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  • Writer's pictureVyapaar Pundit

Benefits of Start-up Recognition in India

Updated: Dec 13, 2022

Startups that meet the definition as prescribed under G.S.R (General Statutory Rules) notification 127 (E) under the Startup India Action Plan are eligible to apply for recognition. The Startups have to provide requisite documents, at the time of application.

With a replenished concept of entrepreneurship, India witnesses a surge in budding startups nationwide. Startup initiative by the government was taken to strengthen the pillars of the corporate ecosystem as well as to primarily encourage and empower startups in India, eventually boosting Indian economy.

Eligibility for Startup recognition

There is a criterion set forth by the Department for Promotion of Industry and Internal trade (DPIIT) under Ministry of Commerce and Trade for startups to be recognized:

  • The Startup should be incorporated as a private limited company (Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under Limited Liability Act, 2008).

  • The Startup should be working towards innovation/ improvement of existing products, services and processes and should have the potential to generate employment/ create wealth by it’s ascendable business model.

  • An entity formed by splitting up or restructuring of an existing business shall not be considered a "Startup”

  • Turnover had not exceeded 100 crores in any of the previous financial years.

  • An entity will be recognized as a startup up to 10 years from its date of registration/incorporation.

The startup recognition initiates with an entity filing an application over mobile app or the e-portal regulated by DPIIT. This step is entailed by providing a Certificate of Incorporation or Registration and a note describing its operational aspects envisioning development/ innovation/empowerment of its processes/products/services or its efficiency to generate employment/create wealth. Certificate, therefore, will be granted to the concerned by the Board which comprises Joint Secretary (DPIIT), Representative of Department of Biotechnology and Representative of Department of Science and Technology. The board may deem fit to reject the application by providing legitimate reasons.

Startups have to register under the “Startup India Portal'' in order to get tax exemption under section 80IAC of the Income Tax Act. Post recognition, startup can avail tax relaxation for its three consecutive financial years out of its first ten years since incorporation/registration. Getting recognized as a startup being the foremost criteria for eligibility, tax exemption is confined to startups incorporated after 1st April,2016 as Private Limited Company and Limited Liability Partnership.

Startup facilitation by Indian Government

Under the Startup India scheme, self-certification would get rid of the regulatory burden on startups which would make startups centralize their workforce and resources on their business model and strategies. This would permit startups to self-certify compliances for 6 labor laws and 3 environmental laws through a simple online procedure.

A drive through the scheme

  • Emphasizing categorically, no inspections would be conducted for a span of 5 years in the context of labor laws.

  • Authorized inspections will be conducted only on receipt of credible and verifiable complaints of violation filed in writing and approved by at least one level senior to the inspection officer.

  • In case of environment laws, startups acknowledged in ‘white category’ as defined by CPCB (Central Pollution Control Board) would be eligible to self-certify compliance and only random audits would be carried out.

  • Intellectual property and innovation is the sole foundation of the startups. Guarding the innovative ideologies and creative pool of the company, the scheme provides patenting the products/services in accordance to increased brand value and growth of the company.

  • This scheme will not be overshadowing the conventional, time consuming and complicated patenting procedures but also providing startups hassle free and cost efficient processes making the entire notion of patenting financially affordable and accessible which would furthermore encourage the startups to bring the best out of their innovations.

Exercising the scheme

Startup India registration process comes with several benefits:

  • Fast-Tracking of Startup Patent Application: For successful execution of the plan, a board of "facilitators" will be empaneled by the Controller General of Patents, Designs and Trademarks (CGPDTM), who will likewise manage their lead and capacities. Facilitators will be liable for giving strategic advisory on various intellectual property as well as assistance on securing and advancing protected intellectual property in different nations.

  • Under this scheme, the Central Government shall handle and respond to the fee charged by facilitators for any number of patents, trademarks or designs that a Startup may file, and the Startups shall bear the cost of only the statutory fees payable.

  • Startups shall be provided an 80% rebate in filing of patents vis-à-vis other companies. This will help them pare costs in the crucial formative years. And again, startups need to be DPIIT-recognized to avail the above stated privilege.

  • Coming to section 56(2)(VIIB) of Income Tax Act, investments into recognized startups by listed companies with a net worth of more than INR 100 Crore or turnover more than INR 250 Crore shall be exempt under Section 56 (2) VIIB of Income Tax Act.

  • Investments into eligible Startups by Accredited Investors, Non-Residents, AIFs (Category I), & listed companies with a net worth more than 100 crores or turnover more than INR 250 Crore, shall be exempt under Section 56(2)(VIIB) of Income Tax Act.

  • Consideration of shares received by eligible startups shall be exempt up to an aggregate limit of INR 25 Crore.

Since startups operate on risk management as well, the objective of scheme Startup India throws spotlight on providing entrepreneurs looking for reallocating their resources and capital to more productive business models with effective exit strategies. This also ensures business operators to experiment with their innovative ideas without any time consuming and prolonged complex exit processes where their capital is at much greater risk.

  • As per the Insolvency and Bankruptcy Code, 2016, startups with simple debt structures, or those meeting certain income specified criteria* can be wound up within 90 days of filing an application for insolvency.

  • An insolvency professional shall be appointed for the Startup, who shall thereafter be in charge of the company (the promoters and management shall no longer run the company) including liquidation of its assets and paying its creditors within six months of such appointment.

  • Upon appointment of the insolvency professional, the liquidator shall be responsible for the swift closure of the business, sale of assets and repayment of creditors in accordance with the distribution waterfall set out in the IBC. This process will respect the concept of limited liability.


Listing initiatives executed by Indian Ministry surely does not end here. The Ministry of Corporate Affairs, Ministry of Commerce and Trade and likewise authorities have been working altogether to create more business-friendly settings for emerging startups trying to build their corporate presence. Equity in industrial opportunities, flexibility in diverse business model establishment and simple regulatory procedures will definitely mark global achievement for Entrepreneurship and Indian Economy. If you think your business is ready, contact Vyapaar Pundit Startup India registration consultants now!


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