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Startup India: It is no surprise that ever since Narender Modi was elected as the Prime Minister of India in May of 2014, he has been putting a lot of focus on making India one of the leading economies of the world. In doing that, Modi has made sure businesses of all types, kinds, and sizes are getting aid from the government. Small scale businesses in particular have received a lot of backing from the Indian government ever since Modi was appointed as the Prime Minister of India. From sole proprietors to budding entrepreneurs, everyone can get benefits from one or more of the schemes implemented by Modi.
One such scheme that aims to provide a lot of aid to entrepreneurs is the Startup India Scheme launched in 2016. This blog is gonna cover what Startup India Scheme is, who is it for, why you should do it, how to do it, and further steps that should be kept in mind.
2. What is the Startup India Scheme?
Before we get into the nitty-gritty of the Startup India Scheme, one should first know what a startup is. A Startup basically is an entity that is in the initial stages of its business. The Indian Government has set the eligibility criteria in a bit more aggressive way though (we will cover that in the next section of this blog).
Now that you have a broad idea of what a startup is, let’s quickly define Startup India. Startup India Scheme was launched by the Indian Government to promote startups, generate employment opportunities for job seekers primarily the Indian youth, and the building of a strong ecosystem for entrepreneurship and innovation in India. Startup India Scheme can be thought of as a broad umbrella under which the Indian Government launched a lot of programs to achieve said objectives.
3. Who is the Startup India Scheme for? (Eligibility Criteria)
Not every business entity can qualify as a startup under the Startup India Initiative. There are a certain set of criteria that any business should meet for it to be considered by the Indian Government:
I. The business entity should be any of the following:
a. Private Limited Company
b. Limited Liability Partnership
c. Registered Partnership Firm
II. Age – The age of the business can be no longer than 10 years (calculated from the year of its incorporation)
III. Turnover – Ever since the year of incorporation, the annual turnover of the business entity should not have exceeded INR 100 Crore.
IV. Business Activity – The core activities of the business should be towards innovation or improvement in existing products or processes.
V. Capability – The business should be capable of generating employment and/or wealth creation
VI. Formation – The business entity should not have been formed by splitting up or reconstructing a business already in existence
4. Why should you go for Startup India Registration?
If your business qualifies for all the criteria mentioned above and you feel like you should go for it, there are some very good reasons that would back your decision:
I. Startup India Seed Fund Scheme
The Govt. has set aside a corpus of Rs.945 Crores to invest in Startups at Seed Stage with a plan to invest in 3600 startups in a span of 4 years. Each startup can apply for government grants up to INR 20 Lakhs, or investments up to INR 1 Crore.
II. Exemption from Income Tax:
Once the business is registered as a startup under this scheme, it can apply to pay income tax for 3 consecutive years out of the first 10 years since its incorporation.
Note: The above benefit is only applicable to startups registered on or after April 1, 2016, but before March 31, 2023.
III. Exemption from Angel Tax:
Angel Investment is a popular source to raise funds when a business is still in its early days. Having said that, the businesses that opt for this form of raising funds do have to pay a hefty sum as tax to the Government. However, if a business is a registered startup in India, it is exempted from paying angel tax as long as the aggregate amount of paid-up share premium and share capital after the proposed issue of shares (if any), does not exceed INR 25 Crore.
IV. Reduced IPR registration Fees:
A registered startup in India is entitled to an 80% rebate if/while applying for a Patent and a 50% rebate in case of Trademark applications.
A registered startup will not have any inspection carried out in case of labor laws for a period of 5 years. On the other hand, with respect to environmental laws, for those startups which are practically non-polluting (white category), only random inspections will be carried out
VI. Government Tender:
If an entity is a registered startup in India, it can apply for government tenders even if it does not fulfill the requirements in certain areas specified
VII. Fund of Funds:
All startups registered under this scheme have access to Fund of Funds – a pooled investment fund that invests in other types of funds.
VIII. Government e-Marketplace:
All government departments have access to Government e-Marketplace which is a platform where they can procure any service/product that they might need. The startups registered under this scheme have access to this platform enabling them to sell their products/services directly to these departments.
IX. In addition to all the above benefits of getting registered under the Startup India Scheme, there are also startup fests that are organized by the government that these startups can attend and network.
5. What documents would you require to register your business under the Startup India Scheme?
I. Registration Certificate or Certificate of Incorporation
II. MOA & AOA in case of a company, Partnership deed in case of LLP & Partnership Firm
III. List of all directors/members/partners along with their email ID and photograph
IV. PAN Card
V. URL Link of a website and social profile of the entity
VI. URL link of the social profile of directors/members/partners
VII. Information related to funds if the entity has had any investments
VIII. Information related to IPR in the name of the entity if it has registered any IPR or even if it is in the process of registering one
IX. Business Plan/Pitch Deck
X. Any information regarding any award, certificate, or recognition that the entity has received
6. What are the steps to Register your startup under the Startup India Scheme?
I. Incorporate your Business
This step goes without saying. Your business must be incorporated as an entity among Private Limited Company, Limited Liability Partnership, or Registered Partnership Firm.
II. Register your entity as a Startup
The next step in this process would be to register your business as a startup in India. This can be done very easily at the Startup India Website here. Follow along with the steps and enter the OTP when asked in the final step. Once you do that, your Startup India profile will be created.
III. Get recognition from DPIIT
The Department for Promotion of Industry and Internal Trade (DPIIT) must give you, its recognition. You will not be able to avail any or all of the benefits stated in the previous section without this recognition. To get this recognition from DPIIT, visit this webpage and follow the steps. At the end of this process, a new tab will be opened consisting of a “Startup Recognition Form” which is proof that the process was completed successfully.
IV. Recognition Application
The next step in this process will be to fill out the “Startup Recognition Form” that you get as soon as you finish the previous step.
Note: You will have to click on the plus (+) sign on the right side of the form to be able to enter each section.
V. Documents for Registration
Keep in hand all the documents mentioned in the above (5th) section of this blog and upload them when prompted.
VI. Recognition Number and Certificate of Recognition
The next and final step in this process is to celebrate. You would get the Recognition Number immediately while the Certificate of Recognition will be issued 2 days from the completion of this process.
To conclude, it is safe to say that if an entity checks all the pointers in the eligibility criteria, it should be registered as a startup under the Startup India Scheme. With little or nothing to lose, there are a lot of benefits a business will be eligible for with this registration. The Startup registration process can be a tedious one, and a risky one too if done incorrectly. In fact, if the wrong documents are uploaded, or even if the right documents are uploaded incorrectly, then a fine of 50% of the paid-up capital will be levied on the business with a minimum fine of INR 25,000.