tax consultancy firm is a professional service business where you help people and businesses handle their tax work.

Your work mainly includes:

• Filing income tax returns (ITR)
• Handling GST registration and returns
• Doing tax planning
• Replying to notices from Income Tax or GST department
• Helping businesses stay compliant with tax laws

In simple words, clients pay you to take care of their tax tension so that they can focus on their work or business.

Who Can Start a Tax Consultancy Firm?

Many students think that only a CA can start a tax consultancy firm. That is not true.

You can start a tax consultancy firm if you are:

• A Chartered Accountant (CA)
• A CMA or CS (within permitted scope)
• A tax practitioner with experience
• A commerce graduate with good tax knowledge
• Someone who has worked in a CA firm and understands tax filing

Important to understand:
If you are not a CA, you cannot sign audit reports, but you can still earn very well from:

• ITR filing
• GST returns
• Consultancy
• Notice handling (non-representational)

Many non-CAs earn a stable income only from return filing and GST work.

Steps to Start a Tax Consultancy Firm Legally and Profitably

Step 1: Decide What Tax Services You Will Offer

This is where most beginners make mistakes. They try to offer all services at once, which creates confusion and errors.

Best Services to Start With

If you are a beginner, focus on:

• Income tax return filing (salaried people)
• ITR filing for small businesses
• GST registration
• Monthly or quarterly GST returns
• TDS returns
• Basic tax advisory

You do not need audit, litigation, or high-level advisory in the beginning.

Start small. Grow slowly.

Step 2: Choose the Right Legal Structure

You must choose a legal structure for your firm. This decides how your business will run.

Option 1: Sole Proprietorship (Best for Beginners)

• Single owner (you)
• Very easy to start
• Low compliance
• Low cost

This is best for 90% beginners.

Option 2: Partnership Firm

• Two or more partners
• Partnership deed required
• Shared responsibility and profit

Option 3: LLP

• Better professional image
• Limited liability
• Higher compliance and cost

If you are starting alone, sole proprietorship is enough.

Step 3: Legal Registrations Required

You cannot run a professional firm without legal registration.

PAN

• Use your personal PAN or firm PAN
• Mandatory for tax-related work

Bank Account

• Open a current account in firm name
• Keep personal and business money separate

GST Registration

GST registration is required if:

• Your turnover crosses the prescribed limit, or
• Your clients demand GST invoice

Many consultants take GST registration voluntarily to look professional.

Professional Tax (If Applicable)

• Depends on your state
• Mandatory in many states

Step 4: ICAI Rules (For Chartered Accountants)

If you are a CA, you must follow ICAI rules:

• Follow code of conduct
• Use approved trade name (if required)
• Do not advertise aggressively
• Maintain professional ethics

Do not worry. Simple compliance is enough if you work honestly.

Step 5: Office Setup – Keep It Simple

You do not need a fancy office to start a tax consultancy firm.

Office Options

• Home office (most recommended)
• Small rented office
• Shared or co-working space

Basic Things You Need

• Laptop or desktop
• Printer and scanner
• Internet connection
• Comfortable chair and table

Clients care about correct work and trust, not office interiors.

Step 6: Software and Tools You Must Have

Good tools save time and reduce mistakes.

Essential Tools

• Income tax return filing software
• GST return filing software
• Excel (very important)
• PDF editor
• Cloud storage like Google Drive

Start with basic versions. Upgrade only when your work increases.

Step 7: How Much Money Is Required to Start?

You can start a tax consultancy firm with very low investment.

Approximate Cost

• Laptop (if already available): ₹0
• Software: ₹10,000–₹25,000 per year
• Office setup: ₹5,000–₹15,000
• Registration costs: Minimal

You can start within ₹30,000–₹50,000 easily.

Step 8: How to Get Your First Clients

Getting clients is the biggest challenge, but also the easiest if done correctly.

Friends and Family

Tell everyone clearly:

• What services you offer
• How you can help them

Ask for referrals politely.

Local Businesses

Visit:

• Shopkeepers
• Small traders
• Freelancers
• Startups

Explain your service in simple language.

Old Contacts

• Articleship seniors and juniors
• Office colleagues
• Past employers

Online Presence

• Google Business Profile
• Simple one-page website
• WhatsApp Business

Even 10–15 regular clients can give stable income.

Step 9: Pricing Your Tax Services Correctly

Pricing is very important. Do not work for very low fees.

Common Market Fees (Approximate)

• ITR (Salaried): ₹1,000–₹3,000
• ITR (Business): ₹3,000–₹8,000
• GST Registration: ₹1,500–₹3,000
• Monthly GST Returns: ₹2,000–₹6,000
• Notice Reply: ₹3,000 and above

Increase your fees with experience and confidence.

Step 10: How to Make Your Firm Profitable

Focus on Regular Clients

Monthly GST clients give a fixed income.

Offer Annual Packages

Instead of charging per work, offer yearly packages.

Maintain Discipline

• Track deadlines
• Follow up for documents
• Keep payment records

Late filings destroy trust.

Step 11: Build Trust and Reputation

Tax work involves money. Trust is everything.

How to Build Trust

• Be honest with clients
• Do not promise tax savings illegally
• Explain risks clearly
• Keep client data safe
• Respond on time

One satisfied client brings many referrals.

Step 12: Common Mistakes to Avoid

• Starting without proper tax knowledge
• Ignoring legal registration
• Charging very low fees
• Missing deadlines
• Depending on one client only
• Not upgrading skills

Avoid these mistakes to survive long-term.

Step 13: When and How to Grow Your Firm

After 1–2 years:

• Hire a junior or assistant
• Add advisory services
• Shift to LLP
• Open a second office

Grow only when your systems are strong.

Final Thoughts

Starting a tax consultancy firm is not risky, but it needs patience and discipline. You will not become rich in one month, but within one or two years, you can build a stable income and respected professional identity.

If you are consistent, honest, and client-focused, a tax consultancy firm can give you long-term financial security and independence.