In a recent notification pertaining to the Startup India initiative of the Government of India released in the mid February 2016, the Ministry of Commerce and Industry and various other Ministries of the Government of India have come up with various stipulations and regulations for creating conducive environment for startups in India.

Startup India initiative is so motherly in its approach to:

Recognize those entities (entity refers to a private limited company, a registered partnership firm or a limited liability partnership) that are in the business for up to five years since the date of incorporation/registration as startups.

Organizations that lay within the stipulated period of incorporation shall enjoy the benefit as a startup, if its turnover for any of the financial year in the specific period has not exceeded Rupees 25 crore. Turnover is defined under the Companies Act 2013.

Organizations that have ventured into and considered to be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property or a significantly improved existing product or service or processes to create or add value to products or services are considered under the startup category, provided they fit under the first two parameters.

The other limitation apart from the turnover cap is that any organisation or entity formed by splitting up or reconstruction of a business existing already shall not be considered as a startup.

Tax Exemption Regulation

Startups that fall in the vicinity of the government’s definition shall avail tax benefits by obtaining a “certificate of an eligible business” from the Inter-Ministerial Board of Certification which has a Joint Secretary, Department of Industrial Policy and Promotion, a Representative of Department of Science and Technology, and a Representative of Department of Biotechnology.

“Startup” Recognition Process

The process of recognition as a 'startup' happens through mobile app/portal of the Department of Industrial Policy and Promotion. Startups will be required to submit a simple application with any of the following documents:

a) A recommendation (with regard to innovative nature of the business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a post-graduate college in India; or

b) A letter of support given by any incubator which is funded (relation to the project) from Government of India or any State Government as part of any specified scheme to promote innovation; or

c) Recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator recognized by Government of India; or

d) A letter of funding of not less than 20 per cent in equity by any Incubation Fund/ Angel Fund/ Private Equity Fund/ Accelerator/ Nagel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit; or

e) A letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or

f) A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of business being promoted.

Department of Industrial Policy and Promotion may, until such mobile app/portal is launched make alternative arrangement of recognizing a 'startup'. Once such application with relevant document is uploaded, a real-time recognition number will be issued to the startup. If on subsequent verification, such recognition is found to be obtained without uploading the document or uploading verification, such recognition is found to be obtained without uploading the document or uploading any other document or a forged document, the concerned applicant shall be liable to a fine which shall be fifty per cent of paid up capital of the startup but shall not be less than Rupees 25,000.

(Rules as given in http://startupindia.gov.in/ )