Know about Start-Up
Start-up India has gained momentum since it was announced by Government of India in the year 2016. The initiative was focused on the growth of start-up business and to encourage innovation and design.
Conditions for an eligible Start-up
- Registered up to 10 years from the date of incorporation
- Is a private limited company/ registered partnership firm/ LLP
- Annual Turnover not exceeding Rs. 100 Crore in any financial year since incorporation.
- Is innovative in nature, and is working towards development or improvement of products/ process/ services or is a scalable business model with a high potential of employment generation or wealth creation.
- Not formed by splitting up or reconstructing a business already in existence
The entity will no longer be an eligible start-up once-
1. It completes 10 years from the date of registration
2. Its turnover exceeds Rs. 100 crore in any year.
Key features for start-up
- Self-certification compliance regime Up to 3 years, there will be no compliance in regards to the environmental law compliance, labour. Compliance based on self-certification.
- Start-up India Hub assistance in obtaining financing, feasibility testing, business structuring, providing hub and spoke model and collaboration with Central & State Governments, Indian and foreign VCs, angel networks, incubators, legal partners etc
- Access to funds Government has set up a Rs. 10,000 Crore funds, to provide funds to the start-ups as venture capital. The government is also giving guarantee to the lenders for the loans to start-ups.
- Mobile app and portal- Single platform mobile app available for start-up registration and with other Government agencies.
- Lower cost and fast examination for Patent establishment of patent facilitation centres and 80% rebate in patent fee.
- Easy norms in public procurement exemption from “prior experience/ turnover criteria” while participating in any tender by Government or PSUs.
- Fast exit It is very important for a business to have a fast and simple exit route. The Insolvency and Bankruptcy Code, 2016 provides for fast track, a simple and fast would up scheme within a period of 90 days from making exit application under the scheme.
TAX EXEMPTIONS FOR START-UPS
- 3 years tax holiday out of 7 years Start-ups registered between 1/04/2016 till 31/03/2022 (earlier till 31/03/2021) will get 100% tax rebate on profit for any 3 years out of block of 7 years. Provided, the annual turnover should not exceed Rs. 25 crore in any financial year and they get a certificate from Inter-Ministerial Board (IMB). This provision is available under section 80IAC of the Income Tax Act, 1961. This exemption is available only to the companies and the LLPs.
Important- There is a difference between star-tup recognition and start-up recognition with tax. Start- up recognition certificate is given by Department of Industrial Policy and Promotion (DIPP), however tax exemption under section 80IAC is granted by Inter-Ministerial board of Certification
- Exemption from the taxation of capital gain Section 54EE inserted in the Income Tax Act for the eligible start-ups to exempt their tax on a long-term capital gain if such a long-term capital gain or a part thereof is invested in a fund notified by the Central Government.
- Exemption under section 56 (2)(viib) of Income Tax Act, 1961
Exemption has been given to Start-ups for the purpose of clause (viib) of sub-section (2) of section 56 of the Act. CBDT through Notification No. 13/2019 granted exemption to start-up companies from angel tax w.e.f. 19.02.2019 if such companies fulfill the conditions specified in para 4 of the notification number G.S.R. 127(E), dated the 19th February, 2019.
Issue of convertible Note-
Start-ups are eligible to issue convertible notes. An amount of Rs. 25,00,000 or more received by a start-up company, by way of a convertible note (convertible into equity shares or repayable within a period not exceeding five years from the date of issue) in a single tranche, from a person” is considered as exempted deposits.
Further, Reserve Bank of India also amended the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2016, to introduce the concept of convertible notes under FEMA.
Registration Steps with Start-up India
- Incorporate your entity as Private Limited Company or Limited Liability Partnership or registered Partnership firm.
- Register yourentity with Star-Up India. It is done online by logging on Start-up India website (https://www.startupindia.gov.in/content/sih/en/home-page.html). You need to fill details and upload documents as required.
- Need to tick if you would like to avail tax benefit for 3 years. But to avail these benefits, they must be certified by the Inter-Ministerial Board (IMB).
And there you go! You get immediately a recognition number. The certificate of recognition will be issued after the examination of all your documents.
Key Services required by Start-ups
- Incorporation formalities, getting the PAN, TAN, MSME registration, Bank account opening etc
- Register with Start-up India and get the recognition certificate and apply for tax exemptions.
- Get the entity ready for due diligence by the prospective investors
- Once the investors have come, signing of Share Holders Agreement (SHA)/ Share Purchase Agreement (SPA)
- Allotment / transfer of shares
- Compliances under the respective act
Start-ups are the backbone for the growth of economy of a country. Start-up India is an initiative by the government for providing support to the growth of the start-up. The Scheme has motivated the entrepreneurs to start-up their business and go for innovation and improvement.