Startup India campaign was started in 2016 for encouraging entrepreneurship in India. The objective was to reduce the regulatory burden on Startups, thereby allowing them to focus on their core business and keep compliance costs low. It was also to promote bank financing to startups and granting various tax exemptions and other benefits to startups.
The government has also provided conditions/ guidelines for eligible startups
What are the criteria for Eligible Startups?
The followings conditions must be fulfilled for an eligible startup:
- Private Limited Company, Registered Partnership firms, and Limited Liability Partnerships. Therefore, sole proprietorship firms, Public Limited Companies, and NGOs are not applicable.
- The entity should be registered or incorporated for less than 7 years from the date of incorporation. Biotechnology startups should be registered or incorporated up to 10 years from the date of incorporation.
- Annual Turnover of the company shall not exceed Rs 25 crores in any of the preceding financial years.
- The objective of the company should be towards innovation, development, deployment, or commercialization of new products, processes, or services driven by technology or intellectual property.
- The company should not have been formed by splitting up or reconstructing a business already in existence.
- It must obtain certification from the Inter-Ministerial Board set up for such a purpose.
What are the benefits of registering as a Startup with Startup India?
Benefits for registering as Startups are as under:
- Startups shall be allowed to self-certify compliance for 6 Labour Laws and 3 Environmental Laws through a simple online procedure.
- No inspection by officers for 5 years in case of labor laws. Startups may be inspected only on receipt of a credible and verifiable complaint of violation, filed in writing, and approved by at least one level senior to the inspecting officer.
- Startups which fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB)) in the case of environment laws, would be able to self-certify compliance and only random checks would be carried out in such cases.
- Refund/ rebate of fees paid at the time of patent registration and Trademark application.
How to register a startup with Startup India?
Step -1: Register your business in India
Register your business as either Private Limited Company or LLP or registered Partnership firm and take PAN, TAN, GST no. etc
Step -2: Register your company with Startup India
You need to login into the Startup India website to create your profile. After creating a profile, apply for various acceleration, incubator/mentorship programs, Learning and Development programs, Government Schemes, etc
Step -3: Apply for DPIIT Recognition
After creating a profile on the website, apply for DPIIT recognition i.e Department for Promotion of Industry and Internal Trade (DPIIT). This helps startups to avail Income tax exemption for 3 consecutive years and tax exemption on investment above fair market value, access to intellectual property services, self-certification under labor and environmental laws, easy winding up of company, becomes eligible for getting funds, etc
Step -4: Recognition Application
The ‘Recognition Application Detail’ page opens. On this page click on ‘View Details’ under the Registration Details section. Fill up the ‘Startup Recognition Form’ and click on ‘Submit.
Step 5: Submit Documents for Registration
- Copy of certificate of incorporation
- Details of the Directors
- Proof of concept like pitch deck/website link/video (in case of a validation/ early traction/scaling stage startup)
- Patent and trademark details (Optional)
- PAN Number
Step 6: Certificate of Recognition
Finally, you will receive a recognition number for your startup. In case there is any mistake in uploading documents or forged documents are uploaded, you shall be liable to a fine of 50% of your paid-up capital of the startup with a minimum fine of Rs. 25,000.
What are the Tax exemptions allowed to Eligible Startups under Startup India?
- Tax holiday for 3 years in a block of 7 years period
This is applicable for startups incorporated between 1st April 2016 to 31st March 2022. However, annual turnover does not exceed Rs 25 crores in any financial year
The government has removed the angel tax in the case of startups. It means that startups are not required to pay any taxes on investment value above fair market value.
- Exemption from tax on Long-term capital gains:
Eligible startups invest their long-term capital gain, this capital gain taxes shall be exempt as per newly introduced section 54EE of the Income Tax Act.