The Short Answer: Yes, MLM is Legal in India.
Multi-Level Marketing (MLM) and Direct Selling are 100% legal in India, provided they comply with the Consumer Protection (Direct Selling) Rules, 2021 and do not fall under the definition of a "Money Circulation Scheme" as per the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
Key Legal Requirements for 2025
To operate a legal MLM business in India in 2025, companies must adhere to the following guidelines:
- Product-Based Business: The company must have tangible products or services. Money circulation schemes where revenue is generated solely from recruitment are illegal.
- Registered Entity: The company must be a registered legal entity (Pvt Ltd, LLP, etc.) in India.
- No Pyramid Schemes: The compensation plan must be based on product sales, not just on enrolling new members.
- Cooling-off Period: Companies must offer a cooling-off period to new distributors to cancel their contract and receive a refund.
- Grievance Redressal: A dedicated grievance redressal mechanism must be in place to handle consumer complaints.
- Written Contract: There must be a written contract between the direct seller and the direct selling entity.
What is Illegal? (Pyramid Schemes)
Any scheme that asks for money primarily for enrolling other members, without any real product or service sales, is considered a Pyramid Scheme or Money Circulation Scheme. These are strictly banned in India under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
Documents Required to Start an MLM Company
- Certificate of Incorporation (CIN)
- GST Registration Certificate
- PAN Card and TAN Number
- Memorandum of Association (MOA) & Articles of Association (AOA)
- Bank Account Details
- Terms & Conditions, Privacy Policy, and Refund Policy
Why Choose AlbaTech for Legal MLM Software?
At AlbaTech, we ensure that our MLM software is designed to be compliant with Indian Direct Selling guidelines. Our software includes features like:
- GST-compliant invoicing
- TDS deduction and reporting
- KYC management for distributors
- E-wallet and payout management with audit trails
- Product inventory and order management
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