DIPP comes out with fresh notification on definition of start-ups

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CHENNAI, APRIL 12: Department of Industrial Policy and Promotion (DIPP), under the Union Ministry for Commerce & Industry, has come out with a new notification on definition of start-ups
According to the notification, an entity shall be considered as a start-up up to a period of 7 years from the date of incorporation/registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under Section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India.
In the case of start-ups in the biotechnology sector, the period shall be up to 10 years from the date of its incorporation/ registration, it added.
The notification also said that the turnover of the entity for any of the financial years since incorporation/ registration should not exceed ?25 crore.
The definition also said that the entity should be working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation. However, an entity formed by splitting up or reconstruction of an existing business shall not be considered a ‘start-up’.
“An entity shall cease to be a start-up on completion of 7 years from the date of its incorporation/ registration or if its turnover for any previous year exceeds ? 25 crore. In respect of start-ups in the biotechnology sector, an entity shall cease to be a start-up on completion of 10 years from the date of its incorporation/registration or if its turnover for any previous year exceeds Rs 25 crore ,” it added.
A start-up shall make an online application over the mobile app or portal set up by the Department of Industrial Policy and Promotion for recognition, it added.
The notification also said that a start-up being a private limited company or a limited liability partnership incorporated on or after 1st day of April 2016 but before 1st day of April 2021, can claim 100% tax exemption on profits for 3 out of 7 years, as per the prescribed norms.
The notification also provided tax relief for issue of shares by start-ups over the fair market value, with certain conditions.
For availing the tax relief for issue of shares over the fair market value, the aggregate amount of paid-up share capital and share premium of the start-up after the proposed issue of shares should not exceed ? 10 crore.
Further, the investor/proposed investor, who proposed to subscribe to the issue of shares, should either have an average returned income of ? 25 lakh or more for the preceding 3 financial years or net worth of ?2 crore or more as on the last date of the preceding financial year.
The start-up had to obtain a report from a merchant banker specifying the fair market value of shares in accordance with rules, it said.(Courtesy: The Hindu)