The government has notified a definition for start-ups to ensure uniformity in the space. As per the Department of Industrial Policy and Promotion (DIPP), a start-up is a business with a turnover of less than Rs. 25 crore, run by a budding entrepreneur. Such a business will now be able to avail of tax breaks over a five-year period.
The DIPP, expecting businesses to dig up loopholes in this definition, also said that entities formed through splitting or re-construction of existing businesses will not receive the benefit.
“In order to obtain tax benefits a startup so identified under the above definition shall be required to obtain a certificate of an eligible business from the Inter-Ministerial Board of Certification,” DIPP said in a notification.
To be recognised as startups, entrepreneurs would need to submit an application with certain documents, such as a letter of funding of not less than 20 per cent in equity by any fund registered with SEBI that endorses the innovative nature of the business.
On January 16, Prime Minister Narendra Modi unveiled a slew of incentives to boost start-up businesses, offering them a tax holiday and inspector raj-free regime for three years, capital gains tax exemption and Rs 10,000 crore corpus to fund them.