Start-up India Scheme

Start-up India Scheme is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Start-ups in the country that will drive sustainable economic growth and generate large scale employment opportunities.

Start-up India Scheme is implemented through the Department of Industrial Policy & Promotions (DIPP), Government of India.

A business will be recognised as a ‘Start-up’ under this scheme only after obtaining a Certificate of Registration from Start-up India Hub.

Conditions for recognition as a ‘Start-up’

To get recognised as a Start-up under the Startup India Scheme, a business entity must full fill the following conditions:

1. The business must be registered must be registered as a

• Private Limited Company under Companies Act, 2013
• Limited Liability Partnership under the Limited Liability Partnership Act, 2008
• Partnership Firm under the Partnership Act, 1932

2. The turnover of business for any of the financial years since incorporation/ registration has not exceeded Rupees 25 crores

3. The Business 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

4. The business will be recognised as Start-up is for a period of 7 years from the date of its incorporation/ registration; however, in the case of Start-ups in the biotechnology sector, the period shall be up to ten years from the date of its incorporation/ registration. Any entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘Start-up’.

Process of Recognition as a Start-up

1. Register the business as a Private Limited Company / Limited Liability Partnership / Partnership Firm

2. Obtain PAN for the Business

3. Obtain MSME Registration for the Business

4. Make a brief writeup on the following:

• What is the problem the startup is solving?
• How does the startup propose to solve this problem?
• What is the uniqueness of solution by the startup?
• How does the startup generate revenue?
• Details of any awards/recognition received by the startup

5. File application at www.startupindia.gov.in with supporting documents such as Certificate of Incorporation / Registration

Start-Up India Hub will review the application and if the application fulfils the Start-up India guidelines and conditions, will grant recognition as a Startup and will issue the Certificate of Recognition.

Benefits for recognised ‘Start-up’

Asper the guidelines of DIPP, a recognised start-up gets the following benefits:

• Self-Certification: For Compliance under 9 environmental & labour laws
• Tax Exemption: Income Tax exemption for a period of 3 consecutive years and exemptions on capital gains & investments above Fair Market Value.
• Easy winding up of company: Within 90 days under insolvency & Bankruptcy code 2016.
• Startup Patent Application and IPR protection: Fast track & up to 80% rebate in filling patents.
• Easier Public Procurement Norms: Exemption on EMD and minimum requirements. Get listed as a seller
• SIDBI Fund of Funds: Funds for investment into startups through Alternate Investment Funds.

Note: All the above benefits are subject to respective guidelines and conditions as may be prescribed by the Government of India from time to time

IMPORTANT NOTES

The business entity shall cease to be a Start-up on the following conditions:

• On completion of seven years from the date of its incorporation/registration
• if its turnover for any previous year exceeds Rupees 25 crores.

However, in respect of Start-ups in the biotechnology sector, an entity shall cease to be a Start-up on completion of ten years from the date of its incorporation/ registration or if its turnover for any previous year exceeds Rupees 25 crores.

Exemption of Income Tax for Startups (80-IAC)*

After obtaining the recognition as a ‘Start-up’ under the Start-up India Scheme, a Private Limited Company or a Limited Liability Partnership incorporated on or after 1st day of April 2016 but before 1st day of April 2021 can apply for exemption of income tax for 3 consecutive years under Section 80-IAC of the Income Tax Act.

After review of application and documents and information, information and if deem fit, the Department will issue a Tax Exemption Certificate to the Start-up. Only after obtaining the Certificate, the Start-up can avail the exemption of Income tax.

Exemption from Angel Tax *

After obtaining the recognition as a ‘Start-up’ under the Start-up India Scheme, a Private Limited Company who complies certain specific conditions can apply for exemption of Angel Tax (Tax on Share Premium) Under Section 56(2)(viib) of Income Tax Act.

After review of application and documents and information, information and if deem fit, the Department will issue a Tax Exemption Certificate to the Start-up. Only after obtaining the Certificate, the Start-up can avail the exemption of Income tax.

*Note: These Applications can be submitted only after obtaining the Recognition as a Start-up