Startup India scheme decoded: Funding, eligibility and benefits for budding entrepreneurs

Launched in 2016, the Startup India initiative aims to catalyse entrepreneurship, spur innovation, and position India as a global startup hub. By easing compliance, offering tax incentives, supporting funding access, and simplifying regulatory processes, the scheme supports new ventures in building scalable businesses, generating jobs, and driving sustainable economic growth.

Eligibility criteria for startups

• Entity type: The business must be incorporated as a Private Limited Company, a Registered Partnership Firm, or a Limited Liability Partnership (LLP).
• Age of company: The entity should be less than 10 years from the date of incorporation.
• Turnover threshold: Annual turnover must not have exceeded ₹100 crore in any previous financial year.
• Innovation and scalability: The venture should focus on innovation, development or improvement of products, processes, or services, or have a scalable business model with significant potential for employment generation and wealth creation.
• No restructuring: The entity must not have been formed by splitting up or reconstructing an existing business.

Funding support and loan access

A key financial pillar of the initiative is the Fund of Funds for Startups (FFS), with a corpus of ₹10,000 crore. Managed through professional fund managers, the FFS does not invest directly in startups; instead, it invests in SEBI-registered Alternative Investment Funds (AIFs), which then evaluate and invest in eligible startups. This approach channels capital to high-potential ventures across sectors and stages.

In addition to equity financing, startups may access loans and credit guarantee support to help overcome collateral constraints commonly faced by early-stage businesses. The amount and form of financing typically depend on the startup’s stage, sector, traction, and growth prospects. Founders usually secure funding by pitching to AIFs supported by the FFS and by approaching banks, NBFCs, or incubators for debt or seed support.

Key benefits and features

• Tax incentives: Eligible startups can apply for an income tax exemption for three consecutive financial years within a specified period, subject to applicable conditions. Certain capital gains tax exemptions are also available under specific scenarios.
• IPR support: Startups receive significant rebates on patent filing fees and benefits such as fast-tracked examination, along with access to facilitators for intellectual property.
• Compliance ease: Recognised startups can self-certify compliance under select labour and environmental laws for a limited period, lowering the cost and complexity of regulatory adherence.
• Faster exit: Simplified and time-bound closure mechanisms help startups wind down operations more efficiently if needed.
• Mentorship and networks: The ecosystem offers access to incubators, accelerators, mentors, and investors, fostering knowledge-sharing and market connections.

How to register your startup

1. Incorporate your entity as a Private Limited Company, LLP, or Registered Partnership Firm.
2. Prepare documentation: Certificate of Incorporation/Registration, details of founders and capital structure, and a brief write-up on your product/service, innovation, and scalability.
3. Apply for recognition: Submit your application for startup recognition with required details and declarations. Upon approval, you receive recognition that enables access to various benefits.
4. Apply for specific benefits as applicable: For example, tax exemptions may require separate certification; funding will involve approaching AIFs, banks, or incubators with your pitch and financials.

Best practices to strengthen your case

• Articulate innovation clearly: Highlight the problem you solve, your unique approach, and measurable improvements over existing solutions.
• Show traction and scalability: Document user growth, pilots, revenues, partnerships, or IP filings that signal market fit and growth potential.
• Maintain compliance: Keep statutory filings, accounting records, and cap tables updated to streamline diligence for grants, loans, or VC funding.
• Leverage IPR support: File for patents or trademarks early where relevant to protect your competitive edge.
• Engage with incubators and mentors: Guidance can refine your strategy and improve funding readiness.

FAQs

1. How can a company sign up under the Startup India initiative?

After incorporating your entity, apply for startup recognition by submitting documents such as the Certificate of Incorporation and a brief on your business model and innovation. Once recognised, you can pursue specific benefits like tax exemptions or funding through relevant channels.

2. Does every startup get funding under the scheme?

No. Funding is not automatic. Investments depend on the quality of the business model, scalability, traction, and evaluation by SEBI-registered funds supported by the Fund of Funds, as well as by lenders or incubators for debt or seed support.

3. Can service-based startups benefit from the scheme?

Yes. Service-focused ventures are eligible if they meet the criteria on innovation, scalability, and employment or wealth creation potential, and comply with other eligibility requirements.

The Startup India scheme continues to evolve, offering a robust platform for founders to innovate, scale, and contribute to nation-building. By aligning with the eligibility criteria, preparing strong documentation, and engaging actively with investors and mentors, budding entrepreneurs can make the most of the opportunities it offers.