Overview
In the past few years, India has witnessed a dynamic shift in its entrepreneurial landscape including the largest number of businesses registered as a start-up in the history of India to fetching billions in investments from global investors, and not to forget the advances made in infrastructure and policies.
In 2021, the start-up ecosystem in India outperformed with 100+ start-up unicorns with an overwhelming amount of growing investor confidence in Indian start-ups and gaining momentum across different stages of growth in a startup journey along with seed funding.
Accordingly, India witnessed a whopping 15,400% rise in Startups in the past six years with a total of 72,993 recognized start-ups as on 30th June 2022 as compared to only 471 start-ups till 2016. These start-ups have been spread diversely spread between various sectors from technology, fin-tech, biotech, agri-tech, etc. All of this is a result of the government interventions &innovative entrepreneurial ventures in the country, which has pushed India into the world’s third-largest emerging startup ecosystem after the USA & China.
Therefore, start-ups are a true means of the engine for the growth of the country. They boost the economy with revolutionary technology and create new industries over time. Recognizing their importance in the nation-building process, the Government of India launched its flagship program Start-up India Initiative on 16th January 2016 intending to build a strong start-up ecosystem that would further drive its economic growth, and support entrepreneurship. Thus, the Government of India initiated the Start-up India Scheme with the primary objectives such as-
i. Extending support & uplift entrepreneurial innovation and creativity;
ii. To build a robust start-up ecosystem and
iii. To create employment opportunities making India a country of job creators instead of the job seeker.
Meaning & Definition of a Start-up
The term startup refers to a company in the first stages of operations. Startups are business organizations founded by one or more entrepreneurs who come together to develop/redevelop an innovative product or service which could create a revolution in the existing industry and make profits for the business. However, most start-ups get started with higher costs & limited revenues, for which they have either to be dependent on bootstrapped funds or look for a variety of sources to raise capital such as venture capitalists firms. If a business idea seems to have merit, potential investors like Venture capitalists Firms and investors keep a close eye on the upcoming start-ups in India intending to offer resources by undertaking sponsorship.
Now, considering the growth & profit-making aspects of a start-up, these play a special role in nation-building through the generation of employment opportunities. Therefore, to develop the Indian economy and attract talented entrepreneurs, the Government of India, under the leadership of PM Narendra Modi, launched &promoted the Startup India initiative to recognize and promote start-ups with numerous benefits.
Therefore, any entrepreneur who wishes to claim the benefits afforded to a business organization, recognized as a ‘Start-up’ in India could make an application for recognition of his business entity as a ‘start-up’ under the Start-up India Registration portal through the help of a dedicated Start-up India Team, which reports to the Department for Industrial Policy and Promotion (DPIIT), under Union Ministry of Commerce. It also goes by names like Start-up India Registration or DPIIT Registration in India.
Eligibility for Start-up India Recognition
i. Age of Business Organization
Any business organization looking to obtain DPIIT registration should not be older than ten years in existence and a total period of 10 years should not have elapsed from the date of incorporation/registration.
ii. Type of Business Organization
Under the start-up, India initiative, only the below–mentioned business organizations should be allowed DPIIT registration, which is incorporated as-
• A Private Limited Company (Pvt. Ltd)
• A Limited Liability Partnership (LLP)
• A Partnership Firm
iii. Limit of Annual Turnover
The business organization should not have exceeded an annual turnover beyond Rs. 100 crores for any financial year since the year of its incorporation.
iv. Original Entity
The applicant’s business organization should be original. In other words, the applicant organization should not be formed as a result of any demerger or reconstruction of any prior existing entity in any way.
v. Innovative & Scalable
The concerned business entity should be working towards either the development or enhancement of any existing /new product, process, or service and/or with a scalable business model with great potential for growth & wealth/employment generation.
Process of DPIIT Registration in India
Step 1- Incorporate your business organization
In the first step of registration, the applicant needs to incorporate his business organization which should either be a private limited company, a partnership firm, or a Limited Liability Partnership. The process of incorporation must be completed by a nominated director/designated by the business organization who will be primarily responsible for fulfillment of all compliances related to business incorporation such as submitting the registration application and obtaining the Certificate of Incorporation/Partnership registration.
A private limited company or LLP could be incorporated by applying for incorporation namely SPICe+ (in case of a company) and FiLLip form in case of LLP, which will be submitted along with attachments to the Ministry of Corporate Affairs, whereas a partnership firm could be registered by filing the application for registration of your firm with the Registrar of Firms of the area where the proposed office of the business is to be located.
Upon acceptance of the application, the applicant will get a Certificate of Incorporation with a unique 21- digit Corporate Identification number in the case of a company, and 7- a digit LLPIN (Limited Liability Partnership Identification Number) in the case of LLPs.
Step 2- Access the Start-up India portal
After incorporation, access the Start-up India portal by logging on to (https://www.startupindia.gov.in/) and clicking the ‘Register’ button as shown below. Next, the applicant will be moved to the ‘Create Account page. Enter basic details such as name, email ID &mobile number, and desired password and click on the ‘Register’ button. From this point on, the registered email id & password will be applicable for applicant login purposes.
Additionally, the applicant will be to access various Learning & Development programs, beneficial Government Schemes, State Policies for Startups, and pro-bono services.
Step 3- Create a business profile on the Start-up Recognition Page
After login, the applicant user will be required to create a user profile for business on the Start-up India website by clicking on the ‘DPIIT Recognition for Start-ups’ button under the ‘Schemes and Policies tab. Here, enter the name of the business organization, type of business organization, Address, CIN no/LLPIN number, etc.
Step 4- File Start-up Recognition Application
In the next step, open the start-up recognition Form under which the applicant will be required to fill section-wise details in six sections which include –details of business organization, details of communication & address, the total number of directors/designated partners/partners, details of the authorized signatory for registration purpose, details of product/services being offered, startup activities and finally self-certification.
To open each section & fill in the details click on the plus sign on the right-hand side of the form and enter each section of the form. Once you fill all these details in the given sections of the ‘Startup Recognition Form’, accept the terms and conditions and click on the ‘Submit’ button.
Step 5- Get a Certificate of DPIIT Recognition’ on Approval
Finally, after the user submits your application, the relevant authority will examine the application and attached documents and if it deems everything is fit, the approving authority will issue a ‘Certificate of Recognition which is usually issued within 2-5 days from the submission of the application.
However, it is to be noted that in case any document is found to be not uploaded/wrongly document uploaded or where it is found that any documents are forged, the applicant entity will be liable for a penalty of up to 50% of your paid-up capital of the startup with a minimum fine of Rs. 25,000.
Step 6- Other Areas to be checked
In case the applicant business entity is looking to obtain a patent for its business products or wishes to obtain a trademark for the business, it could easily approach the list of authorized facilitators issued by the Government of India. Here, the applicant would only be required to pay only statutory fees, which means an 80% reduction in fees.
Benefits of Start-Up India Registration
The Start-up scheme offers several financial and non-financial benefits in a form of encouragement to the business organizations recognized as start-ups to greater revenues & profits & expand their businesses in the long term while helping the Indian economy.
Thus, provided below are some of the benefits offered to the business entities recognized as a Start-up-
i. Tax Holiday for three years under Section 80-IAC
A start-up recognized by DPIIT can obtain a tax benefit of no-income-tax burden for initial three years of recognition out of the total ten years from the date of incorporation. Relaxation from tax payments in the initial years could be hugely beneficial for start-ups since it can help them from a shortage of funds in business operations.
Further, where a start-up recognized under DPIIT gets long-term capital gains on the sale of any residential property, it will be exempted from payment of taxes on capital gains, subject to the condition that such is intended and invested in the start-up.
ii. Relief from Time-consuming Compliances
Most start-ups have to deal with challenges like limited resources & high operational costs due to excessive competition in the markets. Therefore, they wish to save their monetary resources & focus their time & energy on their core business activities, but a long list of compliances may defeat their purpose. Therefore, the businesses recognized as Startups have been relieved from fulfilling certain compliances based on self-certification only for a total period of five years effective from the date of its incorporation.
Provided below is the list of labor laws and environmental laws that have been allowed for self-certification by entities recognized as start-ups-
i. Building and Other Construction Workers Regulation Act, 1996;
ii. The Inter-State Migrant Workmen Act, 1996;
iii. The Payment of Gratuity Act, 1972;
iv. The Contract Labour Regulation Act, 1970;
v. The Employees Provident Funds and Miscellaneous Act, 1952; and
vi. The Employees State Insurance Act, 1948,
Likewise, these three environmental laws have allowed relaxation from compliances based on self-certification-
i. The Water Pollution Prevention Act, 1974;
ii. The Water Pollution Cess (Amendment) Act, 2003; and
iii. The Air Pollution Prevention Act, 1981.
Fee Reduction for IPR Registrations
With an intent to encourage creativity &innovation concerning a scalable business model, the Government of India has allowed a list of facilitators for intellectual properties like – patents &trademarks. These facilitators will offer high-quality Intellectual Property Right Services including faster processing of patent applications with up to 80% fee reduction since the facilitator fee will be paid by the Government of India and the applicant would only be required to pay a statutory fee.
In other words, the applicant start-up can own exclusive patent rights with an 80% reduction in patent registration fees and around 50% reduction in filling applications for Trademarks. Thus, this relaxation in IPR registration fees & faster processing of applications is another huge benefit for DPIIT-recognized start-ups.
Ease In Public Procuring Standards
Generally, goods or services procured by the Government Ministries/Departments have eligibility criteria including years of experience in the business of manufacturing goods or providing services for businesses wishing to submit quotes for procurement. However, the Government of India has allowed a DPIIT registered start-up to submit tenders with an exemption for security deposit payments, turnover, and business experience-related criteria for goods/services such as computers, automobiles, and office supplies.
Additionally, business organizations recognized as Start-up are allowed access to the largest e-procurement portal owned & administered by the Govt of India, namely the Government e-Marketplace (GeM) portal where they can list themselves as sellers and list their offerings to be procured by the Government of India.
Ease In Access to Funds
Since only those business organizations offering an innovative product/service with a scalable business model having the sufficient potential to grow & generate wealth are allowed DPIIT recognition, they easily become a point of attraction for investors like venture capitalists and angel investors.
Easier & Faster Winding Up
For a business, there are always possibilities for an idea to not work out or see massive failures at the beginning itself. Understanding this concern for most of the businesses, businesses recognized as start-ups are allowed with a benefit to wind up their business within 90 days through fast track processes as compared to other entities which may be wounded up within 180 days.
Sidbi Funds as Corpus Funds
Many businesses face funding shortages during their initial developmental years for many reasons such as lack of experience, security or existing cash flows, underdeveloped prototypes, etc. which puts off many investors.
To solve this problem, the Government of India set up a fund with an initial corpus of Rs. 2500 crores with a total corpus of Rs.10, 000 crore over 4 years. Therefore, the Government of India has a Fund of Funds, a corpus fund administered by the SIDBI (Small Industries Development bank of India), which doesn’t directly invest in the start-ups, but it contributes to the SEBI registered Venture Funds for start-ups.
R & D facilities for Start-ups
To encourage creativity & innovation, the Government of India has announced as many as seven research parks to be set up to offer facilities to Startups in the R&D sector.
Tax saving for investors
As, another measure of helping start-ups to access funds, the Government of India allows tax exemption for capital gains under the Income-Tax Act 1961 for investors who have invested their capital gains in the venture funds set up for start-ups. It will help them to attract more investors and gain better funds.
Allowing Choice of Investors
Start-ups recognized by the DPIIT will be allowed the option to choose between various VCs which will in turn allow them to choose their investors.
Sharing Knowledge & Experience through Events
Entrepreneurship is a roller coaster ride and not the same for everybody. To enhance learning from shared knowledge and experiences, the Government of India has announced to hold at least two startup fests annually – nationally & internationally which will enable the spread of knowledge and offer huge networking opportunities.
Documents Which Have Been Waived Off
Though the process of obtaining DPIIT registration has been simple always, there are slight changes made in the procedure from time to time. However, lately, the government of India has simplified the process even more by waiving the requirement of certain documents which were required earlier to be attached along with the application.
Here is the list of the documents which has been waived off-
• GST Certificate
• MSME certificate
• Udyog Aadhaar Certificate
• Letter of Recommendations
• Letter of funding
• Sanction Letters
Conclusion
Hence, the process of DPIIT registration is a simple process that involves fewer steps, easy and faster processing with an average time of 2-3 days to receive your start-up recognition certificate subject to the approval of the authority. If you are an entrepreneur looking to start a new company or a new business owner who wants to access all the benefits of DPIIT registration, get your DPIIT registration & start your journey today!
