Startup India

Definitions, Benefits and Registrations

Dear Fiends, There has being a lot of buzz around the word “STARTUP”, since our PM’s speech regarding it.  After the launch of “The Action Plan” on 16 January 2016, lot of things have been crystallized and framed out for ease of doing business and Startup India.

The word “Start-up” and encouragement for it has been an inspiration to all IITians, MBAs, Engineers and aspiring entrepreneurs.

However, as a CA (Chartered Accountant ), many students, graduates and even entrepreneurs have been coming to me with lot of questions like what is a Start-up, How to enroll for it, What are the benefits for an Start-up. Thus, to give you more clarity on what is termed as Start-up, what kind of activities are covered etc. and to  help you understand in more simple manner,  I have tried to put it in a very easy to understand Q&A format  below.

Happy reading:-

• Q1: What is a Start-up , as per Government of India
  • Ans:- An entity shall be considered as a “Startup” –
    1. Up to 5 years from the date of its incorporation /registration and
    2. If its turnover for any financial years has not exceeded Rs. 25 Crore and
    3. If It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property;

• Q2: What is meant by an entity:-
  • Ans:- An entity can only be
    1. Private limited company or
    2. Registered partnership firm or
    3. Limited Liability Partnership (LLP)

A proprietorship or a public limited company is not eligible for Startup

• Q3: What considered to be working towards innovation, development, employment or commercialization of new products, processes or services driven by technology or intellectual property
  • Ans:- If an entity is aims to develop and commercialize –
    1. A new product or service or process, or
    2. A significantly improved existing product or services or process that will create or add value for customers or workflow.

Provided that the mere act of developing:

1. products or services or processes which do not have potential for commercialization, or
2. undifferentiated products or services or processes, or
3. products or services or processes with no or limited incremental value for customers or work flow

would not be covered under this definition.

• Q4: Do I need to get registration / recognition from GoI as a Startup after incorporation of entity
  • Ans:- Yes, You need to get recognition as a “Startup” from DIPP ( Department of industrial Policy and Promotion”

• Q5: What is the process for getting recognition
  • Ans:- You need to submit any of the following documents through a “Mobile app/Portal” of DIPP

1. A recommendation (with regard to innovative nature of business), in a format specified by DIPP, from any Incubator established in a post-graduate college in India; or
2. A letter of support by any incubator which is funded (in relation to the project) from Government of India or any State Government as part of any specified scheme to promote innovation; or
3. A recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any incubator recognized by Government of India; or
4. A letter of funding of not less than 20 per cent in equity by any Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit; or
5. A letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or
6. A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of business being promoted.

• Q6: What are the benefits available for a Startup.
  • Ans:- Various incentives and schemes have been launched and benefits are available under following categories
    1. Funding for Startups ( incubators and VC’s) – 10000 Cr funds allotted
    2. Credit guarantee for Banks who funds Startups
    3. Income tax – Tax benefit
    4. Intellectual Property Rights – Startup Intellectual Property Protection (SIPP) Scheme
    5. MSME – No criteria of Prior Turnover/Experienced and 20% procurement from MSME
    6. No requirement of EC of Pollution control  Board – Initiative of Easy of Doing Business – White Industries Category introduced

• Q7: Where are these Incubators Located so as to approach them
  • Ans:- Please find PFD documents mentioning name and address of VC’s and incubator centers in india.

With above basic Q&A’s, hope you all have got I fair idea of what is a STARTUP and its benefits. If you need any further information about startups, its registration etc do write to me on Aditya@vpshinde.com

My next Article on Startup will have details of all Income tax benefit available and how to acquire them.

Hope this will benefit all aspiring and existing entrepreneurs.

Thanks and regards

CA Aditya Shinde

Startup_India_List_of_Incubators