Source: www.dipp.nic.in
The Department of Industrial Policy and Promotion (DIPP),
under aegis of the Union Ministry for Commerce and Industry, has recently
brought up a revised definition of start-ups.
The new definition according to DIPP notification shall
now recite as :
“An entity shall be considered as a start-up
up to a period of seven years from the date of incorporation/registration, if
it is incorporated as a private limited company (as defined in the Companies
Act, 2013) or registered as a partnership firm (registered under Section 59 of
the Partnership Act, 1932) or a limited liability partnership (under the
Limited Liability Partnership Act, 2008) in India”.
In reference to the biotechnology sector
including medical device, the period shall be up to ten years from the
date of its incorporation/ registration. The sudden increase has been made on
the very fact that the companies in these two sectors take longer development
process to mature.
Further, the notification revealed that the turnover
of any entity for any of the financial years since the incorporation
should not exceed INR 250,000,000 and that the entity should be working towards
innovation, development or improvement of products or processes or services, or
if it is a scalable business model with a high potential of employment
generation or wealth creation.
An entity formed by splitting up or reconstruction of an
existing business shall not be considered a ‘start-up’.
Going forward, a start-up being a private limited company
or a limited liability partnership incorporated on or after 1st day of April
2016, but before 1st day of April 2021, can claim 100% tax exemption on profits
for three out of seven years, as per the prescribed norms. There is also a provision
of tax relief for issue of shares by start-ups over the fair market value, with
certain conditions. However, for availing the tax relief for issue of shares
over the fair market value, the aggregate amount of paid-up share capital and
share premium of the start-up should not exceed 10 crore.
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