Change in Definition of Start-ups

New Definition:
An entity will be considered as a Start-Up if its turn over is less than Rs 25 crore and has not completed seven years from the date of its  incorporation/ registration.
Earlier, the time was five year. The new definition has increased it to 7 years taking into the consideration the long gestation period involved in establishing start-ups.
Other Changes:
  • The scope of definition of start-up will also be widened to include scalability of business model with potential of employment generation or wealth creation.
  • The process of recognition of an entity as a start-up will be through an online application made over the mobile app/portal set up by the DIPP.
  • For the Start-Ups in the biotechnology sector, they will be considered as start-ups for a period of up to 10 years from the date of incorporation/registration.
  • Start-ups will not require a letter of recommendation from an incubator or an industry association to get tax benefits under the Start-up India action plan. However, the entities should obtain a certificate of an eligible business from an inter- ministerial board of certification as constituted by the DIPP to claim tax benefits.
  • An entity will be deemed as a start-up if it is working towards innovation, development or improvement of products/processes/services, or if it is a scalable business model with potential for employment generation or wealth creation.
Why these changes?
  • The new definition and amendments will help to ease of starting new business and will promote the start-up ecosystem.
  • The tweak in the definition will also help the entities to avail government sponsored venture funding and tax and other benefits. 
  • It will create more jobs and promote entrepreneurship under the Start-up India scheme.
  • 5 year was less for many business types.
  • Earlier, start-ups had to acquire certificate to get benefits which was cumbersome.

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