Startup India Scheme
Startup India Scheme is an initiative by the Government of India for generation of employment and wealth creation. The goal of Startup India is the development and innovation of products and services and increasing the employment rate in India. The Startup India has initiated several programs for building a robust startup ecosystem and transforming India into a country of job creators instead of job seekers. To achieve these objectives, a lot of programs have been started and are managed by the Department for Industrial Policy and Promotion (DPIIT).
Startup Company: What Is It?
Startups are young companies founded to develop a unique product or service or improving an existing product or service in such a way that it meets the requirements of the customers.
Startups are rooted in innovation, addressing the deficiencies of existing products or creating entirely new categories of goods and services, thereby disrupting entrenched ways of thinking and doing business for entire industries. That’s why many startups are known within their respective industries as “disruptors.”
You may be most familiar with startups in Big Tech—think Facebook, Amazon, Apple, Netflix, Google, collectively known as FAANG stocks—but even companies like WeWork, Peloton and Beyond Meat are considered startups.
The notification issued by the department for promotion of industry and internal trade on February 19, 2019 provided the definition of a startup. Accordingly, a Startup is an entity:
Furthermore, an entity that is created by splitting or reconstructing an existing business unit is not considered a startup. Also, a business entity shall cease to exist as a startup:
Benefits from DPIIT
Under the Startup India Initiative, the companies which are registered under DPIIT are eligible to receive the following benefits:
This initiative simplifies the work for the new entrants in order to motivate them. This includes following steps taken by the government:
In order to motivate the startups, the government provides financial support to the startups through different initiatives. The government has set up a corpus of Rs.10,000 crores for 4 years (Rs.2500 crore each year). From such fund, the government invests in various startups.
Another mode of financial support provided is exemption from income taxes. Approved startups can avail exemption from payment of income taxes for a period of 3 years.
3. Incubation & Industry-Academia Partnerships – Creation of numerous incubators and innovation labs, events, competitions and grants.
Ease of business comes here into the picture as self-certification resembles reducing the regulatory burden on the startups to allow them to concentrate on their core business, also to keep compliance costs low.
Eligibility to Self-Certification of the companies-
Though the company is termed as a startup if it was incorporated within 10 years, the eligibility for self-certification is granted only startups that are incorporated not before 5 years.
Tax Exemption under 80IAC
Eligible startups are exempted from paying income tax for 3 consecutive financial years out of their first ten years since incorporation.
Eligibility to avail tax exemption under 80IAC
Registration Process & Documents-
Access Startup India portal and register
After registration, apply for DPIIT recognition
Access the Section 80 IAC exemption application
Fill in all details with the required documents and submit the application form
Section 56 Exemption
Exemption under Section 56(2) (VIIB) of Income Tax Act
Eligibility to avail tax exemption under Section 56
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. The Windup of startups can be done only in 90 days under insolvency & Bankruptcy code 2016, which provides easy of winding up of entities over the other laws in time being force.
The objective is to reduce the cost and time taken for a startup to acquire a patent, making it financially viable for them to protect their innovations and encouraging them to innovate further.
Step 1: Log on Startup India Portal https://startupindia.gov.in/registration.php.
Step 2: Enter your Legal Entity.
Step 3 : Enter your Incorporation/Registration No.
Step 4 : Enter your Incorporation/Registration Date.
Step 5: Enter the PAN Number (optional).
Step 6: Enter your address, Pin Code & State.
Step 7: Enter details of the Authorised Representative.
Step 8: Enter the Details of Directors and Partners.
Step 9: Upload the essential documents and Self-certification in the prescribed manner.
Step 10: File the Incorporation/Registration certificate of the company.
Thus, in order to boost job creation and entrepreneurship, the Government of India launched the Startup India Scheme. Under this scheme, the government intends to give a host of tax benefits, make compliance easy, fast track IPR tracking and offer other set of benefits. These benefits are offered so that entrepreneurs can focus on their core business and do not have any regulatory burden.