Definition of Startup for Government schemes

The Government of India has announced 'Startup India' initiative for creating a conducive environment for startups in India. The various Ministries of the Government of India have initiated a number of activities for the purpose. To bring uniformity in the identified enterprises, the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India has come out with a definition for an entity to be considered as a Startup.

Definition of Startup (only for the purpose of Government schemes)

An entity shall be considered as a Startup:

• Company age : Period of existence and operations should not be exceeding 10 years from the Date of Incorporation
• Company Type : Incorporated as a Private Limited Company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India.
• Annual Turnover :  Should have an annual turnover not exceeding Rs. 100 crore for any of the financial years since its IncorporationTurnover of the entity for any of the financial years since incorporation/ registration has not exceeded one hundred crore rupees.
• 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. Provided that an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘Startup’.

Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.

An entity shall cease to be a Startup on completion of ten years from the date of its incorporation/ registration or if its turnover for any previous year exceeds one hundred crore rupees.

Definition of terms

• Entity - Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2002)
• Inter-Ministerial Board of Certification - Inter-Ministerial Board of Certification comprising of the following members: (i) Joint Secretary, Department of Promotion of Industry and Internal Trade, Convener (ii) Representative of Department of Biotechnology, Member (iii) Representative of Department of Science & Technology, Member

Process of recognition as a startup

• The process of recognition as a ‘Startup’ shall be through an online application set up by the Department for Promotion of Industry and Internal Trade.
• The application shall be accompanied by
• a copy of Certificate of Incorporation or Registration, as the case may be, and
• 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,
• recognise the eligible entity as Startup; or
• reject the application by providing reasons.

Startup India: 80 IAC Tax exemption

Post getting recognition a Startup may apply for Tax exemption under section 80 IAC of the Income Tax Act. Post getting clearance for Tax exemption, the Startup can avail tax holiday for 3 consecutive financial years out of its first ten years since incorporation.

Eligibility Criteria for applying to Income Tax exemption (80IAC):

1. The entity should be a recognized Startup
2. Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC
3. The Startup should have been incorporated after 1st April, 2016

Tax Exemption under Section 56 of the Income Tax Act (Angel Tax)

Post getting recognition a Startup may apply for Angel Tax Exemption.

Eligibility Criteria for Tax Exemption under Section 56 of the Income Tax Act:

1. The entity should be a DPIIT recognized Startup
2. Aggregate amount of paid up share capital and share premium of the Startup after the proposed issue of share, if any, does not exceed INR 25 Crore.

Source : Department for Promotion of Industry and Internal Trade

Related resources

1. Check application status - Startup Recognition
2. List of DPIIT recognised Startups