Independent Director explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 5 says what skills and relationships an independent director must have, and rule 6 requires every independent director, and every person who intends to become one, to register in the databank kept by the institute and, unless exempt, to pass an online proficiency self-assessment test. This article is as amended up to G.S.R. 943(E) dated 31 December 2025 per the MCA e-book. Later amendments should be checked before you rely on it. If you are lining up an independent director, see our appointment of director service.
Every independent director, and every individual intending to be appointed as one, must apply online to the institute for inclusion in the data bank, for one year, five years or life-time, and renew within thirty days of expiry. Unless exempt, the person must pass the online proficiency self-assessment test within two years of inclusion, with a score of not less than fifty per cent. A name removed for failing the test can be restored on payment of one thousand rupees.
Rule 5: qualifications of an independent director
Rule 5(1) requires appropriate skills, experience and knowledge in one or more of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company's business.
Rule 5(2) deals with relatives of an independent director, for the purposes of section 149(6)(d)(ii) and (iii). None of them may (i) be indebted to the company, its holding, subsidiary or associate company, or their promoters or directors; or (ii) have given a guarantee or provided any security in connection with the indebtedness of a third person to the company, its holding, subsidiary or associate company or their promoters, or directors of the holding company. The limit is fifty lakhs rupees, at any time during the two immediately preceding financial years or during the current financial year. The Act-side conditions are in section 149 of the Companies Act, 2013.
Rule 6(1): register in the databank
Every individual (a) appointed as an independent director when the Fifth Amendment Rules, 2019 commenced had to apply within thirteen months of that commencement (the text prints the period substituted in 2020); or (b) who intends to be appointed afterwards must apply before the appointment. The application is made online to the institute, for inclusion for one year, five years or his life-time, and he must take the steps in sub-rule (2) so long as he holds office as an independent director in any company.
A proviso lets any individual, including one without a DIN, voluntarily apply for inclusion.
Rule 6(2) and (3): renewal and declaration
- Renewal. A person in the data bank must apply for renewal for a further period of one year, five years or life-time within thirty days from the date of expiry, failing which the name stands removed. A person who has paid life-time fees does not renew.
- Declaration. Every independent director must submit a declaration of compliance with sub-rules (1) and (2) to the Board each time he submits the declaration required under section 149(7) of the Act.
Rule 6(4): the proficiency test
Every individual in the data bank must pass the online proficiency self-assessment test conducted by the institute within two years from the date of inclusion of his name, failing which the name stands removed. The Explanation says:
- the "institute" is the Indian Institute of Corporate Affairs at Manesar notified under section 150(1) of the Act;
- a person scoring not less than fifty per cent in aggregate is deemed to have passed;
- there is no limit on the number of attempts.
Who need not take the test
| Group | Condition as printed |
|---|---|
| Directors and KMP of larger bodies | Served a total period of not less than three years as on the date of inclusion in the databank, as a director or key managerial personnel in one or more of: a listed public company; an unlisted public company with paid-up share capital of rupees ten crore or more; a body corporate listed on a recognised stock exchange or in a Financial Action Task Force member State whose securities regulator is an IOSCO member; a body corporate incorporated outside India with paid-up share capital of US$ 2 million or more; or a statutory corporation carrying on commercial activities |
| Senior Government officers | In the pay scale of Director or equivalent or above in a Central or State Government Ministry or Department, with experience in commerce, corporate affairs, finance, industry or public enterprises, or in Government companies or statutory corporations carrying on commercial activities |
| Regulator officers | In the pay scale of Chief General Manager or above in SEBI, the Reserve Bank of India, the Insurance Regulatory and Development Authority of India or the Pension Fund Regulatory and Development Authority, with experience in corporate, securities or economic laws |
| Professionals | Individuals who are or have been, for at least ten years, an advocate of a court, or in practice as a chartered accountant, cost accountant or company secretary |
A further proviso says that where a person acted as director or KMP in two or more bodies at the same time, that period is counted only once in the three-year calculation. Our article on the five categories of prior service goes through the exemptions in more detail.
Rule 6(5): restoration
A person whose name was removed under sub-rule (4) may apply for restoration on payment of fees of one thousand rupees, subject to two conditions: (i) the name is shown in a separate restored category for one year from restoration, during which he must pass the test, and his name is included in the databank only if he passes, with the fees paid at initial registration remaining valid for the period originally paid; and (ii) if he fails to pass within that year, the name is removed and he must apply afresh under sub-rule (1).
The sequence in a table
| Step | Time limit | Source |
|---|---|---|
| Apply to the institute | Before appointment (existing directors: thirteen months from the 2019 commencement) | Rule 6(1) |
| Renew | Within thirty days of expiry | Rule 6(2) |
| Declare compliance to the Board | Each time the section 149(7) declaration is given | Rule 6(3) |
| Pass the test | Within two years of inclusion | Rule 6(4) |
| Restore after removal | Fee of one thousand rupees; pass within one year | Rule 6(5) |
A worked example
Neha Kapoor, a retired company secretary with more than ten years in practice, is invited to join the Board of Zenith Pharma Limited as an independent director. Before appointment she applies online to the institute for a five-year inclusion in the data bank. Because she has been in practice as a company secretary for at least ten years, she is not required to pass the proficiency test. Five years later, she renews within thirty days of expiry, otherwise her name is removed. Her colleague Arjun Mehta has no exempt background; his name is included on the databank, and he must pass the test within two years with fifty per cent in aggregate, with unlimited attempts.
The databank itself, and the institute's duties, are set out in the Databank Rules, 2019: see rules 1 to 6 of those rules and section 150 of the Act.
Need help with independent director compliance?
Registration, renewal and the test are small tasks with serious consequences if missed. Our appointment of director team can handle databank registration, track renewal dates and prepare the declarations your Board needs.
Key takeaways
- An independent director needs the printed skills, and relatives must stay within the fifty lakhs limit on indebtedness and guarantees.
- Register in the databank before appointment, for one year, five years or life-time; renew within thirty days of expiry.
- Pass the proficiency test within two years of inclusion, with fifty per cent in aggregate and unlimited attempts, unless exempt.
- Exemptions cover three years of senior service, senior Government and regulator officers, and ten years of professional practice.
- Restoration costs one thousand rupees and the test must be passed within one year.
Read next
- Rules 1, 2 and 4: number of independent directors
- Rules 1-6 of the Independent Directors Databank Rules, 2019
- Proficiency test exemption: five categories of prior service
- Section 150 of the Companies Act, 2013
Disclaimer: Based on the Companies Act, 2013 rules (and the Companies (Auditor's Report) Order, 2020) named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.