The Start-Up India Scheme was launched by the Central Government in the year 2016. This idea was the brainchild of the honorable Prime Minister of India. It is one of the significant igniting forces in the start-up community of the nation.

Start-Up India Scheme aims at forming a robust mechanism of new innovations and experiments. At the same time, it burns the fire of creating a nation full of job givers instead of job lookers. This innovative idea by PM Narendra Modi intends at wealth development through self-employment. At the same time, it provides incentives to budding small indigenous businesses.

Since its inception, the star-up scheme introduced many reforms and benefits for the new businesses to grow and enhance. Thereby, helping the economy to accomplish positive hikes and economic graphs.

It is to be noted that the Start-Up India Scheme is regulated and formulated by the Department for Industrial Policy and Promotion (DPIIT).

For our fellow readers, here is a list of few pointers that will teach them enough about the Start-Up India Scheme. At the same time, it will provide them the encouragement to start their own business.

What kind of a business entity is referred to as a “Start-Up”?

In order to meet the exact definition of being a ‘start-up’, here are a few requirements that the business entities are required to fulfill.

– The date of incorporation of the business should not exceed the period of 10 years.

– The business should be registered as a Private Limited Company or a Registered Partnership Firm or a Limited Liability Partnership.

– The annual turnover of the business should not exceed Rs. 100 crores for any financial years from the date of incorporation.

– The business entity should be a new one. This means it should not be formed by splitting or breaking down an existing business.

– Lastly, this new idea should have the scope for the development/growth of an existing product/service. At the same time, it paves a way for a new idea having a proper business model with the heights of creating wealth and employment.

All the above points fulfill the criteria of eligibility for any business that falls under the category of ‘Start-up’ under this governmental scheme.

What are the benefits/advantages provided by the DPIIT?

– All the start-ups can easily comply with the 6 labor laws and 3 environmental laws through an easy-simplified online procedure.

– The Start-up India scheme has its own online portal for the entrants to get access for various reasons. It provides tools for simple and flexible compliance. It paves the way for flexible entry and exit for failed startups, legal support, a fast working patent application handle, etc.

– The business entities under the scheme are eligible for various funds and incentives. This enables them to become a part of various capital infusing techniques and credit guarantees to enhance their business operations.

– Apart from the above, there are many income tax and capital tax gain exemptions provided to the businesses by the Start-up India Hub.

What are the tax exemptions and gains enjoyed by the businesses under this scheme?

As per the Start-up India Plan, many small businesses and star-ups that fall under G.S.R notification 127 are eligible for various tax exemptions. Below listed are some of the most prominent and superlative benefits enjoyed by all new startups falling under the Start-Up India Scheme.

1) Tax Exemption under section 80IAC

Under this, all start-ups are eligible for a tax break of three years out of their first 10 years from the date of incorporation.

– It should be noted that the start-up should be registered within the period starting from 1st April 2016 to 31st March 2021.

– The business should be eligible and its turnover should not have been more than 25 crores in the previous year.

– It should hold the eligible business certificate from the Inter-Ministerial Board of Certification as directed by the Central Government.

Only by fulfilling the above conditions, the start-up can avail of this tax benefit.

2) Tax Exemption under section 56 (Income Tax Act)

This relates to the investments into eligible businesses done by the listed companies. The companies that have a net worth of INR 100 crores or turnover of INR 250 crores are exempted from any tax liability. This is done in accordance with section 56(2) VIIB of the Income Tax Act.

The same tax exemption is given to the Accredited Investors, Non-residents, AIFs falling under the category 1. It should be observed that these parties should have a net worth of INR 100 crores or an annual turnover of INR 250 crores.

Moreover, under this section, the consideration paid in shares shall be exempted up to the amount of INR 25 crores.

In order to avail of this exemption, the company should:

– be a private limited company;

– be recognized by the DPIIT;

– not be giving any loans & advances, investments in mobile property, capital contributions more than the limit of INR 10 lakhs.

What about the exiting/winding-up procedure for start-ups under this scheme?

The small businesses under this scheme are given the autonomy to leave the business as and when the need arises. There can be many reasons for a business to stop its production such as insolvency, less demand in the market, inability to pay its workers/laborers, etc.

It should be observed that every business activity is taken under for its lucrative nature. Therefore, if the business is unable to prosper in the long run, the best way to overcome this is to stop its activities altogether.

In accordance with the Insolvency and Bankruptcy Act, 2016, the startups can wound up their operations within 90 days of filing up for insolvency. A proper insolvency expert can be hired for this purpose.

This liquidator/expert will look after the payment and sale of several assets and liabilities of the company in question.

Why is there a need for Patent and IPR applications?

The patent and intellectual property rights application is filled by the start-ups to ensure the safety of business from getting duplicated and used by the fraudsters in the market. It enables the actual producers to use their innovation in their own benefit, financially and legally.

This offers the listed advantages;

– Under this scheme, all the patent and IPR applications are fast-tracked. This helps in realizing the business’s worth soon.

– There is the presence of a panel that facilitates the filing of applications in the best manner possible for the new entrants.

– All the costs and expenses related to patents, trademarks, copyrights, etc are paid by the Central government. This is applicable to all the filings done by the start-ups under this scheme. The Start-ups are to pay only the statutory fees for the process.

– Start-ups, under this scheme, get the rebate of 80% in the filing of patents vis-a-vis other companies. This helps small businesses to maintain its cost budget in the crucial operating years.

To sum this up, the start-ups under the Start-Up India Scheme are given the tax holiday for three years. Moreover, the government of India has allocated the fund of INR 2,500 crores. Additionally, it gives the provision for credit guarantees fund of INR 500 crores.

We, in order to educate our readers, have prepared this full-fledged article that comprises everything that is necessary to get into the depth of the Start-Up India Scheme. This piece would not only help the start-up community to understand their rights but it will also give enough for the new enterprises to join the process.


The information contained herein is of a general nature and is not intended to address the circumstances of any person or entity. Although we endeavor to provide accurate and timely information, there is no guarantee that such information is accurate as of the date it received or that it will continue to be accurate in the future. No one should act on such information appropriate professional advice after a thorough examination of the situation.

Author Bio

Qualification: CA in Practice
Company: Rastogi & Co (Member Firm PBS Ltd)
Location: Navi Mumbai, Maharashtra, IN
Member Since: 30 Mar 2020 | Total Posts: 7

My Published Posts

More Under Corporate Law

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

April 2021