A startup is a newly business setup that is small in nature and initiated by single or a group of individuals. What makes the startup different from other businesses is that a startup presents a new product or service that is not in present at some other place in the same manner. The base of startup is modernisation and innovation. The enterprise which indulge in developing the new product or service or redevelop the current into something better is signifies as startup.
Startup India is a campaign that is established in year 2016 by the Prime Minister Narendra Modi Ji with the intent to boost entrepreneurship. This action plan has various objectives like promotion of bank financing for the startup, to simplify the process for the startup registration and incorporation and along with that aimed to grant many tax aids to newly established startup. But all the advantages and exemptions are on hand to the startups solely if they satisfy below mentioned criteria of an ‘Eligible Startup’.
Eligibility Criteria for startup recognition
- Upto a period of 10 years from the date of incorporation, if it is integrated as a private company (as defined in the companies act, 2013) or a limited liability partnership (under the LLP act, 2008) or can say registered as a partnership firm under the provision of section 59 of the Indian partnership act, 1932.
- An enterprise shall be consider as a startup only up to ten years from the date of its registration
- Turnover of the entity since incorporation shall be less than one hundred crore rupees for any of the previous financial years.
- Entity is working in the direction of innovation, development or enhancement of products or processes or services, or if it is a scalable enterprise model with a high manageable of employment generation or can say creation of wealth.
- An entity must be newly formed or if in case it’s being registered by way of splitting up or renewal of an existing one then it shall not be considered in ‘Startup’.
- It should be incorporated either as a private limited company or a registered partnership firm or a limited liability partnership
Tax exemptions in startup
- Startup India tax exemption under section 80 IAC says that a startup may apply for tax exemption after being registered by DPIIT. DPIIT registration certificate and approval of inter-ministerial board allows the startup to avail tax excursion for three consecutive financial years out of its first ten years since incorporation. One entity must be eligible for this exemption if they are incorporated in form of private limited or LLP after 01 Apr, 2016 and they got the certificate of recognised startup.
- Tax Exemption under section 56 of the income tax act (Angel Tax)- Unlisted companies raise the capital by way of issuing the shares and the share prices is more than FMV of share sold. Entity after getting registration as startup is eligible to apply for angel tax exemption. An entity must be recognised by a department for promotion of industry and internal trade and the cumulative amount of paid-up share capital and share premium of the startup must not exceed Rs 25 crore after
Conditions required to be fulfilled for getting registration under DPIIT
- Copy of certificate of incorporation certificate and PAN card
- Brief details about company and products or services
- Brief profile of directors and authorised representative such as email Id, contact details, and address etc.
- Detailed answers to the questions as prescribed at portal
- Digital Signature of Authorized Representative of Firm