Startup India: Its eligibility & Benefits.

What is a Startup?

In the year 2016, the govt. of India launched the Startup India initiative with a motive to support entrepreneurs, create a ecosystem of creating jobs rather than seeking them, which would encourage the economic growth and create large employment opportunities.

Startup is an entity/company by two or more entrepreneurs investing funds to develop a unique product and launch in the market.

Eligibility/Criteria for Startup India

Following are the eligibility criteria defined by the Govt. of India which shall be recognized by Department for Promotion of Industry & Internal Trade (DPIIT)

  • The period of existence and operations should not be exceeding 10 years from the date of incorporation.
  • Should be incorporated as a Private Limited Company as per Companies Act, 2013 or a registered Partnership Firm as per section 59 of the Partnership Act, 1932 or a Limited Liability Partnership as per Limited Liability Partnership Act, 2008
  • Should have an annual turnover not exceeding Rs. 100 Crore for any of the financial years since its incorporation.
  • Entity should not have been formed by splitting up or reconstructing an already existing business.
  • Should work towards development or improvement of a product, process or service and/or have scalable business model with high potential for creation of wealth & employment.

Registration process for startup india.

  1. Register at Shram Suvidha Portal and then login.
  2. After successful login, click link “Is Any of your Establishment a Startup?”
  3. Follow the instructions.

Key benefits provided to the Startups / Startup India:

 

  • Self Certify Compliance:

Startups shall be allowed to be self-certify compliance for 6 Labour Laws and 3 Environmental Laws through a simple online procedure. Following are the Labor Laws & Environmental Laws:

  • The Building and 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 Water (Prevention & Control of Pollution) Act, 1974
    • The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003
    • The Air (Prevention & Control of Pollution) Act, 1981
  • Special benefit for Startup patent Application and IPR application:

Since patents are a way of protecting innovative new ideas that give your company a competitive edge, patenting your product or process can dramatically increase its value and the value of your company. Following benefits for patents & IPR applications are being provided by the Govt. of India under the Startup India initiative 2016

Fast-tracking of Startup Patent Applications: Patent applications filed by startups shall be fast-tracked for examination so that their value can be realised sooner.

Panel of facilitators to assist in filing of IP applications: For effective implementation of the scheme, a panel of “facilitators” shall be empanelled by the Controller General of Patents, Designs and Trademarks (CGPDTM), who shall also regulate their conduct and functions. Facilitators will be responsible for providing general advisory on different intellectually property as well as information on protecting and promoting intellectual property in other countries.

Government to bear facilitation cost: Under this scheme, the Central Government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a Startup may file, and the Startups shall bear the cost of only the statutory fees payable.

Rebate on filing of application: Startups shall be provided an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years

  • Tax Exemption under 80IAC:

         Eligible startups can be exempted from paying income tax for 3 consecutive financial years out of their first ten years since incorporation.

        Following are the requirements for Tax Exemtion

  • The entity should be a DPIIT recognised startup
  • Only Private Limited Companies or Limited Liability Partnerships are eligible for tax exemption under Section 80IAC
  • The startup should have been incorporated after 1st April, 2016
  • Required documents for Tax Exemption: Memorandum of Association for Pvt. Ltd. / LLP Deed
  • Board Resolution (If Any)
  • Annual Accounts of the startup for the last three financial years
  • Income Tax returns for the last three financial years
  • Exemption under Section 56(2)(VIIB) of Income Tax Act:
  • Investments into eligible startups by listed companies with a net worth of more than INR 100 Crore or turnover more than INR 250 Crore shall be exempt under Section 56 (2) VIIB of Income Tax Act
  • Investments into eligible Startups by Accredited Investors, Non-Residents, AIFs (Category I), & listed companies with a net worth more than 100 crores or turnover more than INR 250 Crore, shall be exempt under Section 56(2)(VIIB) of Income Tax Act
  • Consideration of shares received by eligible startups shall be exempt upto an aggregate limit of INR 25 Crore
  • Should be a private limited company
  • Should be a DPIIT recognised startup. To get DPIIT recognition, click on “Get Recognised” below.
  • Not Investing in specified asset classes
  • Startup should not be investing in immovable property, transport vehicles above INR 10 Lakh, Loans and advances, capital contribution to other entities, except in the ordinary course of business
  • Easy Winding Up of Company

Startups also known as fast track firms can be wound up within 90 days as against 180 days for other companies.

Further, an insolvency professional shall be appointed for liquidating the assets and paying creditors. This would be done within six months of filing an application to make such an exit.

  • Relaxation in Public Procurement Norm:

In order to meet quality and technical specifications all government of India departments, ministries and PSUs have been given authority to ease the norms with regards to public procurements. Thus, a startup can avail exemptions on:

  • earnest money deposit
  • prior turnover and
  • experience requirements in case of government tenders

Further, startups can now get listed as sellers on Indian Government’s largest e-Procurement portal that is Government– Marketplace (GeM)

  • Easy access to Fund:

A 10,000 crore rupees fund is set-up by government to provide funds to the startups as venture capital.  The government is also giving guarantee to the lenders to encourage banks and other financial institutions for providing venture capital.

  • Tax saving for investor:

People investing their capital gains in the venture funds setup by government will get exemption from capital gains. This will help startups to attract more investors.

Conclusion:

Thus, in order to create large job opportunities and entrepreneurship, the Startup India Scheme has been launched by the Government of India. Under this scheme, the government intends to give a host of tax benefits, make compliance easy, fast track IPR tracking and offer other set of benefits. These benefits are offered so that entrepreneurs can focus on their core business and do not have any regulatory burden.

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