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Startup India – Meaning of Term “Startup” in the Startup India Scheme

START UP INDIA – MEANING OF TERM “STARTUP” IN THE SCHEME

 

Before looking into the benefits provided under the scheme, One must look at the definition of “Startup” as per scheme.

 

Page no. 28 of Startup India : Action plan released by government of India defines “Startup” as below.

 

Part A:  Definition of startup (only for the purpose of Government Schemes)

 

Startup means an entity, incorporate or registered in India not prior to five years, with annual turnover not exceeding INR 25 crore in any preceding financial year, working towards innovation,  development, deployment or commercialization of new products, processes or service driven by technology or intellectual property.

 

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

 

Provided also that an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crores or it has completed 5 years from the date of incorporation / registration.

 

Provided further that a startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

 

Part B:   Definition of Terms

 

Term Definition
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, 2008)

 

Identification of businesses covered under the definition in Part A above A business is covered under the definition if it aims to develop and commercialize

 

·         A new product or service or process; or

·         A significantly improved existing product or service or process that will create or add value for customers or workflow.

 

The mere act or developing

 

·         Products or services or processes which do not have potential for commercialization; or

·         Undifferentiated products or services or processes; or

·         Products or services or processes with no or limited incremental value for customers or workflow

 

Would not be covered under this definition

 

In order for a “Startup” to be considered eligible, the Startup should

·         Be supported by a recommendation (with regard to innovative nature or business) in a format specified by DIPP, from an incubator established in a post-graduate college in India; or

·         Be supported by an incubator which is funded (in relation to the project) from GOI as part of any specified scheme to promote innovation; or

·         Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an incubator recognized by GOI; or

·         Be funded by an incubation fund / Angel Fund/ Private Equity Fund / Accelerator/ Angel Network duly registered with SEBI* that endorses innovative nature of the business; or

·         Be funded by GOI as part of any specified scheme to promote innovation; or

·         Have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.

 

*DIPP may publish a “negative list” of funds which are not eligible for this initiative.

 

Turnover As defined under the Companies Act, 2013

 

Inter-Ministerial Board An Inter-Ministerial Board Setup by DIPP to validate the innovative nature of the business for granting tax related benefits.

 

Approval from the Inter-Ministerial Board shall not in any manner, limit or absolve the entity(ies) from any liability incurred in case of any misrepresentation / fraud arising from submission of such application and / or supporting such application

 

The definition of “Startup” is such a lengthy definition and to become eligible for classified as “Startup” under the scheme, there are numerous formalities would be needed for an entrepreneur.

 

To Download the complete Action Plan of Start up India Scheme follow this link

pdf-icon 1-1

 

 

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