Benefits of Startup India Scheme
Introduction
This article explains the #3 major things about the Startup India Scheme. And these things are very useful when you start your own startup.
These three major things are given below:
#1 Why Startup India Scheme is made?
Startup India Scheme is made by the government for promoting the startup, which are innovative, scalable, young, and want to do something big. Its objective is to help such startups to get funding from internal as well as foreign investors and our country can grow further.
This scheme is overseen by a department of Ministry of Commerce, which is named as DPIIT (Department of Promotion for Investment and Internal Trade).
When you get recognition from Startup India, then it is given by DPIIT.
#2 Definition of Startup
According to Startup India, if you start any business, it does not mean that it is a startup.
There are five fundamentals or factors based on which it is decided whether you are a startup or not. The five factors are:
1. Age of your company
When you are applying for recognition in the Startup India Scheme, the age of your company should be less than 10 years.
It means from the Date of Incorporation of your company, which is the date when you have actually registered your company on the Ministry of Corporate Affairs (MCA) website, till today, when you are recognizing your company in the Startup India Scheme, the age of your company is less than 10 years.
2. Company type
It means whether you are a Private Limited Company, an LLP, or a registered Partnership Company. Only these three types of companies will be considered as a startup according to the Startup India Scheme.
3. Annual turnover
According to Startup India, the turnover of your company in any financial year should be less than 100 crores to be recognized as a Startup.
4. Original entity
Some big companies start a small business unit. These business units will not be considered as a Startup by the Startup India Scheme.
You need to register an original entity, i.e. new company from scratch to get eligible for Startup India.
5. Innovative and Scalable
According to Startup India, the businesses that are working on innovations whether it is process innovation, product innovation, or service innovation, and also have scalability will be considered as the Startup.
Most of the companies that are registered in Startup India are either scaling up their business using the Internet or by offline networking.
So, when you apply for Startup India Scheme, DPIIT will judge you on all the above 5 parameters and will tell you whether you can be recognized as a startup or not.
If your application is registered successfully, then you will get a number immediately but get the certificate digitally after 2-5 days generally or more days sometime.
This complete process is automated and digitalized.
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#3 How to apply in the Startup India Scheme?
It is a myth that you need to invest a lot of money and hire a CA to apply in the Startup India Scheme.
You just need to visit the official website of Startup India, i.e. startupindia.gov.in, and click on the “Get recognized” link. After that, you reach the login page and can easily apply for Startup India Scheme in simple steps.
The website will ask you for your company’s MOA, AOA, registration certificate, and other documents to check your company on the five fundamentals of recognizing a company as a startup, which is discussed above.
Once you upload all the documents, you reach the final step. You don’t need to make any type of payment for this application.
In a few days, you will get a congratulatory note that you are a legally validated startup in India. Now, you become a government certified startup; so, investors will also start trusting you and ready to invest in you.
#4 Advantages of being recognized by Startup India Scheme
1. Patent and IPR Norms
Startup should know about Patent and IPR norms as they do lots of innovations.
Sometimes, startups build some innovative technology, process, products, or service and they started getting sales. But, suddenly, they came to know that their competitor copied their product or service and selling them. You will never be able to fight any case against this competitor if you do not have the IPR rights.
In Startup India Scheme, the government has engaged lawyers to give you advice on IPR and Patient, which you can easily implement in your business.
2. Tax Exemption for Startups
According to Section 80-IAC, if you are a startup recognized by Startup India, then in the first three years of your company age, you don’t have to pay any income tax. This is one of the biggest advantages given by the government to the startups so that the startups can save more cash and invest it in making more innovative products and scaling up their businesses.
You will get this advantage only when you are recognized and certified by DPIIT.
You can get information about this on the Startup India’s official website as well as you can take the help of a CA. On the Startup India website, there is a community where you can ask your questions and get free advice.
3. Tax Exemption for External Investors
Whenever an external investor invests in your business, the government imposes a tax on him, which is called angel tax.
However, a lot of debate happened on this tax a few years back.
Through Startup India Scheme, the government has clarified it completely that if your investor is an Alternate Investment Fund (AIF) or a listed company having valuation more than 100 crores and turnover less than 250 crores, then according to the Section 56, the investor doesn’t have to pay any tax.
Thus, your investors also have a big advantage. Now, instead of investing their money in an instrument, they will invest it in your business.
So, startups and their investors will also be able to create more wealth if the startup becomes very successful and scalable.
4. Easy Winding-up of Company
It may be possible that your startup is not working well or about to fail, which happens most of the time, and failure is ok.
However, the winding-up of companies is very difficult.
If you ask a CA, then he/she will suggest you not to wind up your company, especially if it is a Pvt. Ltd. He/she will suggest you to give your company to somebody else by giving the directorship of your company to someone else. But, the winding-up of the company is a very tough and long process.
However, Startup India has made the winding-up process very easy. You just have to hire an insolvency professional. He/she will do the valuation of your balance sheet and tell the government that the company is not doing any fraud, it is actually wrapping up.
5. Easier Public Procurement Norms
Most of the small companies and startups want to know how to apply for the tender of credit, listed, or public companies.
If you are a recognized startup by Startup India, then you can apply in such tenders.
A few years back, the tender process was very fast. For applying in a tender, you had to prove that you are a 10 years old company with a huge turnover, cash, large number employees, etc. at the time, startups were not allowed to apply for the tenders.
But, today, Startup India has allowed the startup to apply for the tender of listed and public companies if they have done some innovation or have a scalable model.
Startup India has its desks or small offices around the world. So, if you have dome an innovation and your customers are in Germany and you do not have so much money to go to Germany, then the Startup India will take you to such excursion on their expenditure and open several networks for you to promote your product globally through one organization named, Invest India.
If you are a recognized startup by Startup India Scheme, then Invest India will help you to go abroad. Invest India will help you to acquire customers or technology from the 12 countries with whom we have good trade relations. Even you can set up your stalls in the trade shows of these 12 countries with the help of Invest India.
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