Definition of Startup (only for the purpose of Government schemes)
Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.
Provided also that an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration.
Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.
Definition of terms
Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2008)Description of Item 1
Identification of businesses covered under the definition in Part A above
A business is covered under the definition if it aims to develop and commercialize
a new product or service or process; or
a significantly improved existing product or service or process,that will create or add value for customers or workflow.The mere act of developing
products or services or processes which do not have potential for commercialization; or
undifferentiated products or services or processes; or
products or services or processes with no or limited incremental value for customers or workflow would not be covered under this definition.In order for a “Startup” to be considered eligible, the Startup should
be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post-graduate college in India; or
be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or
be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI; or
be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/ Accelerator/Angel Network duly registered with SEBI* that endorses innovative nature of the business; or
be funded by GoI as part of any specified scheme to promote innovation; or
have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.* DIPP may publish a ‘negative’ list of funds which are not eligible for this initiative.
As defined under The Companies Act, 2013
An Inter-Ministerial Board setup by DIPP to validate the innovative nature of the business for granting tax related benefits
Approval from the Inter-Ministerial Board shall not in any manner, limit or absolve the entity(ies) from any liability incurred in case of any misrepresentation/ fraud arising from submission of such application and/ or supporting such application.
EASE OF DOING BUSINESS – HIGHLIGHTS
Introduction of compliance regime based on self-certification. Start-ups would be allowed to self-certify compliance with labour and environment laws. As far as labour laws are concerned, no inspection would be conducted for a period of three years. In case of environment laws, start-ups under ‘white’ category would be able to self-certify compliance.
Fast track mechanisms of start-up patent applications The government would allow start-ups to realise the value of their intellectual property rights (IPR) at the earliest possible, patent applications of the start-ups will be fast tracked for examination and disposal
Faster exits for start-ups Provisions for fast-tracking closure of businesses have been included in ‘The insolvency and Bankruptcy Bill, 2015’. Start-ups, who have simple debt structures, can be allowed to wind up within a period of 90 days after filing an application.
Tax exemption to start-ups for 3 years Start-ups set up after April 1, 2016, shall be exempted from income-tax for a period of three years.
Tax exemption on investments above fair market value Exemption would be available to venture capital funds to invest in start-ups above fair market value (FMV). It would also include investments made by incubators above FMV
Tax exemption on capital gains Tax on long-term capital gains in unlisted entities would be cut from present rate up to 20 percent
Starting a start-up in a day through mobile app.
A mobile app would be made live in April 2016 that would, for budding start-ups, act as a window for information exchange and interacting with government and regulatory bodies. It would help start a new company in a single day as all paperwork would be filed through the mobile app and portal
A panel to aid start-ups with legal support and assistance in filing of patent application Government appointed facilitators shall help start-ups in filing and disposal of patent applications The govt would bear the cost of it
Norms of public procurement for start-ups to be relaxed Public sector units would give start-ups preference.
80 percent rebate on filing patent applications by start-ups Start-ups to be given 80 percent rebate in filing patents to help them lower costs of setting up business
FOR PROMOTING START-UPS
Start-up India Hub An entire start-up ecosystem that would be a set-up and a friend, mentor and guide for start-ups through their entire journey
Setting up of 7 new research parks modelled on the research park at IIT-Madras Seven new research parks with an initial investment of Rs 100 crore each would be set up
35 new incubators in institutions A maximum of Rs 10 crore financial support to be given by central government to new incubators.
Launch of Atal Innovation Mission– Entrepreneurship promotion * Sector-specific incubators to be established * 500 tinkering labs with 3D printers in universities * Pre-incubation training to potential entrepreneurs * Strengthening of the existing incubation facilities * Seed funding to high growth start-ups
Innovation promotion * Institution of innovation awards: 3 per state/UT and 3 national level * Providing support to State Innovation councils for awareness creation and organising state-level workshops/conferences * Launch of Grand Innovation Challenge Awards for finding low-cost solution to intractable problems