Startups have been gaining popularity in India ever since the launch of the Startup India initiative in 2015. The support and guidance of this government initiative served as the incentive needed by many innovators who were previously apprehensive of launching their new businesses. This was primarily due to know-how and scepticism of whether the economy would be conducive to such startups. Now, with the backing of the government and incentives such as simplified application procedure, tax exemptions, intellectual property assistance and investment promotion, startups have found the fuel they were previously lacking.
In this blog, we’ll take a look at the step-by-step registration procedure for getting your startup registered in India and thereby gaining access to various government benefits.
Let’s start first with understanding what business constitutes a ‘startup’.
What is a Startup?
A business or company is said to be a startup if it deals with a new product or service or is an improvement upon a certain product or service. The key requirement for a startup is innovation. A startup can be by a single person or a collective, working towards innovation, improvement or development of a new product or service. A business will also be considered a startup if it has a scalable business model, capable of generating significant employment or wealth. Examples of successful healthcare Insurance startups in India include Plum Insurance.
In order for a business to avail of the government benefits provided under the Startup India initiative, the following eligibility criteria must be kept in mind –
- The company must be incorporated. The preferred business structure for startups has been a limited liability partnership (LLP) or a private limited company.
- The company must be less than 10 years old.
- The company must have an annual turnover of less than Rs. 100 crore for any year since the date of incorporation.
- The business must be working towards innovation, development or improvement of products or services. Alternatively, a business having a high potential of employment generation or wealth creation will also qualify.
It is interesting to note that as per the eligibility guidelines, an already existing business can also register as a startup upon meeting the eligibility criteria. However, a split or reconstructed business are not considered as startups.
Registering Your Startup
Upon meeting the eligibility criteria mentioned above, a company can register their startup in India by following these simple steps.
Being one of the eligibility criteria, incorporation is an important first step towards your journey to becoming a registered startup. A startup must be incorporated in the same manner and follow the same procedures as required for any regular business. A startup must also, therefore, obtain an incorporation certificate as the first step.
- Registration with Startup India
Once incorporated, your next step will be to register your company on the startup India Website. Once a profile is created in Startup India, you will be required to submit the incorporation certificate and a brief description of your business. Registration with Startup India also grants the entity access to accelerations, mentorship programs, and free learning and development programs.
- Recognition by the Department for Promotion of Industry and Internal Trade (DPIIT)
By clicking on the ‘Get Recognised’ tab, the business gets access to various government benefits such as self-certification of labour and environment compliance, simplified access to funds and access to quality intellectual property services at reduced costs. Upon filling and submitting the ‘Startup Recognition Form’ along with the below listed documents, you will obtain a Recognition Number upon successful examination.
Documents required –
- Incorporation certificate
- Details of directors
- Proof of concept such as website link or pitch deck
- Patents and trademark details
- PAN Numbers
It is crucial to upload the correct and accurate documents. If the documents are found to be wrong or forged, the company is liable to face a penalty of 50% of the paid-up capital of the startup, with a minimum fine of Rs. 25,000.
Benefits Provided to Startups
Upon successful registration and recognition, startups become eligible for a number of government benefits. Some of these are listed below.
- Simplified compliance – The self-certification mechanism under labour and employment laws reduces the compliance, thus alleviating startups of regulatory burden.
- Tax exemption – Income tax exemption of 100% for a period of three years is available to startups incorporated on or after 1st April 2016 until 31st March 2022, provided the annual turnover does not exceed Rs. 25 crores. However, to avail of these, the startup must be certified by the Inter-Ministerial Board (IMB). Additional details of tax benefits are available on the startup India Website.
- Intellectual property services – The government also provides a list of facilitators for patent and trademark registration, and the business is only to incur the cost of the statutory fees. Therefore, 80% of the fees are waived.
- Funding – A major challenge for entrepreneurs is funding. This has also been taken care of by setting up funds with an initial corpus of Rs. 2500 crores and a total corpus of Rs. 10,000 crores. Fund of Funds means that there won’t be a direct investment, but a participation in the capital of SEBI registered Venture Funds. Investors contributing to this fund are also eligible for tax exemptions, and therefore startups can attract more investors.
- Government tenders – Entrepreneurs can apply for government tenders, and the requirement of prior experience/turnover has been waived for startups.
It can be said that the present economic climate has been made more than conducive for innovators and entrepreneurs. With the Startup India initiative leading to simplified registrations, various incentives, and government-backed initiatives, creative thinkers now have the confidence to develop and invest in their ideas. This is evidenced by the way the startup industry continues to contribute to the exponential growth of the economy. With the way things are going, this is just the beginning!