1. What is Start Ups?
A Startup is a team having a vision and skills like entrepreneurship, innovative thinking, in identifiable and investable form, in order to validate and capture the value of the created innovation – with ambition to grow fast with scalable business model for maximum impact within limited resources.
“Ideas are cheap. Execution is everything. It’s all about the people,’ I only invest when I think I have found the right team for the right business.” – Chris Sacca
Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand.
These companies typically don’t have a fully developed business model and, more crucially, lack adequate capital to move onto the next phase of business. Most of these companies are initially funded by their founders.
Technology plays a major role in startups, as digital technology itself have become more affordable, available and commonplace in general, – technology itself is not the key factor anymore in most cases, but what is done with things that technology have already enabled.
2. Who can become Start-up
The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership. Turnover should be less than INR 100 Crores in any of the previous financial years. An entity shall be considered as a startup up to 10 years from the date of its incorporation.
3. How to recognize
A Startup shall make an online application over the mobile app or portal set up by the Department of Industrial Policy and Promotion.
The application shall be accompanied by—
(a) A copy of Certificate of Incorporation or Registration, as the case may be, and
(b) A write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation.
The Department of Industrial Policy and Promotion may, after calling for such documents or information and making such enquires, as it may deem fit, —
(a) Recognize the eligible entity as Startup; or
(b) Reject the application by providing reasons.
4. Exemptions of Income Tax for Startups.
a. Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the Income Tax Act. Post getting clearance for Tax exemption, the Startup can avail tax holiday for 3 consecutive financial years out of its first ten years since incorporation.
b. Post getting recognition a Startup may apply for Angel Tax Exemption.
(Angel tax is levied on the capital raised via the issue of shares by unlisted companies from an Indian investor if the share price of issued shares is in excess of the fair market value of the company. The excess realization is considered as income and therefore, taxed accordingly)s.