Eligible startups are exempted from paying income tax for 3 consecutive financial years out of their first ten years since incorporation. Startups do not have to pay income tax for the first three years but to avail such benefits; the company must be certified by the Inter-Ministerial Board (IMB). This is where companies registered with DIPP get relaxation as the registration is enough to get the benefits. The Inter-Ministerial Board setup by Department of Industrial Policy and Promotion validates Startups for granting tax related benefits. The Board comprises of the following members:

• Joint Secretary, Department for Promotion of Industry and Internal Trade, Convener
• Representative of Department of Biotechnology, Member
• Representative of Department of Science & Technology, Member

The board shall validate startups for the Income Tax Exemption on profits under Section 80-IAC of Income Tax Act Eligibility to avail tax exemption under 80IAC-

1. The entity should be recognized by the DPIIT
2. Only Private Limited Companies or Limited Liability Partnerships are eligible for tax exemption under Section 80IAC
3. The Startup must have been incorporated on or after 1st April, 2016

Registration Process & Documents

1. Access Startup India portal and register
2. After registration, apply for DPIIT recognition
3. Access the Section 80 IAC exemption application
4. Fill in all details with the below-mentioned documents uploaded and submit the application form

Documents Needed

• Memorandum of Association for Pvt. Ltd./LLP Deed
• Board Resolution (If Any)
• Annual Accounts of the startup for the last three financial years
• IT returns for the last three financial years Electronic Process after Applying
• Refer to your Dashboard on the Startup India Portal for the status of your application. This can be found on the top right of the page after you log in.
• For any clarifications, please email: dipp-startups@nic.in

Exemption under Section 56(2) (VIIB) of Income Tax Act - After startup India registration, you may apply for Angel Tax Exemption u/s 56 of the Income Tax Act 1961:

• Investments into eligible startups by listed companies with a net worth of more than      100 Crore or turnover more than      250 Crore shall be exempt under Section 56(2) VIIB of Income Tax Act
• Investments into eligible Startups by Accredited Investors, Non-Residents, AIFs (Category I), & listed companies with a net worth more than      100 crores or turnover more than      250 Crore, shall be exempted under Section 56(2)(VIIB) of Income Tax Act
• Consideration of shares received by eligible startups shall be exempted upto an aggregate limit of      25 Crore

Eligibility to avail tax exemption under Section 56

• Should be a private limited company
• Should have been recognized as a DPIIT. To get DPIIT recognition, click on “Get Recognized” below.
• Not Investing in specified asset classes
• Startup should not be investing in immovable property, transport vehicles above      10 Lakh, Loans and advances, capital contribution to other entities, except in the ordinary course of business

Registration Process

• Registration to be done at the Startup India Portal
• Get DPIIT Recognition
• File the up Section 56 Exemption application form from this link
• Startup company will receive an email once the registration is activated

This is to ease the shut down or wind up operations of the startups. This will allow the entrepreneurs to reallocate capital and resources to more productive avenues faster. To encourage entrepreneurs to experiment with new and innovative ideas without facing complex exit processes where their capital stuck in case of business failure.

As per the Insolvency and Bankruptcy Code, 2016, startups with simple debt structures, it can be wound up in 90 days of filing the application for insolvency.

An insolvency professional can be appointed for the Startup who can be in charge of the company including liquidation of its assets and paying its creditors within six months of such appointment. It is responsibility of the insolvency professional to the closure of the business, sale of assets and repayment of creditors in accordance with the distribution waterfall set out in the IBC.

The objective is to reduce the cost and time taken for a startup to acquire a patent, making it financially viable for them to protect their innovations and encouraging them to innovate further. Intellectual Property Rights (lPRs) are emerging as a strategic business tool for any business organization to enhance industrial competitiveness. Start-Ups, with limited resources and manpower can sustain in this highly competitive world only through continuous growth and development oriented innovations; for this, it is equally crucial that they protect their IPRs. The scheme for Start-Ups Intellectual Property Protection (SIPP) is envisaged to facilitate protection of Patents, Trademark and Designs of innovative and interested Start Up. The Indian Patent Office (IPO) has issued guidelines for startups to file patent, trademark and design application under Start-Ups Intellectual Property Protection (SIPP).

• Fast-tracking of Startup Patent Applications – The applications will be fast-tracked so that the value can be realized sooner
• Panel of facilitators to assist in the filing of IP applications – The facilitators will be assisting in the filing of applications.
• Government to bear facilitation cost – Under this scheme, the Central Government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a Startup may file, and the Startups shall bear the cost of only the statutory fees payable.
• Rebate on the filing of application – Startups shall be provided with an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years

Features of the Scheme

The following features make the scheme a stand-out factor:

• New-entrants are granted a tax-holiday for three years.
• The government has provided a fund of     2500 crore for startups, as well as a credit guarantee fund of     500 crore rupees.

Eligibility for Startup Registration

• The company to be formed must be a private limited company or a limited liability partnership.
• It should be a new firm or not older than five years, and the total turnover of the company should be not exceeding     100 crores.
• The firms should have obtained the approval from the Department of Industrial Policy and Promotion (DIPP).
• To get approval from DIPP, the firm should be funded by an Incubation fund, Angel Fund or Private Equity Fund.
• The firm should have obtained a patron guarantee from the Indian patent and Trademark Office.
• It must have a recommendation letter by incubation.(which has been recently waived off)
• Capital gain is exempted from income tax under the startup India campaign.
• The firm must provide innovative schemes or products.
• Angel fund, Incubation fund, Accelerators, Private Equity Fund, Angel network and all the details regarding the funding must be registered with SEBI (Securities and Exchange Board of India).
• The firm must come up with innovative ideas and schemes

     10,000 crore funds for investment into startups through Alternate Investment Funds and      2,000 crore credit Guarantee fund for Startups through National Credit Guarantee Trust Company/ SIDBI.

Cloud Services-

• $ 1000 worth Cloud Credits @ Amazon Web Services,
• $ 1000 worth Cloud Credits @ DigitalOcean,
• $ 300 worth Cloud Telephony Services @ MyOperator,
• $ 100 worth Cloud Telephony Services @ Exotel

Funding Opportunities & Other Government Schemes - Startups registered under Startup India scheme can avail funding under various government or semi government aided schemes such as

• Venture Capital Assistance Scheme - Under this scheme, interest free loan is provided by Small Farmers’ Agribusiness Consortium (SFAC) to projects falling short of capital requirement for project completion.
• Support to MSMEs for International Patent Protection in Electronics and IT - Stand Up India Scheme bank loan from ₹10 lakh-₹1 crore to at least 1 SC/ST borrower and at least one women enterprise per bank branch.
• Single Point Registration Scheme (SPRS) - NSIC registers MSEs under SPRS scheme for participation in Government Purchases.

Get listed as seller to the government in India’s Largest E-procurement portal, Government - E - Marketplace (GEM) & benefit from exemptions on Earnest Money Deposit (EMD) in all Central Government Ministries/ Departments & minimum requirements. There is relaxation under the criteria of Prior Turnover / Prior Experience in Government Tenders.

In order to remove corruption, the public procurement is being transformed as online market places and e-tendering by the Government of India. The Government e-Marketplace (GeM) also offers other advantages such as minimizing prices while maximizing ease, efficiency and transparency. It will enhance demand aggregation, real time price discovery and prompt automated payments. Hence GeM is an end to end, Government-e-Market Place hosted by Directorate General of Supplies and Goods (DGS&D) where common user goods and services can be procured by various government organizations.

GeM promotes entrepreneurship and empowerment by making it possible to start doing business with government through a completely online and faceless system. Objective of GeM is to promote the concept of minimum price with maximum ease, efficiency and transparency.

After the examination of all your documents viz. Company incorporation certificate & Pan Card, Company website or Brochure and GST number (For invoice) the Certificate of Recognition is issued which is usually done in 2 days after submitting the details online. Here is a sample of “Certificate of Recognition” to avail tax exemptions and other benefits:

Startup India has changed the procedure of registration since its inception. It has exempted most of the previous requirements now. Many documents which were required to be filed previously are waived off. The list of documents that are not required to be filed at the time of the registration are-

The Fund of Funds shall be managed by the Small Industries Development Bank of India (SIDBI)

• Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds
• The Fund of Funds shall contribute to a maximum of 50% of the SEBI registered Venture Funds (“daughter funds”). In order to be able to receive the contribution, the daughter fund should have already raised the balance 50%. The Fund of Funds shall have representatives on the board of the venture fund based on the contribution made.
• The Fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health, education, etc.

• Proof of Business Registration Certificate of Incorporation of the company or registered partnership deed.
• Brief on Business Idea required a short depiction of the innovative idea of your business operation
• Core Team details of director required including their qualifications, role in company, etc
• Other relevant information regarding any funding received; Any IPR applied, if any, and number of employees including founders and their roles.

For effective implementation of the scheme, facilitators shall be empanelled by the Controller General of Patent, Trademark and Design (CGPDTM). The CGPDTM shall regulate conduct and functions of empanelled facilitators from time to time. In case of any complaint by a Start-Up about a facilitator or on getting information about professional misconduct through any source, the CGPDTM can remove the facilitator from the panel.

Who can be a Facilitator?

• Any Patent Agent registered with the CGPDTM
• Any Trademark Agent registered with the CGPDTM
• Any Advocate as defined under The Advocates Act, 1961 who is entitled to practice law as per the rules laid down by Bar Council of India from time to time, who is well¬ versed with the provisions of the relevant Acts and Rules, and is actively involved in filing and disposal of applications for patents, trademarks and designs
• Government departments/ organizations/ agencies like TIFAC, NRDC, BIRAC, DEITY, DSIR etc.

Functions of Facilitators

Among other functions as may be decided by the CGPDTM, facilitators will be responsible for;

• Providing general advisory on different intellectual property rights to Start-Ups on pro bono basis
• Drafting complete/ provisional specifications for inventions of Start-Ups,
• Providing information on protecting and promoting IPRs to Start-Ups in other countries on pro bono basis;
• Providing assistance m filing and disposal of the IP applications related to patents, trademarks and Design under relevant Acts at the national IP offices under the CGPDTM;
• Preparing and filing responses to examination reports 4nd other queries, notices or letters by the IP office;
• Appearing on behalf of start-up at hearings as may be scheduled,
• Contesting opposition, if any, by other parties, and
• Ensuring final disposal of the IPR application

Fees of Facilitators

Following fees structure will be applicable to the empanelled facilitators, for any number of patents, trademarks or designs that may be applied for by a Start-Up. The facilitator shall not charge anything from the Start-Up or the entrepreneur, and these fees shall be paid directly to the facilitator by the Central Government through the office of the CGPDTM. This structure may be revised from time to time by the Department of Industrial Policy and Promotion.

Note: If any application is withdrawn or abandoned before disposal of application, facilitator shall be entitled to fees only for filing of application and not for disposal of application.

Statutory Fees

The cost of the statutory fees payable for each patent, trademark or design applied for in India or abroad by a Start-Up after launch of this scheme shall be borne by the Start-Up itself.

The facilitator shall also perform the following steps in furtherance of the patent application:

• Prepare reply to any query from patent office;
• Attend the hearings as fixed by the Patent Office with relation to the Patent Application.
• Find relevant documents in the patent office on time pursuant to hearing or otherwise as per Patent Act like Form 3, etc.

Patent Application - As per the new guidelines, a startup willing to file patent application can directly contact any of the facilitators available on the official website of Indian Patent Office for preparing the patent application. In case the startup is unable to select a facilitator, the head of the respective patent office as per jurisdiction shall provide names of 3 facilitators to choose from.

Trademark and Design - Application for Design and Trademark registration shall be filed and processed in the same manner as that of patents. The list of facilitators for patents shall be applicable to design applications as well. A separate list of facilitators for trademarks is available on the website of Trademark Office for trademark applications.

After the launch of the Startup India scheme, a new program was launched by the government named the I-MADE program which focused on helping the Indian entrepreneurs in building 1 million mobile app start-ups. The government of India had also launched the Pradhan Mantri Mudra Yojana which aimed to provide financial supports to entrepreneurs from low socio-economic backgrounds through low-interest rate loans. Some of the key benefits of Startup India are as follows:

1. To reduce the patent registration fees.
2. Improvement of the Bankruptcy Code ensuring a 90-day exit window.
3. To provide freedom from mystifying inspections and capital gain tax for the first 3 years of operation.
4. To create an innovation hub under the Atal Innovation Mission.
5. Targeting 5 lakh schools along with the involvement of 10 lakh children in innovation-related programs.
6. To develop new schemes that will provide IPR protection to startup firms.
7. To encourage entrepreneurship throughout the country.
8. To promote India as a start-up hub across the world.

Government Measures to Promote Startup Culture in the Country

1. As part of the “Make in India” initiative, the government proposes to hold one Start-Up fest at the national level annually to enable all the stakeholders of the Start-up ecosystem to come together on one platform. You can know in detail about the Make In India program on the linked page.
2. Launch of Atal Innovation Mission (AIM) – to promote Entrepreneurship through Self-Employment and Talent Utilization (SETU), wherein innovators would be supported and mentored to become successful entrepreneurs. It also provides a platform where innovative ideas are generated. Relevant details on Atal Innovation Mission (AIM) are available on the linked page.
3. Incubator set up by PPP – To ensure professional management of Government-sponsored or funded incubators, the government will create a policy and framework for setting-up of incubators across the country in public-private partnerships. The incubator shall be managed and operated by the private sector.

• 35 new incubators in existing institutions. Funding support of 40% shall be provided by the Central Government, 40% funding by the respective State Government and 20% funding by the private sector for establishment of new incubators.
• 35 new private sector incubators. A grant of 50% (subject to a maximum of      10 crore) shall be provided by Central Government for incubators established by the private sector in existing institutions.

A Startup India Seed Fund Scheme has been implemented with effect from April 1, 2021. The scheme aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization.