Starting a business in India can sound fascinating, but entrepreneurs have to face some obstacles with funding, tax, and regulatory compliance. The Government of India has opened Startup India, which focuses on supporting those with ideas that are unique while developing a healthy new business ecosystem.
Becoming registered under the Startup India program is more than just a brief stamp of approval – it offers credibility and trust (important when eyeing external funds), and, most importantly, it provides funds! Entrepreneurs are able to secure tax concessions (if applicable), avoid compliance regulations, and connect with investors.
Tax Benefits of Startup India Registration
Here are the key tax benefits of Startup India registration for entrepreneurs:
1. Tax Holiday for 3 Years
Registered Start-ups eligible under Section 80-IAC of the Income Tax Act are allowed a 100% tax deduction for any 3 consecutive years out of the first 10 years after incorporation, provided the start-up has turnover does not cross ₹100crore.
This will allow entrepreneurs to reinvest profits back into their business, while also alleviating some financial pressure during their earliest stages as entrepreneurs.
2. Angel Tax Exemption
Start-ups recognized by the DPIIT are granted an exemption from the previously imposed tax on angel investment under Section 56(2)(viib), which taxed investment exceeding the fair market value.
Thus, entrepreneurs can raise capital from investors without needing to account for tax on the funds raised. This makes start-ups much more appealing to receive early-stage funding, which can be taxing in itself (imagine the burden of taxing!).
3. Capital Gains Tax Exemption
Start-ups are given relief from capital gains tax if the cash fund or assets purchased were invested in a government-recognized Fund of Funds or used for new assets. The purpose of the exemption is to encourage repeat funding for the growth of an entrepreneur’s business and business innovation.
4. Carry Forward Losses
Shareholders can change, but qualified startups can carry forward losses only if the original promoters continue to carry on the business. They will also need to provide documentation, like the company registration documents, to support any requests for this advantage.
Additional Benefits of Startup India Registration
Aside from tax incentives, Startup India offers a range of benefits entrepreneurs may qualify for:
- Fast-Track Patent Application – Startups benefit from patent filing rebates of 80% off the typical patent filing fee. Startups are also guaranteed a fast-track examination, which decreases the time and cost to protect their intellectual property.
- Simple Compliance- Startups can self-certify in 9 laws related to labor and environmental standards for a period of 5years, significantly reducing the amount of paperwork associated with compliance.
- Networking Opportunities – The government keeps hosting workshops, bootcamps, and events where start-up businesses connect with investors, mentors, and industry experts for scaling.
- Access to Funding – With ₹ 10,000 crore Fund of Funds for Startups (FFS) and support for incubators and VCs, startups can more easily raise capital to expand operations.
Eligibility for Startup India Registration
For a business to avail of the benefits of Startup India registration, it must meet a few criteria:
- Should be incorporated as a Private Limited Company, LLP, or Partnership Firm. ● Turnover should not exceed ₹100 crores in any previous year.
- Should be working towards an innovation of a product or process, or the development and improvement of products and services.
- It should not have been formed by splitting up or reconstructing an already established business.
How to Register for Startup India?
Entrepreneurs can easily apply online via the Startup India portal (startupindia.gov.in). The following steps need to be taken after incorporating your company:
- Create a Startup India Account – Go to the Startup India Portal and create an account using your basic details, such as email ID, mobile number, and business information.
- Fill in the Application Form- Provide details about your business activities, the industry you hope to work within, its stage of development, and any innovation involved in the idea.
- Required Document Upload– Such as PAN card, Certificate of Incorporation, details of founders, and business summary with an explanation of the startup idea.
- DPIIT Recognition Application- After creating an account and filling in the form, you will make an application for recognition by the Department for Promotion of Industry & Internal Trade (DPIIT).
- Verification Process– The application will be checked by DPIIT. If any further information is required, you will be asked to submit supporting documents.
- Recognition Certificate Received– As soon as the startup is approved and recognised, it will receive a Certificate of Recognition, which will give it eligibility to avail of all the Startup India benefits, including tax exemptions, funding support, and the ability to access tenders.
Legal experts like Udyamita helpline businesses with Startup India registration and compliance services to help entrepreneurs save time and energy.
Conclusion
For entrepreneurs building a scalable business, Startup India registration for entrepreneurs is not just compliance for perusal but is a distinct pathway for tax benefits, incentives from the government, and credibility.
Startup India’s registration will not only provide savings to the entrepreneurs but also enable them to leverage support to compete in the marketplace and grow sustainably.
