The Government of India started a new scheme which is Startup India Scheme. Under this scheme, the Government of India has authorised Department for Promotion of Industry and Internal Trade (DPIIT) for granting recognition to entities as startup.
The eligibility criteria for recognition as startup is as follows-
- The startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership.
- Turnover should be less than INR 100 crores in any of the previous financial years.
- An entity shall be considered as a startup up to 10 years from the date of its incorporation.
- The Startup should be working towards innovation/ improvement of existing products, services and 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”.
A company which has been recognized as startup by DPIIT can avail following benefits and for availing the benefits it has to apply to the Department concerned in the following manner:
(1) Deduction u/s 80-IAC of Income Tax Act:
Startup, can avail deduction under Section 80-IAC of the Income Tax Act.
(2) Exemption u/s56(2)(viib) of Income Tax Act:
A DPIIT recognized startup is eligible for availing exemption from the provisions of section 56(2)(viib) of the Income Tax Act.
(3) Self-Certification under Labour & Environment Laws
Startups are allowed to self-certify their compliance under 6 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporation.
The Startup may self-certify compliance in respect of following Labour Laws:
- Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996
- The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
- The Payment of Gratuity Act, 1972
- The Contract Labour (Regulation and Abolition) Act, 1970
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- The Employees’ State Insurance Act, 1948
In respect of 3 Environment laws, units operating under 36 white category industries (as published on the website of Central Pollution Control Board) do not require clearance under 3 Environment related Acts for 3 years.
In order to self-certify compliance, the startup may log on to ‘Shram Suvidha Portal’.
(4) Intellectual Property Rights (IPR)
Startups are provided an 80% rebate in filing of patents vis-a-vis other companies.
The above benefits provided by Indian government for startups under Startup India Scheme facilitates ease of doing business for startups in India.