How to start a web-dev agency in India if you posess all the web-dev skills and you wanna start a business? What are the legalities involved and how to go about it?

Okay, thats helpful! So then what to advertise it as? As an agency? Freelance business? And what if we are a team of 2-3 people or more?

Create a landing page, start marketing it

Don't need to register business, just take income in your bank account as a consultant. Once it grows you can register sole proprietorship. No need to get into paperwork before you get enough clients.