Changing format
There is good news for start-ups. The Indian Government has slightly changed the definition of what constitutes a start-up. Now on, an entity will be considered a start-up for up to 7 years compared to 5 years earlier. For companies in the bio-technology sector, the period is 10 years. This period is to be calculated from the date of registration or incorporation.
That is not all. A business can qualify as a start-up only if it is working towards "innovation, development, or improvement of products or processes or services", or “if it is a scalable business with a high potential to generate employment,” states a notification by the Department of Industrial Policy & Promotion (DIPP). This would mean the products or services that will be developed by a company need to be innovative, commercially viable and scalable for the company to be recognised as a start-up.
The need for a start-up to provide a letter from an incubator or industry association to be recognised as a start-up, as was in place earlier, has also been done away with.
These changes are aimed at bringing in more companies under the start-up ecosystem. The Start-up India initiative launched in January 2016 says that recognised start-ups can avail a three-year tax holiday in the first seven years of their existence. The amendment will help more companies to be recognised as start-ups and avail tax benefits.