How to Establish a Startup in India

By Dezan Shira & Associates

Posted: 10th May 2016 09:25

A host of incentives have been unveiled by the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) government that seek to promote the growth of startups in India. Economic goals are at the core of the government’s reforms, which include ease of doing business, job creation, promotion of skill development, and entrepreneurship. Towards this a national policy framework was launched in February 2016 called the Startup India Action Plan.
 
What is the Startup India Action Plan?
 
Under this plan, new startups in India can avail of regulatory and tax benefits for three years, capital gains tax exemption, and access to funds from the government’s U.S. $1.5 billion (Rs 10,000 crores) corpus. A self-certification compliance system is now in place, with respect to nine labor and environment laws, whereby there will be no inspections for the first three years of the launch of the venture.
 
Other benefits include reduction in patent registration fees by 80 percent, simpler entry and exit norms, protection of intellectual property rights (IPR), and facilities to promote entrepreneurship among women and SC/ST communities. The Department of Industrial Policy and Promotion (DIPP) is currently in the process of developing a mobile application that will serve as the single point of access for all services from registration to meeting compliance norms. Meanwhile a Twitter helpline has just been launched; persons can tweet with #mociseva for assistance in any matter related to startups in India.
 
Additionally, the government will be setting up 31 centers of innovation and entrepreneurship at national institutes, as part of its focus on developing R&D in the country.
 
How is a Startup Defined in India?
 
As per new legal norms, a business entity is identified as a startup for up to five years from the date of its incorporation. It also needs to meet the following criteria set by the DIPP to access government benefits:
What are the Legal Requirements to Establish a Startup?
 
For a corporation, entity, or a business to be termed as a startup, it must be established under either of the following legal frameworks:
This legal definition means that Sole Proprietorship Firms are not under the Startup India scheme.
 
How to Avail Tax Benefits under the ‘Startup India’ Scheme?
 
In order to avail tax benefits, an entity or firm has to obtain a certificate from the Inter-Ministerial Board of Certification. The board consists of the following members:
What is the Application Process to Establish a Startup in India?
 
The application process requires any one of the following documents to be submitted:
Once the application is uploaded, a recognition number will be immediately issued to the startup. If the appropriate documents are not uploaded or are found to be forged, a fine on the applicant will be levied, which shall be 50 percent of the paid-up capital of the startup, and not less than U.S. $375 (Rs 25,000).
 
What are the Tax Exemptions Provided to Startups?
 
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.
 
For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com

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