Startup India : Eligibility Criteria & it Benefits

A startup typically means a company that is in the first stage of its operations. Startups are usually small and initially financed and operated by a handful of founders or one individual and involved in some innovation. These companies offer a product or service that is not currently being offered elsewhere in the market, or that the founders believe is being offered in an inferior manner. In order to develop Indian economy and attract talented entrepreneurs, the Government of India, under the leadership of Prime Minister Narendra Modi , has started and promoted various schemes and tax incentives under startups India initiative to recognize and promote startups.

Step To Register as startup India

Step 1 : Registration of Business entity under the respective laws

Step 2 : Registration with Startup India

Step 3 : Documents to be uploaded (in pdf format only)

Step 4 : Tax benefits

Step 5 : Must satisfy the required criteria

Step 6 : Get the recognition number

Step 7 : Other Areas

Step 1 : Registration of Business Entity

First of all you have to registered the business entity under the respective laws prevailing in the country. There are various form of business entity, the details of which is given below.

  • Sole Proprietorship
  • Partnership Firm
  • One Person Company
  • Limited Liability Partnership
  • Private Limited Company
  • Public limited Company
  • Section 8 Company
  • Non Government Organisation (NGO)/Trust
  • Society
  • Nidhi Company

Step 2 : Registration with Startup India

When the business comes under the definition of a startup as per the DIPP Notification, it can get its Startup India registration done. A business registered as a Private Limited Company under the Companies Act, 2013, as a Partnership Firm under Section 59 of the Partnership Act, 1932 or as a Limited Liability Partnership under the Limited Liability Partnership Act, 2008 can get Startup India Registration if it fulfils the following criteria:  

It has not been more than 10 years from the date of business registration.

The annual turnover of the entity for any financial year since its registration has not exceeded Rs. 100 crores.

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 for employment generation or wealth creation.

Step 3: Documents to be uploaded (in PDF format only)

a) A letter of recommendation/support 

A letter of recommendation must be submitted along with the registration form. Any of the following will be valid-

(i) A recommendation (regarding innovative nature of business) from an Incubator established in a post-graduate college in India, in a format specified by the Department of Industrial Policy and Promotion (DIPP); or

(ii) A letter of support by an incubator which is funded (in relation to the project) by Government of India as part of any specified scheme to promote innovation; or

(iii) A letter of  recommendation (regarding innovative nature of business), from an Incubator, recognized by the Government of India in DIPP specified format; or

(iv) A letter of funding of not less than 20% in equity, by any Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network, duly registered with SEBI that endorses innovative nature of the business; or

(v) A letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or

(vi) A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of the business being promoted.

b) Incorporation/Registration Certificate

You need to upload the certificate of incorporation of your company/LLP (Registration Certificate in case of partnership)

c) Description of your business in brief

A brief description of the innovative nature of your products/services.

Step 4: Tax benefits

Startups entities enjoy a income tax incentives for a period of 3 years. But to avail these benefits, they must be certified by the Inter-Ministerial Board (IMB). Start-ups recognized by DIPP, Govt. of India can now directly avail IPR related benefits without requiring any additional certification from IMB.

Step 5: Must satisfy the Required Criteria

To avail the benefits you must fulfill the laid down criteria required for the subject purpose. The details about the criteria is given below.

a) You must register your new business entity as a Private Limited Company, Partnership firm or a Limited Liability Partnership

b) Your firm/company must be incorporated/registered in India, not before 5 years.

c) Turnover of the business must be less than 25 crores per year.

d) The business must be involved in innovation or working towards innovating something new or significantly improving the existing used technology.

e) Your business must not be as a result of splitting up or reconstruction of an existing business.

Step 6: Get the recognition number

After applying it, you will immediately get a recognition number for your startup entity. The certificate of recognition will be issued after the examination of all your documents.

You must be careful about the documents you upload. . If on subsequent verification, it is found to be obtained that the required document is not uploaded/wrong document uploaded or a forged document has been uploaded then 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.

Step 7: Other areas

a) Patents or trademarks registration

If you need a patent for your innovation or a trademark for your business, you can easily approach any from the list of facilitators issued by the government. You will need to bear only the statutory fees thus getting an 80% reduction in fees.

b) Funding

One of the major challenges, that is faced by many startups is requirement of fund.  Entrepreneurs fail to attract investors because of lack of experience, security or existing cash flows, Besides, the high-risk nature of startups, as a significant percentage fail to take-off, puts off many investors.

Benefits of Startups

Startup India: 80 IAC Tax exemption

Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the Income Tax Act. Post getting clearance for Tax exemption, the Startup can avail tax holiday for 3 consecutive financial years out of its first ten years since incorporation.

Eligibility Criteria for applying to Income Tax exemption (80IAC):

The entity should be a recognized Startup  

Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC

The Startup should have been incorporated after 1st April, 2016

 Startup India: Tax Exemption under section 56 of Income Tax Act (Angel Tax)

The Business entity may apply for Angel Tax Exemption after getting recognitions of the startups. The eligibility criteria for tax exemption under section 56 of the income Tax Act are given below :-

The entity should be a DPIIT recognized Startup Aggregate amount of paid up share capital and share premium of the Startup after the proposed issue of share, if any, does not exceed INR 25 Crore.