Startup Recognition:
Under the Startup India Action Plan, startups that meet the definition as prescribed under the G.S.R. notification 501 (E) are eligible to apply for recognition under the program. The Startups have to provide support documents, at the time of application.
Eligibility Criteria for Startup Recognition:
The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership:
- Turnover should be less than INR 25 Crores in any of the previous financial years
- An entity shall be considered as a startup up to 7 years from the date of its incorporate or 10 years in case of Startups in the Bio Technology sector
- The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth.
Requirements for Registration:
- An Application with DIPP
- 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.
Benefits to Startups
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 seven years since incorporation.
Eligibility Criteria for applying to Income Tax exemption (80IAC):
- The entity should be a recognized Startup
- Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC
- The Startup should have been incorporated after 1st April, 2016.
Startup India: 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:
- The entity should be a DIPP recognized Startup
- 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 10 Crore.
- The investor’s net worth should be more than INR 2 Crore as on the last date of the preceding financial year or more than the amount of investment made/ proposed to be made, whichever is higher, in the preceding financial year