1 What is a STARTUP under Startup India Scheme?

Under Startup India Scheme Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Provided also that an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration.

Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.

Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

Meaning of Startup Explained:

The definition given for Startups under Startup India Stand up India (SISI) Scheme is limited to get benefits under this scheme and is not a general or legal definition given to Startup.

It means FlipKart or OLA may be called startups in general, however they will not be eligible to get benefits under Startup Scheme (As their turnover is much higher than Rs. 25 crore).

A) Startup Entity/Business: must be registered as

  • Private Limited Company (under The Companies Act, 2013) or
  • Limited Liability Partnership (under The LLP Act, 2008) or
  • Registered Partnership Firm (under The Indian Partnership Act, 1932)

B) Age of Company:

  • Company must not be older than 5 years
  • It means on the date of application for Startup India scheme, the startup must be registered for less than 5 years.
  • Any company registered before the date of announcement of the scheme is also eligible for the Scheme

C) Annual Turnover of Start-ups:

  • not more than Rs. 25 crore in any preceding financial year

D) Highly Innovative Product or Service:

  • Startup must be working towards innovation, development of new products, processes or services driven by technology or intellectual property

E) No splitting of existing Company allowed:

  • It means dividing an existing company and floating a new company to get benefit under Plan is not allowed

2 Eligibility to take benefits under Start up India Initiative?

The Exemptions and benefits under the Startup Initiative can be enjoyed by the Startups who fulfill the below 6 Eligibility Criteria.

Criteria #1:

Business must be Private Limited Company, One Person Company (OPC), LLP or registered Partnership Firm

Criteria #2:

Turnover of Company to be less than Rs. 25 crore in last financial year

Criteria #3:

Company must not be older than 5 years.

Criteria #4:

Only Startups involved in developing and commercializing

  • New product or service or process
  • Significantly improve the existing product or service or process to create or add value for customers or workflow

Criteria #5:

Certification from the Inter-Ministerial Board is a must for getting 3 years tax exemptions.

Criteria #6:

Recommendation or Funding requirement

The startup application for the scheme must be supported by a recommendation certificate for innovative nature of business from any one of the following establishment:

  • Incubator established in a post-graduate college in India like IIT, IIM etc. OR
  • Incubator funded from Government of India (in relation to the project) OR
  • Incubator recognized by Government of India OR
  • Funding by an Incubation Fund or Angel Fund or Private Equity Fund or Business Accelerator or Angel Network duly registered with SEBI that endorses innovative nature of the business;
Flowchart For Eligibility Under Startup India Scheme

3 benefits & exemptions under Start-up India Stand-up India

The eligible Startups will be enjoying various Incentives and Exemptions

  • Easy availability of Seed Funding
  • Income Tax Exemptions for 3 years
  • 80% Patent fee will be refunded
  • Labour & Environment laws exemptions. No Inception from PF, ESIC & Environment departments for 3 years.
  • Capital Gain Tax exemption for investment in eligible Startup
  • Exposure to best startup mentorship
  • Easy Exit from the Startup within 90 days

4 Myths around Startup India Programme

Myth #1: Applicability only for companies registered after announcement of Scheme or 1st April, 2016:

Truth: The Startup India Plan is ALSO APPLICABLE to companies REGISTERED BEFORE THE ANNOUNCEMENT or implementation of the Scheme.

Myth #2: Applicable for all registered companies:

Truth: The scheme is applicable ONLY TO MOST INNOVATIVE COMPANIES fulfilling above 5 criteria

Myth #3: Exemption in Incorporation and compliance cost:

Truth: There is NO EXEMPTION for company INCORPORATION OR ROC FILING FEES. The exemption is only related with 80% of Patent Fee and that too, registration fee will be paid by the startup and later rebate or refund will be made by the Government.

5 Importance of Trademark & Patent under Startup India Mission.

Trademark Registration is given huge importance under Startup India Plan. This has created awareness among entrepreneurs to apply for trademark before and after starting up.

Patented innovations to be given high priority under the Scheme and will enjoy rebate/refund of 80% Patent application fees.

6 How to Plan for Startup India Scheme

  • Register a Private Limited (Pvt. Ltd.) or LLP
  • File for trademark
  • Develop a prototype Product or Service which is technology driven and solve new market problem
  • Keep your company ROC filing up to date
  • Search for a recognized Incubator or Angel Funding Firm
  • Apply for Patent (If the process is a new innovation)
  • Get recommendation from Incubator or Angel Funding Firm
  • Apply to Inter Ministerial Board for approval

Register your Startup and be ready for the Startup India Scheme

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