Startups: DPIIT Recognition Process and Benefits

New businesses having scalable business model and innovation are being promoted by the government of India. One of the most lucrative offers is getting recognition from Department for Promotion of Industry and Internal Trade (DPIIT) and then enjoying a host of benefits. There are approximately 115000 startups who have got the recognition so far. In this article, let us explore the process of DPIIT recognition and benefits associated with that.

Let us start with eligibility for DPIIT recognition:

Eligibility:

• Entity should be partnership firm or limited liability partnership or private limited company. It means that the proprietorship, HUF, AOP and cooperative society are not eligible for recognition.
• Entity is not formed by splitting up or reconstruction of a business.
• Annual turnover should be less than 100 crores.
• Entity should not be older than 10 years.
• Entity should work towards innovation, development or improvement of products or services.

Keep ready documents:

• Incorporation/Registration Certificate
• Proof of funding, if any
• Authorization letter of the authorized representative of the company, LLP or partnership firm
• Proof of concept like pitch deck/website link/video (in case of a validation/ early traction/scaling stage startup)
• Patent and trademark details, if any
• List of awards or certificates of recognition, if any
• PAN Number
• DSC
• Mobile number and email ID
• A write up with details of how the entity is going to be creating innovation of product, process, services and/or the entity has scalable business model with high potential of employment generation or wealth creation. This write-up is the most decisive document whether the entity will be granted DPIIT Recognition or not. So, it needs to be drafted carefully.

Process of DPIIT Registration:

1. Log on to startupindia.gov.in: Click on Register then create an account with basic details like name, email Id, mobile number and password and submit.

2. Apply for DPIIT registration: Login to created account and apply for DPIIT registration in recognition tab. On next page click apply now. It will take you to NSWS window.

3. Startup Recognition form: Fill details such as the entity details, full address (office), authorized representative details, directors/partner details, required information, startup activities and self-certification.

4. Then upload the required and ready documents

5. After applying you will get your Recognition Number with e-certificate. The certificate of recognition will be issued after the examination of documents usually done within 2 days after submitting the details online.

Benefits of DPIIT Recognition:

1. Patent applications of startups will be fast tracked for examination.

2. Startups get 80% rebate on filing of patent applications and 50% on trademark application.

3. The entity will get preference in government tenders. It is a great opportunity for startups to participate in public procurement process and access potential market for the products. The entity can visit on https://gem.gov.in; eprocure.gov.in; entenders.gov.in

4. Self-certification: Startups can self-certify compliance with 9 Labour laws and 3 Environment laws for 3-5 years from incorporation.

5. Faster exit: Startups with simple debt structures/specified criteria are allowed to wind up operations in just 90 days in place 180 days

6. Startup India Seed Fund Scheme supports startups with funds for concept, prototype, product trial, market entry and commercialization.

7. Startups with Inter-Ministerial Board Certificate are exempted from Income Tax for 3 consecutive years out of 10 years since incorporation under section 80-IAC of Income Tax Act.

8. DPIIT Recognized Startup is eligible for exemption from provisions of section 56(2) of Income Tax Act. No angel tax.

9. Surcharge on long-term capital gains for listed equity shares reduced from 37% to 15% for unlisted companies under Finance Act.

10. Under Section 54GB of Income Tax Act, 1961, no capital gains tax is levied from sale of residential property of promoter if the same is invested into a startup private limited company.

11. For availing tax benefits, the entity needs to apply to Inter Ministerial Board.

In case you have any concern and queries or need any support in DPIIT Recognition or in availing tax benefits, you may like to contact us.

Abhinarayan Mishra, FCA, FCS; Managing Partner, KPAM & Associates, Chartered Accountants, Dwarka, New Delhi; +9910744992, ca.abhimishra@gmail.com