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NIC Code for Udyam Registration: Meaning, Guide & Benefits

NIC Code for Udyam Registration: Meaning, Guide & Benefits

In India, the Micro, Small, and Medium Enterprises (MSMEs) sector witnessed rapid growth in recent years. MSMEs are also a major contributor to the country’s social and economic development. The sector has become significant due to its contributions to India’s Gross Domestic Product (GDP) and exports. This sector’s exponential growth has contributed heavily to a rise in entrepreneurship, especially in rural and semi-urban areas of the country.

In light of these developments, classifying different MSMEs has become crucial for data collection, trend analysis, and more. This is where the NIC code comes in. This article delves into NIC codes, different classifications, why they are essential, and more.

NIC Code Full Form and Its Importance in MSME Sector

The NIC code full form is the National Industrial Classification, a system that classifies economic activities and is essential when registering an MSME under Udyam. This classification helps define the core business activity, ensuring that enterprises are properly recognised and compliant for government schemes and support. 

Selecting the correct NIC code means ensuring your business activity is accurately classified, which helps determine eligibility for MSME benefits, government schemes, and easier access to support from a lender. With the right classification, enterprises can access tailored schemes and smoother support from a Lender and government initiatives.

What is the NIC Code?

The NIC code’s full form is the National Industrial Classification code. It is a numerical classification that categorises economic activities into multiple different sectors. Initially developed by the Central Statistical Organisation (CSO), this system makes the organisation of industries more manageable, helps in statistical analysis by sector economic research, and aids in formulating policies. NIC codes are also essential for businesses. They allow MSMEs to register themselves, avail of government benefits, and adhere to compliance regulations.

NIC Code Structure: Digits and Classification Hierarchy  

The NIC Code MSME follows a structured hierarchy designed to classify business activities with clarity and precision. It begins with a broad section identified by a letter, then moves through division, group, class, and subclass levels using digits to narrow down the exact nature of the enterprise. This step by step structure ensures businesses are correctly mapped during Udyam registration and official reporting.

Understanding what NIC number means helps entrepreneurs select the most accurate classification for their operations. Correct coding supports regulatory compliance, improves data consistency, and enables smoother access to MSME schemes, incentives, and financial support from a Lender.

Also,read: A Guide on MSME Loan without Collateral

Types of NIC Code Classifications in India

The National Industrial Classification Code categorises industries in India into different groups. The major ones include:

– Agriculture, forestry, and fishing industries

– Mining and quarrying

–  Manufacturing

– Construction

– Electricity, water, gas, steam, and air conditioning services

– Transport, storage, and communication services

– Wholesale and retail trade; Hotels, Restaurants, and Similar Activities; Repair of Motor Vehicles and Motorcycles;

– Accommodation and food service activities

– Information and communication

– Financial intermediation services, including insurance, real estate, and renting activities

– Administrative and support service activities

– Public administration and defence; Compulsory social security

– Human health and social work

– Arts, entertainment,  and recreation

– Activtiies of extraterritorial organisations and bodies

– Real Estate activities, including Renting of Property for Residential purposes; Retail sale through mail order houses or via the Internet, Business enterprises with architectural/technical services; Business enterprises with medical/healthcare servicing; Retail sales in non-specialised stores



Also,read: Supply Chain Financing: Opening doors for MSMEs


What is the Role of NIC Code in Udyam Registration?

Udyam registration refers to a simple online process that allows individuals to register their MSMEs as legal entities easily. It is a free and paperless process. Once the registration is completed, your business will receive an e-certificate called a Udyam registration certificate. This certificate contains a permanent 16-digit registration number.

NIC codes play a significant role in the Udyam registration process. When registering an MSME, business owners must pick the appropriate NIC code that best encompasses their business’s activities. There are several documents and steps to remember when applying for your MSME registration. These are listed below:

  1. How to Apply for NIC Code for MSME

To  apply for an NIC code to register your MSME, the following steps must be followed:

  1. Visit the Udyam Registration portal online
  1. Fill in the required details, such as your PAN card and Aadhaar card information
  1. Choose the NIC code that best matches your business activities
  1. Submit your application form to generate the NIC code

5. Once processed, you will receive the registration certificate for your MSME with the NIC code

  1. Documents Required for Obtaining NIC Code

The following documents will be necessary when applying for your MSME registration:

– The business owner’s Aadhaar card

– The business’s PAN card

– Proof of the business’s physical address (such as the lease agreement or utility bill)

– Bank statements or cancelled cheques to verify the business’s bank account

– The correct NIC code for your business activity

Also,read:  Government Schemes for Startups and MSMEs in India

Why is NIC Code Important?

The NIC code plays a crucial role in MSME registration and tracking. Some important points include:

1. Accurately classifying business activities

Each NIC code’s meaning is representative of a particular industry or sector. They create a standardised framework within which to report any financial or operational information, which helps assess the contributions of different sectors to the economy. This also allows governments to facilitate interventions for industrial development whenever necessary.

2. Statistical analysis and assessment 

The NIC code is also useful for statistical purposes. For example, it makes it easier to track the growth and development of MSMEs in different sectors, helping governments understand trends and develop initiatives accordingly.

3. Availing government benefits and subsidies

The NIC code is also a deciding factor in whether businesses receive government benefits or subsidies. The government offers several advantages and subsidies for MSMEs, including concessional loans, tax exemptions, subsidies on electricity bills, and more. However, only specific NIC codes are eligible for these benefits, and MSMEs must present them when availing themselves.

4. MSME Database

The government also utilises NIC codes to create a comprehensive and extensive database of all registered MSMEs in the country. This helps the government connect with them and offer information and support services.

Also,read: List Of Businesses That Come Under the MSME Sector

Common Mistakes to Avoid While Choosing Your NIC Code

  • Selecting an incorrect activity: Choosing a code that does not reflect your primary business can lead to misclassification and reduced benefits.
  • Choosing overly broad categories: General codes may ignore the exact nature of operations and affect scheme eligibility.
  • Skipping verification: Not matching your activity with the official list can cause registration errors.
  • Ignoring business changes: Failing to update codes after expansion may limit support from a Lender.

How to Change or Update Your NIC Code After Udyam Registration

Step 1: Visit the official Udyam portal and log in with your credentials, then navigate to the update section to obtain the NIC Code relevant to your new business activity.

Step 2: Review the official NIC list carefully and select the correct classification that matches your current operations.

Step 3: Submit the updated details along with any required documents for verification.

Step 4: Once approved, your revised NIC classification will be reflected in your Udyam profile and facilitate smoother interactions with a Lender.

Conclusion

The National Industrial Classification (NIC) code plays a key role in the country’s growth and organisation of MSMEs. When starting your MSME, it’s important to be aware of all registration requirements, understand code classifications, and have your documents ready.

Another important aspect of setting up your MSME is financing. If you want to set up your own enterprise, consider an MSME loan from Tata Capital. We offer high loan amounts, flexible tenures, competitive business loan interest rates, and much more! For further details, visit the Tata Capital website or download the app today!

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FAQs

What are the 4 classifications of industry?

The four primary classifications of industry are primary (extraction/agriculture), secondary (manufacturing), tertiary (service sector), and sometimes quaternary/quinary (knowledge, research, and culture).

How do I find my NIC code?

To find your MSME code, you must visit msmeregistrar.org. The process can be completed online and is necessary for Udyam registration.

How to get a NIC number?

To get an NIC number, you must visit the Udyam registration portal, enter the necessary details and documents, select the NIC code that suits your business activities, and submit your application.

What does NIC code mean and what is its full form?

The NIC Code full form is National Industrial Classification, used to categorise businesses based on their primary economic activity.

Is NIC code mandatory for Udyam or MSME registration in India?

Yes, selecting a valid NIC code is mandatory to complete Udyam registration and correctly define the nature of business.

How do I find the correct NIC code for my business activity?

You can identify the correct code by matching your core activity with the official NIC list provided on Udyam portals.

Can MSMEs have more than one NIC code?

Yes, MSMEs can select multiple NIC codes if they operate across different business activities or verticals.

How can I change my NIC code after Udyam registration is completed?

You can update the NIC code by logging into the Udyam portal and editing business details under the update option.

What is the difference between NIC code and HS code in business?

NIC codes classify business activities, while HS codes classify goods for taxation, customs, and trade purposes.

Will a wrong NIC code affect my MSME benefits or compliance?

Yes, an incorrect classification may impact scheme eligibility, compliance clarity, and assessments by government bodies or a Lender.

What does NIC number mean on a Udyam registration certificate?

The NIC number means the numerical representation of your registered business activity as per the national classification system.

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