What is Startup India?
Startup India is a flagship initiative launched by the Government of India on 16th January 2016 to build a strong ecosystem for nurturing innovation and startups in the country. The program aims to drive sustainable economic growth and generate large scale employment opportunities through innovation and entrepreneurship.
The initiative is managed by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry. Since its inception, Startup India has recognized over 99,000 startups as of 2024, making it one of the largest startup ecosystems globally.
Vision of Startup India
- • To catalyze an entrepreneurial culture across India
- • To promote innovation and enable startups to grow through innovation and design
- • To create a platform where innovative ideas can be nurtured
- • To facilitate access to funding, networks, and markets for startups
- • To reduce regulatory burden and enable self-certification
Key Objectives
Simplification
Simplification and handholding through self-certification, startup hub, and mobile app
Funding Support
Funding support through Fund of Funds, credit guarantee, and tax exemptions
Industry-Academia Partnership
Promoting research and innovation through incubators and R&D facilities
Incubation
Setting up incubators, innovation centers, and startup centers
Eligibility Criteria for Startup India Recognition
To be eligible for Startup India recognition and avail the associated benefits, an entity must meet the following criteria as defined by DPIIT:
Entity Structure
- • Private Limited Company (under Companies Act, 2013)
- • Registered Partnership Firm (under Partnership Act, 1932)
- • Limited Liability Partnership (under LLP Act, 2008)
- • Note: Sole Proprietorship and One Person Companies (OPC) are NOT eligible
Age of Entity
The period of existence and operations should not exceed 10 years from the date of incorporation/registration. This ensures that only genuinely new and emerging businesses benefit from the scheme.
Turnover Limit
The annual turnover should not exceed ₹100 crore for any of the financial years since incorporation/registration. This threshold was increased from ₹25 crore in 2019 to accommodate growing startups.
Innovation Criteria (Most Important)
The entity should be working towards innovation, development, or improvement of products or processes or services, or it should be a scalable business model with a high potential of employment generation or wealth creation.
What Counts as Innovation?
- • Development of new products or services
- • Improvement of existing products/processes
- • Use of technology to solve problems
- • Unique business models
- • Social innovation and impact
- • Sector-specific innovations (healthcare, education, agriculture, etc.)
Original Entity
The entity should not have been formed by splitting up or reconstruction of an existing business. It must be an original entity pursuing new ideas and innovations.
Key Benefits and Incentives
Recognized startups under the Startup India initiative enjoy numerous benefits across taxation, compliance, funding, and intellectual property:
1. Tax Benefits
Income Tax Exemption (Section 80-IAC)
Eligible startups can claim 100% tax exemption on profits for any 3 consecutive years out of their first 10 years of incorporation. This significantly reduces the tax burden during the crucial early growth phase.
Long-term Capital Gains Exemption (Section 54EE)
If long-term capital gains (or a part thereof) are invested in a fund notified by the Central Government within 6 months from the date of transfer of the asset, the investment is exempt from tax.
Tax Exemption on Investments Above Fair Market Value (Section 56)
Investments received by eligible startups above fair market value are exempt from tax under Section 56(2)(viib) of the Income Tax Act, commonly known as the "Angel Tax" exemption.
2. Self-Certification Compliance
Startups can self-certify compliance for 6 labor laws and 3 environmental laws through a simple online procedure:
Labor Laws
- • The Building and Other Constructions Workers' Act
- • The Inter-State Migrant Workmen Act
- • The Payment of Gratuity Act
- • The Contract Labor Act
- • The Employees' Provident Fund Act
- • The Employees' State Insurance Act
Environmental Laws
- • The Water Act, 1974
- • The Air Act, 1981
- • The Environment Protection Act
3. Intellectual Property Benefits
- Fast-track Patent Examination: Startups get expedited examination of patent applications
- Patent Fee Rebate: 80% rebate on patent filing fees compared to other companies
- Trademark Fee Rebate: 50% rebate on trademark application fees
- Free Legal Support: Access to facilitators for IP filing and protection
4. Other Benefits
Easy Winding Up
Startups can wind up operations within 90 days under Insolvency and Bankruptcy Code, 2016
Public Procurement
Exemption from prior experience/turnover requirements in government tenders
Fund of Funds
Access to ₹10,000 crore Fund of Funds for investment in startups through SEBI registered AIFs
Credit Guarantee
Credit Guarantee Scheme for loans up to ₹10 crore
Registration Process
Follow these steps to register your startup and obtain DPIIT recognition:
Step 1: Incorporate Your Business
First, incorporate your business as a Private Limited Company, LLP, or Partnership Firm. Obtain Certificate of Incorporation, PAN, and other required registrations.
Step 2: Visit Startup India Portal
Go to startupindia.gov.in and click on "Register" to create your profile.
Step 3: Create Account
Register using your email ID and mobile number. Verify through OTP. Create your login credentials.
Step 4: Fill Recognition Application
Access the "DPIIT Recognition" section. Fill in all details about your startup including entity details, authorized representative, and innovation details.
Step 5: Upload Documents
Upload Certificate of Incorporation, proof of funding (if any), awards, patents, and a brief write-up about your innovation.
Step 6: Submit for Review
Review all details and submit your application. DPIIT will review your application within 7-10 working days.
Step 7: Receive Recognition Certificate
Once approved, download your DPIIT Recognition Certificate. You can now avail all Startup India benefits.
Tax Exemptions Under Startup India
One of the most significant benefits of Startup India is the comprehensive tax exemption package designed to support startups during their growth phase:
Income Tax Exemption (Section 80-IAC)
- • Benefit: 100% deduction of profits and gains for 3 consecutive assessment years
- • Period: Any 3 years out of the first 10 years from incorporation
- • Condition: Must obtain Inter-Ministerial Board (IMB) certificate
- • Additional: MAT (Minimum Alternate Tax) applies at normal rates
Angel Tax Exemption (Section 56)
Startups recognized by DPIIT are exempt from the "Angel Tax" provisions under Section 56(2)(viib) of the Income Tax Act. This means:
- • Investments from Indian investors above fair market value are not taxed
- • No 30% tax on premium received during fundraising
- • Encourages domestic angel investments
Conditions: Aggregate paid-up capital and share premium after issue should not exceed ₹25 crore (excluding investments from non-residents, AIFs, and listed companies).
Capital Gains Exemption
Section 54EE: Exemption on long-term capital gains if invested in units of specified funds notified for financing startups. Maximum investment limit: ₹50 lakhs. Lock-in period: 3 years.
Funding Support for Startups
The Government of India has established multiple funding mechanisms to support startups at various stages:
1. Fund of Funds for Startups (FFS)
- • Corpus: ₹10,000 crore
- • Managed by: SIDBI
- • Mechanism: Invests in SEBI-registered Alternative Investment Funds (AIFs)
- • Focus: Provides equity funding to startups across sectors
- • Stage: Early stage (seed, Series A, Series B)
2. Startup India Seed Fund Scheme (SISFS)
- • Budget: ₹945 crore (2021-2025)
- • Purpose: Financial assistance for proof of concept, prototype development, product trials, and market entry
- • Grant: Up to ₹20 lakhs as grant
- • Debt: Up to ₹50 lakhs as convertible debenture or debt
3. Credit Guarantee Scheme for Startups (CGSS)
- • Credit Guarantee: For loans up to ₹10 crore
- • Coverage: Up to 75% of the loan amount
- • Purpose: Working capital, term loans, venture debt
- • Benefit: Collateral-free loans for eligible startups