1- Which Entity can be registered as Start ups to avail the benefit of Startups
Any entity if it is 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 can only be registered as Startups to avail various benefits available to startups
2- Definition / Meaning of Startups
Conditions for An entity to be considered as a Startup: i. Upto a period of ten years from the date of incorporation/ registration, if it is 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. ii. Turnover of the entity for any of the financial years since incorporation / registration has not exceeded one hundred crore rupees. iii. 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’. 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.
3- Recognition of a Startup The process of recognition of an eligible entity as startup shall be as under: — (i) A Startup shall make an online application over the mobile app or portal set up by the DPIIT. (ii) The application shall be accompanied by— (a) a copy of Certificate of Incorporation or Registration, as the case may be, and (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. (iii) 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 Startup; or (b) reject the application by providing reasons.
4- Benefits to the Startups (i) Income Tax holiday for 3 Years Startups will be exempted, u/s 80-IAC of the Income Tax Act, from 100% of the income tax for 3 consecutive years out of 10 years begning from the year in which the eligible startup was incorporated - provided the startups statisfy the following conditions - get a certification from Inter-Ministerial Board (IMB).
- It is incorporated on or after 1-4-2016 but before 1-4-2024
- The annual turnover of the venture must not exceed INR 100 crores. - The company must be a pioneer in its area of expertise and must be pushing for innovation. - It must be a new venture and not one formed by the splitting up or revamping of an earlier enterprise.
(ii) Relaxation on shares are issued at share premium The amendment of Section 56(2) (vii) (b) of the Income Tax Act has also given entrepreneurs the right to issue shares at a higher rate than the value noted in the books helping them raise funds with more ease Provided aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share, if any, does not exceed, twenty five crore rupees. This exemption is subject to certain other conditions also.
However in computing the aggregate amount of paid up share capital, the amount of paid up share capital and share premium of twenty five crore rupees in respect of shares issued to any of the following persons shall not be included
(a) a non-resident; or
(b) a venture capital company or a venture capital fund;
(iii) Benefits under Companies Act-2013- Exemption from Deposits an amount of twenty five lakh rupees or more received by a start-up company, by way of a convertible note (convertible into equity shares or repayable within a period not exceeding five years from the date of issue) in a single tranche, from a person shall not be treated as deposits. The above exemption is subject to certain conditions.
(iv) Financing options Another benefit provided by the government to help startup is a fund which has an initial corpus of INR 2500 crores and a final corpus of INR 10000 crores lasting four years. This comes under the Funds of Funds (FOF) benefit which will serve as the direct investment under the direction of SEBI and will only apply to startups registered under DIPP. With financial shortage being the most prominent problem faced by companies early on in their journey, such a benefit comes as a welcome relief for many and will serve as a considerable accelerator for the growth of such ventures.
Further there are number of schemes promoted by Government for the arrangement of funds to the Startups.
(v) Benefits while Applying for tenders Startups can apply for government tenders. They are exempted from the “prior experience/turnover” criteria applicable for normal companies answering to government tenders. Further under various tenders, exemptions are given from furnishing of earnest money deposits. |