What is a startup?
A startup is a newly established business, usually small, started by 1 or a group of individuals. What differentiates it from other new businesses is that a startup offers a new product or service that is not being given elsewhere in the same way. The keyword is innovation. The business either develops a new product/ service or redevelops a current product/service into something better.
What is Startup India?
Startups are becoming very popular in India. To develop the Indian economy and attract talented entrepreneurs, the Government of India, under the leadership of PM Narendra Modi, has started and promoted the Startup India initiative to recognize and promote startups.
The startup eligibility criteria
- The firm has to be a private limited company or a limited liability partnership
- The company remains a startup for the first ten years, post the date of registration. In the recent past, the Indian government changed that to 10 years from 7 years to give opportunities and tax exemptions for the companies for a longer run
- The company remains a startup if the turnover per year does not cross the Rs 100 crore mark in any of the 10 years. Once the company crosses the mark, it no longer remains eligible to be called a startup. The mark of Rs 100 crore has been improved by the Indian government in the recent past from Rs 25 crore
- The firm should have approval from the Department of Industrial Policy and Promotion (DIPP)
- The firm should be funded by an Incubation Fund, an Angel Fund, or a Private Equity Fund
- A patron guarantee from the Indian Patent and Trademark office is necessary
- You must have a recommendation letter by an incubation
- The firm must come up with innovative ideas and schemes
- All the details regarding the funding must be registered with SEBI (Securities and Exchange Board of India)
The benefits of the startup India scheme are:
1.Financial Benefits
The majority of the startups are patent-based. It implies they produce or give exceptional products or services. To register their patents, they need to acquire a heavy cost which is recognized as the Patent Cost. Under this scheme, the government gives an 80% reduction on the patent costs. Also, the procedure of patent registration and related is quicker for them. Likewise, the government pays the fees of the facilitator towards obtaining the patent.
2.Income Tax Benefits
The startup has a good amount of benefits under the Income Tax Act. After getting recognition a Startup can apply for Tax exemption under section 80 IAC of the Income Tax Act. After getting clearance for Tax exemption, the Startup could avail of tax holiday for 3 consecutive financial years out of its first ten years since incorporation. After getting recognition a Startup might apply for tax-exempt under Section 56 of the Income Tax Act (Angel Tax).
3.Registration Benefits
Under the Startup India scheme, an application is there to make easy the registration. A single meeting is arranged towards the Start-up India hub. Also, there is a single doubt and problem-solving window for them.
4.Government Tenders
Under the startup India scheme, the startups have the benefit of participating in public procurement jobs using tenders in getting government tenders. Also, there is relaxation in prior experience, EMD, or turnover criteria.
5.Huge Networking Opportunities
Networking Opportunities implies the opportunity of meeting with a variety of startup stakeholders at a specific place and time. The government gives this opportunity through conducting 2 startups fests annually nationally and internationally level allowing various stakeholders of a startup to meet. The Startup India scheme also offers an Intellectual Property awareness workshop as well as attentiveness.
Procedure for registering a startup in India
Step 1: Incorporate your business
First things first, you need to incorporate your business as a Private Limited Company or a Limited Liability Partnership, or a Partnership firm. You just need to follow the normal procedure that includes you filling up a form to get the registration.
Step 2: Register under Startup India
Now you need to register your firm or company as a startup in the Startup India scheme of the government. You just need to fill the form available for you on the Startup India website. You have to fill in all the details and upload a certain number of documents as well.
Step 3: Documents you need to upload
- You need a letter of recommendation along with the registration form. You can get any one of the following recommendation letters.
- A recommendation letter from an Incubator known in a post-graduate college in India, in a format approved by the DIPP. This is regarding the innovative nature of the business; OR
- A recommendation letter from an incubator that the Government of India funds as part of any specified scheme to promote innovation; OR
- A letter from any of the Incubators, recognized by the Government of India, in DIPP format.
- A letter of funding not less than 20% in equity, by an Incubation Fund, Private Equity Fund, Angel Fund, Accelerator, Private Equity Fund, registered with SEBI that endorses the innovative nature of business; OR
- A recommendation later by the Central or any State Government of India; OR
- A patent filed and published in the Journal of Indian Patent Office in areas affiliated with the nature of the business being promoted.
Step 4: You need to mention if you need tax exemption
In India, startups do not have to pay income tax for the first three years but to avail of such benefits; the company must be certified by the Inter-Ministerial Board (IMB). This is where companies registered with DIPP get relaxation as the registration is enough to get the benefits.
Step 5: Self-certification of the following conditions
- You are a Private limited company, an LLP, or a partnership firm.
- Your business must be incorporated or registered in India, not before 5 years.
- Your company’s turnover must not be more than Rs 100 crore.
- The company has to keep innovating something new or making the existing system better in its way.
- Your business must be a fresh idea and not a splitting up or reconstruction of an existing business.
Step 6: Get your recognition number
On the application of this registration, you will get a recognition number with immediate effect. You get the certificate of registration or incorporation only after the authority goes through all your uploaded documents.
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