Startup India License
Startup India License has been introduced to reduce the regulatory burden on Startups, thereby allowing them to focus on their core business and keep compliance costs low.
Recognition as a Startup with the DPITT
An entity (Private Limited Company / Limited Liability Partnership) shall be considered as a Startup:
- Upto a period of ten years from the date of incorporation/ registration in India;
- Turnover of the entity does not exceeded INR 100 crores;
- Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation;
- Entity not formed by splitting up or reconstruction of an existing business.
Process for obtaining Startup India Recognition?
- A Startup shall make an online application with the DPIIT.
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The application shall be accompanied by
a) a copy of Certificate of Incorporation or Registration, as the case may be, &
b) a write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation. -
The DPIIT may, after calling for such documents or information and making such enquires, as it may deem fit,
a) Recognise the eligible entity as a Startup; or
b) Reject the application by providing reasons.
Key Benefits
An eligible Startup can claim a deduction of 100% of taxable income (Minimum Alternate tax provisions shall still apply) for 3 consecutive years out of 7 years from the date of incorporation.
The applications will be fast-tracked so that the value of business can be realised sooner by an eligible Startup.
The facilitators will be assisting in the filing of applications. The cost of the same shall be borne by the Government.
Startups shall be provided with an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years.
- This is to ease the shut down or wind up operations of the Startups. This will allow the entrepreneurs to reallocate capital and resources to more productive avenues faster;
- To encourage entrepreneurs to experiment with new and innovative ideas without facing complex exit processes where their capital stuck in case of business failure;
- As per the Insolvency and Bankruptcy Code, 2016, Startups with simple debt structures, it can be wound up in 90 days of filing the application for insolvency.
- An Insolvency Professional can be appointed for the Startup who can be in charge of the company including liquidation of its assets and paying its creditors within six months of such appointment.
- It is responsibility of the insolvency professional to the closure of the business, sale of assets and repayment of creditors in accordance with the distribution waterfall set out in the IBC.
Recognised Start Ups that can claim a certification under Section 80-IAC of the Income Tax Act, 1961
- A Company or a Limited Liability Partnership;
- Entity incorporated on or after 1 April 2016 but before 1 April 2021;
- The total turnover of its business does not exceed INR 100 crore* in the previous year in which deduction is claimed; and
- It holds a certificate of eligible business from the Inter-Ministerial Board of Certification.
* Note that earlier the limit was only INR 25 Crores. Thus, there was a mismatch in the turnover limit of an eligible Startup under the Income Tax Act and under the DPIIT regulations. Thus, the limit was increased to INR 100 Crore to bring the limit under Income Tax Act at par with DPIIT regulations.
Further, an eligible Startup registered as a Partnership Firm is not eligible for obtaining certificate under Section 80-IAC of the Income Tax Act, 1961.
Process for obtaining certificate u/s 80IAC of the Income Tax Act, 1961
- An eligible Startup shall make an application in Form-1 along with documents specified therein to the Board.
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The Board may, after calling for documents or information and making such enquires, as it may deem fit, —
a) Grant the certificate referred to in sub-clause (c) of clause (ii) of the Explanation to section 80-IAC of the Act; or
b) Reject the application by providing reasons.
Start Up India License Registration Service
Filing of application with Startup India for recognition as an eligible Startup - Rs. 3,999/-
Inclusive of GST
Other Services Offered
- Providing an opinion if an entity classifies as an eligible Startup;
- Assistance in representation with the income tax authorities in case of any queries raised by the Authorities.