I. Introduction

What qualifies as a “Start-up” under the Start-up India Scheme?

An entity shall be eligible to apply for Start-up Registration if:

1. It is incorporated as a Pvt Ltd Company or registered partnership firm or LLP.

2. Up to ten years from the date of its incorporation/registration

3. Turnover for any of the financial years since incorporation/registration has not exceeded Rs. 100 Crores

4. Working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation

Note: An entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘Start-up’.

II. Benefits of Startups

A. Relaxations as per Income Tax

Sr. No Benefits Applicability
Firm LLP Pvt Ltd.
1. Tax Exemption u/s 80IAC

Start-ups can avail tax holiday for 3 consecutive financial years out of its first 10 years.

Start-up should be incorporated on or after 1st April, 2016 to avail such exemption and it should hold a certificate of eligible business from the Inter-Ministerial Board of Certification

NA Yes


2. Angel Tax exemption u/s 56(2)(viib)

Unlike Companies other than Startups, Startups are exempted from angel tax if they are registered under DPIIT & aggregate amount of Paid-up capital & share premium is not more than Rs. 25 crores after share issue. Hence startups are not required to obtain valuation report from merchant banker at the time of raising funds by issuing equity shares.

3. Exemption from long-term capital gains tax to investor of startups u/s 54EE

LTCG from Residential property arising to an individual/HUF is exempted if the net consideration is invested in the equity shares of eligible startups

4. Startups can set off or carry forward losses u/s 79 and capital gains even if there is change in shareholding pattern by more than 51% subject to the condition of 51% voting rights remaining unchanged.

B. Relaxations as per Companies Act

Relaxations as per Companies ActC. Relaxation under FEMA

Convertible notes A person resident outside India is permitted to purchase convertible securities issued by Startups amounting to Rs. 25 lac or more in a single tranche. This can further be acquired or transfer w.r.t entry routes and pricing guidelines for capital instruments.  Following is the link for the same notification:

FEMA (Transfer or Issue of Security by a Person Resident outside India) 15th Amendment) Regulations, 2016

Foreign Venture capital fund (FVCI) “FVCI” means a Foreign Venture Capital Investor incorporated and established outside India and registered with the

SEBI under the SEBI (FVCI) Regulations, 2000. FVCI are permitted to purchase securities issued by Startups.

D. Common Benefits

1. Self Certification

They can self-certify (through the Startup mobile app) with 6 Labour Laws and 3 Environment Laws. In case of the labour laws, no inspections will be conducted for a period upto 5 years. This makes the process meaningful and simpler.

2. Patent Application and IPR Protection

The scheme of Startup Intellectual Property Protection facilitates the filing of patent, trademarks and various designs by them over which they are allowed a rebate of 80% and the entire cost is borne by the Central Government.

3. Startup Incubators

Startup incubators are usually non-profit organizations, which are usually run by both public and private entities.  They help the startups in arranging funding and other business needs that is faced in the primary stages of business

4. Corpus Fund

Government have kept aside a corpus fund of Rs. 10,000 Crore managed by SIDBI to provide equity funding support to startups


For further in-depth knowledge regarding the Exemptions or Relaxations given to the Startups & it’s Registration Process, you can reach us on below mail ID’s:

CA Shreyans Dedhia| Partner | E-mail ID: [email protected]

Kiwa Shah | Associate Consultant | E-mail ID: [email protected]

Urvesh Shah |Associate Consultant | E-mail ID: [email protected]

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September 2021