Department of Industrial Policy and Promotion has released Notification on Startups in supersession of the Gazette Notification No. G.S.R. 364(E) dated April 11, 2018.
Following significant changes have been brought in this Notification:
Definition of Startup
An entity shall be considered as a Startup Upto a period of ten years from the date of incorporation/ registration. Earlier the period was upto seven years. The Turnover limit for an entity to be called a startup has been increased to Rs 100 crore from Rs. 25 crore. No distinction has been made in respect of Startups in the biotechnology sector.
Composition of Inter-Ministerial Board of Certification
As per the earlier notification, there were 8 members in the Board representing various Departments and ministries. Under the new Notification, there will be only three members:
- Joint Secretary, Department of Promotion of Industry and Internal Trade, Convener
- Representative of Department of Biotechnology, Member
- Representative of Department of Science & Technology, Member
Change of Department name- “Department for Promotion of Industry and Internal Trade (DPIIT)”
The government has earlier renamed the Department of Industrial Policy and Promotion (DIPP) as the Department for Promotion of Industry and Internal Trade (DPIIT). Accordingly, changes have been brought in new notification.
Startup shall make an online application over the mobile app or portal set up by the DPIIT along with (a) a copy of Certificate of Incorporation or Registration and (b) a write-up about the nature of business highlighting how it is working towards innovation, development or improvement of products or processes or services, or its scalability in terms of employment generation or wealth creation. Earlier, the applications were submitted to Department of Industrial Policy and Promotion.
Change in conditions for Exemption under Section 56(viib) of Income Tax Act
Exemption shall be provided to startups recognised by DPIIT, if aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share, if any, does not exceed, twenty five crore rupees. The limit for exemption has been changed from Rs. 10 crores to 25 crores. In the computation of twenty five crore rupees, shares issued to a non-resident; or a venture capital company or a venture capital fund, shall not be included.
A startup fulfilling the conditions mentioned in para 4 (i) and para 4 (ii) of the notification shall file duly signed declaration in Form 2 that it fulfills the conditions mentioned in para 4. On receipt of such declaration, the DPIIT shall forward the same to the CBDT.
To avail the exemption, startups must not invest in the list of assets provided in the Para 4 of the notification before seven years from the end of the latest financial year in which the shares are issued at premium. In case such investment is made, exemption shall be revoked with retrospective effect.
This notification has come to effect from 19th February, 2019 and it is subject to review on or before 31.03.2021.
Click here for the Notification.
Click here for the previous notification.
