Govt eases startup norms, expands scope of benefits to 7 years

The government has extended benefits under the Startup India Action Plan beyond the five-year age of incorporation to include businesses that are not older than seven years, making more companies eligible for concessions.

In the case of startups in the biotechnology sector, the government has now extended the gestation period to ten years from the date of incorporation/ registration.

So far, only companies up to five years from the date of incorporation were eligible for concessions under the plan launched by the government on 16 January 2016. Through this the government intends to build a strong eco-system for nurturing innovation and startups in the country to drive economic growth and generate large scale employment opportunities.

The government has extended the gestation period of startups to seven years taking into account the long period startups needed to become commercially viable. Accordingly, an entity shall be considered as a startup up to seven years from the date of its incorporation/registration. However, in the case of startups in the biotechnology sector, the period shall be up to ten years from the date of incorporation/ registration.

Also, no letter of recommendation from an incubator/industry association will be required for either recognition or tax benefits, according to a government notification.

The scope of definition has also been broadened to include scalability of business model with potential of employment generation or wealth creation.

The move comes after extensive consultations between the Department of Industrial Policy and Promotion (DIPP) with stakeholders. DIPP hopes the changes will ensure ease of starting up new businesses to promote the startup ecosystem and build a nation of job creators.

As per the new definition, an entity shall be considered as a start-up if its turnover is less than Rs25 crore (which remains unchanged) and has not completed seven years from the date of incorporation/registration.

Also, an entity shall be considered as a start-up if it 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.

To obtain tax benefits, a startup should obtain a certificate of an eligible business from an inter-ministerial board of certification as constituted by the DIPP.

It said if the recognition would be obtained without uploading the relevant documents or on the basis of false information, the DIPP reserves the right to revoke the recognition certificate and certificate of an eligible business for tax benefits immediately without any prior notice or reason.

Further, the notification said the process of recognition as a start-up would be through an online application made over the mobile app/portal set up by the DIPP.