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What is a Startup?

The Indian Government has expanded the definition of what consists of a startup. The definition now consists of a venture which is as old as seven years, and the norms for tax benefits have also been relaxed. Earlier, the definition included a venture which was as old as five. It has included the potential of employment generation so as to give a push to the entrepreneurship development and to job creation. The overall age limit for all startups has been increased to seven, but the same has been increased to ten for Biocon companies. Another major change is the removal of the requirement of the recommendation letter in order to be eligible for tax benefits. These changes are in an effort to ease up the starting up of a new business and to create an economy of job creators instead of job seekers. 

The scope of the definition of a startup was also broadened in order to include the scalability of the business model. Since the launch of the Startup India Action Plan, various incentives have been provided to the startups in order to facilitate an easy incorporation and functioning. Any entity having a scalable model with a high potential for job creation is now eligible for recognition as a startup. Earlier, only if the activity of the entity was innovative and driven by technology, it was considered as a startup. This definition had restricted many companies due to the non-tech aspect. Various startups remained left out, because they were not driven by technology. This expansion of the definition will allow additional entities to be a part of the startup culture and avail the tax benefits.

Entities in the non tech space will be benefitted by the definition expansion. It will allow more entities, who are actively involved in job generation to avail the tax benefits and be considered as a startup. The online process of application will also be useful and will allow quick processing of the same. Although the Government will need to clarify if the assessment will be made on a case to case basis or will it be applied without any exceptions. The amendment of the definition is seen as a welcome change for the entities that remained left out due to various aspects. The Finance Act provides a tax exemption to the startups for a period of three years in a block of five years, if they are incorporated between April 1, 2016 and March 31, 2019. The budget then expanded the period to three years in a block of seven years. According to the statistics, 932 entities have been recognized as startups till date. With the expansion of this definition, many entities will be registered as startups and will be able to avail additional tax benefits. The extension of the period of incorporation in order to be recognized as a startup has been a welcome change for many entities. The Government is taking small steps to achieve the goal of higher job creation and encourage ‘Make in India’

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