What is Startup India Scheme?

  • Blog|Income Tax|
  • 4 Min Read
  • By Taxmann
  • |
  • Last Updated on 1 March, 2022
Startup India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of start-up businesses, to drive sustainable economic growth, and generate large-scale employment opportunities. The Government through this initiative aims to empower Startups to grow through innovation and design. Several programs have been undertaken since the launch of the initiative on the 16th of January, 2016 by the Hon’ble Prime Minister, to transform India into a country of job creators instead of job seekers.
For availing various benefits under the Startup India scheme, an entity would be required to be recognized by DPIIT as a startup by applying here.
Taxation of Start-ups & Investors by Srinivasan Anand G. This book is a ready referencer to understand the taxation of start-ups and other operational issues with the help of detailed case studies, illustrations, FAQs & Start-up Ready Reckoners

Benefits to recognized startups under ‘Startup India Scheme'”

The benefits provided to recognized startups under the Start-up India initiative are:


1. Compliance Regime based on Self-Certification: 

 a) List of 36 industries in the “white” category has been published on CPCB’s website. CPCB has exempted such industries from all the applicable self-certification under 3 Environment related Acts listed in the Startup India Action Plan.

b) Ministry of Skill Development and Entrepreneurship (MSDE) has issued advisory to States to allow Startups to self-certify compliance with the Apprenticeship Rules, 1992 of Apprenticeship Act, 1961.

Read: Meaning of Entrepreneurship

c) Startups have been allowed to self-certify compliance in respect of 6 Labour laws.

d) 27 States have confirmed compliance to the advisory issued on 12.01.2016 and new advisory issued on 6.4.2017 by Ministry of Labour and Employment (MoLE).

2. Rolling out of Mobile App and Portal: 

 a) Startup India portal has been developed to provide access to the following:

i) Startup recognition – 15,978 Startups have been recognized till 7th February 2019.

ii) Learning & development module – over 2,30,000 registrations achieved.

b) The portal acts as a one-stop solution for all queries related to the Startup India initiative.

c)Startup India mobile app has been developed to provide on-the-go services and information to users.

3. Startup India Hub: 

a) 1,23,000+ queries have been handled by the Startup India Hub.

b) 660+ Startups have been mentored for incubation and funding support.

c) 2,90,000+ registrations have been achieved on the Hub as of February 2019.

4. Legal Support and Fast-tracking Patent Examination at Lower Costs: 

 a) 427 facilitators for Patent and Design and 670 facilitators for Trademark applications have been impaneled to assist Startups in filing patents and trademarks.

b) 801 applications have received rebates of up to 80% on patent fees and have also received legal assistance.

c) Patent filing has been made faster for Startups and accordingly 176 Startups have been facilitated.

d) Trademark facilitation has been extended to 1226 Startups as of October 2018.

5. Relaxed Norms of Public Procurement for Startups: 

 a) Relaxed norms for public procurement for micro, small and other enterprises have been provisioned in the Procurement Policy by the Ministry of Micro, Small, and Medium Enterprise.

b) All Central Ministries/Departments/Department of Public Enterprises/Central Public Sector Undertakings have been authorized to relax conditions of prior experience and prior turnover with respect to MSEs in all public procurements subject to meeting quality and technical specifications.

c) Further, Rule 173(i) has been incorporated in GFR, 2017 which provides for relaxation of conditions of prior turnover and prior experience for Startups, and

d) Rule 170(i) of GFR 2017 has been amended on 25th July 2017 allowing all Startups as recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) exemption from submission of Earnest Money Deposit/Bid Security in public procurement tenders.

6. Faster Exit for Startups: 

 a) Insolvency and Bankruptcy Board has been constituted. 

b) MCA has notified the relevant sections 55 to 58 of Insolvency and Bankruptcy Code, 2016 pertaining to the Fast Track Process on 16.6.2017 and also notified that the process shall apply to Startup (other than the partnership firm) as defined by DPIIT.

c) For Startups, Insolvency Resolution Process to be completed within 90 days as against 180 days for other entities.


7. Providing Funding Support through fund of funds ( FFS) with a corpus of Rs. 10,000 crores. 

 a) Fund of Funds for Startups of Rs. 10,000 crore shall be released over two Finance Commission cycles, that is, by the year 2025.

b) Rs. 500 crore has been released to SIDBI in FY 16 and Rs. 100 crore in FY17.

c) Total commitments under FFS stand at Rs. 1,750.70 Cr. To 35 Alternative Investment Funds (AIFs) while drawdown by AIFs is Rs. 279.98 crores.

d) 182 Startups have received funding under FFS with catalyzed investment of Rs. 1004.82.

8. Tax Exemption on Capital Gains: 

 a) Section 54EE of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act”) has been introduced by the Finance Act, 2016 which provides for exemption of capital gain arising out of transfer of long term capital asset (not exceeding Rs. 50 Lakh in a financial year) invested in a fund notified by Central Government.

b) Section 54GB of the Act has been amended to provide exemption from tax on capital gains arising out of the sale of a residential house or a residential plot of land if the amount of net consideration is invested in equity shares of an eligible Startup company for utilizing the same to purchase the specified asset.

9. Tax Exemption to Startups for 3 years: 

 a) Provision has been made for Startups (Companies and LLPs) to avail income tax exemption for 3 years in a block of 7 years, if they are incorporated between 1st April 2016 and 31st March 2021. (Section 80-IAC of the Act)

b) 94 Startups have been approved for availing tax benefits under section 80-IAC as of February 2019.

10. Tax Exemption on Investments above Fair Market Value ( i.e. exemption from Angel Tax): 

a) Revised simplified norms for Angel Tax exemption under section 56(2)(viib) of the Act have been notified on 19.02.2019.

To know more benefits in detail under Start-up India Scheme, buy this book at Taxmann bookstore.

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied