The Union Government on 25 May 2017 introduced minor changes to the startup definition, saying a business not older than seven years will now qualify for benefits under the Startup India Action Plan.
Earlier, companies which were not older than five years from the date of incorporation were eligible for concessions under the plan, which was announced in 2016.
New Definition: Under the new definition, an entity shall be considered as a startup if its turnover is less than Rs 25 crore - which remains unchanged - and has not completed seven years from the date of its incorporation/registration. However, in the case of startups in the biotechnology sector, the period shall be up to 10 years.
It also said that an entity shall be considered as a start-up if it is working towards innovation, development or improvement of products or processes or services. It will also be called a startup if it is a scalable business model with a high potential of employment generation or wealth creation.
When will the entity cease to be a startup?
The new definition also added that an entity will cease to be a startup on completion of seven years from the date of its registration or incorporation. It will also cease to be a startup entity if its turnover for any previous year exceeds Rs 25 crore.
To obtain tax benefits, it said, a startup should obtain a certificate of an eligible business from an inter-ministerial board of certification as constituted by the Department of Industrial Policy and Promotion.
The Start-up India initiative was announced by Prime Minister Narendra Modi in his Independence Day speech on 15 August 2015. The initiative was announced with an aim to foster entrepreneurship and promote innovation by creating an ecosystem that is conducive for the growth of Startups.
Objective: The initiative was announced with an objective to promote India a nation of job creators instead of the nation of job seekers.
In order to meet the objectives of the initiative, Union Government announced the Action Plan that addresses all aspects of the Startup ecosystem on 16th January 2016. With this Action Plan, the Government hopes to accelerate spreading of the Startup movement. The Action Plan is based on the following three pillars:
• Simplification and Handholding
• Funding Support and Incentives
• Industry-Academia Partnership and Incubation