Today we will discuss who can register for the startup in India and the benefits of startup recognition in India. In this we will discuss in detail the Process of Startup Registration in India.
Who can register as a START UP in India?
- Upto a period of ten years from the date of incorporation/ registration
- If it is incorporated in India as a
- Private Limited Company or
- Registered as a Partnership Firm or
- a Limited Liability Partnership
- Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded 100 Crore rupees.
- 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’.
What are the Benefits of START UP RECOGNITION in India?
- Self-Certification : Self-compliance under 3 environmental & 6 labour laws
- Patent Application & IPR Protection : Fast track & up to 80% rebate in filing patents
- Income Tax Exemption : For 3 consecutive years & exemptions on capital gains & investments above Fair Market Value
- Easier Public Procurement Norms : Get listed as seller to the government & benefit from exemptions on EMD & min requirements.
- Easy Winding Up of Company : Within 90 days under Insolvency & Bankruptcy Code, 2016
PROCESS OF START UP REGISTRATION IN INDIA
Startup will be registered in three steps for the three different benefits.
First step – Get the Recognition of START UP
Second step – Get the Benefits of share issued at security premium for the start up
Third Step – Get the Benefits of income tax Act 1961
Recognition of START UP to an entity-
First step to avail the benefits of startup is that entity must recognized as a start up in India.
The process of recognition of an eligible entity as startup shall be as under: —
- A Startup shall make an online application over the mobile app or portal set up by the DPIIT.
- The application shall be accompanied by—
a. copy of Certificate of Incorporation or Registration, as the case may be, and
b. write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation.
3. The DPIIT may, after calling for such documents or information and making such enquires, as it may deem fit, —
a. recognize the eligible entity as Startup; or
b. Reject the application by providing reasons.
B. How to get the Benefits of share issued at security premium for the start up?
If any company issue the share at security premium than it is taxable as per section 56 (viib) of income tax act 1961.
Sec 56 – (viib) – where a company receives any consideration for issue of shares that exceeds the face value of such shares in previous year, from any person being a Resident.
Taxable amount – the aggregate consideration received for such shares as exceeds the fair market value of the shares will be taxable.
If any start up recognised company issue the share at security premium than it is Not taxable as per section 56 (viib) (ii) of income tax act 1961.
Provided that this clause Sec 56 – (viib) shall not apply where the consideration for issue of shares is received—(ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf:
A start up can issue the share at security premium under section 56(2)(viib) if it satisfied the below condition.
- It has been recognized by DPIIT as above in Milestone A
- Aggregate amount of paid up share capital and share premium of the startup (after issue or proposed issue of share) does not exceed twenty five crore rupees (Excluding (a) a non-resident; or (b) a venture capital company or a venture capital fund; )
- It has not invested in any of the following assets building or land, Non Essential loans and advances ,capital contribution made to any other entity, Shares and securities, Vechile exceeding 10 lakh Rupees,jewelry other than Stock In Trade in the ordinary course of business;
Steps to Apply –
- Get the Recognition of startup as mentioned above.
- Apply in Form 2 at https://www.startupindia.gov.in/content/sih/en/Form-56.html
- How to get the Certification for the purposes of Exemption in income tax act 1961.
Section 80-IAC (i) and (ii) of the Income tax Act provide the exemption to the startup.
Steps to Apply –
- Get the Recognition of startup as mentioned above.
- Make an application in Form-1 with necessary documents at https://www.startupindia.gov.in
- Board will grant the certificate referred to in sub-clause (c) of clause or reject the application by providing reasons
Fees for the Startup Registration in India
As mentioned above startup will be registered in three steps, Fees for the startup will be also covered on three steps.
Fees for getting startup recognition – 7500/-
Fess for Form 2 will be – 10000/-
