Benefits of the Scheme
a) Patents, trademarks and/or design registration: If you need a patent for your innovation or a trademark for your business, you can easily approach any from the list of facilitators issued by the government. You will need to bear only the statutory fees thus getting an 80% reduction in fees.
b) Tax exemption for startups: Income tax exemption to startups announced for three years
c) Exemption from Capital Gains Tax: Currently, investments by venture capital funds in startups are exempt from this law. Now, the same is being extended to investments made by incubators in startups.
d) Tax exemption on investments above Fair Market Value: In order to obtain tax and IPR related benefits, a Startup shall be required to be certified as an eligible business from the Inter-Ministerial Board of Certification.
What qualifies as a “Startup” under this scheme?
An entity (Private Limited Company or Registered Partnership Firm or Limited Liability Partnership) shall be considered a “Startup” if it satisfies the following conditions:
a)Your business must be incorporated/registered in India for not over 5 years, and
b) Its turnover for any of the financial years has not exceeded Rs. 25 crore, and
c) Innovation is a must– the business must be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
d) It should have obtained a letter of recommendation for registering under this scheme from one of the following entities:
(i) 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 post-graduate college in India(http://startupindia.gov.in/startup-recognition.php); or
(ii) 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;( http://startupindia.gov.in/startup-recognition.php) or
(iii) 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;( http://startupindia.gov.in/startup-recognition.php) or
(iv) Letter of funding of not less than 20 percent 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 (http://startupindia.gov.in/startup-recognition.php); or
(v) Letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation (http://startupindia.gov.in/startup-recognition.php); or
(vi) Patent filed and published in the Journal by the India Patent Office in areas affiliated with the nature of business being promoted(http://startupindia.gov.in/startup-recognition.php).
Note:
Solution on above 6 Points - Best thing is just find a good government recognized college incubator or e cell which can provide you recommendation letter or you can join any Incubators in India which are recognized under this scheme.
The entity should not have been formed by splitting up or reconstruction of a business already in existence.
A Proprietorship or a Public Limited Company is not eligible as startup. A One Person Company (OPC), being a Private Limited Company is entitled to be recognized as a 'startup'.
Can an existing entity register itself as a “Startup” on the Startup India Portal and Mobile App?
Yes, an existing entity that meets the criteria can be registered as a startup. Formats of the recommendation/ support letters that need to be attached as part of the application form have been published on the portal and mobile app.
What is the process of registration under the Scheme?
Step 1: Log on to http://startupindia.gov.in
Once you have incorporated your business, you can progress on to the next step that entails logging on to the government’s official website (StartupIndia.gov.in) and filling in all the details of your business in the form and uploading the supporting documents and self-certifications whichever are applicable to your business. The entire process is very easy to understand and is completely online. http://startupindia.gov.in/registration.php
The information required in during registration is:
-Nature of the Entity
- Name of the Entity
- Sector
- Incorporation / Registration No
- Incorporation / Registration Date
- PAN
- Full Address (Office)
-Authorized Representative Details
- Director(s) / Partner(s) Details
Step 2: After completion of step first you can check your application status.
On successful registration, you would be able to download a system generated verifiable certificate of recognition.
The certificate of recognition is verifiable through the portal and mobile app by entering the Startup Recognition/ Certificate Number.
Step 3: Real Time Startup Recognition:
A real time recognition certificate is provided to Startups on completion of the application process. A digital version of the final certificate of recognition is available for download, through the portal and mobile app. A request for certificate of eligibility for tax exemptions from Inter-ministerial Board will be made simultaneously by selection of a simple option.
Approval of Inter-Ministerial Board: – DIPP has also setup an Inter-Ministerial Board to verify the eligibility of Startups opting to avail Tax and IPR related benefits and to provide a certificate of eligibility to innovative Startups.
What are documents startups should consider in their checklist before applying?
1) Certificate of Incorporation
2) Company Registration with the Income-tax-PAN, TAN, VAT, GST
3) If the proposed business of Software Development is only for Exports, then the Company should get itself registered with Software Technology Parks India.
4) If the proposed business is a manufacturing business, then there are other enactments that would be applicable.
5) If the proposed business is a Service oriented business, the applicable laws would be different.
6) Company with 20 employees – Registration with Provident Fund Authorities - Social Security for employees.
7) Company Registration with Local Authority – Shops & Establishments
8) If the company is involved in import and export, it has to do import and export registration.
9) Employees related legal documents.
10) Investor legal documents
However, be careful while uploading the documents. If on subsequent verification, it is found to be obtained that the required document is not uploaded/wrong document uploaded or a forged document has been uploaded then you shall be liable to a fine of 50% of your paid up capital of the startup with a minimum fine of Rs. 25,000
How would the Inter-Ministerial Board review the applications received for the purpose of tax/ IPR benefits?
The Board shall review the supporting document(s) provided to ascertain if the entity qualifies as an eligible business for availing tax/ IPR benefits.
What is the timeframe for obtaining certification of Inter-Ministerial Board for availing tax/ IPR benefits in case an entity already exists?
An application for a certificate from the inter-ministerial board shall be processed within a period of 10-25 working days.
If an incubator rejects an application, can the entity apply again to the same incubator or would it be required to apply at a different incubator?
Yes. In such cases, an entity can apply again to the same incubator that rejected the application, as well as any other incubator.
Is there any specified format for obtaining a recommendation letter?
Yes. The prescribed formats for recommendation/ support/ endorsement letters are published on Startup India portal.
Can entities that do not have any of the other evidences like incubator certificate, funding from registered VCs or patents still apply to Inter -Ministerial Board for tax exemptions?
No. One (i) of the six (vi) prescribed supporting material is mandatory to make an application to the Inter Ministerial Board.
For how long would recognition as a “Startup” be valid?
An entity would cease to be a 'startup' upon expiry of:
a) 5 years from the date of its incorporation/ registration, OR
b) If its turnover for any of the financial years has exceeded INR 25 crore; OR
Startups would be required to intimate DIPP of any such cases within a period of 21 days.
Funding
One of key challenges faced by many startups has been access to finance. Due to lack of experience, security or existing cash flows, entrepreneurs fail to attract investors. Besides, the high risk nature of startups, as a significant percentage fail to take-off, puts off many investors.
In order to provide funding support, Government has set up a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year) . The Fund is in the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of SEBI registered Venture Funds.
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Contributed by:
CA Kulpreet Kaur
Sandeep Ahuja & Co.
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Contributed by:
CA Kulpreet Kaur
Sandeep Ahuja & Co.
