Introduction

The Government of India has announced ‘Startup India’ initiative for creating a favorable environment for startups in India by Department of Industrial Policy and Promotion , Ministry of Commerce & Industry vide its notification dated 17-02-2016 .

Definition of Eligible Startup Unit

“Eligible startup” means a company or a Limited Liability Partnership engaged in eligible business which fulfill the following conditions namely:-

  • It is incorporated on or after the 1st of April 2016 but before the 1st day of April 2019.
  • The total turnover of its business does not exceed 25 Crore Rs. any of the previous year beginning on or after the 1st day of April 2016 and ending on the 31st day of March 2021 and
  • It holds a certificate of eligible business from the Inter Ministerial Board of Certification as a notified in the official Gazette by the Central Government.

Procedure for recognition as a startup unit and documents required for setting startup units

The process for the registration of the startup is simple and hassle free. The startup entity required to submit a simple application form along-with any one of the documents mentioned below:

  • Recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a postgraduate college in India; or
  • A letter of support by any incubator which is funded (in relation to the project) from Government of India or any State Government as part of any specified scheme to promote innovation; or
  • A recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator recognized by Government of India; or
  • A letter of funding of not less than 20 per cent in equity by any Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit; or
  • A letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or
  • A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of business being promoted.

Benefits for Startup units

  • Under the Income tax Act,x`

    • 100% deduction from the income tax under section 80I-AC on satisfaction of the following conditions:
      • Assessee must be a private limited a company or Limited liability partnership firm
      • it is not formed by splitting up, or the reconstruction, of a business already in existence:
      • It is not formed by the transfer to a new business of machinery or plant previously used for any purpose In India.
      • The total turnover of the business does not exceed Rs. 25 Crore in any of the previous years beginning or after Ist day of the April 2016 and ending on 31.03.2021
      • it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government;
    • Capital gain exemption under section 54EE of the income tax ActExemption to persons who have capital gains during the year, if they have invested such capital gains in the Fund of Funds recognized by the Government under section 54EE of the Act up to Rs. 50 Lacs
    • Exemption under section 54GB of the income tax Act where Net consideration invested into plant and machinery of the startup.
    • Exemption from provision of the section 56(2)(viib).