Startup India Registration

Startup India Scheme is a flagship program by the Government of India, launched in 2016. The Government through this initiative aims to empower Startups to grow through innovation and design. The goal of Startup India is the development and innovation of products and services and increasing the employment rate in India. Under the Startup India initiative, eligible companies can get recognized as Startups by the Department for Promotion of Industry and Internal Trade (DPIIT) to access a host of tax benefits, easier compliance, IPR fast-tracking & more. The Department for Promotion of Industry and Internal Trade (DPIIT) is mandated to coordinate the implementation of the Startup India initiative with other Government Departments. DPIIT is the monitoring agency and the Small Industries Development Bank of India (Sidbi) is the operating agency for the Fund of Funds for Startups (FFS).

Benefits of Registering as Startup With DPIIT

The benefits form a promising narrative of the government to support the entrepreneurial ecosystem, enabling jobs and innovations. In January 2019, only 4% of startup applicants got tax breaks within the first 30 months of the Startup India initiative.

Exemption under Section 56(2)(vii)(b) of the Income Tax Act, 1961

The exemption that is available to a registered startup is the levy of tax on this excess consideration. This exemption is particularly beneficial at the stage of an angel/VC round, where the angel or VC invests in the excess of the fair market value.

Exemption under Section 80-IAC

A registered startup can avail of an exemption from payment of income tax for three consecutive years out of the first 10 years from the date of its incorporation.

Exemption under Section 54(GB)

Section 54GB relates to tax on long-term capital gains received upon the sale of a residential property of an individual. The government has exempted individuals from payment of this tax if such long-term capital is invested in a registered startup.

The documents required for the DPIIT Certificate of Recognition for Startups is listed as follows:

  • Certificate of Incorporation or Registration of entity
  • If the startup received any funding, the Proof of Funding need to furnish for the DPIIT Certificate of Recognition for Startups
  • Document of awards or recognition received by the entity
  • Document of the patent published by the entity (The patent should be published in the patent journals)
  • A brief description of the nature of the business. The write-up should contain the following details:
  • Details of how the startup is working towards innovation
  • Development of products or processes or services
  • The scalability in terms of employment generation or wealth creation