Home Founder's Corner Why Should You Apply for DPIIT Startup Recognition?

Why Should You Apply for DPIIT Startup Recognition?

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Do you know over 92,000 Indian businesses have been recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) since the launch of the Startup India initiative in 2016. 
This unique initiative of the government aims to build a strong ecosystem for nurturing innovation and startups to drive sustainable economic growth and the creation of large-scale employment.
The DPIIT recognition brings with it several benefits for the business entity that include:
  1. Tax benefits – A DPIIT-registered startup can avail of an exemption from payment of income tax for three consecutive years out of the first 10 years from the date of its incorporation. This benefit can be availed if the total turnover of the startup in the assessment year for which the deduction is being claimed does not exceed Rs 25 crore.
  2. Access to Government Schemes: Recognized startups gain access to numerous government schemes and programs aimed at fostering innovation and entrepreneurship. These schemes cover areas such as funding, mentorship, incubation, and intellectual property rights protection, which can significantly support a startup’s growth and development.
  3. Networking and Collaboration: Recognition by DPIIT facilitates networking opportunities with other startups, investors, industry experts, and government officials. Startups can participate in events, conferences, and networking sessions organized by the government, enabling them to build valuable connections and partnerships.
  4. Visibility and Branding: DPIIT recognition brings credibility and visibility to startups. Registered startups are listed on the Startup India portal, increasing their visibility among potential investors, customers, and partners. This recognition can enhance a startup’s brand image and increase its chances of attracting investments and collaborations.
  5. Easy Winding-up: Startups recognized by DPIIT can avail of a faster and simplified process for winding up their operations. This helps in reducing the time and effort required to close down a business, enabling entrepreneurs to experiment and take risks without the fear of prolonged legal proceedings.
  6. Long term capital gains: This section relates to tax on long-term capital gains received on the sale of a residential property of an individual. If this amount is invested in a registered start-up the tax is exempted subject to certain conditions. The main condition is that the assesses should have more than 50% of the share capital or voting rights after the investment. Another condition is that the invested amount should be used to purchase assets that cannot be transferred to anyone for five years.

Who Can Apply for DPIIT Recognition?

Businesses or Entities meeting the following eligibility norms can apply for DPIIT recognition:

  • Age- The applicant entity’s period of existence and operations should not be more than 10 years from the date of its incorporation.
  • Structure of Company- The entity should have been incorporated as a Private Limited Company or a Registered Partnership Firm or a Limited Liability Partnership.
  • Annual turnover– The annual turnover of the business should not have exceeded Rs 100 crore in any of the financial years since its inception.
  • Original Entity– The entity should be original and not a result of the restructuring or breaking up of an existing business.
  • Innovative and Scalable– The entity’s goal should be to work towards the development or improvement of a product, process, or service. The business model should be scalable and have the potential to create wealth and jobs.

It’s important to note that DPIIT recognition is not mandatory for all startups. It primarily benefits startups that wish to leverage the various support mechanisms and incentives provided by the government.

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