What is a Startup?
The term startup is quite popular over the past few years as a young tech company. But what the startup really is?
A startup is a young entity that started to develop unique products or services. These companies are generally offering those products or services which are not available or are available in inferior quality.
As per Government scheme on Startup “Startup means an entity, incorporated 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, or commercialization of new products, processes or services driven by technology or intellectual property.”
Typically Startup launches by taking seeding funds from its founder or their family or friends.
In the early stages, these startup companies have little or no revenue. They have an idea to develop, test, commercialize it, thus first tasks are raising a substantial amount of money to further develop the product or services.
What is Startup India Scheme?
Startup India is a flagship scheme launched by the Government of India in January 2016. This initiative is taken to boost the ecosystem of startup and innovation in India and to transform the country of the job seeker to job creator.
Action Plan of Startup India Scheme
The Action Plan of Startup India is divided across the following areas:
- Simplification and Handholding
- Funding Support and Incentives
- Industry-Academia Partnership and Incubation
Simplification and Hand-holding
- Compliance Regime based on Self-Certification: Regulatory formalities requiring compliance with various labor and environment laws which are time-consuming and difficult in nature, therefore to reduce this regulatory burden and allow the startup to focus on their core business. This scheme facilitates startups to self-certify compliance (through the Startup mobile app) with 9 labor and environment laws.
- Startup India Hub: To create single point ecosystem for Startup for knowledge exchange and access to funding
- Rolling-out of Mobile App and Portal: To provide a platform for interacting with Government and regulatory authorities for their business needs.
- Legal Support and Fast-tracking Patent Examination at Lower Costs: To create awareness and protecting and commercializing their innovation, this scheme facilities high-quality Intellectual Property services and resources, including fast-track examination of patent applications and rebate in application fees.
- Faster Exit for Startups: To make it easier for Startups to wind up their operations.
Funding Support and Incentives
- Fund of Funds: Funding is the key challenge face by startup thus providing funding support Fund of Funds created under this scheme.
- Tax Exemption on Capital Gains: It is essential to provide a suitable incentive to attract investment at the initial stage. With this objective, the persons who have capital gains during the year an exemption shall be given, if they have invested such capital gains in the Fund of Funds recognized by the Government.
- Tax Exemption to Startups for 3 years: Tax exemption is given to startup for an initial period of 3 years.
Industry-Academia Partnership and Incubation
- Harnessing Private Sector Expertise for Incubator Setup: Government has created a policy and framework for setting-up up incubators across the country in a public-private partnership to provide professional incubation facilities to startups.
- Innovation Centers: To promote incubation and R&D efforts in the country. The government has set up innovation and entrepreneurship centers at national institutes.
- Promoting Startups in the Biotechnology Sector.
- Launching Innovation Focused Programs for Students.
Process of Registration under Startup Scheme
Following are the steps involved for registering under Startup scheme:
Step 1: Incorporate your business.
The first requirement for registering business under startup is to incorporate an entity as:
- Private Limited Company
- Limited Liability Partnership
- Partnership Firm
For theses one need to follow normal procedure of incorporation like obtaining the certificate of Incorporation/Partnership registration, PAN, and other required compliances.
Step 2: Register with Startup India
After business incorporation next is required to register it with Startup India by login online portal of Startup India Website and fill the required detail of the business and upload necessary documents in PDF format.
Step 4: Confirm whether like to avail tax benefits
Startups are exempted from income tax for 3 years. But to avail of these benefits, they must be applying to the Inter-Ministerial Board (IMB).
Step 5: Self Certification
Next is to self certify the following conditions:
- New entity is register as a Private Limited Company, Partnership firm or a Limited Liability Partnership.
- Business must not be older than 5 years.
- Turnover must be less than 25 crores per year.
- The business must be working towards innovating something new product or significantly improving the existing used technology.
- The business must not be as a result of splitting or reconstruction of an existing business.
Step 6: Get Recognition Number
After successful submission of application, a recognition number is generated for the startup, and a certificate of recognition will be issued after the examination of all documents uploaded.
Note: Be careful while uploading documents if on subsequent verification, it is found that the required documents are not uploaded/wrong documents uploaded or a forged documents have been uploaded then the fine of 50% of paid-up capital of the startup with a minimum fine of Rs. 25,000 will be charge.
Eligibility for Startup Registration
- The Entity must be incorporated as a private limited company or a limited liability partnership or Partnership.
- It shall be a new firm or not older than five years, and the total turnover of the company should not more than 25 crores provides innovative services or products.
- The approval from the Department of Industrial Policy and Promotion (DIPP) shall be obtained by the entity.
- A patron guarantee from the Indian Patent and Trademark Office obtained.
- Require a recommendation letter from an incubation.
Patent Application and IPR Application
To reduce the cost, time taken to acquire a patent and making it financially viable for them and to protect their innovations and encouraging them to innovate further, Startup India scheme provides:
- Fast-tracking of Startup Patent Applications.
- A panel of facilitators to assist in the filing of IP applications
- Facilitation cost bear by Government
- Rebate on the filing of an application
For how long would recognition as a “Startup” be valid?
Startup India recognition is valid for 10 year from the date of its incorporation/ registration or if its turnover for any previous year exceeds hundred crore rupees.
Can an existing entity register itself as a “Startup” on the Startup India Portal and Mobile App?
Yes, an existing entity that meets the criteria can register itself as a “Startup”.
How does a Startup obtain benefits under various Government schemes including the ones announced in the Action Plan on January 16, 2016?
For availing various benefits an entity would be required to be recognized as a Startup by applying on Startup India Mobile App/ Portal and to obtain tax and IPR related benefits, a Startup shall be required to be certified as an eligible business from the Inter-Ministerial Board of Certification.
Do I need to submit the physical copy of the application to complete the process of Startup registration?
No. The application has to be submitted online mode only.
Is there any specified format for obtaining a recommendation letter?
Yes. prescribed formats for recommendation letters are published on Startup India portal.