Startup India is a flagship scheme of the Indian government, which enables the startups to be recognised as a DPIIT recognised startup. Ever since the Prime Minister of the country, Narendra Modi, launched the Startup India program, there has been an incredible surge in the number of startups coming up. Under the Startup India initiative, eligible companies can get recognised as Startups by DPIIT, in order to access a host of tax benefits, easier compliance, IPR fast-tracking & more. The incredible creative minds that India has in the form of majority young founders and owners is the major cause behind this scheme, which aims at promoting the entrepreneurship culture in India.
Conditions to be recognised as a DPIIT startup:
1. Period of existence and operations should not be exceeding 10 years from the Date of Incorporation
2. Incorporated as a Private Limited Company, a Registered Partnership Firm or a Limited Liability Partnership
3. Should have an annual turnover not exceeding Rs. 100 crore for any of the financial years since its Incorporation
4. Entity should not have been formed by splitting up or reconstructing an already existing business
5. 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
Benefits of DPIIT recognition:
1. Self Certification:
– Startups shall be allowed to be self-certify compliance for 6 Labour Laws and 3 Environmental Laws through a simple online procedure.
– In the case of labour laws, no inspections will be conducted for a period of 5 years. Startups may be inspected only on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.
– In the case of environment laws, startups which fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and only random checks would be carried out in such cases
2. Patent Application & IPR Application:
– Patent applications filed by startups shall be fast-tracked for examination so that their value can be realised sooner.
– Startups shall be provided an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years.
3. Tax Benefits under Section 80IAC
– Eligible startups can be exempted from paying income tax for 3 consecutive financial years out of their first ten years since incorporation.
4. Relief from Angel tax
– Exemption under Section 56(2)(VIIB) of Income Tax Act (Angel Tax). Section 56(2)(viib) of the Act brings to tax any money received by a company from a resident on the issue of its shares to the extent it exceeds the fair market value (FMV) of the shares so issued.
– Investments into eligible startups by listed companies with a net worth of more than INR 100 Crore or turnover more than INR 250 Crore shall be exempt under Section 56 (2) VIIB of Income Tax Act
– Investments into eligible Startups by Accredited Investors, Non-Residents, AIFs (Category I), & listed companies with a net worth more than 100 crores or turnover more than INR 250 Crore, shall be exempt under Section 56(2)(VIIB) of Income Tax Act
– Consideration of shares received by eligible startups shall be exempt upto an aggregate limit of INR 25 Crore
5. Easy Winding Up:
– As per the Insolvency and Bankruptcy Code, 2016, startups with simple debt structures, or those meeting certain income specified criteria can be wound up within 90 days of filing an application for insolvency.
– An insolvency professional shall be appointed for the Startup, who shall thereafter be in charge of the company (the promoters and management shall no longer run the company) including liquidation of its assets and paying its creditors within six months of such appointment.
– Upon appointment of the insolvency professional, the liquidator shall be responsible for the swift closure of the business, sale of assets and repayment of creditors in accordance with the distribution waterfall set out in the IBC. This process will respect the concept of limited liability.
For availing the benefits of Startup India Schemes, reach out to Brainbox for getting your business as a startup.