Startup India Scheme

The Startup India Scheme is a flagship initiative launched by the Government of India on January 16, 2016. It aims at encouraging a robust ecosystem for startups in the country. Recognised startups receive DPIIT certification, tax exemptions under Section 80-IAC, access to the Fund of Funds for Startups (FFS), and simplified regulatory compliance. Its primary goals are to promote innovation, improve entrepreneurship, and create job opportunities, in order to transform India into a business development hub. 

It empowers entrepreneurs and startups through various support mechanisms, including financial assistance, regulatory reforms, and infrastructure development. With this scheme, the government aims to transform India from a country of job seekers to that of job creators. The scheme is managed by a skilled and experienced Startup India team, reporting to the Department for Promotion of Industry and Internal Trade (DPIIT).

Here is a brief overview of the key benefits and features of the Startup India scheme offers to entrepreneurs across the nation: 

Easy and Hassle-free Registration

DPIIT has launched Bharat Startup Knowledge Access Registry (BHASKAR) portal on September 16, 2024. It serves as a platform for startups to register under the Startup India scheme. You can visit https://www.startupindia.gov.in/bhaskar and register for the scheme.

The Startup India registration process is easy and business owners get proper guidelines at every stage. Startups can enjoy legal support at reduced costs, along with relaxed norms for the public procurement process.

Tax Exemption

Startups can receive a 100% tax exemption on profits for a period of 3 years within a block of 7 years. However, for this, they must meet certain eligibility criteria, such as having an annual turnover not exceeding ₹25 Crores.

Financial Support in the Form of Incentives and Funding

The scheme offers financing support to startups through a Fund of Funds(FoF) program under the SEBI-registered Alternative Investment Funds (AIFs). The funding amount can go up to ₹10,000 Crores. Besides, startups can enjoy a Credit Guarantee fund as a part of this initiative

Self-certification

Startups are allowed to self-certify their compliance with 3 Environmental Laws and 6 Labour Laws with a simple online process. No inspection is conducted for a timeline of 5 years in the case of Labour Laws.

Note that the category designation for every startup will be defined by the Central Pollution Control Board (CPCB). 

Patent and IPR Application

The scheme allows fast-tracking of patent applications filed by startups, wherein, the central government bears the entire cost of facilitation fees. Besides, startups can enjoy an 80% rebate when filing patents, helping them manage the initial costs with ease.

Easy Termination Process

Startups can wind up their business transactions within 90 days of filing an insolvency application. Entrepreneurs can also easily relocate their funds to more productive avenues through a simplified process.

The Startup India Scheme extends its benefits to specific types of business entities. To qualify, your organisation must fall under one of the following categories:

• Private Limited Companies: These should be officially registered under the Companies Act, 2013. 

• Limited Liability Partnerships (LLPs): Only those registered under the Limited Liability Partnership Act, 2008 are eligible. 

• Registered Partnership Firms: These must be incorporated in accordance with the Indian Partnership Act, 1932. 
   

In simple terms, startups structured as private limited companies, LLPs, or registered partnership firms can apply for recognition under this scheme.

The Startup India Scheme offers significant tax incentives designed to ease financial pressures on early‑stage ventures and help them reinvest more capital into innovation and growth. Two of the most impactful benefits available to DPIIT‑recognised startups are the Section 80-IAC tax holiday and the Section 56(2) Angel Tax exemption. Together, these provisions strengthen the financial stability of startups during their formative years.
 

Section 80-IAC: 3-Year Tax Holiday

Under Section 80-IAC of the Income Tax Act, eligible startups can claim a 100% tax exemption on profits for any three consecutive assessment years within the first ten years of incorporation. This incentive allows founders to channel a greater share of earnings toward scaling operations and building long-term capabilities.

Key Benefits of Section 80-IAC

• 100% Profit Deduction

Startups can deduct 100% of their profits and gains for any three consecutive years, chosen at their convenience, within the first 10 years of incorporation.

• Improved Cash Flow for Growth

By eliminating tax outflow during the chosen three-year period, startups can reinvest funds into product development, research, talent acquisition, and expansion.

• No Advance Tax Liability

Since the taxable income becomes Nil for these years, startups are exempt from paying advance tax, helping maintain liquidity at critical stages.

• Simple Online Application

The certification required for claiming Section 80-IAC benefits can be applied for online, with no mandatory government fees, enabling an easy compliance experience.
 

Section 56(2): Angel Tax Exemption

The Angel Tax, previously applicable when startups raised funds at a valuation higher than their fair market value (FMV), posed a major hurdle for fundraising. Under the Startup India framework, DPIIT-recognised startups are exempt from this tax u/s 56(2), helping them secure investments more freely.

Key Benefits of Section 56 Exemption

• Full Protection of Capital Raised

The exemption removes tax on investments received above FMV, ensuring that all investor funds remain available for business expansion, as noted by many legal and startup advisory bodies.

• Encourages Early-stage Investments

By eliminating the (approx.) 30.9% tax burden previously levied on such funding, the provision boosts investor confidence and supports a more vibrant startup investment ecosystem.

• Allows Higher Valuations Based on Potential

Startups can raise capital based on future growth prospects, not just current financials, without worrying about tax complications.

Eligibility and Requirements for Claiming These Benefits

To avail exemptions under Sections 80-IAC and 56(2), a startup must meet the following conditions:

• DPIIT Recognition

The entity must be officially recognised as a startup by the Department for Promotion of Industry and Internal Trade (DPIIT).

• Eligible Business Structure

Only Private Limited Companies and Limited Liability Partnerships (LLPs) can claim these tax benefits.

• Incorporation Timeline

The entity must be incorporated on or after April 1, 2016, and must not exceed the prescribed age limits defined for startup eligibility.

• Not Formed by Splitting/Reconstruction

The business should not be created by reconstructing or splitting up an existing enterprise.

Why These Provisions Matter

By reducing tax liabilities during the most vulnerable phases of a startup’s journey, Sections 80-IAC and 56(2) enable founders to retain more capital, focus on innovation, and build a foundation for sustainable long-term growth. These benefits are widely regarded as crucial building blocks that help India’s startup ecosystem thrive and compete globally.

The Fund of Funds for Startups (FFS) is one of the flagship financial support mechanisms introduced under the Startup India initiative. Launched in 2016 with a ₹10,000 crore corpus, the fund was created to bridge the high‑risk capital gap faced by Indian startups and stimulate domestic investment. Managed by the Small Industries Development Bank of India (SIDBI), FFS operates as a “fund of funds”, meaning it does not directly invest in startups, but instead channels capital into SEBI‑registered Alternative Investment Funds (AIFs). These AIFs subsequently invest in DPIIT-recognized startups, ensuring a structured, professionally managed investment flow.

Key Features of the Fund of Funds for Startups

The primary goals of FFS are to:

• Meet the funding requirements of early-stage and growth-stage startups

• Catalyse private sector investments into the Indian startup ecosystem

• Reduce reliance on foreign capital by promoting domestic funding avenues

• Foster innovation, entrepreneurship, and self-reliance, especially in high-risk and technology-driven sectors
   

This vision aligns with the broader national mission of promoting home-grown technologies and indigenous capabilities.

Operating and Monitoring Agencies

• Operating Agency: Small Industries Development Bank of India (SIDBI) is responsible for managing the FFS corpus and committing funds to eligible AIFs.

• Monitoring Agency: The Department for Promotion of Industry and Internal Trade (DPIIT) oversees the strategic direction, implementation, and performance of the fund.
   

Investment Mechanism

FFS follows a catalytic model designed to multiply private investment:

• SIDBI commits funds to SEBI-registered AIFs, which then invest in promising startups.

• Each AIF receiving funds must invest at least twice the contribution made by FFS into DPIIT-recognised startups.

  • For example, if FFS contributes ₹20 crore to an AIF, the AIF must invest at least ₹40 crore into eligible startups.

This ensures a 2x multiplier effect, expanding the reach and impact of government capital.
 

Impact of FFS

The Fund of Funds has played a major role in strengthening India's venture capital pipeline.
As of January 2024:

• SIDBI has committed over ₹10,229 crore to 129 AIFs,

• Which in turn have supported over 939 startups across sectors like fintech, deep tech, SaaS, manufacturing, and clean energy.

This downstream impact illustrates the effectiveness of FFS in enabling capital access for startups that might otherwise struggle to secure funding.
 

FFS 2.0 (Launched February 2026)

In February 2026, the government approved FFS 2.0, a renewed ₹10,000 crore corpus designed to:

• Prioritize deep-tech innovation, including AI, quantum, defence tech, and space tech

• Support innovative manufacturing and R&D-heavy ventures

• Boost startups at early-growth stages, where capital needs spike but investor appetite often dips
   

FFS 2.0 builds on the success of the original fund while expanding its scope to high-impact sectors that align with India’s long-term strategic priorities.

Startup Eligibility for Receiving Investments via AIFs

To be eligible for funding through AIFs supported by FFS, a startup must:

• Be recognised by DPIIT under the Startup India initiative

• Be incorporated for less than 10 years

• Have an annual turnover below ₹100 crore

• Operate as a Private Limited Company or LLP
   

These conditions ensure that the funds reach genuine early-stage innovators aligned with national startup policies.

Why FFS Matters

The Fund of Funds addresses one of the most pressing challenges in India’s entrepreneurial ecosystem, access to high-risk, early-stage capital. By mobilising private investments and encouraging domestic venture funding, FFS:

• Strengthens India’s self-reliance in technology development

• Reduces dependence on foreign institutional investors

• Supports ambitious founders working on breakthrough innovation

• Helps build a robust, globally competitive startup ecosystem
   

Overall, FFS is a cornerstone of the Startup India mission, promoting long-term, innovation-led economic growth.

Submit these documents to register your business under the Startup India Scheme:

• Certificate of Registration or Incorporation of the startup

• PAN card of the company

• Proof of concept, such as a website link or video, if your startup is in its early scaling phase

• Proof of funding, if applicable

• List of recognitions and awards, if any

• Authorisation letter from the authorised company representative

• Certificate of incorporation

• MSME registration, GST registration, Trademark registration certificates (if available)

• Company’s website or profile

• Details of company directors

• Revenue details

To apply for the Startup India Scheme, you must first incorporate your business, then register on the Startup India portal. After registering, you can apply for DPIIT recognition through the portal or the National Single Window System (NSWS). 

Step 1: Incorporate your Business 

• Before applying, you must first legally incorporate your business as a private limited company, LLP, or registered partnership firm. 

• Obtain the necessary documents, such as the Certificate of Incorporation.
   

Step 2: Register on the Startup India Portal 

• Visit the Startup India portal and click on ‘Register’.

• You will be redirected to the Bhaskar portal to create a basic profile.

• Log in to the Startup India portal with your new credentials.

• Complete your profile and set up a password.
   

Step 3: Apply for DPIIT Recognition 

• Log in to your Startup India dashboard. 

• Navigate to the recognition section and select ‘Get Recognised’ or go to the National Single Window System (NSWS) and search for ‘Registration as a Startup’. 

• Fill out the application form and upload the required documents. 

• You can save your progress and return to the application later. 
   

Step 4: Submit and Receive your Certificate 

• After submitting, you will receive an acknowledgment. 

• The certificate of recognition is typically issued within two working days after successful submission with all necessary documents.

Follow this hassle-free process to register your enterprise under the Startup India Scheme:

• Incorporate your business as an LLP, partnership firm or private limited company by filling out a registration application to the ROC (Registrar of Companies) of your region

• Register the business as a startup by visiting the Shram Suvidha portal at https://shramsuvidha.gov.in/signupUser 

• Enter your details, such as name, email ID and mobile number, followed by a verification code

• Click on the ‘Signup’ tab and register your firm on the website

• Log in using the credentials after completing the registration process

• Click on the link ‘Is Any of Your Establishment a Startup?’ after you log in to the portal

• Follow the instructions as mentioned and upload supporting documents along with self-certification before you click on the ‘Submit’ tab
   

Once you submit the required details, DPIIT verifies your information and gives approval if you meet the Startup India Scheme eligibility.

All startups registered under this flagship initiative are eligible for the following tax exemptions:

Tax Exemption Under Section 80IAC

• Startups can be exempted from paying tax for a maximum of 3 consecutive financial years within their first 10 years of inception

• The entity must be a DPIIT-recognised startup to enjoy these tax exemptions

• The startup must be a private limited company or a Limited Liability Partnership entity

• The firm must have been incorporated only after April 1, 2016
   

Tax Exemption Under Section 56

Investments in startups by listed public entities having a net value exceeding ₹100 Crores or a total turnover of more than ₹250 Crores can claim tax exemption. 

• Shares from startups up to a maximum limit of ₹25 Crores will be included within the tax exemption threshold limit

• The firm should be a private limited company to enjoy tax exemption

• The startup must not invest in immovable assets exceeding a limit of ₹10 Lakhs

The Startup India Scheme aims to empower innovative entrepreneurs by offering easier registration, tax benefits, and access to essential government support. It helps startups focus on growth by simplifying compliance and encouraging innovation. Besides government assistance, you can also explore a suitable Business Loan to strengthen your working capital and expand operations. If you have a unique business idea, register under the Startup India Scheme and take the first step towards building a sustainable venture.