Overview
A startup is a newly established business, typically small, founded by an individual or a group of entrepreneurs. What differentiates a startup from other new businesses is its focus on innovation. A startup offers a new product or service, or it redevelops an existing one into something better, addressing a unique gap in the market. The key element is innovation.
In India, entrepreneurial aspirations among young people, particularly in the middle class, are rising. Technology has unlocked new business opportunities, making it easier to manage businesses. The Indian government has also introduced various schemes to encourage entrepreneurs. As a result, this is a rewarding time to start a business in India.
The journey of starting a business begins with the idealization stage, where the entrepreneur searches for ideas and solidifies plans. At this point, it is crucial to research the market, understand the product or service offered, analyze existing competition, assess manpower availability, secure funding, and plan infrastructure needs. This research lays the foundation for building the business idea. LegalTax specializes in providing startup advisory support and has helped establish over 50,000 businesses across India in diverse industries. Our advisors are available 24/7 and can assist with legal formalities, business licenses, funding, income tax, GST, and labor law compliance.
Startup India Scheme:
Launched in 2016, the Startup India Scheme is an initiative by the Government of India. The main goals of this program are to promote startups, generate employment, and create wealth. Startup India has introduced several initiatives to build a strong startup ecosystem and transform India into a nation of job creators, rather than job seekers. These programs are managed by the Department for Industrial Policy and Promotion (DPIIT).
Definition of Startup:
Any company which falls into below list of categories will be called as “Startup” and eligible to be recognized by the DPIIT to avail the benefits from the Government of India.
Age of the Company
The date of incorporation should not exceed 10 years.
Type of Company
The company should be incorporated as a Private Limited Company, a Registered Partnership Firm, or a Limited Liability Partnership (LLP).
Annual Turnover
The annual turnover should not exceed Rs. 100 crore for any of the financial years since its incorporation.
Original Entity
The company or entity must have been originally formed by the promoters and should not have been created by splitting or reconstructing an existing business.
Innovative & Scalable
The company should have a plan for the development or improvement of a product, process, or service, and/or possess a scalable business model with high potential for creating wealth and employment.
Eligibility for Startup India Registration:
- Private Limited Company, LLP, or Partnership Firm
- Registered for no more than 10 years
- The company must offer innovative products or services
- The company must have a business model with high potential for employment generation
- The turnover should not exceed Rs. 100 crores
- The company should have a business model with high potential for wealth creation.
What Are the Documents Required for Startup India Registration?
What Is the Startup India Certificate of Recognition?
With the vision to enhance the economy and encourage entrepreneurship, the Government of India, under the Ministry of Commerce & Industry, launched the Start-up India Stand-up India initiative in 2015 to support and grow Indian startups.
Who Is Not Eligible for Startup India Recognition?
- Sole Proprietorship
- Firm constituted by a notarized partnership deed
- Companies with annual turnover exceeding INR 100 crore
- Companies older than 10 years
What Is the Process for Startup India Registration?
- Provide the necessary business details and information on our web portal.
- Choose a package and complete the payment through the available modes.
- Upon placing the order, your Startup India application will be assigned to one of our dedicated professionals.
- Our professional will carefully review the eligibility criteria for startup recognition and file the application.
- We will follow up with the government department for the issuance of the Startup India Certificate.
- After successful examination, the Startup India Registration certificate will be provided to you.
What Are the Three Layers/steps to Recognise the Startup India Recognition?
Issuance of Startup India Certificate:
Upon receiving an application, the DPIIT issues a Startup India certificate to the newly incorporated company after validating its unique business process and confirming that it meets the eligibility criteria.
Angel Tax Exemption on Equity Investment:
Investments made in a startup by investors at a premium are exempt from tax under Section 56(2)(vii)(b) of the Income Tax Act, provided the startup is approved by the Inter-Ministerial Board. This exemption remains valid until the startup’s paid-up share capital and share premium do not exceed INR 25 crore. To avail of the angel tax exemption, a startup must file a declaration under Form-2 with the DIPP.
Income Tax Exemption:
The startup is eligible for a tax holiday for any 3 consecutive years within a 10-year period. To claim income tax exemption under Section 80-IAC, the startup must file a separate application under Form-1. The Income Tax authority will either grant or reject the application. This can only be done after the Startup India Certificate has been issued.
Startup India Certificate Validation:
An entity will no longer be considered a Startup upon the completion of ten [10] years from the date of its incorporation/registration, or if its turnover exceeds one hundred [100] crore in any previous year, whichever comes first.
Startup India Certificate Vaerification:
Once you apply for Startup India registration, you will receive an acknowledgment receipt number (ARN) for tracking the status of your certificate. Once your Startup India application is successfully processed, you can easily download your Startup India certificate.
Benefits of Startup India Certificate:
Tax Exemption u/s 80 IAC
After obtaining recognition under the Startup India scheme, startups can apply for tax exemption under Section 80 IAC of the Income Tax Act. Eligible startups can avail of a tax holiday for three consecutive financial years within their first 10 years of eligibility.
Criteria for 80 IAC Tax Exemption:
- Must be a recognized startup.
- Only Private Limited Companies or LLPs are eligible.
- Must be incorporated on or after April 1, 2016.
Tax Exemption u/s 80 IAC
After obtaining recognition under the Startup India scheme, startups can apply for tax exemption under Section 80 IAC of the Income Tax Act. Eligible startups can avail of a tax holiday for three consecutive financial years within their first 10 years of eligibility.
Criteria for 80 IAC Tax Exemption:
- Must be a recognized startup.
- Only Private Limited Companies or LLPs are eligible.
- Must be incorporated on or after April 1, 2016.
Angel Tax Exemption u/s 56
Recognized startups can apply for Angel Tax Exemption under Section 56 of the Income Tax Act.
Criteria for Angel Tax Exemption:
- The entity must be a DPIIT-recognized startup.
- The total paid-up share capital and share premium after the proposed issue of shares must not exceed INR 25 crore.Self-Compliance for Labor Laws
Startups can self-assess labor law compliances with no inspections or physical visits by public officers during the first three years. Startups can self-certify through the Startup India portal under six labor laws:
- Inter-State Migrant Workmen Act.
- Gratuity Act.
- Provident Fund Act.
- Employees’ State Insurance Act.
- Building and Other Construction Workers Act.
- Contract Labor Act.
Support: Our professionals can assist with labor law self-certification.
Trademark, Patent, and IPR Benefits
Recognized startups can enjoy the following intellectual property rights (IPR) benefits:
- Fast-tracking of patent applications with an 80% rebate on government fees.
- Access to a panel of facilitators for IP application assistance.
- A 50% rebate on trademark application fees.Easy Winding Up of the Company
Startups registered under the Startup India scheme can opt for an easy exit route under the Insolvency and Bankruptcy Code, 2016. Companies can wind up within 90 days if their business model fails.Funding Opportunities and Government Schemes
Recognized startups can benefit from funding and various government-aided schemes:
- Venture Capital Assistance Scheme:
Interest-free loans provided by the Small Farmers’ Agribusiness Consortium (SFAC) for projects with capital shortfalls.
- Support for International Patent Protection (Electronics and IT):
Financial aid for protecting patents internationally.
- Stand Up India Scheme:
Bank loans ranging from INR 10 lakh to INR 1 crore for SC/ST and women entrepreneurs.
- Single Point Registration Scheme (SPRS):
NSIC registers MSEs under SPRS for participation in government purchases.Easier Norms on the GeM Portal
The Government e-Marketplace (GeM) allows startups to sell products and services directly to government buyers.
- Startups enjoy privileges under the GeM Startup Runway Scheme, including exemptions on prior turnover, experience, earnest money deposits, and minimum criteria for tenders.Other Benefits:
- Eligibility for Tax Holiday:
Startups can claim a tax holiday for three consecutive financial years within their first 10 years.
- Access to Funds of Funds Scheme:
Startups can benefit from the remaining corpus of INR 8,400 crore under the Funds of Funds for Startups (FOF) scheme.
- Priority in Government Tenders and Procurement:
Startups are exempted from prior experience or turnover requirements and security deposits.
- Labor Law Self-Declaration:
Startups can self-manage compliance with PF, ESIC, gratuity, and environmental laws.
- Trademark and Patent Fee Discounts:
- 50% discount on trademark application fees.
- 80% rebate on patent filing fees.
- Deposit Acceptance:
Private Limited Companies can accept deposits from their members for up to five years under the Companies (Acceptance of Deposits) Rules, 2014.
- External Commercial Borrowings (ECB):
Recognized startups can borrow up to USD 3 million annually from non-resident investors with simplified RBI compliance.
- State Government Incentives:
Many state governments offer incentives like GST rebates, loans, and other benefits to startups.
Why to Choose Legaltax Over Any Other Organization?
- Our excellent services have earned us numerous five-star Google reviews.
- We boast a team of 100+ dedicated experts delivering top-notch services.
- We have successfully assisted in the incorporation of a significant number of companies.
- With our outstanding services across India, we facilitate over 3,000 registrations every month.
- Backed by over 10 years of startup-centric legal expertise, we are trusted leaders in the field.
- For added convenience, we offer seamless support through our user-friendly mobile app.
A startup is essentially a newly established business, typically small, founded by an individual or a group. What sets a startup apart from other new businesses is its focus on offering an innovative product or service that is unique in the market. Innovation is the key factor, as startups either develop a completely new product or service or significantly enhance an existing one.
Entrepreneurial aspirations are increasingly growing among India’s middle class, especially among the youth. Technology has created abundant opportunities for businesses and simplified business management. To further encourage entrepreneurship, the Government of India has launched various supportive schemes, making this an ideal time to start a business in India.
The journey of starting a business begins with the ideation stage, where entrepreneurs brainstorm and finalize their business ideas. Following this, thorough research is conducted on the target market, the specifics of the product or service, existing competition, manpower requirements, funding, and infrastructure. Based on this research, the business plan takes shape.
We specialize in offering comprehensive startup advisory support, having assisted in the launch of over 50,000 businesses across diverse industries in India. Our team of advisors is available 24/7, 365 days a year, to address all your questions related to legal formalities, business licenses, funding, income tax, GST, and labor law compliance.
The Startup India Scheme, launched by the Government of India in 2016, aims to foster innovation, create employment opportunities, and drive wealth creation. This initiative is dedicated to promoting startups and establishing a strong startup ecosystem, transforming India into a nation of job creators rather than job seekers. The scheme includes various programs designed to support startups, all of which are overseen by the Department for Promotion of Industry and Internal Trade (DPIIT).
- The entity must be a Private Limited Company, Limited Liability Partnership (LLP), or a Partnership Firm.
- Should not be registered for more than 10 years.
- Must offer innovative products or services.
- Should have a business model with significant potential for job creation.
- Annual turnover should not exceed ₹100 crores.
- Must demonstrate a business model with high potential for wealth creation.
- Submit the necessary business details and information through our online portal.
- Select a suitable package and make payment using any of the available payment options.
- Once the order is placed, your Startup India application will be assigned to a dedicated expert.
- Our expert will thoroughly review the eligibility criteria and file the application on your behalf.
- We will coordinate and follow up with the relevant government department for the issuance of the Startup India Certificate.
- Upon successful verification, you will receive your Startup India Registration Certificate.
Tax Exemption Under Section 80 IAC:
After obtaining recognition under the Startup India Scheme, startups can apply for tax exemption under Section 80 IAC of the Income Tax Act.
- Tax Holiday: Eligible startups can avail a tax holiday for three consecutive financial years during the first 10 years of startup eligibility.
- Eligibility Criteria:
- Must be a recognized startup.
- Only Private Limited Companies or LLPs are eligible.
- Must be incorporated on or after April 1, 2016.
Angel Tax Exemption Under Section 56:
Startups recognized under the Startup India Scheme can apply for Angel Tax Exemption under Section 56 of the Income Tax Act, 1961.
- Eligibility Criteria:
- Must be a DPIIT-recognized startup.
- The total paid-up share capital and share premium after the proposed issue should not exceed INR 25 crore.
Self-Compliance for Labor Laws:
Startups can self-certify compliance with labor laws for the first three years, ensuring no physical inspections by public officers.
- Applicable Laws:
- Inter-State Migrant Workmen Laws
- Gratuity Laws
- Provident Fund Laws
- Employees’ State Insurance Laws
- Construction Workers’ Laws
- Contract Labor Laws
- Assistance: Professionals are available to guide startups in self-certifying these compliances through the Startup India portal.
Trademark, Patent, and IPR-Related Exemptions:
Startups recognized under the scheme can avail the following benefits:
- Fast-Track IPR Applications: Patent applications processed faster with an 80% rebate on government fees.
- Facilitator Support: Assistance from a panel of facilitators for IPR applications.
- Trademark Rebates: Enjoy rebates on filing trademark applications.
Easy Winding Up:
Startups can wind up their businesses within 90 days under the Insolvency and Bankruptcy Code, 2016, if the business model fails.
Funding Opportunities and Government Schemes:
Recognized startups can access funding and benefits under various schemes:
- Venture Capital Assistance Scheme: Interest-free loans by SFAC to address capital shortfalls.
- Support for MSMEs: Assistance for international patent protection in electronics and IT.
- Stand Up India Scheme: Bank loans ranging from INR 10 lakh to INR 1 crore for SC/ST and women entrepreneurs.
- Single Point Registration Scheme (SPRS): Facilitates MSEs’ participation in government purchases.
GeM Portal Benefits:
- Government e-Marketplace (GeM): An e-commerce platform for selling products and services to government buyers.
- Startup Runway Scheme: Provides exemptions on prior turnover, experience, earnest money deposit, and minimum criteria for government tenders.
Income Tax and Funding Exemptions:
- 3-Year Income Tax Exemption: Eligible startups can avail income tax exemption for three consecutive financial years within the first 10 years since incorporation.
- Funds of Funds Scheme: Startups can benefit from the INR 10,000 crore corpus, with over INR 1,600 crore already invested.
Other Notable Benefits:
- Government Tender Priority: Exemptions on prior experience, turnover, and security deposits for tenders.
- Labor Law Compliance Simplified: Startups can self-manage PF, ESIC, and gratuity compliance through declarations.
- IPR Discounts: 50% rebate on trademark fees and 80% rebate on patent filing fees.
- Deposits from Members: Private Limited Companies can accept deposits from members for five years from incorporation.
- Foreign Investor Loans: Avail loans of up to $3 million annually from non-resident investors through a simple RBI-compliance mechanism.
- State Government Incentives: Access schemes like the Maharashtra GST rebate and various loan and rebate initiatives.
- We pride ourselves on consistently delivering excellent services, reflected in our five-star Google reviews.
- Our dedicated team of 100+ experts strives to provide top-notch solutions tailored to our clients’ needs.
- We have successfully facilitated the incorporation of numerous companies across various industries.
- With a reputation for offering some of the best services nationwide, we handle over 3,000 registrations every month.
- Boasting over a decade of startup-centric legal expertise, we specialize in empowering businesses to thrive.
- Our user-friendly mobile app ensures unparalleled convenience and accessibility for our clients.
- The business must be established as a private limited company or a limited liability partnership (LLP).
- It should be a newly formed entity, not exceeding five years since incorporation, with a turnover not exceeding ₹25 crores.
- The company must secure approval from the Department for Promotion of Industry and Internal Trade (DPIIT).
- To obtain DPIIT approval, the company should be funded by an Incubation Fund, Angel Fund, or Private Equity Fund.
- The business must secure a patron guarantee from the Indian Patent and Trademark Office.
- A recommendation letter from an incubation center is essential for the application process.
- Capital gains are exempt from income tax under the Startup India campaign.
- The company should focus on providing innovative schemes, products, or services.
- Angel Funds, Incubation Funds, Accelerators, Private Equity Funds, and Angel Networks must be registered with the Securities and Exchange Board of India (SEBI).
A letter of support is a mandatory document that must be submitted along with the enrollment form for Startup India registration to qualify for tax exemption.
Any of the following can be submitted as a letter of support:
- A proposal from an incubator regarding the innovative nature of the business.
- A letter of support from an incubator, funded by the Government of India as part of a predefined program to promote innovation.
- A letter from an incubator recognized by the Government of India under the DIPP framework, confirming the innovative nature of the business.
- A letter from an Incubation Fund, Angel Fund, Private Equity Fund, Accelerator, or Angel Network, registered with SEBI, confirming at least 20% equity funding and the innovative nature of the business.
- A letter of funding from the Government of India or any State Government as part of a predefined scheme to promote innovation.
- A letter published in the journal by the Indian Patent Office, related to the business idea being promoted.
Following are needed to be furnished as proof of business existence: –
- Certificate of Company Incorporation
- Udyog Aadhaar Certificate (also known as MSME Registration)
Yes, E-StartupIndia is an online platform available across India. No matter where you are operating your business, all you need is an internet connection on your mobile or desktop, and we are ready to assist you in getting your job done.
No, you don’t need to be physically present for the process. E-StartupIndia is an online platform, and all you need is an internet connection on your phone or computer along with the required documents. We can complete the job for you, no matter if you are located in the remotest part of India.
An entity incorporated as a Private Limited Company, Partnership Firm, or Limited Liability Partnership can register under the Startup India scheme. The annual turnover of these entities should not exceed Rs. 100 crores, and they should have been in existence for up to ten years from the date of incorporation/registration. The entity must be focused on innovation, development, or improvement of products, services, or processes.
The most preferred business structures for startups are Private Limited Companies and LLPs. A Private Limited Company is legally recognized and typically favored by investors, although it comes with stricter compliance requirements and may have a higher cost of incorporation. On the other hand, LLPs have a lower incorporation cost and comparatively relaxed compliance regulations. Additionally, LLPs offer limited liability and are equally recognized by investors and globally.
To attract investors, it’s essential to have not only a stellar product with a scalable model but also visibility. Ensure your product gains healthy engagement and traction. Register your startup with Startup India and actively seek out investors. It’s crucial to effectively communicate your business idea and demonstrate the sustainability of your business model to potential investors.
Any entity with at least one registered office in India can register on the hub, as location preferences are currently available only for Indian states. However, the government plans to expand registration options to include stakeholders from the global ecosystem in the near future.
Any business entity that has been incorporated/registered for 10 years or more, and has exceeded the previous year’s turnover of Rs. 100 crore, will no longer be considered a startup after completing 10 years from its incorporation/registration date.
Yes, according to the law, an existing entity can register as a startup, provided it meets the prescribed criteria. It will also be eligible to avail various tax and intellectual property rights (IPR) benefits available to startups.
Once the application is complete and the startup is recognized, you will receive a system-generated certificate of recognition. This certificate can be downloaded from the Startup India portal.
After creating a profile on the Startup India website, the next step is to obtain recognition from the Department for Promotion of Industry and Internal Trade (DPIIT). This recognition allows startups to access several benefits, including high-quality intellectual property services, a simplified process for company winding, self-certification for compliance with environmental and labor laws, reduced norms for public procurement, access to the fund of funds, tax exemptions for three consecutive years, and tax exemptions on investments above the fair market value.
DPIIT-recognized companies can avail the following benefits under the Startup India Registration Scheme:
- Simplified compliance processes and an easier exit strategy for failed startups, along with seamless legal support.
- Funding and incentives, including exemptions from income tax and capital gains tax, along with increased funding to infuse more capital into startups.
- Incubation and industry-academia partnerships, fostering the growth of incubators, innovation labs, events, competitions, and grants.
Startup incubators are organizations that assist entrepreneurs in developing their businesses, especially during the early stages. On the other hand, startup accelerators support early-stage companies that are focused on growth and expansion.
Investing in a startup can be risky, but the low overhead capital requirements combined with high potential returns make it an attractive opportunity for investors to put their money into new businesses.
No, application has to be submitted online only.
Yes, once the registration is successful, you can download a system-generated, verifiable certificate of recognition.
