In India, preschools have become a big business. You will be able to find a preschool with daycare, crche, playschool, and after school activities in every corner. Investing in preschools is a good business to invest in. It is important to note that many preschools have failed to meet ethical criteria in order to fail to contribute towards a successful preschool business. The criteria for starting a preschool in an advanced city will be different than in a minor city.
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India has become the tenth-largest economy in the world by nominal GDP and the third-largest by purchasing power parity in the last few years, as well as witnessing significant social development with rising levels of literacy. A fast growing economy and a favorable environment for businesses to flourish has led to a demand for quality education for all age groups. The Government of India enacted the Right to Education Act in 2009, providing for free and compulsory education for children between 6 and 14 years of age. Section 11 of the act states that the appropriate government may make necessary arrangement for providing free pre-school education for children below the age of 6. The Government of India has signed a convention for implementing Early Childhood care and Education scheme for free playschool education. As per the Law commission Report No.259 Early Childhood Development and Legal Entitlements “The National Early Childhood Care and Education (ECCE) Policy, 2013 envisions a holistic and integrated development of the child with a focus on care and early learning at each sub-stage of the development continuum, in order to promote all-round development.” The ECCE scheme is not yet implemented.
About 16% of the total Indian population are children in the age group of 0-6 years. Due to the increasing demand and rising importance of preschool education for shaping a child's personality and laying the foundation of his/her character has made setting up a Playschool a lucrative business opportunity. The Business structure for starting a play school in India will be the subject of this article.
First and foremost, a Business plan needs to be prepared to take into account all important issues and challenges when setting up a playschool. This will serve as a plan for guiding the next course of action.
It is recommended that a business plan be prepared before starting a preschool. The details should be included in the business plan for the preschool.
- How many children are you going to cater to?
- Business mode includes daycare, preschool, playschool, crche and more.
- How many staff are you going to hire?
- Funds are needed for renting, leasing, vehicles, salaries and equipment.
- It's location and space.
- The outdoor and indoor area.
- The business may be full time or part time.
- There will be a number of children that are catered for.
- The selected area needs to be well maintained, safe for children and adequate to set up the infrastructure. A play school can be started from a residential area.
- Business mode of the playschool can be Full time or part time.
- Investments for infrastructure, supplies, equipment, advertising, and whether a loan needs to be arranged are related to the budget. The BMB Parvarish loan scheme, which requires loan repayment in 5 years and a 12% rate of interest, is one of the schemes the Government has come up with.
- As per the guidelines of the National council for Teacher Education, a preschool teacher must have a Secondary School certificate or its equivalent and aDiploma/Certificate in Pre-school teacher education programme of not less than one year.
- The Montessori Method of education focuses both on social interaction and academics, which is why the curriculum should be taught and followed in the school.
- It is advertising and marketing.
Registrations & Licenses
The Private School Education Acts were enacted by the state government. It is important for the Promoters to know about the State Education Act in order to start a preschool.
For-profit or not-for-profit preschools can be formed. It is advisable to incorporate a private limited company for the purpose of operating the preschool. Section 8 companies or trusts can be registered if the preschool is to be operated as a not-for-profit enterprise.
Loan for Starting Preschool
It's crucial to arrange funds to invest in your preschool. You will need to arrange for funds based on how big or small your preschool is. Banks are willing to lend for the purpose of establishing a preschool, with a special scheme in place for funding day care centers.
Parvarish is a loan for a day care centre.
- To help women establish a daycare centre.
- There will be a cover for Collateral Free.
- 5 years is how long it will take to repay the loan.
- The age of the applicants is 21 and 55.
- 12% rate of interest
Banks usually give loans for items such as building, interior, furniture or equipment. Banks cannot fund operational expenditure such as staff salary, maintenance, rental, utility bill, etc., Therefore, it is important that the promoters draw out a cash flow statement for at least one year and syndicate bank loan for investment in long-term assets (building, furniture, etc.,), which can be funded by the Bank. The equity funds of the promoter would have to support any shortfall in operational expenditure.
Choosing the RightLocation & Infrastructure
It's important to find the right location and adequate space to set up a preschool. The preschool should be located in a child-friendly area and space should be adequate to set up infrastructure accordingly. Ensuring that the location of the school is well maintained and does not have a health risk is very important.
In case the location where the preschool is setup is not an own premise, enter into a long-term lease or rental with the landlord to ensure that the investment in infrastructure and business development is not jeopardized.
Service Tax Applicability for Schools
Compliance with tax regulations needs to be maintained once the school starts. The income tax on the profits of the preschool can be applied based on the type of entity established by the promoter.
Service tax is not applicable for a school because it is included in the negative list. The items on the negative list are exempt from service tax.
- Pre-school education and higher secondary education.
- For the time being in force, education is a part of the curriculum for obtaining a qualification recognized by any law.
- Vocational education is a part of education.
Formations of entity
Profit/ Non- profit enterprise
Preschools can be set up as profit or nonprofit enterprises.
In the case of the playschool being a Profit making enterprise, it is advisable to incorporate it into a private limited company or a Limited Liability Partnership.
In the case of the playschool being a nonprofit enterprise, a Company or a Trust can be registered under Section 8 of the Companies Act 2013, which pertains to a established company ‘for promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object’, provided the profits, if any, or other income is applied for promoting only the objects of the company, and no dividend is paid to its members.
Franchise/ setting up one’s institution
If you want to start a Playschool, you can either choose a franchise or set your own institution.
The company can be a franchise.
In the case of the Franchise, one needs to enter into an agreement with the parent organization and abide by the terms and conditions of the same. In India, there is no specific law on the regulation of franchised businesses. Chapter 5 of theFinance Actdefines ‘franchise’ as “an agreement by which the franchisee is granted representational rights to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trademark, service mark, trade name or logo or any such symbol, as the case may be, is involved.”Franchise arrangement is therefore largely contractual in nature and governed byThe Indian Contract act 1872. Moreover, Laws relating to intellectual property, (includes Copyright, Trademark Act, Patent, etc) Taxation, Sale of Goods, Property Laws, Insurance Law and Labour Laws also apply to franchise transactions.
In the last decade, Franchising in the pre-school sector has grown. Different organizations of Playschools have different criteria mostly in relation to investment, location, training, etc; these along with curriculum and support are usually listed on their websites and can also be availed with the help of various play school consultancies. As compared to setting up one’s own institution, a Franchise involves less risk as they have an already established brand name and offer support in selecting a location for playschool, hiring trained staff, developing good curriculum, marketing, purchasing school equipment, promotions, support in organizing events, etc. However, the franchise agreement needs to be carefully drafted keeping in mind interest of both parties.
Setting Up One’s Own Institution
A new institution can be set up either as a proprietary concern or Partnership or as a company. Where a company needs to be registered with the Ministry of Corporate affairs and is governed byThe Companies Act 2013, A Partnership deed is governed byThe Partnership Act 1932. It is usually easier to form a partnership, as it is cheaper and quick to register.
The advantage of Setting up one’s own institution is that the investment for setting up preschool is lesser as no amount has to be paid as franchise fees or royalty later. Also, there is greater control and opportunities for innovation which would be difficult to exercise in case of a franchise.
There is no specific legislation or certification for setting up a play school in India. However, laws like the Private School Education Actsenacted by the State Government needs to be thoroughly considered as they may require registration and licensing of playschool. Moreover to set up a playschool in an independent premise, the formalities related the Municipal Corporation and education department of the city where the play school is being set up need to be completed and the respective application and registration fee is to be paid. For instance in Maharashtra,The Maharashtra Preschool Centres (Regulation of Admission) Act. 1996provides for compulsory registration of preschools.
Similarly, In Tamil Nadu The District Elementary Educational Officer is the Competent Authority for the approval as per Draft Code Regulations for Play schools 2015
It is proposed that The ‘Early Childhood Care and Education (ECCE) Policy’ along with regularizing the curriculum and learning tools for children, shall also make registration and accreditation of playschools mandatory
The other regulations.
The Shops and Establishments Act , in general, is silent in case of a playschool, that is a play school need not be registered under the said act, however as the regulations are different for every state, the act of the state where the preschool is proposed to be set up needs to be carefully studied and verified in order to reach to any conclusion.
The state act needs to be followed in the case of Labor Laws.
Minimum wages for primary schools are Rs. 80 per day will vary from state to state and are to be paid accordingly. In case of more than 20 employees, the Payment of Bonus Act, 1965, is considered.
It is possible for service tax to be applicable to schools.
1994 service tax is not applicable for a playschool as it is included in the negative list, according to clause (l) of Section 66D of the Finance Act.