Friday, February 19, 2016

How to apply for a Startup - Government Notifies Rules

I hope you read 10 benefits of startup in India . So are you thinking to ride the bandwagon of startup India by the government ? The first thing is to understand if your startup comes within the meaning of Startup as defined by the government . The Ministry of Commerce and Industry has issued notification fixing the rules for determining who is a startup , how to apply for a startup and when your startup shall cease to be considered as startup  .

So who will be regarded as Startup ?


  1.  You must be either a Private Limited Company or Firm or Limited Liability Partnership (LLP) 
  2. The turnover (as defined under the Companies Act, 2013) of the startup should be less than 25 corre. The year it goes up, you lose the tag of Startup  
  3. The startup must be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property if it aims to develop and commercialize:
  • A new product or service or process, or
  • A significantly improved existing product or service or process, that will create or add value for customers or workflow.


What is not covered in product development by startup ?


Following are not covered under the product developments by a startup

a. products or services or processes which do not have potential for commercialization, or
b. undifferentiated products or services or processes, or
c. products or services or processes with no or limited incremental value for customers or workflow
would not be covered under this definition.

 

How the Startup is Recognized by Government ?


The process of recognition as a ‘startup’ shall be through mobile app/portal of the Department of
Industrial Policy and Promotion. Startups will be required to submit a simple application with any of
following documents:


  1. a recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a postgraduate college in India; or  
  2. a letter of support by any incubator which is funded (in relation to the project) from  Government of India or any State Government as part of any specified scheme to promote  innovation; or  
  3. a recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator recognized by Government of India; or  
  4. a letter of funding of not less than 20 per cent in equity by any Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business. Department of Industrial Policy and Promotion may include any such fund in a negative list for such reasons as it may deem fit; or
     
  5. a letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or
     
  6. a patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of business being promoted. 

Notification for Startup  Rules


MINISTRY OF COMMERCE AND INDUSTRY
(Department of Industrial Policy and Promotion)
NOTIFICATION
New Delhi, the 17th February, 2016
G.S.R. 180(E).—The Government of India has announced ‘Startup India’ initiative for creating a
conducive environment for startups in India. The various Ministries of the Government of India have initiated
a number of activities for the purpose. To bring uniformity in the identified enterprises, an entity shall be
considered as a ‘startup’-
a) Up to five years from the date of its incorporation/registration,
b) If its turnover for any of the financial years has not exceeded Rupees 25 crore, and
c) It is working towards innovation, development, deployment or commercialization of new products,
processes or services driven by technology or intellectual property;
Provided that any such entity formed by splitting up or reconstruction of a business already in existence shall
not be considered a ‘startup’;
Provided further that in order to obtain tax benefits a startup so identified under the above definition shall be
required to obtain a certificate of an eligible business from the Inter-Ministerial Board of Certification
consisting of:
a) Joint Secretary, Department of Industrial Policy and Promotion,
b) Representative of Department of Science and Technology, and
c) Representative of Department of Biotechnology.
Explanation:
1. An entity shall cease to be a startup on completion of five years from the date of its
incorporation/registration or if its turnover for any previous year exceeds Rupees 25 crore.
2. Entity means a private limited company (as defined in the Companies Act, 2013), or a registered
partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability
partnership (under the Limited Liability Partnership Act, 2002).
3. Turnover is as defined under the Companies Act, 2013.
4. An entity is considered to be working towards innovation, development, deployment or
commercialization of new products, processes or services driven by technology or intellectual
property if it aims to develop and commercialize:
a. A new product or service or process, or
b. A significantly improved existing product or service or process, that will create or add
value for customers or workflow. 4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
Provided that the mere act of developing:
a. products or services or processes which do not have potential for commercialization, or
b. undifferentiated products or services or processes, or
c. products or services or processes with no or limited incremental value for customers or
workflow
would not be covered under this definition.
5. The process of recognition as a ‘startup’ shall be through mobile app/portal of the Department of
Industrial Policy and Promotion. Startups will be required to submit a simple application with any of
following documents:
a) a recommendation (with regard to innovative nature of business), in a format specified by
Department of Industrial Policy and Promotion, from any Incubator established in a postgraduate college in India; or
b) a letter of support by any incubator which is funded (in relation to the project) from
Government of India or any State Government as part of any specified scheme to promote
innovation; or
c) a recommendation (with regard to innovative nature of business), in a format specified by
Department of Industrial Policy and Promotion, from any Incubator recognized by Government
of India; or
d) a letter of funding of not less than 20 per cent in equity by any Incubation Fund/Angel
Fund/Private Equity Fund/Accelerator/Angel Network duly registered with Securities and
Exchange Board of India that endorses innovative nature of the business. Department of
Industrial Policy and Promotion may include any such fund in a negative list for such reasons
as it may deem fit; or
e) a letter of funding by Government of India or any State Government as part of any specified
scheme to promote innovation; or
f) a patent filed and published in the Journal by the Indian Patent Office in areas affiliated with
the nature of business being promoted.
Department of Industrial Policy and Promotion may, until such mobile app/portal is launched make
alternative arrangement of recognizing a ‘startup’. Once such application with relevant document
is uploaded a real-time recognition number will be issued to the startup. If on subsequent
verification, such recognition is found to be obtained without uploading the document or uploading
any other document or a forged document, the concerned applicant shall be liable to a fine which
shall be fifty per cent of paid up capital of the startup but shall not be less than Rupees 25,000.
This notification shall come into force on the date of its publication in the Official Gazette.
[F. No. 5(91)/2015-BE. I]
RAVNEET KAUR, Jt. Secy.

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