Startup Definition Redefined – Benefits Applicable Till 7 Years Now; No Need For Recommendation Letter!



India is world’s youngest startup nation, and change is the only thing constant when it comes to growth.

Following this principle, Indian Govt. has once again changed the very definition of a startup, and the intentions this time are pretty noble.

Although the Govt. is turning out to be an angel for startups, due to various reasons, out of 798 applications received by Department of Industrial Policy and Promotion in the last one year, Govt. has identified only 10 genuine startups which deserved tax benefits under Startup India.

And it seems Govt. wants to change this equation.

The New Definition Of A Startup: 7 Years Benefit Period

Earlier, Govt. had decided to provide tax and other benefits to a startup only if it’s less than 5-year-old. But now, this definition has been extended to 7 years.

This will now help more startups to claim the benefits under Startup India program, and hence, will attract more entrepreneurs as well.

Explaining the reasons, DIPP said in a 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”

However, biotech companies, which needs more time to settle and prove their expertise, have been provided with 10 years of tax benefits, which has been left unchanged.

No Letter Of Recommendation Required

Earlier, there was a requirement for startups to furnish a letter of recommendation from an incubator or an industry association for availing benefits under Startup India program.

This requirement has also been abolished by DIPP. Instead, the startup will have to include a comprehensive description of the business model, how will it scale, and approximate employment generation potential of that business.

Last week, we had reported that job creation estimation will become a requirement for availing startup benefits from the Govt.

However, one thing which is surprising is that the cap on business turnover hasn’t been altered. Earlier, it was Rs 5 crore per year cap, which translated to Rs 25 crore cap for 5 year period. Any startup which conducted business more than this amount was not eligible for startup benefits.

With 7 years extension in the startup, this cap of Rs 25 crore has been maintained. This means, that the startup should not exceed business turnover by more than Rs 25 crore in the 7 year period, in order to avail tax benefits.

In order to become more flexible, and more liberal, this rule should also be extended and increased.

What else can Govt do to promote startups in India? Do let us know by commenting right here!

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