We all have heard of popular business establishments in India such as Paytm, Upgrad, Zomato, Ola Academy, Airbnb, Razorpay, 1mg etc., but do you know they started as start-ups before becoming such larger corporations? A start-up is nothing but a business in India started with lower capital but having stronger means for revenue generation capability or profit earning prospects while working on either creating something unique and innovative or making any improvement over existing goods or services.

Start-up entrepreneurship has gained special importance in the modern world due to the fact that it introduces innovative products and technologies, create job opportunities and increase rates of employment, and also regulate competitive dynamics in the business environment. Realising the importance of recognising their importance for the economic and socio-economic development, the Government of India has devised the “Start-up India Scheme” under the Department for Promotion of Industry and Internal Trade (DPIIT) under the direct monitoring of the Ministry of Commerce and Industry in India in the year 2016.

As per the guidelines, the applicant business entities shall be required to meet the eligibility criteria drawn and notified by the DPIIT and such applicant shall be required to acquire registration under the Scheme by making an application under website www.startupindia.gov.in. after which such business entities in India will be eligible to avail benefits offered under the Start-up India Scheme.

Meaning & Definition of “Start-ups”

In the general sense, the term “start-up” refers to a newly started business that is in first stage of its business operations. They are founded as a result of contributions made by its founders who intend to either create or develop any product or services which is or going to be in high demand later. Developing a new product or service could be a challenging task, and the funds are either managed by the founders or promoters of the business entity or are managed by getting investments from sponsors or venture capitalists.

Thus, the Start-up India Scheme was introduced in Indian providing for the criteria to recognize a “Start-up” with the objective to –

  1. Encourage entrepreneurial innovation and creativity;
  2. Create a robust start-up ecosystem and
  3. Creation of new job opportunities in India and increasing employment rate.

Therefore, the DPIIT has laid the following criteria for recognizing a “Start-up” to seek registration and avail benefits under the Act-

  1. Any Private Company/Partnership or LLP in nature
  2. That has been incorporated for lesser than ten years
  3. Holds an annual turnover of less than 100 crores

Meets the eligibility criteria for the purpose of acquiring Start-Up India Scheme subject to fulfilment of other conditions for eligibility criteria.

Most of the Start-ups in India are operated on limited budgets especially by a close knit group of friends and families. Thus, business entities founded on a creative idea, recognition under the scheme gains attention of Venture capitalists Firms and sponsors who give funds for the development of the idea. The scheme also allows multiple benefits such as tax exemptions, fee concessions, and easier compliances under laws etc.

DPIIT RegistrationEligibility for Start-Up India Registration in India

Provided below is the criterion for being eligible to register under the “Start-up” India scheme in India –

  • Age from the Date of Incorporation

A business in India entity who aims to get registered under the “Start-up” India Scheme should not be older than 10 years from the date of the incorporation.

  • Type of Business Entity

No business entity in India could be registered as “Start-up” under Start-up India Scheme if they have not been incorporated as-

    • A Private Limited Company
    • A Limited Liability Partnership
    • A Partnership Firm
  • Annual Turnover of the entity-

The annual turnover of such business entity in India should not exceed Rs. 100 crore for any of the financial years since the year of its incorporation.

  • Should not be a result of any Merger or Demerger

Such business entity should not be resulted from any business split or reconstruction such as amalgamation, merger or demergers and should be an original from the date of incorporation.

  • Making any innovative product/service with scalability

The business idea towards which such newly incorporated business is working towards should either be any innovative product or services or any improvement over any product or services possessing scalability to generate better revenues in future.

  • Business Objective

Such business entity must be functioning either in the innovation or improvement for the development of any product or services with scalability and holding higher prospects of either revenue generation or employment generation or both.

Documents Required For Start-up Registration in India

  • Proof of Identification of the authorized representative of the business entity
  • Proof of registered address of the Business entity
  • Self-attested Copies of documents evidencing constitution of the business (MOA&AOA for company, LLP deed for LLP etc.)
  • Scanned copy of certificate of incorporation or registration issued by Ministry of Corporate Affairs.
  • Scanned copy of letter of authorization signed by the authorized representative of the business entity along with an identification proof attached with such letter.

Process of Start-Up India Registration in India

Provided below is the step-by-step process of start-up registration in India-

Step 1: Log on to the https://www.startupindia.gov.in/content/sih/en/login.html and create a user Id and password with the registered email Id and mobile number of the authorised representative of the business entity.

Step 2- After logging in, create a profile for the Business entity by filling its details such as Name of the Business, type of the entity, registered business address, CIN no. in case of company and industry and sub-industry under which the entity intends to develop business  in.

Step 3- Next, you may find an option “DPIIT registration” in the home page. Click the option and move to the page.

Step 4. Fill DPIIT registration form by filling information such as Name of the Business, address, no. of employees hired, director/partner details along with any proof of identification number and finally upload self-attested documents such as Certificate of registration or incorporation, letter of Authorisation or any certificate or award received by the entity etc. on the portal.

Step 5-Further, the applicant may also be required to upload any additional document or information by way of any pitch deck presentation, website link or any other document to explain the wealth-generation potential and feasibility of the business idea;

Step 6:  In the last step, the applicant shall be required to self-certify some facts by clicking on the checkboxes provided along with the facts such as-

  • The entity is either a Private Limited Company, Partnership firm or a Limited Liability Partnership and not anything else;
  • It is original in nature and not the result of any merger or demerger of previously existing business entities;
  • The annual turnover of such business entity never exceeded Rs.100 crores during any Financial Year;
  • The business entity is functioning in the development of a business idea which is either innovative in nature or an improvement over existing products/services;

Step7- After marking these checkboxes, click submit and the application shall be submitted to the DPIIT for verification and approval purposes.

Startup India RegistrationBenefits of Start-up India Registration in India

The Start-up in India scheme intents to encourage Start-ups by providing various benefits to the registered legal entity. Such benefits include financial and non-financial benefits for legal entity on fulfilling the eligibility criteria. Following are the benefits of registering as a start -up with DPIIT in India-

 Tax Exemptions under Income –Tax Provisions

  •  Section 56(2) (vii) (b) –

Section 56(2) (vii) (b) of the Income-Tax Act provides for levying of Income-Tax in case where a company in India receives consideration for issue of shares to the shareholders of the company where the price of shares is above the Fair Market Value (FMV) of the shares and   the same in the taxable in hands of the shareholders as Income from other Sources. However, an entity registered as a start-up has been exempted from this provision and exempted from the levy of taxes in the hands of the Venture Capitalists or other investors from the levy of such taxes on this excess consideration.

  • Exemption under Section 80-IAC-

A business entity duly registered as a Start-up in India under the Start-up India Scheme is granted tax holiday for any three years out of 10 years from the date of its incorporation, so that the amount to be paid as income-tax could be used for the purpose of business development or meet any capital requirement which is especially relevant for Start-ups.

  • Tax Exemption under Section 54(GB)-

A business entity registered under the provisions of the Start-up India Scheme in India has been exempted to make payment of long term capital gains on sale of any residential property if the sale proceeds are intended to be invested for business development purposes with respect to such start-up.

Relaxation under Labour and Employment Laws-

Every business entity has been made subject to certain rules and regulations including registrations of establishments and other compliances such as annual returns filling, record maintenance, inspections, audits etc. which is primarily under these three categories-

  • Compliance under Labor Laws
  • Compliances under Environment Laws
  • Compliances under Employment Laws

Thus, any business entity registered under the Start-up India Scheme shall be subject to self-certify the applicable compliances under relevant labour and environmental laws for a period of five years effective from the date of incorporation.

For compliances applicable under labour laws, there shall be random inspections conducted on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.

According to the DPIIT guidelines, following labour laws have been allowed self-certification by registered entities in India-

  • Building and Other Construction Workers Regulation Act, 1996;
  • The Inter-State Migrant Workmen Act, 1996;
  • The Payment of Gratuity Act, 1972;
  • The Contract Labour Regulation Act, 1970;
  • The Employees Provident Funds and Miscellaneous Act, 1952; and
  • The Employees State Insurance Act, 1948,

For compliances applicable under environmental laws, for start-ups recognized under the “Start-up India Scheme”, those start-ups categorised under ‘white category’ are allowed to complete compliances through self-certification and such entities shall only be subject to random inspections by authorities. Similarly, the following environmental laws are allowed to self-certify under the following acts-

  • The Water Pollution Prevention Act, 1974;
  • The Water Pollution Cess (Amendment) Act, 2003; and
  • The Air Pollution Prevention Act, 1981.

Fee Concessions in IPR Applications in India

A business entity holding start-up registration in India can avail application fee concessions with respect to IPR registrations for providing protection to their IPR ownership rights, which is another greatest benefit of acquiring registration under the scheme. Thus, an entity registered as a Start-up can avail up to 80% fee concession with respect to Patents and up to 50% concession with respect to trademark application.

Ease in Public Procuring Standards-

The Government of India has made it easier for business entities to submit applications for tender approvals with lesser eligibility requirements. Further, business entities registered as start-up can also get themselves registered under various e-marketplace and e-procurement portals such as GeM and can offer their products or services for sale.

As per DPIIT guidelines, business entities are allowed exemptions with respect to the following-

  • Payment of security Deposits;
  • Requirement of specific limits of Annual Turnover
  • Total experience in the business for tender requirements

Ease to find sponsorships and investors

Registration of Start-up in India is a comprehensive process that requires the applicant to adequately explain that the business has the potential to generate profits. Thus, if the business idea is unique enough to gain attention of venture capitalists and angel investors, it is easier for them to get access to funding easily.

Stress- Free Winding Up Of Company

Since there is an equal probability for a business to prosper as well as to fail in the intial stages of business operations. Thus, a business entity who has been registered under the Start-up India Scheme has the benefit of avail “Fast Track winding up “ process within a total period of 90 days, which is nearly 180 days in case of other entities.

SIDBI Funds as Corpus Funds

The Ministry of Commerce has provided a corpus fund that shall be administered by Small Industries Development Bank of India, namely SIDBI Corpus Funds who shall make investments towards SEBI registered capital funds amounting Rs.10, 000 crores, who in turn shall make re-invest such sums towards start-ups to offer equity funding assistance and also to promote growth and development of start-ups who are driven by uniqueness and innovation.

Disadvantages of Start-Up India Registration in India

  • Possibilities of Business failure

For a business with limited capita and in its initial phase of business operations there are higher chances of failing to get sponsorship or investments or failure of business idea or its inability to seize market opportunities ultimately leading to shut down of the business.

  • Heavy Compliances-

Though, the start-ups registered under the “Start-up India scheme “have been allowed multiple benefits .However, it puts the burden to comply with some additional compliances any failure to comply with the same can lead to heavy fines and penalties.

  • Lack of team organization

Most of the start-ups in present are being started by close knit group of friends or families, which makes the business organization more in an informal structure, which some time leads to problems like casual behaviour and lack of professionalism, disagreements and team spirit in the business organization that only leads to failure or business.

  • Lack of Skilled Staff

Due to the reason of limited capital and tight budgets, very few employees prefer to work in a start-up environment. Further, there is also lack of job security, continuous promotions and other perks being offered by established businesses. Thus, there are chances that a business will suffer from lack of staff skilled in their core competencies.

  • Harder to get funding from sponsors or capitalists-

When it comes to reality it is really difficult for a start-up entity to establish the fact and convince investors that the business idea has exceptional capability to earn profits in near future and even tough to compete with established businesses with better resources.

Conclusion

Thus, Start-up India Scheme is a beneficial scheme in India offering multifarious benefits with some negligible disadvantages which could be eliminated with prudence. If the business idea really holds any merit in its idea for the purpose of wealth & revenue generation, it could easily get seed funding from sponsors. The rates of start-up registration is increasing rapidly with as much as 57,570 Start-ups recognized and benefited under the Scheme. Therefore, if you are someone intending to start your entrepreneurial journey, DPIIT registration is the one beneficial for you. Good Luck!