Is Your Startup Still a ‘Startup’? The 2026 DPIIT Rulebook for Founders

Summary: DPIIT’s Notification G.S.R. 108(E), dated 4 February 2026, substantially rewrites India’s startup-recognition framework by replacing the 2019 notification. A startup may now remain recognised for up to 10 years with turnover not exceeding ₹200 crore in any financial year since incorporation, while the newly introduced Deep Tech Startup category receives a 20-year period and ₹300 crore ceiling. Cooperative societies and multi-state cooperative societies have also been brought within the eligible entity types. At the same time, the new framework introduces important restrictions on deployment of startup funds, requiring funds to be used primarily for core business, innovation, research, scaling or operational requirements and restricting specified investments unless integral to the business. DPIIT recognition remains distinct from the income-tax holiday, for which an eligible private limited company or LLP needs separate certification from the Inter-Ministerial Board. This note explains the revised eligibility tests, Deep Tech criteria, recognition procedure, tax deduction framework, fund-use restrictions, revocation provisions and continuing compliance requirements, and provides founders with a practical checklist for protecting startup recognition.

Introduction

What changed on 4 February 2026, what you can still claim, and the rules you must now live by

For seven years, the answer to “is my company a startup?” was simple: register on the DPIIT portal, stay under ₹100 crore of turnover, and stay within ten years of incorporation. On 4 February 2026 the rules were rewritten. The ceiling is higher, a new Deep Tech category exists, and, for the first time, the notification tells recognised startups how they may and may not deploy their money.

This note is written for founders and promoters. It explains who is a startup today, how to get and keep that status, what the tax holiday now looks like, and which spending patterns need a second look. It closes with a checklist you can hand to your finance team.

1. What changed: 2019 versus 2026

2. Are you a startup? A five-point test

An entity qualifies only if every one of these holds.

• Form. Private limited company, registered partnership firm, LLP, multi-state cooperative society, or a cooperative society registered under a state or UT law.
• Age. Within 10 years of incorporation or registration (20 years if recognised as Deep Tech).
• Turnover. Not above ₹200 crore (₹300 crore for Deep Tech) in any financial year since incorporation or registration.
• Purpose. Working towards innovation, development or improvement of products, processes or services, or running a scalable business model with high potential for employment generation or wealth creation.
• Not a split or reconstruction. An entity formed by splitting up or reconstructing an existing business is not a startup.

How turnover is measured

The notification borrows the definition of turnover in Section 2(91) of the Companies Act, 2013: the aggregate value realised from the sale, supply or distribution of goods, or from services rendered, in a financial year. It applies to LLPs, partnerships and cooperatives too. Use this figure from your audited accounts. Do not use GST turnover or any other measure when testing eligibility.

The limit works in one direction. The notification says an entity ceases to be a startup if its turnover for any previous year exceeds the limit. Take a company with ₹150 crore of turnover in one year and ₹210 crore in the next. It has crossed ₹200 crore, so the status ends, even if turnover later falls back. Growth planning should therefore include a clear view of when the ceiling will be reached.

When the status ends

• On completing 10 years from incorporation or registration (20 years for a Deep Tech Startup), or
• When turnover for any previous year exceeds ₹200 crore (₹300 crore for Deep Tech).

Put both dates in your compliance calendar now. Many benefits, and investor expectations, are tied to being a recognised startup.

3. Deep Tech Startups

A Deep Tech Startup is a startup that, in addition to the five points above, has all four of these attributes:

• It is working on a solution based on new knowledge or advances in a scientific or engineering discipline (or several) that is yet to be developed, or is in development.
• It spends a high percentage of revenue or funding on R&D.
• It owns, or is creating, significant novel intellectual property and is taking steps to commercialise it.
• It faces long development timelines, long gestation, high capital and infrastructure needs, and carries large technical or scientific uncertainty.

A Deep Tech Startup is deemed a startup for all purposes of the notification. Whether an entity meets the attributes will be decided under a framework, parameters and guidelines issued by DPIIT, based on documents the applicant furnishes. The notification does not fix numerical R&D thresholds, so check the portal for the current parameters before you apply.

Who should consider it: biotech, advanced materials, semiconductors, space, climate hardware and similar ventures that expect to run past ten years or ₹200 crore of turnover before reaching scale.

4. Getting recognised

5. The tax holiday: from section 80-IAC to section 140

Recognition does not give you the tax holiday automatically. A separate application to the Inter-Ministerial Board is needed, and the tax law has its own conditions.

• Who can apply. Only a recognised startup that is a private limited company or LLP and meets the conditions of the tax provision. Partnership firms and cooperative societies cannot get this certificate.
• How. Application in Form-1 to the Board, with the memorandum or LLP deed, board resolution or registration details, audited accounts for the last three financial years (if applicable), and proof of innovation, wealth creation and employment generation, such as product details, IP filings, revenue or user growth, funding and employment data.
• The benefit. A deduction of 100% of profits from the eligible business for any three consecutive years out of the first ten years from incorporation, at your option.
• Incorporation window. On or after 1 April 2016 and before 1 April 2030, following the extension in the 2025 Budget.
• New numbering. The Income-tax Act, 2025 came into force on 1 April 2026. For tax year 2026-27 onwards, the deduction is in section 140. Section 80-IAC of the 1961 Act continues to govern earlier years.

Check before you rely on it. The turnover condition for the tax deduction has moved from ₹100 crore to ₹300 crore through the Finance Act, 2026, but several guides and portal templates still quote ₹100 crore. Read the final text of section 140 before you plan a claim. Also check how the deduction interacts with concessional corporate tax regimes before electing, because they generally do not run together.

Angel tax is no longer part of the picture. It was abolished from assessment year 2025-26, so it is not a reason to seek recognition.

6. The new rule on how you use your money

Paragraphs 4 and 5 of the notification are new, and they matter most for operating startups. A startup, including a Deep Tech Startup, must deploy its funds primarily towards its core business activities, innovation, research, scaling or operational requirements. During the period of recognition it must not invest in the following, other than where the investment is integral to its core business:

Where founders should look twice

• Parking surplus cash. Placing funding proceeds in market-linked instruments or shares goes beyond ordinary treasury operations. Keep the treasury policy conservative, and record the reasoning.
• Group lending. Loans to promoters, group companies or related parties fall under item 3. A loan to an ESOP trust or a subsidiary also needs to be looked at against items 3 and 4. These are our readings, not settled guidance.
• Funding subsidiaries or investing in other ventures. Item 4 allows contributions directly related to the business or strategic objectives. Document the business nexus before the money moves.
• Property and vehicles. Buying an office is fine if the startup occupies it. A company car or flat for the founder is a different question.

The notification does not state what happens on a breach. Until DPIIT clarifies, treat the list as a risk to your recognition and to any tax claim built on it. The practical safeguard is a board-approved investment and treasury policy, with minutes that tie each non-operating spend to the business.

7. Revocation, relaxation and effect

• False information. If a tax certificate was obtained on false information, the Board may revoke it. Once revoked, it is deemed never to have been issued. Any deduction claimed on that basis is then exposed for all the years concerned. Accuracy in Form-1 is a tax-risk issue as well as a compliance one.
• Relaxation. The Central Government may, in special circumstances, relax or modify one or more conditions for classes of startups or individual cases.
• Effect. The notification applies from the date of its publication, 4 February 2026.

8. Why the status is worth protecting

• Tax. The three-year profit deduction, where you qualify and obtain the Board’s certificate.
• Company law relaxations. Several relaxations for start-up private companies, for example on board meeting frequency and on ESOP and sweat equity issuance, are keyed to the DPIIT definition. Check the exact definition each provision uses before you rely on it.
• Restructuring. The fast-track merger route under the Companies Act is open to start-ups. Rule 25 defines a start-up by reference to the 2019 notification (G.S.R. 127(E)), which the 2026 notification supersedes. That cross-reference still appeared unchanged on a statute database valid as on 30 September 2026. Until the position is clarified, take a cautious view of eligibility there.
• Government and investor credibility. Procurement relaxations, intellectual property filing support and investor due diligence all start with a valid, current recognition.

9. Founder’s checklist

Hand this to your finance and legal team. Tick items off as they are completed.

1. Confirm your status today

• Entity type confirmed (company, LLP, partnership, cooperative) and date of incorporation or registration recorded
• 10-year (or 20-year, if Deep Tech) end date calculated and added to the compliance calendar
• Turnover for every financial year since incorporation computed under Section 2(91) of the Companies Act, 2013
• Year in which turnover is expected to touch ₹200 crore (₹300 crore for Deep Tech) projected
• Not formed by splitting or reconstruction of an existing business
• Current recognition certificate downloaded and its details checked on the portal

2. Deep Tech, if relevant

• Four attributes assessed honestly against your product and R&D plan
• Evidence file built: R&D spend as a share of revenue or funding, IP filings, development milestones, capital needs
• Current DPIIT framework, parameters and guidelines checked before applying

3. Money and conduct

• Board-approved investment and treasury policy adopted, mapped to the eight restricted categories
• Existing loans, advances and contributions to group entities, ESOP trusts, subsidiaries and related parties reviewed
• Property, vehicle and other asset purchases checked for business use, with documentation
• Surplus funds held in instruments consistent with ordinary treasury operations
• Board minutes record the business purpose of every non-operating investment

4. Tax holiday, if you plan to claim

• Entity is a private limited company or LLP
• Incorporated on or after 1 April 2016 and before 1 April 2030
• Turnover condition checked against the final text of section 140 for the relevant tax year
• Form-1 prepared with audited accounts, constitutional documents and proof of innovation, wealth creation and employment
• Information in Form-1 verified line by line, given the retrospective revocation risk
• Years in which the three-year deduction will be claimed planned against the profit forecast
• Interaction with concessional tax regimes reviewed before electing

5. Ongoing

• Annual review of recognition status, turnover headroom and age
• DPIIT portal notices and FAQs tracked for transition and clarification
• Companies Act relaxations you rely on checked against the definition each one uses
• Investor data room updated with current recognition, certificates and compliance records

10. Open questions to watch

• Transition. The notification carries no separate transition clause for entities recognised under the 2019 framework. Confirm on the portal how existing recognitions are treated, and assume the new conditions apply to you from 4 February 2026.
• Deep Tech parameters. The attributes are set out, but the measuring framework is left to DPIIT guidelines.
• Consequence of breaching the use-of-funds conditions. The text is silent.
• Cross-references to the 2019 notification in other rules, and how they will be read.
• Section 140 turnover figure. Read the final text rather than relying on commentary, because older guides still show ₹100 crore.

Conclusion

The 2026 framework gives founders more room to grow: a higher ceiling, a longer runway for Deep Tech, and a wider set of eligible entities. In return it asks for discipline, both in how recognition is earned and in how funds are used. The founders who do best will treat startup status as something to be managed, with a calendar, a turnover tracker and a treasury policy, and not as a certificate that is filed away.

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Disclaimer: This note is for general information and is not legal or tax advice. It reflects the position as understood on 5 October 2026. Please verify the gazette text and current portal guidance, and consult a professional before acting on any specific matter.

Dr. CS Ronak Jhuthawat, Founding and Managing Partner at M/s Ronak Jhuthawat & Co, Practicing Company secretary Call: +91 98874 22212 | Email: [email protected]