Startup community in India is excited by the announcements made by the Prime Minister Narendra Modi as Startup India Action Plan. After announcement of Startup India Action Plan, the Startups have come up with a question “Who is eligible for schemes under Startup India Action Plan?”
Here are the highlights of Startup India Action Plan
- No Capital Gain Tax on personal property sold to invest in Startup.
- No Income Tax on Profits of Startup for First 3 Years.
- Self-certification compliance for startups.
- Startup hub will be a single point source for Information and Mentoring
- Simplifying Patent Regime and IPR
- 80% Rebate on Filing a Patent Application
- Mobile Oriented Application Form for Startups
- Exit Policy to be introduced for Startups
- Brought Bankruptcy Bill, 2015 in Parliament to help Startup Exit in 90 days
- Dedicated fund worth 10000 cr. Will be setup for Startups
- Credit Guarantee Scheme for Loans
- Will bring in new policies to help Women Entrepreneurs
- Will bring in Sector Specific Incubators
- 5 New Bio Clusters will be setup to help Biotech Sector
Here is the analysis of eligibility criteria for those startups who are seeking tax exemption:
- To be recognized as a startup an entity must be a Private Limited Company incorporated under Companies Act, 2013 or a Registered Partnership Firm under Partnership Act, 1032 or a Limited Liability Partnership under the Limited Liability Partnership Act, 2008.
- Age of the entity should not be more than five years.
- Annual Turnover of the Company should not have crossed Rs. 25 cr. In any preceding financial year.
- Startup must be working towards development, innovation, commercialization or deployment of new product or process driven by technology or IPR.
- Startup should not be formed by splitting or restructuring business which was already in existence.
- Startup must be engaged in product or services which have potential of commercialization.
- Startup has to obtain certificate from inter ministerial board setup by DIPP to validate innovative nature of business and
- Has to obtain a recommendation letter in the format specified by DIPP, from an incubator established in Post Graduate college in India; or
- Has to obtain recommendation letter from incubator which is funded by Government of India; or
- Has to obtain recommendation letter from incubator which is recognized by Government of India; or
- Is funded by recognized incubator fund / Angel Fund / Private Equity Fund or Accelerator. These funds are recognized by SEBI. However DIPP may publish a list of negative funds which are not eligible for funding.
- Is funded by Government of India under any specified scheme to promote innovation
- Has patent granted by Indian Patent and Trademark office related to business.
Based on above mentioned points, it is understood that the product or service has to be new innovation or has to be significantly improved to take the advantage of scheme under Startup India Action Plan. For example, if a person is planning to develop a market place like flipkart or a wallet like paytm, may not be eligible unless his product in significantly improved than the existing products.
Other eligibility criteria of getting recommendation letter from incubators etc may become a tough task for the startups.
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