“What if your start-up is missing out on benefits it is legally entitled to?”
In recent years, India has witnessed a significant shift towards innovation-driven businesses led by Startups, which has resulted in increased Policy Support by Government for entrepreneurs. The Startup India Scheme launched in the year 2016 was a remarkable transformation in the entrepreneurial Ecosystem.
Most of the Entrepreneurs have the idea of inception of business, networking and funding requirements but they lack insights into how government schemes can support their business growth. The success of a start-up is not just driven by innovation—but also by how well it leverages policy support.
Did you know most early-stage start-ups lose valuable tax benefits simply because they are unaware of the Start-up India Scheme?
This article aims to inform readers about the key benefits available under the Start-up India Scheme and their practical significance for start-ups.
The Government of India provides a range of financial, regulatory, and infrastructural benefits to support start-ups under the Start-up India Scheme. These measures, aimed at fostering innovation, easy compliances, and enabling sustainable business growth.
Startups that meet the definition as prescribed under G.S.R. notification 108(E) are eligible to apply for recognition under DPIIT. After getting DPIIT certificate, the startups can claim various benefits.
Various Benefits under Start up India Scheme are summarized below:
1.Tax Benefits
Tax incentives play a key role in the Start-up India initiative, allowing new businesses to improve their cash flow and reinvest in expansion and innovation.
Section 80IAC – Post getting recognition a Startup may apply for Tax exemption under Section 80 IAC of the Income Tax Act.
The Startup can avail tax holiday for 3 consecutive financial years out of its first ten years since incorporation.
Few Eligibility Criteria for applying to Income Tax exemption (80IAC):
- The entity should be a recognized Startup
- Only Private limited or a Limited Liability Partnership is eligible for Tax exemption under Section 80IAC
- The Startup should have been incorporated after 1st April, 2016.
- Startup should be working towards innovation/improvement/scalable model
Previously, DPIIT-recognized startups could apply for exemption from Angel Tax subject to prescribed eligibility conditions. However, pursuant to the Finance Act 2024, the Angel Tax provisions have been abolished with effect from 1 April 2025 to promote startup funding.
2.Startup India Seed Fund Scheme
Startup India Seed Fund Scheme (SISFS) provides financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.
The seed fund is disbursed to selected startups through empaneled incubators across India.
Some of the key eligibility criteria includes:
- The startup should be using technology in its core product or service, business model, distribution model, or methodology to address the targeted problem.
- The startup should not have received more than ₹10 lakh of monetary support under any other Central or State Government scheme (excluding prize money from competitions, subsidized facilities, founder allowances, laboratory access, or prototyping support).
- Shareholding of at least 51% should be held by Indian promoters at the time of application, in accordance with the Companies Act, 2013 and applicable SEBI regulations.
Under the Startup India Seed Fund Scheme (SISFS), financial assistance to eligible startups is provided by incubators in the following manner:
- Up to ₹20 lakh as a grant for validation of proof of concept, prototype development, or product trials. Such grants are generally released in milestone-based instalments linked to progress such as prototype development, product testing, and readiness for market launch.
- Up to ₹50 lakh as investment for market entry, commercialization, or scaling up through convertible debentures, debt, or other debt-linked instruments.
An eligible startup may avail seed funding support once in the form of a grant and once in the form of debt or convertible securities, subject to the scheme guidelines.
3.Credit Guarantee Scheme
The Government of India has introduced the Credit Guarantee Scheme for Startups (CGSS) to facilitate collateral-free debt funding to DPIIT-recognized startups.
Under the scheme, credit guarantees are provided against loans extended by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs), and SEBI-registered Alternative Investment Funds (AIFs) offering venture debt.
Under the revised framework, the guarantee cover has been enhanced, increasing the maximum guarantee limit from ₹10 crore to ₹20 crore per eligible borrower.
The guarantee coverage may be provided on a transaction-based or umbrella-based approach, as specified under the scheme guidelines.
4.Intellectual Property Protection Support
Innovation is the bread and butter of the startups. It is the Driving Force that sustains growth and define the competitive edge. Patents protect novel inventions and technological advancements, while trademarks secure brand names, logos, and distinctive identities.
Start-ups are provided significant support in the form of fast-track examination, cost rebates, and facilitation assistance for intellectual property filings. This not only reduces the financial burden but also encourages early-stage businesses to protect and commercialize their innovations effectively.
PATENT PROTECTION-
- Fast-Track Examination: Expedited review of patent applications to ensure quicker grant.
- Substantial Fee Rebate: Up to 80% reduction in statutory filing fees.
- Facilitator Assistance: Government-appointed professionals to assist in drafting, filing, and prosecution of patent applications.
TRADEMARK PROTECTION-
- Rebate on Filing Fees: Approximately 50% reduction in trademark registration fees.
- Simplified Registration Process: Streamlined procedures for quicker protection of brand identity.
5.Ease in Compliances
Start-ups are permitted to furnish self-declarations of compliance with specified labour and environmental laws through a streamlined online mechanism, thereby significantly reducing regulatory burden and procedural delays.
- Labour Laws – In the case of labour laws, no inspections will be conducted for a period of 5 years. Startups may be inspected only on receipt of a credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.
Consequent to the implementation of new Labour Codes, revised formats for self-certification and related compliance procedures are awaited from the Government.
- Environmental Laws – Start-ups falling under the ‘white category’, as classified by the Central Pollution Control Board, are allowed to furnish such compliance declarations, with oversight limited to periodic or random inspections, thereby balancing ease of doing business with regulatory oversight.
6.Procurement Benefits
Public procurement involves the method through which governments and publicly owned companies acquire products and services from private businesses.
Allowing government tenders to be open to startups enhances the options available to government agencies, as startups are typically more flexible than corporate suppliers and can offer more affordable, innovative products and services.
To facilitate such participation, the Government has developed the Government e Marketplace (GeM), an online procurement platform for government ministries and departments.
MSMEs, DPIIT recognised startups can register on GeM as sellers and sell their products and services directly to government entities.
7. Faster Exit Mechanisms
Start-ups benefit from a faster exit process under the Insolvency and Bankruptcy Code, 2016, which allows them to close their business operations within a condensed period of up to 90 days.
This helps streamline the winding-up process, reduces lengthy legal procedures, and enables entrepreneurs to reallocate resources with less financial and regulatory pressure.
8. Networking and incubation support
Recognized startups get access to:
- Government-supported incubators
- Startup India programs
- Investor connect opportunities
- Mentorship support
Startups that strategically leverage these benefits can strengthen their operational foundation, improve credibility, and accelerate sustainable growth. Therefore, entrepreneurs should look beyond funding and fully explore the wide range of institutional support available under the Startup India initiative.
We at LegalDelight assist startups in securing DPIIT recognition and help them effectively leverage the regulatory, tax, and funding benefits available under the Startup India ecosystem.
Startup India Scheme: Essential FAQs
- What is the Startup India Scheme and who is eligible?
The Startup India Scheme, launched in 2016, is a government initiative providing financial, regulatory, and infrastructural support to foster innovation and sustainable growth. To be eligible for benefits, a startup must meet the definition prescribed under G.S.R. notification 108(E) and obtain recognition from the Department for Promotion of Industry and Internal Trade (DPIIT).
- What tax benefits are available to recognized startups?
Recognized startups can access significant tax incentives to improve cash flow:
Income Tax Exemption (Section 80IAC): Eligible Private Limited companies or LLPs incorporated after April 1, 2016, can avail a tax holiday for three consecutive financial years within their first ten years.
- How does the Startup India Seed Fund Scheme (SISFS) work?
The SISFS provides financial assistance through empanelled incubators for proof of concept, prototype development, and market entry.
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- Grants: Up to ₹20 lakh for validation and prototyping, often released in milestone-based installments.
- Investments: Up to ₹50 lakh for commercialization or scaling through debt or convertible debentures.
- Eligibility: The startup must use technology in its core product/model and have at least 51% Indian promoter shareholding.
- What support is provided for protecting Intellectual Property (IP)?
Innovation is a startup’s competitive edge, and the government provides several protections:
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- Patents: Startups receive an 80% fee rebate, fast-track examination for quicker grants, and assistance from government-appointed facilitators.
- Trademarks: Startups benefit from a 50% reduction in registration fees and simplified procedures.
- How are regulatory compliances simplified for startups?
The scheme significantly reduces the regulatory burden through a streamlined online self-certification mechanism:
Environmental Laws: Startups in the “white category” can furnish compliance declarations with limited oversight via random inspections.
- Can startups sell directly to the government?
Yes. Through the Government e Marketplace (GeM), DPIIT-recognized startups can register as sellers and sell products or services directly to government ministries and departments. This gives them access to government tenders that are specifically open to startups to encourage affordable and innovative solutions.
- What is the “Faster Exit” mechanism for startups?
Under the Insolvency and Bankruptcy Code, 2016, startups benefit from a condensed winding-up process. This allows an entrepreneur to close business operations within 90 days, facilitating a faster reallocation of resources with less legal pressure.
