This scheme focuses on the growth and development of start-ups and entrepreneurship in India by providing easy finance options, various tax exemptions and rebate on patent and trademark filing.
Prime Minister Narendra Modi initiated the Start-up Scheme in 2016 with the aim to promote the operations of start-ups in India which will generate more employment options in the country. Companies incorporated less than 7 years ago with an annual turnover of less than Rs. 25 Crores can be registered under this scheme.
The business must be willing to work towards development, innovation, deployment or commercialisation of new products, processes or services driven by technology or intellectual property. However; the entity must not be formed by splitting up or reconstruction of a business already in existence.
For registering your business under the Start-up India Scheme, the following documents need to be uploaded in the PDF form.
The applicant needs to submit incorporation or registration certificate of his business, i.e. limited liability partnership deed in case of an LLP/Partnership and registration certificate in case of Private Limited Company.
The applicant needs to explain the kind of activities his business is involved. The business must either be in creating an innovative product/service or improving an existing product/service.
To register under the Start-up India Scheme, your business must be registered as a legal entity such as Private Limited Company, Partnership Firm or Limited Liability Partnership. Once you register a company, you can now register as a start-up under the scheme.
The applicant needs to file an online form with all the required information and details. Once you apply a recognition number is provided; however; the concerned authorities will rectify all the details to maintain its authenticity.
There are several benefits of getting your business registered under the Start-up India Scheme.
To boost the economy of India, this scheme offers various tax exemptions to entrepreneurs who make sure they receive required financial help to run their businesses.
All the start-ups incorporated after 1 April 2016, are eligible for a 100% tax rebate on the number of profits earned within 3 years out of its 10 years provided that the annual turnover must not exceed Rs. 25 Crore.
This helps the entrepreneurs to arrange for the initial working capital for their business and operate in the market.
The Government of India has levied a tax on the investment above the fair market value for all the eligible start-ups. These include investments made by the resident angel investors, family or funds not registered as venture capital funds.
According to the Income Tax Act, start-ups are eligible to exempt taxes on the long-term capital gains only if the capital gain or part of it is invested in a fund under the Central Government within 6 months from the date of transferring the asset.
The maximum amount that can be invested in a specified long-term asset is Rs 50 Lakh which should remain invested for 3 years. If withdrawn before time, the exemption will be revoked at the same time.
Long-term Capital Gains are also defined under the Micro, Small and Medium Enterprises Act, 2006 according to which tax on the sale of any residential property is also exempted if the gains incurred from the respective sale is invested in the MSME sector.
If any individual or Hindu undivided family invests in the capital gains to subscribe in 50% or more equity shares of eligible start-ups, then the tax on long-term capital gain will be exempted.
The Start-up India Scheme focuses on reducing the financial burdens of the Start-ups in India and focussing on the core business with a low compliance cost. For this, various environment and labour laws are also exempted for the entrepreneurs for the initial period of their operations.