21 January, 2016

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Startup India Scheme–What is the Definition / Eligibility Criterions of ‘Startup’

Startup India Scheme–What is the Definition / Eligibility Criterions of ‘Startup’ – Complete Details

Definition of Startup (only for the purpose of Government schemes)
 
Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
 
Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.
Provided also that an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration.
 
Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.
 
What is Entity

Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932)or Limited Liability Partnership (under The Limited Liability PartnershipAct, 2008)
Which Business Is Covered under the Scheme

A business is covered under the definition if it aims to develop and commercialize

•     a new product or service or process; or
•     a significantly improved existing product or service or process,that will create or add value for customers or workflow. The mere act of developing
products or services or processes which do not have potential for commercialization; or
undifferentiated products or services or processes; or


products or services or processes with no or limited incremental value for customers or workflow would not be covered under this definition.
In order for a “Startup” to be considered eligible, the Startup should

•     be supported by a recommendation (with regard to innovative nature  of  business),  in  a  format  specified  by  DIPP,  from  an Incubator established in a post-graduate college in India; or
•     be supported by an incubator which is funded (in relation to theproject) from GoI as part of any specified scheme to promote innovation; or
•     be supported by a recommendation (with regard to innovative nature  of  business),  in  a  format  specified  by  DIPP,  from  an Incubator recognized by GoI; or be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/ Accelerator/Angel Network duly registered with SEBI* that endorsesinnovative nature of the business; or
•    be funded by GoI as part of any specified scheme to promote innovation; or
•    have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.
* DIPP may publish a ‘negative’ list of funds which are not eligible for this
initiative.

What is ‘Turnover’?

As defined under The Companies Act, 2013 i.e. Section 2(91) of the CA, 2013 is

(91) "turnover" means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year;
What shall be Inter Ministerial Board ?

An Inter-Ministerial Board setup by DIPP to validate the innovativenature of the business for granting tax related benefits
Approval from the Inter-Ministerial Board shall not in any manner, limit or absolve the entity(ies) from any liability incurred in case of any misrepresentation/ fraud arising from submission of such application and/ or supporting such application.







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