The definition of a startup in India has finally been tweaked. After the Department of Industrial Policy & Promotion (DIPP) invited inputs a few months ago to revise the definition of startups, Economic Times reports that the government has broadened the definition of what constitutes a startup.
According to the new rule, a venture that is seven years old can now qualify as a startup. The government has also relaxed the norms for tax benefits and included employment generation potential to give a push to job creation and entrepreneurship.
Prime Minister Narendra Modi launched the Startup India initiative in 2016 with the intention of boosting entrepreneurship and innovation in India.
In a release on Thursday, DIPP said that these changes are an effort to ensure ease of starting up new businesses to promote the startup ecosystem and build a nation of job creators instead of job seekers.
While the overall age limit has been increased to seven years, for biotechnology firms, it has been increased to 10 years from the date of incorporation. AS the DIPP earlier said, this is to account for the longer gestation period for companies in the biotech sector.
Norms for availing tax benefits have also been eased and the new definition will allow more startups to avail them. According to the initial definition, startups needed to furnish a letter of recommendation from an incubator or industry association to be eligible for recognition under Startup India. This will not be required anymore.
Companies incorporated post March 31 will be eligible for a three-year tax holiday in the first seven years.
ET reports that DIPP has recognised 798 applicants as startups but not given them tax benefits.
The Startup India initiative did not see much traction with only 10 companies getting tax benefits after going through the initial process. Industry representatives sought for the definition to be changed and the process to be simplified. Post this, the DIPP invited suggestions from various industries for an overhaul of the definition of a startup.