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Startup India a flagship initiative announced by the Government of India on 15th August 2015.
This initiative was launched to build an ecosystem for assisting in the growth of start-up businesses, to enable sustainable economic growth, coupled with greater large-scale employment opportunities.
This initiative also aims to enable start-ups to flourish by way of innovation and design.
An entity is eligible to apply when:
Note: An entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘Startup’.
Exemption under Sec 80 IAC of the Income Tax Act, 1961
A Startup can apply to avail an exemption under Sec 80 IAC of the said Act, which will result in the profits and gains from the business, to be fully exempt from tax for 3 consecutive financial years, within the first 5 years of the company’s incorporation.
Exemption from Section 56 (2) (vii)(b) of the Income Tax Act, 1961 covering ‘Angel Tax’
Earlier, a company which raised funds by issuing shares to private investors, was taxed on the differential amount between the issue price of the share, and the fair market value of the same, i.e. it was a tax on the share premium over market value. However, a registered Startup is now eligible to apply for an exemption from this section. A registered Startup having a total paid-up share capital and share premium under INR 25 crores after such issue of the shares, can apply for such an exemption. This is meant to benefit small companies and encourage investors to invest in them.
Self-Certification under Indian Labour and Employment laws
A private limited company is ordinarily bound by compliance towards employee benefit schemes such as payment of gratuity, bonus, insurance cover etc.
A registered Startup can self-certify their compliance towards 6 labour laws and 3 environment laws. Such certification will remove the requirement of inspection for compliance towards such laws, for a period of 3 years from the date of recognition.
Patent & IPR Applications
A registered Startup is eligible to apply for trademarks at a significantly subsidised cost.
Similarly, when submitting a patent application, a registered Startup is required to pay a much lower amount, as compared to other entities and it will further be entitled to avail a rebate of 80% of the patent fees, after filing of a patent.
An entity is eligible to apply for an exemption under Sec 80IAC and Section 56(2)(viib), only after it has been recognised as a StartUp.
A Startup intending to claim exemption from Section 56(2)(viib) will have to ensure that it has not already invested in:
Where a Startup has availed the exemption from Section 56(2)(viib), it cannot invest in the above-mentioned assets for a period of 7 years, from the end of the most recent financial year in which shares were issued at a premium i.e. the most recent financial year in which the exemption was used.
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