June 29, 2021 In Uncategorized

ADVANTAGES OF REGISTERING UNDER STARTUP INDIA

Taaniyaa Dograa, Associate

During the exceptional and trying times that the prevailing pandemic has brought to the fore, it has been observed that a lot of individuals and like-minded people have come together to establish what we all in normal parlance refer to as a “Startup”. The people of this country from being waiting to be employees for large corporations, have transformed their aspirations to be entrepreneurs. The Government realising this shift in the thought process, has also come up with various schemes to develop a framework to assist such entrepreneurial aspirations. One such scheme is the ‘Startup India Scheme’. This article will attempt at providing a general overview of how the said scheme works and the modalities for registering under the scheme.

General Criteria for registration with startup India 

Under the Startup India Action Plan, startups that meet the definition as prescribed under G.S.R. notification 127 (E) are eligible to apply for recognition under the program. The Startups have to provide support documents, at the time of application.

Eligibility Criteria for Startup Recognition:

a. The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership;

b. Turnover should be less than INR 100 Crores in any of the previous financial years;

c. An entity shall be considered as a startup up to 10 years from the date of its incorporation or registration; and

d. The Startup should be working towards innovation/ improvement of existing products, services and/or processes, and should have the potential to generate employment/ create wealth. An entity formed by splitting up or reconstruction of an existing business shall not be considered a “Startup”.

The process of recognition of eligible entity as Startup is the following:

  1. The start-up shall send an online application through either device or the portal set by the DPIIT.
  2. The application must be accompanied by
  • a copy of Certificate of Incorporation or Registration, as the case may be; and
  • a write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation.

3) The DPIIT may, after calling for such documents or information and making such enquires, as it may deem fit,

  • Recognise the eligible entity as Startup; or
  • Reject the application providing reasons.

Key Benefits of the Startup India Scheme: 

a) Recognized Startups are exempt from income tax on the profits earned by them, for a period of three consecutive years, since they are granted the inter-ministerial board certificate. This benefit aims to advance business growth and satisfy working capital requirements during the early years. 

b) Consecutively, in the situation that the Startup has an inter-ministerial board certificate and also receives consideration from the issue of shares surpassing the fair market value of the mentioned shares, then the consideration up to Rs. 10 crores which are received from such shares is exempt from tax. 

c) The compliances under some labour and environment laws can be self-certified by the Startups, for a period of five years from the date of incorporation of the entity. This benefit aims to lessen the regulatory burden on startups and allow them to maintain low compliance costs. 

d) Within six  months of filing an application of winding up the company, an insolvency professional shall be appointed for the liquidation of assets and payment of creditors, and the startup can be wound up within 90 days as compared to the 180 day limitation for other companies. 

e) The scheme lays out various IP services and resources to assist startups in maintenance and protection of their IPRs, such as, fast-tracking of the patent application; an 80% rebate in filing of the patents; 50% rebate in filing of trademarks; a panel of facilitators for assistance in filing of the IP applications; and covering of the facilitation costs by the government. 

f) A startup has the opportunity to avail exemptions on earnest money deposit, prior turnover, and experience necessities in case of government tenders, as according to the scheme and with the view to meet quality and technical requirements, all departments under the Government of India, Public sector undertakings, and ministries have been authorized to mitigate the norms in relation to public procurements. 

g) Finally, the Indian Government has maintained a corpus fund of Rs. 10,000 crore, the concept of which is such that Government contributes towards the capital of SEBI registered funds, which in turn invest in startups. This fund is governed by SIDBI with the intention to dispense monetary support for development and advancement of innovation driven entities. 

Hence, it is clear that the simplicity of procedure along with all the benefits provided by the Government of India under this scheme makes it a no-brainer as to the registration of an entity under “Startup India”. 

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