A brief overview on registering a start up under DPIIT

The department for promotion of industry and internal trade was established in the year 1995 with an objective to promote and develop industrial activities. In 2018, DPIIT was assigned to deal with the matter relating to e-commerce, internal trade, welfare of the traders and their employees and start ups. Notwithstanding it the DIIPT also now involved in the promotion of the investment made in new technologies and FDI to support and balance the trade. 

Introduction 

DPIIT is an integral portal of the government of India which provides services to the new business start-ups across the country by helping them in getting registered on industrial entrepreneur memorandum and industrial licensing application. Further the department deals with the matter concerning the start-ups which is inclusive of the concerns relating to the accessing quality IP services, promoting high standard of labour, easy access for funds, tax exemptions for 3 years, easy winding ups etc. 

Governing Law

The DPIIT department handles matters relating to IPR (Copyright, Patent, Designs, Geographical Indicators, Trademark), FDI to support and encourage start-ups by way of promoting investment towards the industrial development of the country. 

What is a Start-up?

The term start-up is a company or venture that focuses on bringing a service to the market with limited source which are funded by the founder of such start-up.

The Start-up initiative in India was launched on 16th January 2016 by the Government of India, to improvise and encourage innovative entrepreneurship in the country with an objective to support new or existing entrepreneurs, job creation, and transformation of the economy. 

A business shall be defined as a start-up when – 

• Producing new product or services or process 
• Services which creates value for customers 
• Product which has the value of commercialization 

Eligibility of a business to be termed as a start up in India 

• Company Type – The Company has to either be registered as an LLP or as Private Limited Company.
• Company Age – The business should be registered not less than 10 years to get the eligibility for being recognized as a start up and shall be eligible for tax exemptions. 
• Annual Turn Over – The business shall be classified as a start-up if its annual turnover doesn’t reach INR 100 crore in preceding 10 years.
• Original entity – the entity should be of new innovative and not an idea or reconstruction of an already existing business. 
• Letter of recommendation – An incubator must provide a letter of recommendation 
• Innovative – The business must have a complete new theme and ideas with the potentiality for wealth creation and employment. 
• Funds – The details of the funds must be reported to the SEBI. The investment shall support to the said start-up by providing funds

How to get recognized under DPIIT?

Start-up is an action plan described under G.S.R. Notification 127(E). In order to get recognized under the department of DPIIT, the start-ups have to follow the following steps – 

• Registration – New users to be registered by logging in as a new user and click “Get Recognised” icon and for existing user click on “dashboard icon”. 
• Application page – after registration, select DPIIT recognition icon, which display the details of the recognised application and view details. 
• Start-up reorganisation form –  in order to get recognized as a start-up with the DPIIT the business has to upload the following documents – 
  • Certificate of incorporation or reorganization certificate of the business 
  • Website link as a proof of the start-up 
  • PAN details of the company 
  • Information of the directors owner of the start-up 
• Submission – after providing and updating all the required details the form has to be submitted by clicking on to the submit button. 
• Examination – the examination of the documents submitted shall take at least two days and after scrutinizing the documents the department shall grant the recognition number for the same. 

Note – during examination, if the document submitted to the DPIIT by the start-ups has some dispensary or accrued by means of forgery then the same shall be charged with a fine of 50% on the capital of such start-up or with the minimum punishment of INR 25,000.  

Revocation of certificate of registration

The internal board of certification when discovers any uploaded certificate(s) was obtained by fraudulent means or misrepresented information in the portal, such registration made shall be revoked by the certifying authority.  

Why to get a start-up registered under DPIIT?

• Tax exemption according to Income Tax Act, 1961. 
  • Section 80 IAC 
  • Section 56 
• Faster exit for start-ups
• Other Exemptions 

Tax exemption – the start up registered under DPIIT are eligible for getting an exemption after receiving recognition by the department. 

Section 80 IAC – according to Section 80 IAC, any company registered as a private limited company or LLP shall has an eligibility for tax exemption up-to 3 years since its incorporation period. Further, such start-ups should have been incorporated after 1st April’ 2016. 

Section 56 – to get an exemption under the section 56, the aggregate amount of paid up share capital and share premium of the start up after the proposed issue of share should not exceed INR 25 Crore. 

Faster Exit – start-ups wanting to wind up due to insufficient resources or funds, business failure shall proceed with the process of winding up without an elaborate procedure or getting trapped in a costly and lengthy process that exits. 

The Insolvency and Bankruptcy Code, 2016 which was introduced by the Lok Sabha provides a condition to wind up start up quickly and voluntarily within 90 days of making such application. In case of an appointment of an insolvency expert as a liquidator by the start up, then such liquidation process has to be completed within 6 months and report has to be submitted. 

Other Exemptions– by registering with DPIIT the start ups are exempted from – 

• Inspection for the first 3 years of the operation 
• Capital gain tax are exempted for the first 3 year
  

Final words

Starting a business always has involves in having an infinite procedures along with extensive legal works. Apart from the legal perspective, to start a business involves certain amount of paid up capital as mentioned by the Companies Act, 2013 due to which many with an innovative ideas refuses to step forth in the commercial or industrial lane. 

Thus, to avoid such hesitation from the entrepreneurs as well to create job opportunities and raise the economy’s GDP, the Government of India came with the start-up initiative in the year 2016. 

Further, getting a start-up recognized under DPIIT encourages the innovative ideas of the people, start-ups to be evaluated by eliminating the needs for the investors to visit multiple platforms to gather information to obtain clearance for investments which raises the investment in the business and is proportional to the economic growth and eliminate the unemployment problem which is an ultimate goal of the department.