MLM Compliance Checklist India

Registration & set-up

Company or LLP incorporated under Indian lawThe direct selling entity is registered in India, e.g. under the Companies Act, 2013 or LLP Act.
Registered office / physical location in IndiaAt least one physical office address in India, shown on your website and documents.
Declaration of compliance filedSelf-declaration that the entity complies with the Direct Selling Rules, submitted to the Department (DPIIT / Consumer Affairs) as required.
PAN, GST and other tax registrations in placeGST registration, TAN for TDS and other applicable registrations are complete.

Business model & payouts

Income comes from sale of real goods / servicesCommissions are linked to actual product sales, not to simply joining or recruiting people.
No pyramid or money circulation schemeThe plan does not pay for enrolment alone and does not promise returns for bringing in members.
No compulsory joining fee or forced purchaseDirect sellers are not forced to pay entry fees or buy stock they cannot sell.
Payout rules are written, fair and paid on timeCompensation plan, payout dates and deductions are documented and followed.
No false income claimsMarketing and leaders do not promise guaranteed or exaggerated earnings.

Direct sellers

Written agreement with every direct sellerSigned contract covering rights, duties, payouts, termination and conduct.
KYC and unique ID for each direct sellerID, address and PAN verified; a unique identification number issued.
Code of conduct and trainingSellers are trained to give honest product information and identify themselves to customers.
Records of sellers, sales and payouts maintainedUp-to-date records of direct sellers, their sales and commissions are kept.

Consumers & grievances

Grievance officer and nodal officer appointedNames and contact details published; complaints acknowledged and resolved within the time the rules require.
Complaint system on the website / appCustomers and sellers can raise and track complaints online.
Clear return, refund and buy-back policyCooling-off, return and buy-back terms are written and shown to buyers.
Product information, MRP and warranty shownPrice, ingredients / specs, expiry, warranty and seller details are clearly displayed.

Website, data & records

Mandatory disclosures on websiteLegal name, address, contact, grievance officer, plan summary, terms and policies are published.
Privacy policy and data protectionPersonal data of sellers and customers is protected and handled as per the DPDP Act, 2023.
TDS deducted and returns filed on commissionsTDS on commission payouts is deducted, deposited and reported on time.
Accounts and statutory filings up to dateAudited accounts, ROC filings, GST and income-tax returns are filed.

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About India's direct selling rules

The Consumer Protection (Direct Selling) Rules, 2021 apply to direct selling entities and direct sellers offering goods or services to consumers in India. They focus on genuine product sales, transparency for consumers, proper records, and quick grievance redressal, and they prohibit pyramid schemes and money circulation schemes.

Some states have issued their own guidelines too. Read our summary of government rules for MLM companies in India and the step-by-step guide on how to open an MLM company.

MLM Compliance FAQs

Which law regulates MLM companies in India?

Direct selling in India is mainly governed by the Consumer Protection (Direct Selling) Rules, 2021 under the Consumer Protection Act, 2019. Schemes that pay mainly for recruiting people can also fall under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, and some states have their own guidelines.

Is MLM legal in India?

Genuine direct selling of real goods and services is legal when the company follows the Direct Selling Rules. Pyramid schemes and money circulation schemes, where income comes mainly from joining new members rather than product sales, are prohibited.

Is this checklist legal advice?

No. It is a self-assessment to help you prepare. Rules change and depend on your business, so always confirm with a qualified lawyer or chartered accountant.

Can MLMYug software help with compliance?

Yes. Our MLM software keeps direct seller KYC, agreements, unique IDs, product-based payouts, TDS reports and grievance tickets in one place, which makes compliance records much easier to maintain.

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About India's direct selling rules

MLM Compliance FAQs

Which law regulates MLM companies in India?

Is MLM legal in India?

Is this checklist legal advice?

Can MLMYug software help with compliance?

More free tools

MLM Plan Finder

MLM Startup Cost Estimator

Tokenomics Calculator

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