India is one of the fastest-growing economies, and to boost innovation and entrepreneurship, the Government of India launched the Startup India initiative in 2016. The initiative is regulated by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry.
Under this scheme, eligible companies can obtain a Startup License (Startup Recognition) from DPIIT, allowing them to avail of various benefits, including tax exemptions, easier compliance, and funding opportunities.
To qualify as a DPIIT-recognized Startup, a business must meet the following criteria:
Only the following business structures are eligible to apply:
• Private Limited Company (PLC) registered under the Companies Act, 2013
• Limited Liability Partnership (LLP) registered under the LLP Act, 2008
• Registered Partnership Firm under the Indian Partnership Act, 1932
• The company should be less than 10 years old from its date of incorporation.
• The annual turnover should not exceed INR 100 crore in any financial year.
• The entity should not be formed by splitting or reconstructing an existing business.
• The business should focus on innovation, development, or improvement of products/services with potential for scalability.
Other forms of businesses, such as sole proprietorships, are not eligible for Startup India registration.
DPIIT-recognized startups can self-certify compliance with 6 labor laws and 3 environmental laws, with no inspection for the first 5 years, unless serious complaints arise.
Labor Law Compliance (Self-Certification)
a. Employees Provident Fund and Miscellaneous Provisions Act, 1952
b. Employees State Insurance Act, 1948
c. Payment of Gratuity Act, 1972
d. Contract Labour Act, 1970
e. Inter-State Migrant Workmen Act, 1979
f. Building and Other Construction Workers Act, 1996
Environmental Law Compliance (Self-Certification)
a. Air (Prevention & Control of Pollution) Act, 1981
b. Water (Prevention & Control of Pollution) Act, 1974
c. Water (Prevention & Control of Pollution) Cess Act, 2003
100% Income Tax Exemption (Section 80-IAC)
• Startups can avail of a 100% income tax exemption for three consecutive financial years out of their first ten years.
• This exemption must be applied for separately on the Startup India portal.
Capital Gains Tax Exemption (Section 56 of Income Tax Act)
• Investments made by listed companies into eligible startups are exempt from capital gains tax, provided the investor company has:
o A net worth of more than INR 100 crore
o A turnover exceeding INR 250 crore
• Startups issuing shares up to INR 25 crore are exempt from capital gains tax.
• 80% rebate on patent filing fees under the Startup India initiative.
• Fast-track patent & trademark applications with assistance from government-appointed facilitators.
• Incubator facility support via the Startup India Portal.
Step-by-Step Online Registration
The registration process is entirely online through the Startup India portal.
a. Create an Account – Visit startupindia.gov.in and register.
b. Submit Company Details – Provide information such as:
i. Company Name & Incorporation Date
ii. PAN, Address Proof, and Incorporation Certificate
iii. Details of Directors/Partners
c. Describe Innovation & Business Model – Upload a brief document explaining how the startup is innovative.
d. Self-Certification of Eligibility – Confirm that the business meets all eligibility conditions.
e. DPIIT Recognition Certificate Issued – Upon successful review, a Startup Recognition Certificate is granted.
Recognized startups must comply with:
• Annual filings with the Ministry of Corporate Affairs (MCA)
• Income Tax Returns (ITR) and GST Returns (if applicable)
• Patent/Trademark updates (if availed)
Case Study 1: Tech Startup Using Tax Benefits
A software startup, XYZ Technologies Pvt Ltd, was incorporated in 2019 and obtained DPIIT recognition in 2020. By availing Section 80-IAC benefits, it saved INR 10 lakh in income tax over three years, which helped fund its expansion.
Case Study 2: Startup Leveraging Intellectual Property Support
A biotech firm, ABC Bio Innovations LLP, filed a patent for its unique drug formulation. Under the Startup India initiative, it received an 80% rebate on patent filing fees, significantly reducing its legal expenses.
• Difficulty in understanding compliance requirements
• Delays in obtaining DPIIT recognition
• Limited awareness of tax exemptions and financial benefits
• Consulting startup advisory firms for compliance guidance
• Ensuring proper documentation before applying for recognition
• Engaging with incubators and government mentors for better awareness
The Startup License (DPIIT Recognition) is a valuable initiative that provides Indian startups with tax benefits, compliance relaxation, and financial support. By leveraging these benefits, entrepreneurs can focus on scaling their businesses while ensuring regulatory compliance.
For hassle-free registration and compliance support, consult ReturnFilings.Com, which provides end-to-end solutions for startups in India. For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.
