Start-up Registration

Who can recognise as start up or Eligibility for Start up

Your company must meet the following criteria to be considered eligible for DPIIT startup recognition.

1.Company Age
Period of existence and operations should not be exceeding 10 years from the Date of Incorporation

2.Company Type
Incorporated as a Private Limited Company, a Registered Partnership Firm or a Limited Liability Partnership(LLP)

3.Annual Turnover
Should have an annual turnover not exceeding Rs. 100 crore for any of the financial years since its Incorporation

4.Original Entity
Entity should not have been formed by splitting up or reconstructing an already existing business

5.Innovative & Scalable
Should work towards development or improvement of a product, process or service and/or have scalable business model with high potential for creation of wealth & employment

Recognition of Start up
The process of recognition of an eligible entity as startup shall be as under: —

(i) A Startup shall make an online application over the mobile app or portal set up by the DPIIT.
(ii) 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.

(iii) The DPIIT may, after calling for such documents or information and making such enquires, as it may deem fit, —
(a) recognise the eligible entity as Startup; or
(b) reject the application by providing reasons.

Benefits to startups by Indian Government

1. Simple registration process
*Government of India has launched a mobile app and a website (http://www.startupindia.gov.in/) for easy registration of startups
*Anyone interested in setting up a startup can fill up a simple form on the website and upload certain documents
*The entire process is completely online.

2. Reduction in cost
*The government also provides lists of facilitators of patents and trademarks
*They will provide high quality IPR Services including fast examination of patents at lower fees
*The government will bear all facilitator fees and the startup will bear only the statutory fees. 
*They will enjoy 80% reduction in cost of filing patents and 50% cost of filling Trademarks.

3. Easy access to Funds
*A 10,000 crore rupees fund is set-up by government to provide funds to the startups as venture capital.
*The government is also giving guarantee to the lenders to encourage banks and other financial institutions for providing venture capital.

4. Tax holiday for 3 Years
*Startups will be exempted from income tax for 3 years provided they get a certification from Inter-Ministerial Board (IMB).

5. Apply for tenders
*Startups can apply for government tenders.
*They are exempted from the “prior experience/turnover” criteria applicable for normal companies answering to government tenders.

6. Research and development facilities
*Seven new Research Parks will be set up to provide facilities to startups in the R&D sector

7. Startups will be permitted to self-certify compliance with nine labour laws and three environmental laws. In the case of labour laws, no inspection will be conducted for a period of three years.

8. Exemption from the taxation of capital gain.

9. Choose your investor
After this plan, the startups will have an option to choose between the VCs, giving them the liberty to choose their investors.

10.A hub for the startup India will be started with a single point of contact which can be available after site
launch.

11.A fast-track mechanism is also set up for patent applications.

12. Easy exit
In case of exit – A startup can close its business within 90 days from the date of application of winding up

13. Meet other entrepreneurs
Government has proposed to hold 2 startup fests annually both nationally and internationally to enable the various stakeholders of a startup to meet. This will provide huge networking opportunities.

INCOME TAX EXEMPTION
Corporate tax holiday Section- 80 IAC
How to Cliam :A recognized startup is required to file Form 1 along with the specified documents to the Inter-Ministerial Board of The board may call for certain documents or information and may make such enquiries, as it deems fit, to recognize the entity as an eligible startup and grant a certificate for claiming exemption under section 80-IAC. The board may reject the application by providing the reasons thereof.

Relief from angle tax 56(2)(vii)b
Menaing of angel tax under section 56(2)(viib): Angel tax is the tax charged on the closely held company when it issues shares to a resident person at a price which is more than its fair market value. When this provision is triggered, the aggregate consideration received from issue of shares as exceeds its fair market value is charged to tax under the head ‘Income from 
other sources’ under section 56(2)(viib).

Conition for exemption provided to an eligible startup from angel tax levied under section 56(2)(viib)

*A start-up shall be eligible for claiming exemption from levy of angel tax under section 56(2)(viib) if following conditions are satisfied:
(a) Start-up is registered with DPIIT;
(b) Its aggregate amount of paid-up share capital and share premium after issue or proposed issue of shares, does not exceed Rs.25 crore. While calculating this threshold limit, issue of shares to following persons shall not be included:
    A non-resident person ;
    Venture capital company;
    Venture capital fund
    Listed company whose net worth exceeds Rs.100 crore or turnover exceeds Rs.250 crore for the financial year preceding the year in which shares are

(c) It does not invest in any of the following assets for a period of 7 years frm the end of the latest financial year in which the shares are issued at premium:
*Land or building, being a residential house, other than that used for the purposes of renting or held as stock-in-trade in the ordinary course of business
*Land or building, not being a residential house, other than that occupied by start-up for its business or renting purposes or held as stock-in-trade in the ordinary course of business 
*Loans and advances, if start-up is not engaged in ordinary business of lending of money 
*Capital contributions to any other entity
*Shares and securities
*Motor vehicle, aircraft, yacht or any other mode of transport, if the cost of such an asset exceeds Rs. 10 lakhs other than that held by the Start-up for the purpose of plying, hiring, leasing or as stock-in-trade in ordinary course of business 
*Jewellery held otherwise than as stock-in-trade 
*Archaeological collections,  drawings,paintings, sculptures, any work of art or bullion

Moreover, consideration received by eligible Start-ups for shares issued or proposed to be issued shall be exempt up to an aggregate limit of Rs. 25 crore.

In addition, consideration received by eligible Start-up for shares issued or proposed to be issued to a listed company having a net worth of Rs.100 crore or turnover of at least Rs. 250 crore will also be exempted.

The aggregate limit of Rs. 25 crore will exclude consideration received by eligible Start-up for the following classes of persons:
i. Non-Residents
ii. Alternative Investment Funds- Category-I registered with SEBI
iii. Listed company having a net worth of Rs.100 Crores or turnover of at least Rs. 250
crore provided that its shares are frequently traded on registered stock exchange
 

Capital gain exemption Sec 54 EE & 54 GB

*Relief for carry forward and set off loss due to change in shareholder Sec 79
*ESOP taxation sec 17 (2) vi & 192 (1C)
*Reduced rate @10% on royalty on patent (Sec 115 BBF)

Relief for carry forward and set off loss due change in shareholder Sec 79

ESOP taxation sec 17 (2) vi & 192 (1C)

Reduced rate @10% on royalty on patent (Sec115 BBF)