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{“@context”:”https://schema.org”,”@type”:”FAQPage”,”mainEntity”:[{“@type”:”Question”,”name”:”What is the definition of a startup in India?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”According to the DPIIT (Department for Promotion of Industry and Internal Trade) notification dated 19 February 2019, a Startup is an entity incorporated or registered in India: not older than 10 years from the date of its incorporation, with annual turnover not exceeding ₹100 crore in any previous financial year, and working towards innovation, development, or improvement of products, processes or services.”}},{“@type”:”Question”,”name”:”Which business structures qualify as startups?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”The following entities can be recognised as startups by DPIIT: Private Limited Companies (under Companies Act 2013), Registered Partnership Firms (under Indian Partnership Act 1932), and Limited Liability Partnerships (LLPs). Sole proprietorships cannot be recognised as startups.”}},{“@type”:”Question”,”name”:”What is the tax holiday for DPIIT-recognised startups?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”Under Section 80-IAC of the Income Tax Act, a DPIIT-recognised startup can claim a 100% deduction on profits for 3 out of 10 years from the date of incorporation. The startup must be incorporated between 1 April 2016 and 31 March 2025 (as per current law) to qualify. The deduction can be claimed in any 3 financial years, making it a flexible tax planning tool.”}},{“@type”:”Question”,”name”:”What is angel tax and are startups exempt?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”Angel tax (Section 56(2)(viib) of the Income Tax Act) applies when a company receives share investment at a price higher than the fair market value — the excess is treated as income from other sources. DPIIT-recognised startups are exempt from angel tax on investments from Angel Funds, Venture Capital Funds, AIFs registered with SEBI, and listed companies with a net worth above ₹100 crore — provided the total investment does not exceed ₹25 crore.”}},{“@type”:”Question”,”name”:”How do I get DPIIT startup recognition?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:”Apply through the Startup India portal (startupindia.gov.in). The process is entirely online: create an account, provide company details and incorporation documents, describe the innovative aspect of the business, and submit. DPIIT typically approves recognition within 3–7 working days. Recognition is free of cost.”}}]}
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What is a Startup Company in India: DPIIT Definition, Eligibility and Benefits
In India, “startup” has a precise legal definition under the DPIIT (Department for Promotion of Industry and Internal Trade) framework — not the colloquial use of the word. Only entities that meet the official criteria and receive DPIIT recognition can access the tax exemptions, angel tax waivers, government scheme access, and self-certification benefits that the Startup India initiative provides. This guide covers exactly what qualifies as a startup, how to get recognised, and what benefits flow from recognition.
Key Takeaways
- DPIIT defines a startup as an entity not older than 10 years with annual turnover ≤ ₹100 crore.
- Must be a Pvt Ltd Company, LLP, or Partnership — not a sole proprietorship.
- Section 80-IAC gives a 100% profit deduction for 3 of the first 10 years.
- DPIIT-recognised startups are exempt from angel tax on qualifying investments.
- DPIIT recognition is free and processed online via startupindia.gov.in in 3–7 days.
In This Article
- What is the official DPIIT definition of a startup in India?
- What are the eligibility criteria for startup recognition?
- What is the Section 80-IAC tax holiday for startups?
- What is angel tax and how are startups exempt?
- What other benefits come with DPIIT startup recognition?
- How do you apply for DPIIT startup recognition?
- How can Tradeviser help you with startup registration and benefits?
What is the official DPIIT definition of a startup in India?
The DPIIT notification dated 19 February 2019 (amended subsequently) defines a Startup as an entity incorporated or registered in India that:
- Has not completed 10 years from its date of incorporation or registration
- Has annual turnover not exceeding ₹100 crore in any financial year since incorporation
- Is working towards innovation, development, or improvement of products, processes, or services, OR has a scalable business model with high potential for employment generation or wealth creation
Merely being a new business or small company is not sufficient — the innovation/scalability element is mandatory for recognition.
What are the eligibility criteria for startup recognition?
| Criterion | Requirement |
|---|---|
| Entity type | Private Limited Company, LLP, or Registered Partnership Firm only |
| Age of entity | Not more than 10 years from date of incorporation |
| Turnover | Annual turnover ≤ ₹100 crore in all years since incorporation |
| Innovation / scalability | Working on innovation / development / improvement or has a scalable business model |
| Not formed by splitting | Entity must not be formed by splitting or reconstructing an existing business |
What is the Section 80-IAC tax holiday for startups?
Under Section 80-IAC of the Income Tax Act 1961, a DPIIT-recognised startup can claim 100% deduction on profits for any 3 years out of the first 10 years from the date of incorporation. Key conditions:
- Entity must be a Private Limited Company or LLP (not a Partnership)
- Must be incorporated between 1 April 2016 and 31 March 2025 (as per current law; the end date may be extended)
- Eligible for a 3-year holiday, which can be chosen across any 3 years within the first 10 years — the company can defer claiming to high-profit years
- The deduction is on profits (business income) — losses still carry forward as usual
What is angel tax and how are startups exempt?
Angel tax (Section 56(2)(viib)) applies when a closely held company receives an investment at a price exceeding the fair market value of its shares — the excess is taxed as “income from other sources” in the hands of the company. This was a significant burden for early-stage startups raising angel funding at high valuations.
DPIIT-recognised startups are exempt from angel tax provided:
- The startup has obtained DPIIT recognition before receiving the investment
- The total investment (aggregate) does not exceed ₹25 crore
- The investment comes from a Category I or II AIF registered with SEBI, or a listed company with net worth ≥ ₹100 crore or turnover ≥ ₹250 crore
What other benefits come with DPIIT startup recognition?
- Self-certification for labour laws: Recognised startups can self-certify compliance with 9 labour laws for up to 5 years
- Fast-tracked patent filing: 80% discount on patent filing fees; dedicated IP facilitation cell
- Fast-tracked trademark registration: Startups get fast-track examination of trademark applications
- Insolvency and Bankruptcy Code: Recognised startups have a simplified winding-up process — liquidation within 90 days
- Government procurement: Eligible to participate in government tenders without prior turnover or experience criteria
How do you apply for DPIIT startup recognition?
- Go to startupindia.gov.in and create an account
- Click on “Get Recognised” and start the application
- Provide company details: CIN, PAN, incorporation date, entity type, sector
- Upload Certificate of Incorporation and describe the innovative product/process/service in the text field
- Submit — DPIIT processes and issues recognition within 3–7 working days
- Download the DPIIT Recognition Certificate — use it to access all startup benefits
How can Tradeviser help you with startup registration and benefits?
Tradeviser helps startups incorporate as a Private Limited Company (the most common vehicle for DPIIT recognition), file for DPIIT recognition, and claim Section 80-IAC deductions and angel tax exemptions at the right time in the right financial year.
Incorporate and Get DPIIT Startup Recognition
Tradeviser handles Private Limited Company incorporation, DPIIT recognition application, 80-IAC deduction planning, and angel tax exemption compliance — end to end.
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