Definition of “start-up” as per the latest start-up Notification No. GSR 127(E), dated 19.02.2019

As per the latest start-up Notification No. G.S.R. 127(E), dated 19.02.2019 has been issued to revise definition of startups and for startups to get exemptions on investments u/s 56(2)(viib) of Income Tax Act. An entity will be treated as a Startup now upto 10 years from date of incorporation if its turnover has not exceeded Rs.100 crore in a year. An entity will be treated as a startup now upto 10 years from its date of incorporation/registration instead of the existing 7 years and if its turnover has not exceeded Rs. 100 Crore instead of existing INR 25 Crore in a year.

In terms of Para 1(a) of the latest start-up Notification, an entity shall be considered as a “Startup” for the purpose of Start-up India scheme:

  1. If it is incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India.
  2. It hasn’t completed 10 years from the date of its incorporation/registration.
  3. Its turnover for any of the financial years since incorporation/registration has not exceeded INR 100 crores.
  4. If it is working towards innovation, development or improvement of products or processes or services, or if it is scalable business model with a high potential of employment generation or wealth creation.

Note: An entity formed by splitting up or reconstruction of a business already in existence shall not be considered a “Startup.”

An entity shall cease to be a startup on completion of ten years from the date of its incorporation/registration or if its turnover for any previous year exceeds one hundred crore rupees.

Thus, in order to be treated as a “Start-up”, the entity has to satisfy the following conditions:

  • It is incorporated or registered in India
  • Date of its incorporation is immaterial-it does not matter whether it was incorporated before date of latest notification i.e. 19.02.2019 or on after that date.
  • It is a registered partnership firm or limited liability¬† partnership or¬† private limited company.
  • It has not completed 10 years from the date of its incorporation or registration.
  • Its turnover for any of the financial years since incorporation/registration has not exceeded INR 100 Crores.
  • It is working towards innovation, development or improvement of products or processes or services,OR it is a scalable business model with high potential of employment generation and wealth creation.
  • Entity not formed by splitting up or reconstruction of a business already in existence.
  • An entity shall cease to be a Startup on completion of ten years from the date of its incorporation/registration or if its turnover for any previous year exceeds one hundred crore rupees.

START UP INDIA SCHEME

Start up India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of start-up businesses, to drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower start ups to grow through innovation and design. Several programs have been under taken since the launch of the (more…)

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