Startups under ‘Startup India’ get a new definition

Now there’s a larger definition for startups…..

India has finally broadened the definition of ‘startups’ eligible under ‘Startup India Initiative.’ In a move to boost entrepreneurship and employment, Modi government has upped the age of startups, to seven from five now; relaxed the norms for tax benefits and included employment generation potential.

According to a Department of Industrial Policy and Promotion (DIPP) press statement, these changes are an effort to ensure ease of starting up new businesses to promote the startup ecosystem and build a nation of job creators instead of job seekers.

“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 new product or service or process. Or this could be a significantly improved existing product or service or process, that will create or add value for customers or workflow,” adds DIPP statement. Also, the turnover of a startup entity should not exceed Rs 25 crore.

The Startup India initiative was launched in January 2016 by Prime Minister Narendra Modi to offer incentives to such ventures creating new, innovative businesses with fresh ideas. "This move clearly seems to address the two most important issues with the previous avatar of the policy- increase in time frame from two to seven years and self-certification by a startup. So, this is a positive step in the right direction," says Devendra Parulekar, co-founder and chief growth hacker of Saffronstays.com.

While the overall age limit for startups have been raised to seven years, for biotechnology firms it is now 10 years. This has been done to account for the longer gestation period for such companies in the sector. Further, the government has also eased norms for getting income tax benefits available under the Startup India programme.

Sanjay Enishetty, managing partner, 50K Ventures, said, "This is finally a very good initiative by the government. And it's positive, as new startups don't have to furbish a recommendation letter from the incubator. They could also avail taz benefits."

The new definition will allow tax benefits easily available to the startups, as per the action plan in the previous year. Startups won’t have to furnish a letter of recommendation from an incubator or industry association to be eligible for the tax benefits and recognition under Startup India, according to an official statement.

The process of recognition as a ‘startup’ shall be through mobile app/portal of the Department of Industrial Policy and Promotion.

Anshul Dave, CEO and managing partner at Oceans Bridge- 50K Ventures, said, "It's a fantastic move by the current government for giving thrusts to startups. This will definitely boost up the morale and act as fuel for StartUpIndia, Digital India, StandUpIndia campaigns. This move will also help a lot of small entrepreneurs who had taken small loans under the Mudra Yojna of the government."

"Overall it's a great move but the government should also focus on getting more startups to enroll and avail benefits of this scheme. Also there should be tax advantages to startup accelerators as well," adds Dave.

Companies incorporated after March 31, 2016, could avail of a three-year tax holiday in the first seven years of their existence as part of the incentives announced for the upcoming firms. The definition’s scope has been broadened to include scalability of business models with the potential of employment generation or wealth creation.

Do you feel this is the right definition of startups? Please share with us.