Check if your Startup is a “Startup” – Government of India

Prime Minister Narendra Modi recently launched StartUp India, Stand Up India to encourage Startups in the country. In India, nowadays many startups are coming with great ideas, and many of them get funded as well. But if you think your Company is a Startup and can avail all the facilities by the government for a startup then you are wrong because Government of India made a set of rules in which you need to check whether your startup is actually a ‘Startup’ or not? The government of India has released a notification regarding the eligibility criteria for the startup to be considered as startup and getting government schemes and services. Notification is issued by Ministry of Commerce & Industry (Department of Industrial Policy and Promotion). Check if your startup is a ‘Startup’ below.

The Government of India has announced ‘Startup India’ initiative for creating a conducive environment for startups in India. The various Ministries of the Government of India have initiated some activities for the purpose. To bring uniformity in the identified enterprises, an entity shall be considered as a ‘startup’:-

• Up to five years from the date of its incorporation/registration
• If its turnover for any of the financial years has not exceeded Rupees 25 crore
• It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Provided that any such entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘startup’; Provided further that in order to obtain tax benefits a startup so identified under the above definition shall be required to obtain a certificate of an eligible business from the Inter-Ministerial Board of Certification consisting of:

• Joint Secretary, Department of Industrial Policy and Promotion
• Representative of Department of Science and Technology
• Representative of Department of Biotechnology

Here is the Explanation for a Startup to be considered as Startup in India.

1. An entity shall cease to be a startup on completion of five years from the date of its incorporation/registration or if its turnover for any previous year exceeds Rupees 25 crore.
2. Entity means a private limited company (as defined in the Companies Act, 2013), or a registered partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2002).
3. Turnover is as defined under the Companies Act, 2013.
4. An entity is considered to be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property if it aims to develop and commercialize:
   a)  A new product or service or process,
   b) A significantly improved existing product or service or process that will create or add value to customers or workflow.
5. THE GAZETTE OF INDIA: EXTRAORDINARY [PART II—SEC. 3(i)]
   Provided that the mere act of developing: a. products or services or processes which do not have the potential for commercialization
   b. related products or services or processes
   c. products or services or processes with no or limited incremental value for customers or workflow would not be covered under this definition.
6. The process of recognition as a ‘startup’ shall be through mobile app/portal of the Department of Industrial Policy and Promotion. Startups will be required to submit a simple application with any of following documents:
   a) a recommendation (concerning innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a postgraduate college in India
   b) a letter of support by any incubator which is funded (in relation to the project) from Government of India or any State Government as part of any specified scheme to promote innovation
   c) a recommendation (concerning innovative nature of business), in a format prescribed by Department of Industrial Policy and Promotion, from any Incubator recognized by Government of India
   d) a letter of funding of not less than 20 per cent in equity by any Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit
   e) a letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation
   f) a patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of the business being promoted.

Department of Industrial Policy and Promotion may, until such mobile app/portal is launched make the alternative arrangement of recognizing a ‘startup’. Once such application with a relevant document is uploaded a real-time recognition number will be issued to the startup. If on subsequent verification, such recognition is found to be obtained without uploading the document or uploading any other document or a forged document, the interested applicant shall be liable to a penalty which shall be fifty per cent of paid up capital of the startup but shall not be less than Rupees 25,000.

So, These are the points made by Government of India to Consider a Startup. If you already have a Startup or going to start a startup company, you must read the above points carefully to get Government approval. Do Share it with your, friends family who are in the startup, a business environment so that they know and Check if their Startup is a “Startup”? if you want to add anything to this story, please do let us know in a comment below.