Startup India Registration

Overview of Startup India Registration

A Startup refers to a business that introduces inventive products or services aimed at addressing societal issues or improving existing offerings. The Indian government, led by Prime Minister Narendra Modi, has launched the Startup India initiative to foster economic growth, recognize and support Startups, and attract talented entrepreneurs. The Startup India scheme was launched by the Government of India in 2016 with the primary objective of fostering the growth of Startups in the country. The Startup India Registration scheme encompasses various initiatives aimed at building a strong Startup ecosystem and transforming India into a nation of job creators rather than job seekers. The Department for Industrial Policy and Promotion (DPIIT) oversees the programs under the Startup India Scheme, which has significantly expanded the scope of development and created new employment opportunities within the Indian economy. India is experiencing a significant rise in the number of Startups, with the government actively encouraging and assisting young entrepreneurs in establishing their ventures. These Startups play a crucial role in stimulating the country’s economy.

Regulations relating the Startup India Registration

The regulatory procedures associated with compliance to labor and environment laws can be time-consuming and challenging. Small and new firms may lack awareness of the intricacies involved and may face intrusive actions by regulatory agencies. To create a more favorable and flexible compliance environment for Startups, it is essential to simplify the regulatory framework. Consequently, the inspection process is made more straightforward and meaningful. For a period of three years, no inspections will be conducted regarding labor laws, except in cases where a credible and verifiable complaint of violation is filed in writing and approved by a senior authority. Regarding environment laws, Startups falling under the “white category” as defined by the Central Pollution Control Board (CPCB) will be allowed to self-certify their compliance. In such cases, only random checks will be carried out.

The Labor Laws Covered Under Startup India Registration Are:

• The Inter-State Migrant Workmen Act, 1979
• The Payment of Gratuity Act, 1972
• The Contract Labour Act, 1970
• The Building and Other Constructions Workers’ Act, 1996
• The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
• The Employees’ State Insurance Act, 1948

The Environment Laws Covered Under Startup India Registration Are:

• The Water (Prevention & Control of Pollution) Act, 1974
• The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003
• The Air (Prevention & Control of Pollution) Act, 1981

Eligibility Criteria of Startup India Registration

In order to be eligible for the DPIIT Certificate of Recognition, a Startup must fulfill the following criteria:

• Period of Existence of Entity: The company’s existence and operations should not exceed a period of 10 years from the date of its formation.
• Entity Classification: The DPIIT Certificate of Recognition applies to organizations that are established as Private Limited Companies, Limited Liability Partnerships (LLPs), or Registered Partnership Firms.
• Annual Turnover: The turnover of the firm should be less than Rs. 100 crores for any financial year since its establishment in order to qualify for the DPIIT Certificate of Recognition.
• Original Entity: The Company should not have been formed by splitting up or recreating an already existing entity in order to avail the DPIIT Certificate of Recognition.
• Innovative & Scalable Entity: The entity should be engaged in the development or improvement of a product, process, or service that demonstrates innovation. Additionally, it should possess a scalable business model with the potential for wealth creation and employment generation.
• Potential for Employment and Wealth Creation: The firm should have the capability to generate employment opportunities and create wealth.

Benefits of Startup India Registration

Startups that have acquired the DPIIT Certificate of Recognition can enjoy various benefits, which are as follows:

• Self-Certification: Once they have obtained the DPIIT Certificate of Recognition, Startups can self-certify their compliance with Three Environmental Laws and Nine Labour Laws.
• Start-Up Patent Application: Recognized Startups are entitled to pay only 80% of the fees for patents, trademarks, copyrights, and designs. Additionally, they can avail fast-track processing for their patent applications.
• Simplified Regulations for Government Purchasing: Startups acknowledged by DPIIT can showcase their products on the Government e-Marketplace. They are exempt from submitting Earnest Money Deposit and do not require prior experience or turnover to participate in projects with all Central Government ministries and departments.
• Easy winding up of Company: As per the Insolvency and Bankruptcy Code, 2016, Startups can complete the process of winding up their company within 90 days from the date of applying for insolvency.
• Funds: Startups are eligible for Rs. 10,000 crore funds from Alternative Investment Funds.
• Rs. 2,000 crore of Credit Guarantee Fund: Over a span of four years, Startups have the opportunity to access a Credit Guarantee Fund provided by the National Credit Guarantee Trust Company or SIDBI.
• Tax Exemptions: Upon obtaining the Certificate of Recognition, Startups can apply for tax exemption under Section 80 IAC of the Income Tax Act. They are also eligible for Angel Tax Exemption. Furthermore, recognized Startups are exempt from income tax for three consecutive financial years out of the first ten years since their formation, once they have obtained clearance for tax exemption.

Objectives of Startup India Registration

The Startup India Movement has set forth the following objectives in its plan to provide support to Startups and beyond:

• Improved infrastructure, which includes the establishment of incubation centers.
• Streamlined facilitation of Intellectual Property Rights (IPR), making the process of patent filing more accessible.
• Creating a favourable regulatory environment that encompasses tax benefits, simplified compliance procedures, streamlined company setup, and efficient mechanisms.
• Aiming to enhance funding opportunities for Startups.
• Providing an extensive networking database for entrepreneurs and other stakeholders involved in the Startup ecosystem.

Key Features of Startup India Scheme

The main characteristics of the Startup India Registration are as follows:

• The Small Industries Development Bank of India (SIDBI) will be responsible for managing the funds.
• The Life Insurance Corporation (LIC) will participate as a co-investor in the Fund of Funds.
• The Fund of Funds will contribute up to 50% of the capital to SEBI registered Venture Funds, also known as “daughter funds.” To receive this contribution, the daughter fund must have already raised the remaining 50% of the required capital. Additionally, the Fund of Funds will have representatives on the board of the venture fund based on their contribution.
• The Fund will ensure support for a diverse range of sectors, including manufacturing, agriculture, health, education, and more.

Documents Required For Startup India Registration

The required documents for registration include:

• Incorporation/Registration Certificate of your Startup
• Proof of funding, if applicable
• Authorization letter of the authorized representative of the company, LLP, or partnership firm
• Proof of concept, such as a pitch deck, website link, or video (for Startups in the validation, early traction, or scaling stage)
• Details of patents and trademarks, if any
• List of awards or certificates of recognition, if received
• PAN Number (Permanent Account Number)

Process of Startup India Registration

The procedure for registering a Startup involves the following steps:

Step 1: Business Incorporation First, you need to incorporate your business as a Private Limited Company, Partnership firm, or Limited Liability Partnership (LLP). This requires following the standard registration procedures such as submitting the registration application and obtaining the Certificate of Incorporation or Partnership registration. You can file the registration application with the Registrar of Companies (ROC) for a Private Limited Company or LLP, or with the Registrar of Firms for a Partnership Firm. The necessary documents and fees must be submitted along with the application.

Step 2: Register with DPIIT After incorporating your business, you should register it as a Startup. This process can be completed online. In the official website click on the ‘Register’ button to register into your profile. Once your profile is set up, you can apply for various acceleration, incubator/mentorship programs, challenges, and access resources like learning programs, government schemes, state policies, and pro-bono services.

Step 3: Obtain DPIIT Recognition The next step is to obtain recognition from the Department for Promotion of Industry and Internal Trade (DPIIT). This recognition provides Startups with benefits such as access to intellectual property services, relaxation in public procurement norms, and self-certification under labor and environment laws, easy winding up of the company, and access to the Fund of Funds, tax exemptions, and more. For applying for DPIIT recognition, apply for the DPIIT Recognition from your registered profile on the Startup India website.

Step 4: Recognition Application Complete the ‘Startup Recognition Form’ by providing details about your entity, full office address, authorized representative details, directors/partners information, Startup activities, and self-certification.

Step 5: Recognition Number After submitting the application, you will receive a recognition number for your Startup. The certificate of recognition will be issued after the examination of all your documents, typically within two days of submitting the details online. It is important to ensure the accuracy and legitimacy of the uploaded documents. Any incorrect or forged document may result in a fine of 50% of the tartup’s paid-up capital, with a minimum fine of Rs. 25,000.

Step 6: Other Areas if you require patents, trademarks, or design registrations for your innovation or business, you can approach experts.

Validity of Startup India Registration

The Startup India Registration certificate remains valid for a period of 10 years starting from the registration of the company, but it must be considered that the validity may also cease if the company achieves a turnover of more than 100 Crores before the expiration of the 10-year period.

Advantages of Startup India Scheme

The primary benefits of Startup India Registration are as follows:

1. Funding: One of the main challenges faced by Startups is obtaining financial support. Many entrepreneurs struggle to attract investors due to their lack of experience, security, or existing cash flows. Additionally, the high-risk nature of Startups, with a significant percentage failing to succeed, discourages many investors. To resolve this issue, the government has set up a fund with an initial amount of INR 2,500 crore and a total amount of INR 10,000 crore over a duration of four years (INR 2,500 crore per year). This fund is not directly invested in Startups but participates in the capital of SEBI registered Venture Funds to provide funding support.
2. Self-Certification under Employment and Labour Laws: Startups could self-certify their compliance with labour laws and environment laws, which helps reduce their regulatory burdens and allows them to focus on their core business. For a period of 3 to 5 years from the date of incorporation, Startups can self-certify their compliance under six labour laws and three environment laws. Additionally, Startups operating within the 36 industries categorized as “white” by the Central Pollution Control Board’s website do not require clearance under three environment-related Acts for a duration of 3 years.
3. Tax Exemption: Startups are eligible for a tax exemption for a period of 3 years. However, to avail these benefits, they need to be certified by the Inter-Ministerial Board (IMB). Startups that have been established on or after April 1st, 2016, are eligible to seek income tax exemption.

How Can ApkaTax Assist You?

FAQs on Startup India