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Indian Start-ups Get a New Definition Under 'Start-up & Stand-up India' Initiative

Even a seven-year-old biz entity can avail the benefits of Start-up India's Action Plan
Indian Start-ups Get a New Definition Under 'Start-up & Stand-up India' Initiative
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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The Narendra Modi Government has recently modified the definition of ‘start-up’, under its ‘Start-up and Stand-up India’ initiative to accommodate businesses that are seven years old, thus making them eligible for government-sponsored funding, tax and other benefits. Earlier, start-ups active for maximum five years were selected for the scheme.

With the unified tax structure, Goods and Services Tax (GST), rolling out from July 1, 2017, the government has relaxed norms to provide tax benefits to start-ups, in a calculated move to create employment opportunities and deflect widespread criticism of failing to create 1 crore jobs.

Listed below are some of the important tweaks made by the central government that you need to know:

Age-limit Extended to Seven Years

If a private limited company (as defined in the Companies Act, 2013) or a partnership firm (registered under Section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) is seven years old, it is qualified to be called a start-up in India under the modified guidelines of ‘Start-up and Stand-up India’.

Till date, companies operational for five years from the date of incorporation were eligible for concessions under the government scheme announced last year. However, in case of start-ups in the biotechnology sector, the period shall be extended to 10 years, the ministry of commerce and ministry announced recently.  

Qualified Limit of Turnover

As per the new definition, a business entity shall be considered as a start-up if its turnover is less than INR 25 crore (the criteria remains unchanged) and has not completed seven years from the date of its incorporation/registration.

Employment Generation or Wealth Creation Should be on the Agenda

An entity shall be considered a start-up if it is working towards innovation, development or improvement of products or processes or services, or if it has a scalable business model with a high potential of employment generation or wealth creation.

Again, an entity will cease to be a start-up on completion of seven years from the date of its incorporation/ registration or if its turnover for any previous year exceeds INR 25 crore.

How to Obtain Tax Benefits

To obtain tax benefits, a start-up should acquire a certificate of an eligible business from an inter- ministerial board of certification, constituted by the Department of Industrial Policy and Promotion (DIPP).

The ministry has also mentioned in its announcement that if the recognition is obtained or acquired without uploading relevant documents or on the basis of false information, the industry body reserves the right to revoke the recognition certificate and certificate of an eligible business for tax benefits immediately without any prior notice or reason. The process for acquiring approval will be made through an online application made via the mobile app/portal set up by the DIPP.

 
Edition: June 2017

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