Eligibility Criteria for Startup Recognition by DPIIT:
- The Startup should be incorporated as a private limited company or a limited liability partnership;
- Turnover should be less than INR 100 Crores in any of the previous financial years;
- An entity shall be considered as a startup up to 10 years from the date of its incorporation,
- The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth.
- An entity formed by splitting up or reconstruction of an existing business shall not be considered a “Startup”.
- The Start-up India Scheme provides its applicants and registrars with financial benefits for their organization. The government offers a refund of 80% for the high patent costs borne by the startups. It also assists in facilitating the patent registration process faster for startups.
- The government launched the Pradhan Mantri Mudra Yojana in April 2015 in collaboration with regulated banks and NBFCs that provide Startup India loan to non-corporate, non-farm MSMEs in their initial or growth stage.
Benefits for DPIIT Recognised Startups on GeM- (Government e-Marketplace):
Startups are exempted from otherwise stringent selection criteria such as Prior Experience, Prior Turnover and Earnest Money Deposits.
- Public Procurement Policy
- Exemption on EMD (Earnest Money Deposit)
- No minimum eligibility requirement.
For this one have to register itself in Listing of Government eMarketplace, GeM Portal.
Benefits for Startup given by Income Tax Department:
Tax exemption under section 80 IAC of the Income Tax Act–
- The Startup can avail tax holiday for 3 consecutive financial years out of its seven years since incorporation.-
- The benefit under section 80IAC allows startups with up to ₹25 crore in sales to deduct their entire income from eligible operations while calculating taxable income.
- 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 but before 1st April 2021
Tax Exemption under Section 56 of the Income Tax Act (Angel Tax)
- Aggregate amount of paid up share capital and share premium of the Startup after the proposed issue of share, if any, does not exceed twenty five crore rupees; there are exemptions in calculating this amount.
The Companies who have invested in specified funds can also avail exemption from capital gains in income Tax.
However, startups can avail of this benefit only if obtained a certificate from the Inter-Ministerial Board.
Compliance ease- Self Certification:
Startups shall be allowed to self-certify (through the Startup mobile app) with labour and environment laws (refer below). In case of the labour laws, no inspections will be conducted for a period of 3 years. Startups may be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer:
Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996
The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
The Payment of Gratuity Act, 1972
The Contract Labour (Regulation and Abolition) Act, 1970
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
The Employees’ State Insurance Act, 1948
The chance to work on trial orders with the Government, making them more likely to take chances on a new product.
The documents required for the DPIIT Certificate of Recognition for Startups is listed as follows:
- Certificate of Incorporation or Registration of entity
- If the startup received any funding, the Proof of Funding need to furnish for DPIIT Certificate of Recognition for Startups
- Document of awards or recognition received by the entity
- Document of the patent published by the entity (The patent should be published in the patent journals)
- A brief description of the nature of the business. The write-up should contain the following details:
- Details of how the startup is working towards innovation
- Development of products or processes or services
- The scalability in terms of employment generation or wealth creation.
Proof document for Funds:
- Support letter from the central or state Government authorities or any incubator which is duly recognized by the government of India can be submitted.
- The document for funding should not be less than 20% in equity by angel funds or incubation funds.
- Department of Industrial Policy and Promotion, Ministry of Commerce and Industry has not appointed any Agency/Representative/ Franchise for DPIIT Certificate of Recognition for Startups.
- Application for Startup India Certificate of Recognition should be filed by the Startup on its own, using own details/ mobile No./ email.
- Ministry of Commerce and Industry does not charge any fee for DPIIT Certificate of Recognition for Startups.
- Any charging of fees for Recognition for Startups is illegal and will invite appropriate legal action.
What is Startup Hub?
Startup India Hub is a one-stop platform for all stakeholders in the Startup ecosystem to interact amongst each other, exchange knowledge and form successful partnerships in a highly dynamic environment.