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Startup India is a flagship initiative of the Government of India launched in the year 2016. The main objective of Startup India is to build a strong eco-system for nurturing innovation and Startups in the country that will 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.
A business will be recognised as a ‘Start-up’ under this scheme only after obtaining a Certificate of Registration from DIPP (Department of Industrial Policy and Promotion).
Let’s proceed and learn what is a Startup and How an entity can be registered under Startup India scheme and What are the benefits available to recognised Startups?
Question 1: What is a Startup?
Answer: An entity shall be considered as a Startup:
a) If such an entity must be registered as a private limited company or registered as a partnership firm or as a limited liability partnership, in India.
b) Up to ten years from the date of its incorporation/registration.
c) If it's turnover for any of the financial years since incorporation/registration has not exceeded INR 100 Crore.
d) 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.
Question 2: Is there any exception to the above-mentioned definition of Startup?
Answer: Yes, there is one exception to this definition of Startup i.e. any entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘Startup’.
Question 3: Which authority provides the recognition to an entity to be considered as Startup?
Answer: Startup recognition is granted by the Department of Industrial Policy and Promotion (DIPP).
Question 4: Who can register with Startup India?
Answer: Any entity satisfying all the above-mentioned conditions mentioned in answer no. 1 can apply and procure registration as a Startup.
Question 5. What is the process for registration of an entity as a Startup?
Answer: The process for registration as a Startup with DIPP is mentioned below:
Step 1: Incorporate an entity whether as a private limited company or partnership firm or as limited liability partnership.
Step 2: Register your details and create login credentials for your business on Startup India Portal.
Step 3: Submit the Required Documents (as mentioned in the list of documents provided by the department).
Step 4: Answer whether you would like to avail tax benefits or not.
Step 5: Self-certify that you satisfied all the eligibility conditions to register as a Startup.
Step 6: Now, DIPP will review your application along with the submitted documents.
Step 6a: In case, application accepted then you will receive the Startup Registration Certificate.
Step 6b: In case of any shortcoming in the submitted application or in the documents then the department will issue a resubmission remark on your application. Once you complete the resubmission remarks and satisfy all the requirement then you will receive the Startup Registration Certificate.
Note: Always submit an active email and phone number as the same will be used by the DIPP in all future correspondence or in case you are seeking any professional assistance then inform such professional to enter your business email id and contact details so you must be aware of all the updates wrt the submitted application.
Bonus Question: What are the benefits available to Startup?
Answer: As per DIPP guidelines a recognised Startup will get the following benefits:
1. Self-Certification: Startups shall be allowed to self-certify compliance for six Labour Laws and three Environmental Laws.
2. Tax Exemption under 80IAC: Eligible startups can be exempted from paying income tax for 3 consecutive financial years out of their first ten years since incorporation.
3. Startup IPR and Patent Application: Startups shall be provided with an 80% rebate in filing of patents vis-a-vis other companies.
4. Easy winding up: As per the Insolvency and Bankruptcy Code, 2016, startups with simple debt structures, or those meeting certain income specified criteria can be wound up within 90 days of filing an application for insolvency.
5. Exemption under Section 56(2)(VIIB) of Income Tax Act: Eligible Startups can claim an exemption under Section 56(2)(VIIB) of Income Tax Act.
6. SIDBI Fund of Funds: Funds for investment into startups through Alternate Investment Funds.
7. Easier Public Procurement Norms: Exemption from requirement of an earnest money deposit, prior turnover and experience requirements in government tenders
A Startup can claim all the above-mentioned benefits after satisfying the conditions imposed by the DIPP for each exemption.
Conclusion: Government of India is providing opportunities to Startups to take advantage of the initiative of ease of doing business in India and by providing benefits to startups its help to create a better working economy for Startups. Easier compliance and easy exit mechanism for failed startups help the entrepreneur to reinvest their time, cost and effort in other assignments. Exemption on Income tax and Capital Gain tax for eligible startups provides tremendous support to early age startups doing good in Indian economy which further help them to contribute more and achieve the higher levels. Hence, it is always preferable to register your business as a Startup so you can enjoy the privileges provided by the Government of India to Startups.
Article By: Ms Bhavya Sharma, a Practising Company Secretary from Delhi.
You can contact us at: legal@bhavyasharmaandassociates.com or for more details you can visit: www.bhavyasharmaandassociates.com
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