What exactly is a startup?

What exactly is a startup?

Startup India, initiated by the Government of India is a flagship initiative launched in January 2016. This initiative is taken by the government of India to boost the ecosystem for supporting innovation and startups in India. Through this scheme, the government is looking forward to driving sustainable economic development and enhances employment opportunities in India. The government of India recently announced Startup India action plan to meet the requirements of this initiative.

Startup means an entity, incorporated and registered in India 

• The Startup should be incorporated as a Private Limited Company or Limited Liability Partnership or Registered as a Partnership Firm.
• With an annual turnover not exceeding Rs. 100 crore for any of the financial years since incorporation/registration.
• Working towards innovation, development or improvement or of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.
• An entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘Startup’.
• Shall not be more than  10 years old for Startup recognition OR not incorporated before April 2016 to claim Tax Exemption certificate.

An entity shall cease to be a Startup,

• On completion of 10 years from the date of incorporation/registration.
• If its turnover for any previous year exceeds Rs. 100 crore

Benefits of Startup India Registration

Tax Exemption

Once your company gets Startup recognition you may get exemption on capital gain and investment above fair market value for 3 consecutive years. You have to apply for Income Tax Exemption benefits available u/s 80IAC and U/s 56(2) viiib relief for Angel Tax relief (Tax on Share Premium).

Easier Public procurement Norms

Public procurement refers to the process by which governments and state-owned enterprises purchase goods and services from the private sector. As public procurement utilises a substantial portion of taxpayers' money, governments are expected to follow strict procedures to ensure that the process is fair, efficient, transparent and minimises wastage of public resources.

In many Tenders, Govt. and PSU gives relaxation for Startups to Participation in public procurement job through tenders. Relaxation in Prior experience, EMD or Turnover criteria.

Govt. Funding Opportunity

Government allotted Rs 10,000 crores funds for investment into startups through Alternate Investment Funds. SIDBI is managing this fund. Startups can apply under this quota.

Participate in various Govt. Scheme

Government issues day to day various schemes for startup to participate. For example, sustainable finance scheme, bank credit facilitation, raw material assistance, etc.

Participate Startup Grand Challenges

Many reputed companies encourage startup entrepreneurs for their solutions. Here gives an opportunity for startup to participate in the scheme and win funding. Recently, Whatsapp, Mahindra, Aditya Birla, many more companies organising such financial assistance scheme with Startup India.

IPR Govt. Fee Concession

In IPR Registration 50%-80% Govt. fee concession available. Example in Trademark, Patent application.

Self Certifications

The process of conducting inspections shall be made more meaningful and simple! Startups shall be allowed to self-certify (through the Startup mobile app) with 9 labour and environment laws. In case of the labour laws, no inspections will be conducted for a period of 3 years.

Startups may be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer:

The Startups may self-certify compliance in respect of following Labour Laws:

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

Easy Winding up

Windup company in 90 days under insolvency & Bankruptcy code 2016.

Connect Networks

Search and find various startups and connect with them. Get Mentorship, connect with investors and industries.

GEM Portal Seller Registration and Bid

Startup India (DIPP) require for registration at GEM Portal of govt. https://gem.gov.in/

Documents Requirement for Startup India Registration

 

• .Certificate of Incorporation / Registration Certificate and PAN
•  Email ID and Mobile number
• .Company Details ( Industry, Sector, Category, Regd. Office Address etc)
• Directors/Partners Details ( Name, Photo, Gender, Mobile No. Email ID, Full Address)
• Details of Authorised Representative ( Name, Designation, Mobile No. Email ID)
• A Brief about business and products/services and notes on innovations
•  Revenue model and Uniqueness of the Product
• Website/Pitch Deck/Video/Patent ( anyone)

How to Apply for Tax Exemption Certificate U/s 80-IAC of Income Tax Act

As per Revised Rule vide Notification dated 11th April '2018 issued by Ministry of Commerce and Industry ( Department of Industrial Planning and Promotion) - 

A Startup being a Private Limited Company or Limited Liability Partnership (LLP) incorporated after 1st April 2016 may, for obtaining a certificate for the purpose of section 80-IAC of the Income Tax Act, make an application in Form-I along with documents specified theirein to the Board and the Board may after calling for such documents or information and making such enquires, as it may deem fit -

Either

i) Issue Tax Exemption Certificate.

or

ii) Reject the application by providing reasons.

 

How to Apply for Tax Exemption Certificate U/s 56 (2) (viib) of Income Tax Act (Angel Tax)

As per Revised Rule vide Notification dated 11th April '2018 issued by Ministry of Commerce and Industry ( Department of Industrial Planning and Promotion) and subsequently amended on 19th February 2019- 

ELIGIBILITY CRITERIA:-

A Startup being a Private Limited Company or LLP recognised as Startup shall be eligible to apply for approval for the purpose of Section 56(2)(viib) of the Income Tax Act ( popularly known as ANGEL TAX), if the following conditions are fulfilled:-

(i)   the agreegate amount of paidup share capital and share premium of the startup after the proposed issue of share capital does not exceed Rs 25 crores.

(ii)   the investor/proposed investor, who proposed to subscribe to the issue of share of the startup has

         a) the average returned income of the Rs 25 Lakhs or more for the proceeding three financial years, or

         b) the networth of Rs 2 Crores or more as on the last date of the proceeding financial year, and

(iii)   the startup has obtained a report from a merchant banker specifying the fair market value of share in accordance with rule 11UA of the Income Tax Rule, 1962.

(iv) Benefit available for 10 years.

 

APPLICATION & APPROVAL PROCESS:-

The application for approval under this para shall be made in Form-2 to the Board and shall be accompanied by documents specified therein.

And Board may after calling for such documents or information and making such enquires, as it may deem fit -

Either

i) Grand approval for the purpose of Section 56(2)(viib) of the Act, specifying the relevant details, including details of investors, amounts of premium on which shares are to be issued and the latest date by which the shares are to be issued; 

or

ii) Decline to grant the said approval after providing reasons.

Blog by aruna Jain