STARTUP DPIIT
STARTUP REGISTRATION WITH THE GOVERNMENT OF INDIA
The startup ecosystem in India today is booming. From a few unicorns over a decade to achieving 40+ unicorns in the year 2021-2022, we have come a long way in scaling and shaping up young companies and equipping them with the required funds and support, so that they are capable of leaving a global footprint.
The Government of India has rolled out programs and incentives to spur this growth forward and ensure that our stellar records keep on adding up. One of the programs they introduced to further their ambition is Startup India. This program helps startups in a variety of ways, from having free highly knowledgeable courses to tax exemptions and access to government tenders, the benefits are enormous.
We at HelpMyBiz support the initiatives taken by the government and are committed to ensuring promising business ideas, take heights. We believe promising ideas should not be bound by the chains of finances and regulations and opportunists by helping you apply for the program easily. With our help, all you need to do to start a business is an idea. If you have what it takes to become the next global company, contact our experts today!
Our expert gets in touch with you to understand your business structure, vision, and your business model. We conduct a SWOT analysis of your startup and discuss with you how your startup will be scalable in the future.
Before registering with the DPIIT we form a Private Limited Company or a Limited Liability Partnership according to your requirements.
We discuss with you and consult you on how to prepare the initial pitch deck, and draft papers detailing your business model that is to be submitted to the DPIIT.
We submit the application to the DPIIT and ensure that your registration goes through.
There are several tax exemption benefits provided by the government of India for a startup,
(i) The startups are exempted from paying income tax on any profits and capital gains for 3 years from the date of incorporation under section 80-IAC.
(ii) The startup can claim exemption from capital gains tax (popularly known as angel tax) under Section 56 of the Income Tax Act, 1961-2014 as well.
Example – Normally, if the fair market value of a startup is Rs. 100,000/- and it raises funding at a valuation of Rs. 150,000/-, then the startup needs to pay income tax for the extra Rs. 50,000/- it has raised, classifying it as income from other sources. This is where this provision comes into play and helps startups to grow by not taxing the startup for the increase in value. However there are certain clauses in place to avail this benefit,
a. The aggregate of the startups' paid-up capital and share premium should not exceed 25 crores. When calculating the threshold limit of 25crores, the issue of shares to a non-resident person, venture capital, category-I AIF, Category-II AIF, and a listed company worth 100crore are not included.
b. The startup is restricted against purchasing Land and building, shares and securities, motor vehicles, aircraft, jewelry, archaeological collection for 7 years from the end of the latest financial year in which the shares are issued at a premium.
c. A declaration needs to be filed with the DPIIT in Form 2 to claim this exemption. Complete details about the company, like name, date of incorporation, registration/incorporation number contact details, etc. needs to be included. A self-declaration form digitally signed by the authorized signatory including the company’s letterhead needs to be attached with the form.
(iii) The startups can claim exemption from long-term capital gains tax under Section 54EE, provided they invest the funds within 6months into a fund notified by the government with the maximum investment not exceeding 50lacs, with a lock-in period of 3years.
(iv) Individual/HUFs can claim exemption on Long Term Capital Gains by investing the LTCG in eligible startups or by investing it to subscribe to 50% or more equity shares of eligible startups. Further, there is a lock-in period of 5 years from the date of acquisition.
(v) The startups face relaxed provisions for setting off and carrying forward of losses under section 79. Losses incurred can be carried on to the next year even if 51% of the shareholding is not being continued by the old shareholders.
hELPMYBIZ is committed to taking care of the complete process involved in registering a business with the DPIIT and ensuring that your application goes through and you become registered.
BENEFITS OF REGISTERING WITH THE DPIIT
Easier Compliances
To facilitate an environment where startups can focus more on their core business, they are allowed to do self-certification of six labor and 3 environmental laws. The government will not do any inspection on their premises unless there is valid and strong proof of the violation and is approved by an officer with authority above an inspecting officer.
Public Tenders
The startups can list themselves as a seller on the government of India’s e-procurement portal and even have insights on the undertakings by the various Ministries/Departments/Public Sector. A startup can self-gauge whether they can meet the quality and technical requirements for any contract and apply for it. They get exemptions on the earnest money deposit and also do not have to necessarily meet the prior turnover and experience requirements.
Cost Benefits
The startups can avail rebate of 80% of the fees paid in patents and IPR. They are provided further assistance by the government-provided facilitators in the commercialization and protection of the IPR. The IPR applications by startups are given priority and are fast-tracked as well.
Easier Exit
In the unfortunate event a startup is not able to take off, the government has put in place insolvency professionals who would help fast-track such cases and facilitate easier closure of accounts and operations. A startup with a simple debt structure can wind up its business within 90days.
Value Addition
A startup needs to work towards innovation development or improvement of products or processes or services. It needs to be a scalable business with a high potential for employment and wealth generation.
Funding
Startups are high endeavors projects, thus they are classified as high-risk investments. Moreover, it is not necessary for the team to be highly experienced nor have cash flows to back up their ideas. So not having access to finances sometimes become a major hurdle for their growth.
For this very purpose, the government has set up a fund of funds. The government does not invest in startups directly but they participate in the capital of SEBI registered Venture Funds. The initial corpus of this initiative is INR 2500 cr, with a total corpus of INR 10,000 cr.
Requirements for registering with DPIIT
01
The startup needs to be already registered as a private limited company or a Limited liability partnership.
02
The startup needs to be less than 10 years old from the date of incorporation
03
The turnover should not have exceeded INR 100 crores for any financial year since its formation.
04
The startup will not be eligible if it has been formed by the transfer of assets or a splitting up of an existing company.
05
The company needs to have been incorporated after April 2016 but before March 2022.
PRE PREPARATIONS
Copy of certificate of registration or incorporation
Information of any awards received
Document of proof of funding received if any.
Documents providing website link, pitch deck, patents, and any proof that adds value to the business.
Write up detailing how the startup is working towards innovation, development, or improvements of products, processes, or service. It also needs to detail how it would be a pivotal enterprise in generating employment and wealth generation.
A budding startup always got its hands full. It has got to focus on its core product and ensure that it is designed to perfection, do marketing for its product and, at the same time ensure that it meets all compliances and is availing all the benefits that come with it. It can definitely be a handful! We at helpmybiz work along with your team ensuring all your financial logistics are well taken care of so that you can build your dreams with more passion and vigor.
