A startup is a company that is in the first stage of its operations. It is basically business model that aims to meet a marketplace need by developing or offering an innovative product, process or service

India has truly become a start-up ‘Nation’. Since last one year tremendous initiatives been taken by the government in startup world. The purpose of Startup campaign is to boost entrepreneurship and encourage startups. The government is really putting a lot of efforts to build a strong startup ecosystem in India for nurturing innovation and generate employment opportunities.

Startup India Campaign:

The campaign was first announced by Prime Minister Shri Narendra Modi in his 15 August, 2015 address from the Red Fort, after that The Prime Minister of India formally launched Startup India initiative on January 16, 2016 from Vigyan Bhawan, New Delhi. In order to meet the objectives of the initiative, Government of India announced Action Plan in this event to address all aspects of the Startup ecosystem. The purpose of the Action Plan was to accelerate Startup movement.

The Government of India has announced ‘Startup India’ initiative for creating a conducive environment for startups in India.

Definition of Startup by DIPP:

On 17th February, 2016, the department of industrial policy and promotion (DIPP) has issued a notification to provide clarity surrounding startups.

 An entity shall be considered as Startup:

  • Up to five years from the date of its incorporation/registration,
  • If its turnover for any of the financial years has not exceeded Rupees 25 crore, and
  • It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property;

Provided that any such entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘startup’;

Provided further that in order to obtain tax benefits a startup so identified under the above definition shall be required to obtain a certificate of an eligible business from the lnter-Ministerial Board of Certification consisting of:

a) Joint Secretary, Department of Industrial Policy and Promotion,

b) Representative of Department of Science and Technology, and

c) Representative of Department of Biotechnology

Explanation:

1. An entity shall cease to be a startup on completion of five years from the date of its incorporation/registration or if its turnover for any previous year exceeds Rupees 25 crore.

2. Entity means a private limited company (as defined in the Companies Act, 2013), or a registered partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2002).

3. Turnover is as defined under the Companies Act, 2013.

4. An entity is considered to be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property if it aims to develop and commercialize:

a. A new product or service or process, or

b. A significantly improved existing product or service or process that will create or add value for customers or workflow.

Provided that the mere act of developing:

a. products or services or processes which do not have potential for commercialization, or

b. undifferentiated products or services or processes, or

c. products or services or processes with no or limited incremental value for customers or workflow would not be covered under this definition.

5. The process of recognition as a ‘startup’ shall be through mobile app portal of the Department of Industrial Policy and Promotion. Startups will be required to submit a simple application with any of following documents:

a) a recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a postgraduate college in India; or

b) a letter of support by any incubator which is funded (in relation to the project) from Government of India or any State Government as part of any specified scheme to promote innovation; or

c) a recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any incubator recognized by Government of India; or

d) a letter of funding of not less than 20 per cent in equity by any Incubation Fund,/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit; or

e) a letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or

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

Department of Industrial Policy and Promotion may, until such mobile app/portal is launched make alternative arrangement of recognizing a ‘startup’. Once such application with relevant document is uploaded a real-time recognition number will be issued to the startup. If on subsequent verification, such recognition is found to be obtained without uploading the document or uploading any other document or a forged document, the concerned applicant shall be liable to a fine which shall be fifty per cent of paid up capital of the startup but shall not be less than Rupees 25,000.

Startup INDIA HUB:

‘Start-up India Hub’ assists start-ups by providing advisory services on financing, business structuring and improving management skills. It also provides for a mobile app which allows start-ups to self-certify themselves and also acts as a single point of contact between entrepreneurs, regulators and the government.

Startup India Hub was operationalised on 1St April, 2016 to resolve queries and provide handholding support to startups. As per the status report issued by the DIPP on 18th August, 2016, the hub has been able to resolve 17,366 queries received from Startups through telephone, email and Twitter.

To seek clarifications pertaining to Certificate of Recognition as a “Startup”, Certificate of Eligibility to avail tax benefits, seeking information on incubators or funding, one can get in touch with the Hub on Toll-Free number: 1800115565 or email id: dippstartups@nic.in

Startup Recognition:

As per the status report issued by the DIPP on 18th August, 2016, 882 applications have been received for out of which 266 had the required documents and have been recognized as Startups by DIPP. Rest of the applicants will be provided guidance and support to submit the relevant documents by the Startup India Hub. Out of the total applications received, 31 applications can be considered for tax benefits as only these Startups have been incorporated after April 1, 2016. Out of the 31 applications, 16 have been considered by the IMB and 3 Startups have been approved for availing tax benefits. Also, 2 out of the remaining eligible applications will be considered in the 4th IMB meeting.

The government has shown its interest to support the startup ecosystem. Over the last one year, the government has been steadily building a conducive atmosphere for encouraging start-ups in India. The Startups in India are going through a transformation phase. Startup industry in India is still young and it will be interesting to see how this industry is going to take pace in coming years.

(Submitted by – Tarun Kumar (B.Com, ACA) Mobile: +91-888-282-8112 Email-ID:  catarunkumar92@gmail.com)

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