Startup Registration in India: Schemes, Features, Benefits, Eligibility

Starting a business in India can be a rewarding venture, as the country’s thriving entrepreneurial ecosystem and large consumer market help push even small ventures forward. However, navigating the legal and regulatory requirements can be challenging, especially for startups as there are several crucial steps to follow when registering a startup in India.

The Startup India scheme

The Indian government’s Startup India program was unveiled on January 16, 2016. The Startup India Initiative has launched a number of initiatives to aid business owners, create a thriving startup environment, invent, and change India into a nation of job creators rather than job seekers. The Department for Industrial and Policy and Promotion (DPIIT) receives reports from the Startup India team, which oversees the programme.

Benefits of Startup India Registration

• Legal recognition and protection: A company established is a distinct legal entity from you. As a result, you can do business, hire employees, and enter into agreements in your company’s name. Also, it protects you from civil or criminal liability on you as a company is a different entity.
• Increased credibility with clients and business associates: Registering your company raises its reputation with clients and associates. It reflects your commitment to your company and the fact that you have made the required preparations to secure its validity and legality. 
• Benefits of government incentives and programs: You must register your startup and meet all the eligibility requirements to receive all the benefits. The Indian government has developed several incentives and programs for startups. 
• Possibility of obtaining funding from investors: if you register your startup you can get the opportunity to obtain funding from investors, which is essential for the expansion and development of your company. Investors prefer to invest in registered companies because it gives them a sense of transparency and security.
• Tax exemptions and advantages: If you register your startup, you may be eligible for several tax advantages and exemptions U/s 80IAC and U/s 56 relief for Angel Tax relief (Tax on Share Premium). These can help you increase your profits by paying less tax.
• Possibility of an acquisition and easier exit: Startup registration makes it simpler to depart or sell it in the future. It is simpler to transfer ownership or sell your company when it is a registered company because they have a transparent ownership structure.

Eligibility criteria of a startup under the Startup India Scheme

• Age requirement: Applicants must fall within the age range of 18 to 65 years.
• Eligible entity types: The applicant can register as a private limited company, a registered partnership firm, or a limited liability partnership.
• Annual turnover limit: The annual turnover should not exceed Rs 100 crore. A company retains its startup status as long as its annual turnover remains below Rs 100 crore in any of the ten years. It’s worth noting that the Indian government recently increased this turnover threshold from Rs 25 crore.
• Startup duration: A company qualifies as a startup for the initial ten years following its registration date. The Indian government has increased that from seven to ten years in order to provide chances and tax advantages for businesses in the long run. Applicant should not have defaulted with any financial institution in the past.
• DIPP approval: The company should have approval from the Department of Industrial Policy and Promotion (DIPP).
• Funding: An Incubation Fund, an Angel Fund or a Private Equity Fund must fund the company. All the funding details must be registered with SEBI.

Startup India registration process

Step 1: Establishing your business

The first thing you need to incorporate is your business as a Private Limited Company or a Partnership firm or a Limited Liability Partnership. Further you need to follow the normal procedure that includes filling up a form to get your company registered. The startup registration process includes obtaining the company’s PAN, certificate of incorporation or certification of partnership registration. The process of registering a company includes obtaining a Director Identification Number (DIN), a Digital Signature Certificate (DSC), and submitting the required paperwork to the Registrar of Companies (ROC).

The applicant can visit the MCA portal and apply for the startup registration process.

Step 2: Startup Registration in India under the Startup India Scheme

Now you need to register your company or firm as a startup in the Startup India scheme of the government. You need to visit the official website of Startup India and fill in the startup registration application form online followed by all the required business details and finally upload certain documents.

Upon creating your profile on the website, your company gains the ability to apply for various acceleration programs, mentorship initiatives, and challenges featured on the platform. Furthermore, you’ll have access to valuable resources such as the Learning and Development Program, State Policies for Startups, Government Schemes, and pro-bono services.

Step 3: Upload the necessary documents in PDF format

Ensure that you upload the required documents in PDF format exclusively.

Select one of the following recommendation letter options, as you will need this letter in conjunction with the registration form:

Letter of Support / Recommendation:

• A recommendation letter issued by an incubator affiliated with a post-graduate college in India, following the format specified by the Department of Industrial Policy and Promotion (DIPP).
• A letter from any of the Incubators recognised by the Government of India, in the prescribed DIPP format.
• A recommendation letter from an incubator supported by the Government of India through specific schemes aimed at promoting innovation.
• A letter demonstrating funding of no less than 20% in equity from an Incubation Fund, Private Equity Fund, Angel Fund, or Accelerator registered with SEBI, validating the innovative nature of your business.
• A recommendation letter from the Central or any State Government of India.
• A patent filed and published in the Journal of the Indian Patent Office in areas relevant to the nature of the business being promoted.

Registration / Incorporation Certificate: Upload the certificate of incorporation for your company or the registration certificate for a partnership company structured as an LLP. Please note that a registration certificate is mandatory.

Business Description: Provide a comprehensive and detailed description of your business’s nature.

These steps are crucial for a successful application and participation in various programs and opportunities available through the platform.

Step 4: Mention if you want tax benefits

In India, startups are tax-exempt for the first three years. To avail of such benefits your Startups must be certified by the Inter-Ministerial Board (IMB). Those startups that the Government of India and  DIPP recognise can get IPR benefits without taking any additional certificate from IMB.

Step 5: To qualify for startup registration, you must fulfil the following self-certified conditions

1. Choose the appropriate legal structure for your enterprise, such as a Private Limited Company, Limited Liability Partnership, or Partnership Firm.

2. Ensure that your business is legally registered or incorporated in India, with no more than five years elapsed since its registration.

3. The annual turnover should be between the range of Rs. 25 crore to Rs. 100 crore.

4. Demonstrate a commitment to continuous innovation, either by introducing novel concepts or by uniquely enhancing existing systems.

5. Ensure that you build your business on fresh and original ideas, distinct from the division or reconstruction of any existing business.

Step 6: Finally you can get your recognition number.

• Once you have completed the Startup India registration process including all the necessary documents, you will get a recognition number with immediate effect. You will get the certificate of incorporation or registration only after the authority goes through all your uploaded documents. 
• You need to be careful while uploading the data, as any wrong documents in it can cause you a huge fine of up to 50% of the paid-up capital of your company or a minimum fine of Rs 25,000.
• Once you get the recognition number, you can apply for trademarks, patents and design registration by approaching any of the facilitators issued by the Government of India.
• Start-ups approved by DIPP are eligible to get IPR benefits without any approval from IMB. Consult a lawyer in case you need a patent or copyright for your business. You will need to pay the legal fees. You can get an 80% reduction on the registration fees for intellectual property.

Now that you are aware of the requirements for startup eligibility and registration, you may enlist your business in the Startup India programme and take advantage of all the government-sponsored perks.

Documentation Needed for Startup India Registration Process

To initiate the Startup India registration process, you will need to provide the following essential documents and information:

1. Business Entity Registration Certificate or Certificate of Incorporation.

2. Memorandum of Association or Articles of Association (for LLP or partnership firms).

3. A duly completed application form containing necessary details, including your email ID and mobile number.

4. Passport-size photographs.

5. Certificate of Registration/Incorporation and PAN (Permanent Account Number).

6. Company particulars, including the office address, nature of business, industry sector, etc.

7. Information about Directors and Partners, including names, photo IDs, gender, addresses, etc.

8. The entity’s social media profile or website link.

9. Any Intellectual Property Rights (IPR) related information, if applicable.

10. Details about funding received, in case the entity has secured investments.

11. A list of awards or certificates of recognition received, if applicable.

Ensuring that you have these documents and information readily available will facilitate a smooth Startup India registration process.

Features of Startup India Registration

• Streamlined Compliance: The Startup India Action Plan introduces a Compliance Regime that relies on Self-Certification. The primary objective is to reduce the regulatory burden on startups. This means that startups can self-certify their compliance with certain regulations, which reduces paperwork and bureaucratic hurdles, allowing them to focus on their core business activities.
• Centralized Support Hub: The Startup India Hub serves as a centralized point of contact for the entire startup ecosystem. Its primary purpose is to facilitate knowledge exchange and collaboration among startups.
• Digital Engagement Platform: To enhance communication between startups and government/regulatory institutions, the scheme launched a Mobile App and Portal. This digital platform offers a single interface for startups to interact with the government, making it easier to access information, submit documents, and address regulatory requirements.
• Startup Showcases: Startup India organises a startup fest to showcase innovative solutions and create a platform for collaboration. These events provide startups with national and international visibility, attracting investors, partners, and customers.
• Innovation Centres: Innovation Centres are established at National Institutes to bolster innovation. These centres facilitate incubation and collaborative research and development efforts, fostering a culture of innovation and entrepreneurship.
• Research Parks: Seven new Research Parks, inspired by the successful model at IIT Madras, are set up. These parks aim to drive innovation through incubation and joint research and development efforts, bridging the gap between academia and industry.

Schemes for startups initiated by the Indian Government

Through a number of measures, the Indian government is actively trying to establish a startup environment there. The creation of a ministry or agency that supports and advertises new firms is one of the initiatives. The Indian Central Government has also introduced a variety of startup programmes to encourage entrepreneurship in the country by providing cash to start-up companies. These programmes are designed to help startups expand by giving them the resources and assistance they need to succeed in a cutthroat business environment.

Here are some schemes launched to encourage and develop startups in India.

ATAL Innovation Mission (AIM)

In order to give innovation development and research more attention in India, the Indian government established the Atal Innovation Mission in 2015. AIM is carried out by the Department of Science and Technology with funds provided by the Indian government for its first stages. In 2015, the government gave AIM 150 crores. The objective is to provide a forum for discussion between business, academia, and government in order to encourage partnerships and support their ideas.

Pradhan Mantri Mudra Yojana (PMMY)

The Pradhan Mantri Mudra Yojana is an Indian startup funding programme designed to offer credit for small businesses. It debuted in April of 2015. The PMMY is a government project that supports and finances businesses with the potential to give Indians more possibilities to earn money and find work.PMMY offers accessible financing to businesses so they can launch, expand, and grow their operations. For different borrowers and business kinds, these loans are classified into categories like Shishu, Kishore, and Tarun:

1. Shishu – Loans up to ₹50,000.
2. Kishore – Loans of over ₹50,000 and below 5 lakh.
3. Tarun – Loans over 5 lakh and below 10 lakh.

Startup India Seed Fund (SISF)

The SISF (Startup India Seed Fund) program has a primary objective of offering financial support to startups throughout various critical stages of their development, including prototype creation, proof of concept, market-entry, product trials, and commercialisation. This initiative, proposed and supported by the government, signifies a substantial commitment to fostering entrepreneurship in India. Its ultimate aim is to level the playing field for new startups, enabling them to compete effectively with larger corporations and cultivating a conducive environment for emerging businesses and investments.

Through the implementation of this scheme, the government intends to facilitate a seamless process for startups to establish their enterprises. This strategic approach is anticipated to yield positive outcomes, particularly in terms of job creation and economic growth across the nation. As an indicator of its commitment, the Union Budget for 2022 has allocated a substantial fund of Rs 283.5 crore to the Startup India Seed Fund initiative, significantly surpassing the previous year’s revised estimate of approximately Rs 100 crore for the fiscal year 2021-22.

Venture Capital Assistance (VCA)

The Small Farmer’s Agri-Business Consortium (SFAC) introduced the Venture Capital Assistance (VCA) scheme to offer interest-free loans to eligible projects. These loans bridge the capital gap for projects with significant potential to evolve into successful ventures.

This initiative has gained widespread recognition both within India and on the global stage as an innovative financial support program for small-scale industries in the country. The VCA scheme actively encourages the training and development of entrepreneurs, further enhancing its impact on fostering business growth and innovation.

Credit Guarantee Trust Fund for Micro and Small Enterprises (CGT-MSE)

The Credit Guarantee Trust Fund for Micro and Small Enterprises (CGT-MSE) stands as one of India’s most significant startup funding initiatives. Its primary objective is to facilitate access to business loans for micro-enterprises, small-scale businesses, and startups, all without the requirement of collateral.

Through this program, eligible Micro and Small Enterprises (MSEs) have the opportunity to secure funding, with a maximum cap of up to Rs. 1 crore. The collaborative efforts of the Ministry of MSME and the Small Industries Development Bank of India (SIDBI) make this financing available. While predominantly designed to support manufacturing units, beneficiaries can choose between utilizing the loan as working capital or opting for a term loan, depending on their specific business needs.

Credit Linked Capital Subsidy (CLCS)

The Indian Government initiated the Credit Linked Capital Subsidy Scheme (CLCS) to enhance technology and productivity within the MSME sector, thereby bolstering their global competitiveness.

Through the CLCS program, small-scale industries receive direct financial assistance for the acquisition of new machinery and equipment on a self-sustained basis. Additionally, they can access funds to engage consultants for technology upgrades and plant productivity enhancements.

Multiplier Grants Scheme (MGS)

The Multiplier Grant Scheme (MGS) is designed to foster collaborative research and development partnerships between industry and academia. Within this framework, when the industry lends its support to the research and development of products with potential for institutional-level commercialisation, the government extends financial backing, which can amount to twice the industry’s contribution. Financial support provided through the scheme is capped at a maximum of ₹2 crores per project, and each project typically has a duration of less than 2 years.

New Generation Innovation & Entrepreneurship Development

To foster and encourage entrepreneurial drive among our nation’s youth, the Indian government introduced the New Generation Innovation and Entrepreneurship Development Scheme. This initiative aims to inject fresh vitality into the economy, leading to job creation, wealth generation, and a significant boost in economic activity across the nation. The core objective of this scheme is to address the various challenges encountered during the early phases of a startup, thereby providing vital support to budding entrepreneurs.

Conclusion

Starting and registering a startup in India is a multi-step process that requires careful planning and compliance with various legal and regulatory requirements. Choosing the right business structure, obtaining the necessary licenses and registrations, and adhering to labour and tax laws are essential steps for a successful startup journey in India.

It’s vital to keep in mind that while our guide covers the main features of startup registration in India, exact criteria and rules may change based on the state and industry you operate. Therefore, it’s advisable to consult with legal and financial professionals who specialise in startup registration to ensure that you navigate the process smoothly and stay compliant with all applicable laws and regulations.

With the right guidance and a clear understanding of the Startup India registration process, you can embark on your entrepreneurial journey in India with confidence, knowing that your startup is built on a strong foundation.

We, here at FlexiLoans, are committed to helping able entrepreneurs like yourself access the finances you need for your invaluable business. Through FlexiLoans’ range of online business loans, we aim to reach and fund budding entrepreneurs across the country. Whatever it is you are looking for, be it unsecured business loans, MSME loans, or even business loans for women, we have got you covered! You can apply for our loans from anywhere in the country through our 100% online application process and take advantage of our “Loans at a Click”! Apply now, and start your journey with your new business finance partner: FlexiLoans!

FAQs

Q. 1) Who can register for the Startup India scheme?

Ans: To be eligible for the Startup India registration, your company structure must be either a Private Limited Company, Partnership Firm, or Limited Liability Partnership. Furthermore, these businesses must meet specific criteria, including having an annual turnover not exceeding Rs. 100 crores and a history of up to ten years from their date of incorporation or registration. The goal of such an organisation should be the invention, development, or improvement of goods, services, or procedures.

Q. 2) How can I get funding for my startup?

Ans: To entice potential investors, it’s essential to have a standout product with a scalable business model. Equally important is gaining visibility for your product and achieving strong user engagement and traction. Registering your startup with Startup India can enhance your credibility. Ensure that you can clearly explain your business concept to potential investors and the viability of your business model.

Apart from investors, you can even get funding through options like business loans, MSME loans or loans for small businesses. Several financial institutions around the country, like FlexiLoans, offer these loans online.

Q. 3)What are the benefits of registering with Startup India?

Ans: Enrolling in the Startup India Initiative offers several perks to startups, but it’s essential to first obtain recognition from the DPIIT as a startup. They enjoy a three-year tax exemption and access to top-notch intellectual property services and resources specifically designed to assist startups in safeguarding and monetising their intellectual property rights.

Q. 4)How long has a company been recognised as a startup?

Ans: A company retains its startup status until it reaches the milestone of ten years from its date of incorporation/registration or exceeds the previous year’s turnover of Rs. 100 crores, at which point it ceases to be classified as a startup.

Q. 5) Is startup registration necessary in India?

Ans: Absolutely, yes. To avail of the benefits provided by the Startup India program and register as a startup, it’s required to have at least one registered office located in India.

Q. 6) What is the registration cost for a startup in India?

Ans: The registration fee for a startup is contingent upon the specific type of company registration and may differ from one individual or entity to another.

Q. 7) Is it possible for a foreign company to register in the Startup India initiative?

Ans:  Indeed, a foreign national has the option to establish a partnership under the LLP Act and subsequently register under the Startup India program. However, the government soon intends to begin registering participants in the global ecosystem as well.

Q. 8) Which registration is best for a Startup?

Ans:  Private limited companies are often considered the best candidates for startup registration in India.

Q. 9)How can I confirm the successful completion of my registration?

Ans: Upon completing the application process and securing startup recognition, you will receive an automatically generated certificate of recognition. You can download this certificate directly from the Startup India portal.

Q. 10) How do accelerators and incubators differ?

Ans: Startup incubators are generally organisations specialising in nurturing entrepreneurs and their businesses, primarily during the early stages of development. These institutions often possess extensive experience in both the business and technology sectors.

Startup accelerators, on the other hand, focus on assisting early-stage companies with rapid growth potential. These programs typically have a specific timeframe during which participating companies collaborate with a team of mentors, who often provide both guidance and potential financial support, for a duration that can range from several weeks to several months.