What is Startup India?
Startup India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of startup businesses, to drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower startups to grow through innovation and design.
Eligibility to become a Startup
An entity shall be considered as a Startup:
- Type of Business: If it is incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India.
- Age of the Company: Up to ten years from the date of its incorporation/registration.
- Annual Turnover of the Company: If its turnover for any of the financial years since incorporation/registration has not exceeded INR 100 Crores.
- Innovative & Scalable: If it is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.
Note: An entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘Startup’.
Benefits of being a Startup
For availing various benefits under the Startup India scheme, an entity would be required to be recognized by DIPP as a startup.
The benefits provided to recognized startups under the Startup India initiative are:
- Self-Certification: Self-certify and comply under 3 Environmental & 6 Labour Laws for 5 years from the date of incorporation.
- Tax Exemption: Income Tax exemption for a period of 3 consecutive years and exemption on capital and investments above Fair Market Value. The entity registered under the Startup India Scheme can apply for an exemption of income tax under section 80 IAC of the Income Tax Act. Such an entity can avail tax exemption for 3 consecutive financial years out of first 10 years from the date of incorporation provided following conditions are fulfilled:
(1) An entity shall be a Private Limited Company or Limited Liability Partnership.
(2) It shall be incorporated between 01st April 2016 to 01st April 2022.(as amended by Finance Act, 2021).
- Angel Tax Exemption: The Startup India recognized entity can avail tax exemption benefit from the funds received as angel investment. The exemption is only granted if the total amount of paid-up share capital and share premium does not exceed Rs. 25 Crore after the proposed issue of share. To avail this exemption the entity need to fulfil some conditions for investing in certain assets.
- Easy Winding of Company: In 90 days under Insolvency & Bankruptcy Code, 2016.
- Startup Patent Application & IPR Protection: Fast track patent application with up to 80% rebate in filling patents.
- Easier Public Procurement Norms: Exemption from requirement of earnest money deposit, prior turnover and experience requirements in government tenders.
- SIDBI Fund of Funds: Funds for investment into startups through Alternate Investment Funds.The startup can raise funds and capital through the fund of funds initiative by Startup India. DIPP has proposed to release Rs.10,000 crore for Startups through this scheme. Small Industries Development Bank of India shall provide funds to Startups approved by Implementing Agencies.
Documents required for recognition under Startup India Initiative
- Business Proof: Certificate of Incorporation from MCA/Registration Certificate from ROF.
- PAN: PAN Card of an entity.
- Constitutional Documents: MOA & AOA in case of company and Partnership deed in case of LLP or Partnership Firm.
- Details of Directors: List of Directors or Designated partners or members along with their photographs and contact details.
- Business Idea: Brief on Business Idea required a short depiction of the innovative idea of your business operation.
- Social Links: URL of website & Mobile App of an entity (if any) and Social Profile’s (LinkedIn and/or twitter) of Directors, DP’s and members.
- Funding: If the entity has received any funds then the details related to the amount of investment and investor.
- IPR & Other Information: If the entity has applied or registered any IPR then the Information related to such application or registration.
- Awards/Certificate/Recognition: Information relating to any Awards/Certificate/ Recognition received by the entity.
- Annual Accounts & ITRs: To claim deduction under section 80-IAC, Form-1 needs to be filed along with Annual Accounts of the Startup for last three financial years (if applicable) and Copies of Income Tax Return for last three financial years (if applicable).
Who Is Not Eligible For Startup India Recognition?
- Sole Proprietorship.
- Firm constitute by the notary partnership deed.
- Once annual turnover exceeds INR 100 crores.
- Company is older than 10 years.