Startup business in India

An entity shall be considered as a Startup:

i. Upto a period of seven years from the date of incorporation/registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act,
2008) in India. In the case of Startups in the biotechnology sector, the period shall be upto ten years from the date of its incorporation/ registration.
ii. Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded Rs. 25 crore
iii. Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

Provided that an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘Startup’.

Recognition 

Eligibility Criteria for Startup Recognition:

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 25 Crores in any of the previous financial years

An entity shall be considered as a startup up to 7 years from the date of its incorporate or 10 years in case of Startups in the Bio Technology sector

The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth

Tax Liability

Eligibility Criteria for applying to Income Tax exemption (80IAC):

The entity should be a recognized Startup

Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC

The Startup should have been incorporated after 1st April, 2016

Eligibility Criteria for Tax Exemption under Section 56 of the Income Tax Act [Angel Tax]:

The entity should be a DIPP recognized Startup

Aggregate amount of paid up share capital and share premium of the Startup after the proposed issue of share, if any, does not exceed INR 10 Crore.

The investor’s net worth should be more than INR 2 Crore as on the last date of the preceding financial year or more than the amount of investment made/ proposed to be made, whichever is higher, in the preceding financial year

The Startups may self-certify compliance in respect of following 6 Labour Laws:

1. Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996
2. The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
3. The Payment of Gratuity Act, 1972
4. The Contract Labour (Regulation and Abolition) Act, 1970
5. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
6. The Employees’ State Insurance Act, 1948

Self Declaration at Shram Suvidha Portal