Prime Minister PM Narendra Modi on Saturday(16.01.2016) unveiled a slew of incentives to boost start-up businesses, offering them a tax holiday and inspector raj-free regime for three years, capital gains tax exemption and Rs 10,000 crores corpus to fund them.
He also announced a self-certification scheme in respect of nine labor and environment laws and said there will be no inspection during the first three years of launch of the venture. Also, a liberalized patent regime is being brought to help start-up businesses register patents, for which the fee will be slashed by 80%.
Addressing the first conference of start-up entrepreneurs, Modi announced an action plan to boost such ventures which are seen as key to employment generation and wealth creation.
Startup India “Startup Definition”
Any Legal entity will be identified as a startup.
1. Till up to five years from the date of incorporation.
2. If its turnover does not exceed 25 crores in the last five financial years.
3. It is working towards innovation, development, deployment, and commercialization of new products, processes, or services driven by technology or intellectual property.
Points to be remember:-
A corporation, entity or a business is termed as a start-up if
- The entity is registered under Companies Act, 2013
- It is registered under section 59 of Partnership Act, 1932, as a partnership firm
- Or registered under Limited Liability Partnership Act, 2002, as a limited liability partnership Note: - Means Sole Proprietorship Firm not under the Startup India Scheme.
How to take tax benefits under this scheme
In order to obtain tax benefits, one has to obtain a certificate from the Inter-Ministerial Board of certification. The board consists of the following:
- Joint Secretary, Department of Industrial Policy and Promotion.
- Representative of Department of Science and Technology.
- Representative of Department of Biotechnology.
Points to be remember : an entity shall be considered a startup only if it aims to develop and commercialize – a new product or a service or a process or significantly improves on a product or service or process which will add significant value for customers or workflow.
So if your Startup is like another Ecommerce Startup Website or IT Sector then it's not eligible for the tax benefits as you will be not defined as Startup.
How to Apply for the Startup India Scheme Process and Form
In the official notification which is issued by the govt. in that said startups have first of all register their business as Legal entity as Private limited company, Limited Liability Partnership, Partnership Firm then they have to register through a mobile app which is not yet launch or through the portal of DIPP(Department of Industrial Policy and Promotion)
The Startup will have to submit their application along with anyone of the following Documents :-
- A recommendation in a format specified by DIPP from an incubator established in a post-graduate college in the country.
- A letter of support from any central or state government funded incubator to promote innovation.
- A recommendation in a format specified by DIPP (with regard to innovative nature of business) from any incubator recognized by the Central Government.
- A letter of funding of not less than 20 per cent in equity by any incubation or angel fund/PE fund/accelerator or angel network duly registered with Securities and Exchange Board of India that endorses its innovative nature of business.
- A letter of funding by the Central or State government as part of any scheme to promote innovation.
- A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of business being promoted. Once the application will be uploaded then, a recognition number will be issued to the startup in real time. If the number is found to be obtained without uploading the documents, or uploading the forged documents, a fine on the applicant will be levied, which shall be 50 per cent of the paid-up capital of the startup and not less than Rs 25,000.
Tax Exemptions to Start ups
- It is stipulated that exemption shall be given to persons who have capital gains during the year, if they have invested such capital gains in the Fund of Funds recognized by the Government. This will act as an incentive for the investors. Similarly, tax exemptions will be given to start ups for a period of three years.
- Under The Income Tax Act, 1961, where a Startup (company) receives any consideration for issue of shares which exceeds the Fair Market Value (FMV) of such shares, such excess consideration is taxable in the hands of recipient as Income from Other Sources. It has been proposed that the same shall be extended to investment made by incubators in the Start ups. The same shall be extended to investment made by incubators in the Startups.
- In order to increase the R&D efforts in the country, the Government is additionally, deciding to set up 31 centers of innovation and entrepreneurship at national institutes.