A Complete Guide on DPIIT Certificate of Recognition for Startups

With the increased count of startups in India, the Government has put forward a flagship program to empower the startups, which is known as Startup India Scheme, which launched in 2016. As a developing nation, it's crucial to expand the economy whose best possible method is to fund startups.

Moreover, it benefits the employment rate with innovation in products and services. The government of India has introduced several beneficiary programs for startups, among which this scheme gives DPIIT recognition to the startups. Here arises a question, what exactly is DPIIT?

Basically, DPIIT stands for the Department for Promotion of Industry and Internal Trade. Those startups which get recognition under DPIIT gain many benefits, such as access to a host of tax benefits, IPR fast-tracking, easier compliance, and many more.

The main objective of this Startup India initiative is to reduce the regulatory burden on the startups and to help them expand their core business with low-cost compliance. DPIIT works as the monitoring agency and the Small Industries Development Bank of India (Sidbi), the principal operating agency for funding startups.

This scheme has indeed helped the nation to increase its employment rate. According to the report of March 2020 given by the Commerce and Industry Minister, Goyal Goyal, states that a total of 3,37,335 employment (sic) has been reported by 27,137 DPIIT-recognized startups.

This statistic clearly shows that the DPIIT scheme has benefited the nation. Now, let's move to the main content of this article which is how to gain the DPIIT Certificate of Recognition for Startups.
Let's begin!

Benefits of Registering a Startup With DPIIT
Eligibility Criteria
Documents Required for DPIIT Registration
Applicable Fees for DPIIT Registration
Steps of DPIIT Registration

Benefits of Registering a Startup With DPIIT

This Startup India Initiative is mainly created to reduce the regulatory burden on startups. Therefore, it comes with several benefits through which the Government of India supports the current entrepreneurial ecosystem of the country. These benefits are:

Exemption of Income Tax Act, 1961 under,

1. Section 56(2)(vii)(b): This section talks about the tax that imposes on those companies which receive consideration for share issues exceeding fair market value. Now, the DPIIT registration helps startups to get exemptions under this section. The utmost benefit of this exemption is seen at the stage of the angle/VC round.
2. Section 80-IAC: Under this section, DPIIT-registered startups are benefited by muting the income tax payment for three consecutive years out of the first ten years of the company's incorporation date.
3. Section 54(GB): This section discusses the tax imposed on long-term capital profit received on the sale of any residential property. And if the government capital profit is invested in the DPIIT registered startup, then the startup gains exemption from this tax payment.

Self-certification under labor law and environmental laws

Typically, all private companies are bound by labor and environmental laws for conducting inspections of the company's establishment, safety norms, maintenance, and beneficial employee norms.

However, those startups registered under DPIIT can self-certify for five years (counting from the incorporation date) themselves under six labor and three environmental laws.

The exemption of six labor laws are:

• The Building and Other Construction Workers (Regulation and Employment and Conditions of Service Act, 1996)
• The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1996
• The Payment of Gratuity Act, 1972
• The Contract Labour (Regulation and Abolition) Act, 1970
• The Employees Provident Funds and Miscellaneous Act, 1952
• The Employees State Insurance Act, 1948

The Exemption of three environmental laws are:

• The Water (Prevention & Control of Pollution) Act, 1974
• The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003
• The Air (Prevention & Control of Pollution) Act, 1981

Intellectual Property Registration

The cost of a trademark registry in India for a trademark in one class is around Rs 9,000. But for DPIIT registered startups, they cost nearly half. The same goes for patent applications as well.

Public Procurement Norms Relaxation

Those within the industry know what Public Procurement refers to. It's the process through which state-owned businesses and the government purchase goods and services from the Private sector.

These contracts are usually marked with high eligibility requirements, but for the DPIIT-registered startups, the contract offer is relatively low.

Eligibility Criteria

Of course, for DPIIT registration, there are some eligibility criteria. Startups fulfilling the criteria will only get the approval and the one that does not fall perfectly under its eligibility criteria will not receive any exemption. The eligibility criteria are shared below.

Company Age

Startups whose existence and operational periods do not exceed ten years, counting from their incorporation date, can apply.

Annual Turnover

Startups with an annual turnover of Rs. One hundred crores for any financial year can apply.

Company Type

Startups that are incorporated as Private Limited companies or registered partnership firms, or limited liability partnerships can apply.

Innovative & Scalable

Startups that work towards product or service improvement and development along with a scalable business model of high potential can apply.

Original entity

Startups with original entities not reconstructed from a pre-existing business can apply.

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Documents Required for DPIIT Registration

Startups must submit a list of essential documents for registration under the DPIIT scheme. These documents are:

• The Incorporation or Registration of entity Certificate
• On receiving funding, Startups need to submit Proof of Funding (a support letter from the state or central government authorities or duly recognized incubator, and the angel funds or incubation fund needs to be 20% or above) to receive the DPIIT certificate.
• Documents of award or any recognition received by the company.
• Brief description of the nature of the business, including details of how the company is working towards innovation, scalability in terms of employment count, and product or service development.
• Document of Patent (published in Patent journals by the company).

And if the ministry found any of the documents mentioned above forged, the applicant is liable for the penalty of 50% of the company's paid-up capital and Rs. 25000.

Applicable Fees for DPIIT Registration

There are no application fees for the startups to pay for registering with the Ministry of Commerce and Industry to receive the DPIIT Recognition certificate for the startup.

Steps of DPIIT Registration

Business Incorporation

The first and foremost step for DPIIT Registration is to incorporate your business as a limited liability partnership or private limited firm.

Register on Startup India Portal

You need to register your startup on the official Startup India Portal. Fill out the details, like the contact info of your startup, along with the name. After successfully registering, you will get the login credentials on your provided email address.

Startup India Portal Login

As you have the login credentials, log in to the Startup India Portal. There you will receive an application that must be filled out and submitted. Then only your startup will be registered.

DIPP Recognition and Registration

After submitting the startup registration form application, you will receive a form for DIPP recognition. Please fill out the form and select the tax exemption that you need, and submit the form by attaching the required documents with it.

Certification of Recognition

After submitting the application for DIPP recognition to DPIIT, which shall issue the Certification of Recognition to your startup.

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Conclusion

The DPIIT certificate is an essential document for startups to gain several benefits from the government. To avail of the certificate, one needs to register their startup companies under the Department of Promotion of Industry and Internal Trade under the sub-category of the Startup India initiative.

The complete guide for the registration as well as the benefits of the DPIIT certificate, eligibility criteria, documents required, etc is shared above.

FAQs

How do I get DPIIT recognition for a startup?

To get DPIIT recognition for a startup, one needs to log in to the page and look for the option of getting DIPP Certified to select register here under the category of Recognition and Tax Exemption.

After clicking on the register here, one needs to fill out the form by submitting all the necessary information and documents required. After submitting, the form will then be processed and if found satisfactory, the startup will get a recognition certificate.

What are the documents required for startup India Registration?

Some of the essential documents required for startup registration are trademarks, articles of association or incorporation, a non-disclosure agreement, intellectual property assignment agreements, a founders agreement, terms and conditions, etc.

Who is eligible for DPIIT?

The basic eligibility criteria for any startup to be registered as DPIIT is to have an annual turnover of about Rs. 100 crores for any fiscal year from its federation.

Is DPIIT registration mandatory?

Startup India Registration with DPIIT is mandatory for startups to get the benefits from the recognition certificate like tax exemption, reduced compliances, etc.