1. What is a Startup?

Startup India is an initiative of the Government of India. Startup India program was launched on 16th January, 2016.  Intended to build a strong eco-system for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities.

The Government of India throughthis initiative aims to empower Startups to grow through innovation and design.

An entity shall be considered as a startup(meaning of Startup) if it satisfies all the following conditions:

a. If it is incorporated/registered as any of the followings:

a. Private Limited Company (as defined in Companies Act, 2013).

b. Partnership Firm (registered under Partnership Act, 1932).

c. Limited Liability Partnership (registered under Limited Liability Partnership Act, 2008).

d. One Person Company (as defined in Companies Act, 2013).

Provided that such entity is not formed by splitting up or reconstruction of a business already in existence.

b. It has not completed ten years since incorporation/registration as above.

c. Its turnover for any of the financial years has not exceeded INR 100 Crore.

d. It satisfies any of the following conditions:

i) It is working towards:

Innovation of new products/processes/services or

Development of new products/processes/services or

Improvement of existing products/processes/services

ii) It is a scalable business model with a high potential of:

Employment generation or

Wealth creation.

Startups

2. Startup India Hub to Promote Startups

Startup India Hub: Objective of Startup India Hub is to create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding. It provides following resources:

a. Learning and Development Programs – 4 weeks online free certification course is available for step-by-step guide to starting a business in India.

b. Government Schemes – All the government schemes for the Startups are available on the portal.

c. State Startup Policies – All the state government policies for Startups are available on the portal

d. Pro Bono Services – Free applications, cloud credits, legal and banking support from startup India partners i.e. Amazon Web Services, PayU, truecaller and so on are available on the portal.

e. Knowledge Bank – A quick guide on allthings relating to Startups, including company registration, investor engagement, legal considerations etc are available.

f. Tools and Templates – A sample templates/formats for all legal & HR documents, investor decks, deeds, contracts etc. are available.

g. Networking – Connect with startups, incubators, accelerators, mentors, governments and investors on the portal. Startup hub provide access to connect with:

No. of Startups:                            80, 397

No. of Incubators:                        565

No. of Corporates/Accelerators:  121

No. of Mentors:                            564

No. of Government body:             47

No. of Investors:                           81

h. Idea Bank – Looking for an Idea for your Startup? Startup India portal has listed some problem statements which require innovative solutions.

3. Startup Registration/Recognition by Government

Startups satisfying all the above conditions can apply to be recognized by Department for Promotion of Industry and Internal Trade (DPIIT) using startup India portal https://www.startupindia.gov.in/.

Requirements for recognition:

a. Certificate of Incorporation/Registration and PAN

b. Total No. of directors/partners and details of each director/partner with respect to Name, Mobile No., Email ID and complete address.

c. Entity details with respect to Industry, sector and category in which it deals.

d. Details of Authorised Representative ( Name, Designation, Mobile No. and Email ID)

e. Number of Employees including founders.

f. Whether any awards/recognition received by the entity? if yes, need to upload document with respect to award/recognition received.

g. What is the problem the startup is solving? It needs to be explained in maximum 250 words.

h. How does your startup propose to solve above mentioned problem? It needs to be explained in maximum 250 words.

i. What is the uniqueness of your solution? It needs to be explained in maximum 250 words.

j. How does your startup generate revenue? It needs to be explained in maximum 250 words.

k. Links or upload additional document to support your application. (eg. Website link, Videos, Pitch Deck, Patents, etc.). It is mandatory to provide any one.

4. Benefits of Startup Recognitionby DPIIT

a) Various benefits with respect to Intellectual Property Rights (IPR):Startups are provided following benefits with respect to intellectual property rights:

i) Startups are provided 80% rebate in filing of patent application and 50% rebate in filing of trademark application.

ii) Speedy examination & disposal of patent application is provided in respect of startups.

iii) A panel of facilitators are provided to startups to assist in filing of application for intellectual property rights such as patents and trademarks. Central Government bears the entire fees of the facilitators for any number of patents, trademarks or designs, and Startups only bear the cost of the statuary fees payable.

As per latest data released by government more than 1000 applicants have received fee benefits and more than 4000 IPR facilitators available to assist startups in getting IPRs.

b. Relaxation in Public Procurement Norms for Startups

Generally when a tender is issued by a government entity or public sector undertaking, it has a requirement of either prior experience or turnover. Generally, startups fail to meet the criteria to participate in the tender.

In order to promote startups in manufacturing sector at par with well experienced entrepreneurs/companies having high turnover government has exempted startups from the criteria of prior experience or turnover. However, no relaxation has been granted with respect to quality standards or technical parameters.

c. Self-Certification of Compliance with Labour &Environment Laws

In order to reduce the regulatory burden on Startups, it has been allowed to self-certify compliances with certain labour & environment laws for a period of three years from the date of incorporation.

In respect of labour laws no inspection will be carried out unless they receive a credible& verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.

Relief in following Labour Laws:

    • The Building and Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996
    • The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
    • The Payment of Gratuity Act, 1972
    • The Contract Labour (Regulation and Abolition) Act, 1970
    • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
    • The Employees’ State Insurance Act, 1948

Relief in following Environment Laws:

    • The Water (Prevention & Control of Pollution) Act, 1974
    • The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003
    • The Air (Prevention & Control of Pollution) Act, 1981

d. Faster Exit

Due to innovative nature of Startups, unfortunately a significant percentage of startups fail to succeed.

In the event of a startup failure, it is important to reallocate capital and resources left to more productive options available and therefore, a swift and simple winding up process has been set up for Startups.

This will promote entrepreneurs to experiment with new and innovative ideas, without having the fear of facing a complex and long-drawn exit process where their capital remain needlessly stuck.

e. Income Tax Exemption under section 80IAC for 3 years

With a view to stimulate the development of Startups in India and provide them a competitive platform, tax exemption to recognised startups for 3 years on approval basis has been allowed.

Startups incorporated on or after 1st April 2016 can apply for income tax exemption under section 80IAC of the Income Tax Act, 1961.

The Inter-Ministerial Board validates the innovative nature of the business for granting Income Tax Exemption.

The recognized Startups that are granted an Inter-Ministerial Board Certificate are exempted from income-tax for a period of 3 consecutive years out of 10 years since incorporation.

f. Income Tax Exemption under section 56(2)(viib) (Angel Tax) on Investments:

What is section 56(2)(viib) ?

Where a company receives any consideration for issue of shares which exceeds the Fair Market Value (FMV) of such shares, such excess consideration is taxable in the hands of recipient as Income from Other Sources.

What is relief to startups given?

To encourage capital investment in startups a relief has been provided to startups with respect to section 56(2)(viib).

A DPIIT recognized startup is eligible for exemption from the provisions of section 56(2)(viib) of the Income Tax Act.

The Startup has to file a duly signed declaration in Form 2 to DPIIT to claim the exemption from the provisions of Section 56(2)(viib) of the Income Tax Act.

Declaration needs to be digitally signed by a person who is authorized to verify the return of income under section 140 of the Income tax act e.g director of the company.

g. Fund of Funds for Startups:

One of key challenges faced by Startups in India has been access to finance. Often Startups, due to lack of collaterals or existing cash flows, fail to justify the loans.

Besides, the high risk nature of Startups wherein a significant percentage fail to take-off, hampers their investment attractiveness.

To provide equity funding support for development and growth of innovation driven enterprises, the Government has set aside a corpus fund of INR 10,000 crores managed by SIDBI.

The Fund is in the nature of Fund of Funds, which means that the Government participates in thecapital of SEBI registered Venture Funds, who invest twice the amount in Startups.

The flow of funds is Government > SIDBI > Venture Capitals > Startups.

h. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

The Credit Guarantee Fund Scheme for Micro and Small Enterprises was launched by the Government of India (GoI) to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme.

i. Tax Exemptions on Capital Gains with an objective to promote investments into Startups by mobilizing the capital gains arising from sale of capital assets.

5. Startup India Progress (statistics till date i.e 14th June, 2020)

Total No. of Users Registered :                    4,07,430

Income Tax Exemptions to Startups:            266

Total No. of DPIIT Recognized Startups:   32,849

Total No. of Startups Funded:                        323

6. Frequently Asked Questions on Startup India (FAQs)

Question 1. I have an innovative idea that I want to pursue as a startup. What guidance can Startup India provide me?

Startup India Learning Program is a free online entrepreneurship program by Startup India. The aim is to help entrepreneurs get their ideas and ventures to the next level through structured learning.

The program covers lessons on key areas of starting up by 40+ top founders of India in an extensive 4-Week Program which is free course with certification for budding entrepreneurs available in both Hindi and English language.

Interested individuals can enroll for this free course at https://www.startupindia.gov.in/content/sih/en/learning-and-development_v2.html.

Question 2. What is the time frame for obtaining certificate of recognition as a “Startup” in case of an entity already exists?

The certificate of recognition is issued typically within 2-3 working days upon successful submission of the application.

Question 3. If my Startup gets recognised, would I obtain certificate for it? If yes, would I be able to download the certificate?

Yes, if your startup gets recognised, you would be able to download a system generated verifiable certificate of recognition.

Question 4. What is the constitution of the Inter-Ministerial Board?

The Inter-Ministerial Board setup by Department of Industrial Policy and Promotion validates Startups for granting tax related benefits.

The Board comprises of the following members:

a. Joint Secretary, Department for Promotion of Industry and Internal Trade, Convener

b. Representative of Department of Biotechnology, Member

c. Representative of Department of Science & Technology, Member

Question 5. If a Startup has applied for DIPP-recognition and the application gets rejected or marked incomplete due to missing documents or insufficient information, should the startup edit the existing application or submit a new one?

If the application for recognition has been marked incomplete, the startup needs to follow the given steps:

a. Log in with their startup credentials on startupindia.gov.in

b. Select ‘Recognition and Tax Exemption’ button on the right panel

c. Select the ‘Edit Application’ button and proceed with completing your application

If the application has been marked ‘Incomplete’ thrice, the application is rejected.

Rejected applications cannot be edited, and a new application can be submitted after three months from the date of communication of the rejection email.

Question 6. Is there any government fee to apply for recognition by DPIIT?

No, there is no government/statutoryfees.

Question 7. I am looking for a Startup idea, what can I do?

Government of India has listed some of the problems on Startup India Portal naming it “Idea bank”. You can think for the solutions of the given problem and execute it through your Startup. Link to access idea bank is https://www.startupindia.gov.in/content/sih/en/idea_bank.html.

Alternatively, you can also think of solutions for problem faced by you or general public.

Question 8. Can I also register my startup as “MSME” to avail benefits extended to MSMEs?

Yes

Question 9. What is not a startup?

a. Proprietorship Firm

b. Unregistered Partnership Firm

c. Limited Company

Please feel free to give your feedback/connect with me at: cssatishprasadsingh@gmail.com Mo. +91 7982078595

Author Bio

Qualification: CA in Practice
Company: N/A
Location: EAST DELHI, New Delhi, IN
Member Since: 03 Apr 2020 | Total Posts: 5
CA Satish Singh is a practicing Chartered Accountant. Besides, He also holds membership of ICSI. A B.com(H) graduate from Motilal Nehru College, Delhi University. He did his articleship training from M/S. Mohinder Puri & Co., Chartered Accountants a renowned Chartered Accountancy Firm. His Post View Full Profile

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