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What is Startup India and how to apply for Startup India?

In recent years, startups have been growing at a high rate. Entrepreneurs are coming up with innovative ideas to start their own business. Startups come up with ideas for new business models focusing on both profitability and customer satisfaction. Indian Government has introduced a scheme called 'Startup India' to encourage upcoming entrepreneurs

Points covered in this article are

  1. What is startup?

  2. What is Startup India Scheme ?

  3. What is the purpose of a startup India Scheme?

  4. Procedure for registration of startup

  5. Financing for Startups

  6. Patent registration

  7. Benefits of Startup India

  8. Eligibility to be recognized by DPIIT

  9. Validity of Startup

  10. Challenges faced by a Startup

1. What is startup?

A new company formed with a unique business idea is called a startup. These are businesses in their early stage. It starts with very less investment and high cost

2. What is Startup India Scheme ?

Startups create wealth and employment for a country. Rather than working under a foreign MNC a Startup can create wealth maximization to the nation.

In order to benefit new entrepreneurs, the government has initiated Startup India Scheme which aims at supporting Startups financially. This scheme was started by the Union government in 2016 and has recognized about 32000 startups till date.

The startup which will be recognised through DPIIT that will be called as startup for the purpose of the startup India scheme

3. What is the purpose of a startup India scheme?

There are lots of innovative business ideas with people. In the initial stage, every activity should be done with utmost care. Because of the innovative business model, startups have high chances of growth in the initial stage

4. Procedure for registration as startup in Startup India Scheme

1. Choose the form of business : First the form of business should be opted. A Startup can only be Partnership, LLP or Private Limited Company. For a startup sole proprietorship or partnership is better because usually startups have less capital and human resources

2. Online registration - Register the business under Startup India. Log in/register to Startup India and fill all the necessary details required

3. Upload necessary documents-all the documents relating to personal and business information should be given

4. Letter of recommendation - Letter of recommendation from Incubator in the format & by The Department for Promotion of Industry and Internal Trade (DPIIT) stating that the business is innovative in nature

5. Letter of funding by SEBI or Government of India

○ If startups are certified by the Inter-Ministerial Board (IMB), they can avail tax exemption for 3 years

○ Self-certification that the business is innovative and not reconstruction of existing business

6. Issues of recognition number - After completing all the steps, a recognition number shall be given to the firm

While applying it should be made sure that all the details and documents submitted are true because if the documents are found to be false on scrutiny, minimum fine of Rs. 25,000 shall be charged

5. Financing for Startups

Usually while incorporating a startup, finance is one of the biggest issues. Startups do not have any great source of finances. Many investors take a step back because of the risk of uncertain business. To encourage all the new businesses, the government introduced Fund of Funds, with a total of Rs.10,000 crores in 2016 with the approval of Union Cabinet. Other than these, startups can get funds through crowdfunding or venture capitalists

6. Patent registration

Patents are intellectual property that gives the owner ownership of their ownership. As startups are based on innovative ideas, Patents are to be made. Under Startup India scheme, entrepreneurs can avail 80% deduction on statutory fees for patent registration

7. Benefits of Startup India Scheme

  1. The registration process for startups are very simple and easy

  2. Tax exemption shall be given till 3 years of incorporation of business.

  3. Funds are provided through government initiative in the form of venture capital

  4. There are no compliances of labour laws as there are for other business forms. All the regulations are simplified for startups

  5. If a startup wants to wind up its business, it can be done within 90 days of applying for winding up

8. Eligibility to be recognized by DPIIT as Startup

  1. The firm incorporated should be a new firm not older than 10 years

  2. Annual turnover of the business should be within Rs. 100 crores

  3. It should be an innovative business not splitting up of existing business

  4. It must be approved by Department of Industrial Policy and Promotion (DIPP)

  5. Should have obtained recommendation letter from Incubator is mandatory

9. Validity of Startup

Any Startup won't remain as a start-up for its lifetime. Upon expiry of certain period of time or upon exceeding certain turnover limit, it shall become regular business.

  1. On 10 years of Date of Incorporation or Registration as a startup, OR

  2. On exceeding turnover limit of Rs. 100 crores

10. Challenges for a Startup

There are lots of challenges faced by startups. Even though they have more benefits than other business, it's not easy to run

  1. Startups are innovative business ideas but it's hard to execute such ideas than just thinking about it

  2. Government has given many benefits for startups but those are only for 10 years from incorporation

  3. For a firm to grow, human capital is very important. But in case of startups, it's not easy as the funds are very less

In India there are many companies that started off as a startup such as Flipkart and Swiggy. There are a lot of startups which have been successful in the last few years. The registrations of startups have also increased rapidly in the past year

Frequently Asked Questions

1. Which business form should I choose as a startup?

Only Partnership firm, Limited Liability Partnership and Private Limited Company can incorporate as a startup

2. How long does a startup have its validity?

A start up is valid for 5 years from its incorporation or when its annual turnover exceeds Rs. 25 crores

3. Do startups get tax benefits?

Startups get tax exemption for 3 years from incorporation. Also other compliances are very low for startups

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