India To Consider Entities As Startups For Up To 7 Years From 5 Years Earlier
The turnover of the entity should not have crossed Rs 25 crore in any of those years.
New Definition
- An entity will be considered a startup for up to seven years instead of five
- It should be incorporated as a private limited company, or a partnership firm, or a limited liability partnership
- Turnover should not have crossed Rs 25 crore for any of the financial years since its registration
Startups can now benefit from the Startup India Action Plan for the first seven years, as opposed to five years earlier.
The government on Thursday made minor tweaks in the definition of startups and will now consider an entity a startup for up to seven years of its incorporation, a notification by the Department of Industrial Policy and Promotion said. For the biotechnology sector, this period has been extended up to 10 years.
Under the new definition, a startup should be incorporated as a private limited company, or a partnership firm, or a limited liability partnership. Besides, its turnover should not have crossed Rs 25 crore for any of the financial years since its registration.
There's more.
An entity can only be a startup if it is working towards "innovation, development, or improvement of products or processes or services", or if it is a scalable business with a high potential to generate employment, the notification said. Entities formed by splitting up or restructuring existing business will not count as startups.
Following the end of the prescribed period since incorporation, the entity will cease to be a startup.
How Will A Startup Be Recognised?
This will be done through an online application made over the mobile application and portal set up the Department of Industrial Policy and Promotion. Entities seeking to be recognised as startups need to submit their applications along with registration certificates and other relevant details.
Startups will also have to submit a write-up about the nature of their business, highlighting how it is working towards innovation, development or employment generation.
What Kind of Innovation Is Innovative?
Innovation shall be considered from a domestic standpoint, the notification said. The mere act of developing products or services or processes which do not have potential for commercialisation would not make a startup eligible. The products, services or processes claimed as innovative should not be undifferentiated, or have no or limited incremental value.
How Does This Effect Startups?
Tax benefits!
Entities incorporated after April 1, 2016, and before April 1, 2019 will be eligible to avail tax benefits under the Startup India Action Plan launched last year.