What is Startup India?
A plan initiated by honorable Prime Minister Narendra Modi on January 2016 for the growth of start-ups in India. A number of incentives, programs, and exemptions have been announced for the rise of start-ups in the country. The flagship Startup India aims to create a favorable ecosystem for the growth of entrepreneurship in the country.
Definition of Startup as per Startup India Action Plan released by DIPP
An entity which is registered or incorporated in India within not less than 5 years, and holds an annual turnover not less than Rs 25 crores in any financial year, while working towards development, deployment, innovation or commercialization of new products, can be declared a startup. This entity must not have been formed from reconstruction or splitting up of any pre-existing business.
The Department of Industrial Policy and Promotion (DIPP) is looking after the process of startup registration. In order to become worthy of being called a startup and receive a nod from the Inter-Ministerial Board, the company with Pvt Ltd Company Registration should have an aim of developing and commercializing a new service or product. It may also be able to improve the product or service, or possibly add value for the final customers. Products, processes, and services which cannot be commercialized or be differentiated, and also do not have incremental value are not considered under Startup India.
So in order to validate its eligibility, the startup must be supported by:
- A recommendation about the innovative type of business being done in the startup as per a format is given by the DIPP by an incubator who is established in a PG college of India, or
- Support from an incubator, with funding (about the project) from the GOI as per a specialized scheme meant to promote innovation among startup, or
- Support from a recommendation (about the innovative type of business) as per format is given by DIPP, from an incubator who has been known under GOI, or
- Funding received from an Angel Fund/Private Equity Fund/Angel Network/Accelerator registered with SEBI, which definitely endorses innovative work in this business, or
- Funding directly from GOI as part of a specific scheme which endorses innovation, or
- A patent is given by the Indian Patent and Trademark Office in areas which are affiliated with the nature of business receiving promotion
Only when one of the above criteria is fulfilled does the company with Pvt Ltd Company Registration get listed under the Startup India Action Plan. As mentioned earlier in this article, the Inter-Ministerial Board by DIPP will be validating the innovativeness of the business, in order to consider it eligible for tax exemption. The approval will not free the business from any liability accrued due to fraud or misinterpretation taking place due to the submission of such an application.
Once the tax exemption is approved, for the first 3 years of business, startups will have 100% income tax rebate on all profits. The condition of this approval is that the annual turnover of the startup should not be more than INR 25 Crore.
Some more information about the DIPP
The DIPP consists of the following persons:
- A representative from the Department of Science and Technology
- Joint Secretary of the Department of Industrial policy and promotion
- Representative from the Department of Biotechnology