PAN TO BE THE SINGLE IDENTITY FOR THE BUSINESS

PAN TO BE THE SINGLE IDENTITY FOR THE BUSINESS IN INDIA

As the every human has its own identity with the different identification just with that for doing business in India, PAN (permanent account number) should be stated the identity for the business spectrum. PAN is a code that acts as identification, especially for those who pay income tax, which is issued by Income Tax Department.

Within the year the central government intends to make the PAN as the business identification number for the companies and firms. PAN is mandatory for financial transaction such as receiving taxable salary or professional fees, sale or purchase of assets above specified limits, buy mutual funds and more.

With this, various intermediary processes will be nullified as the separate registration to the various departments (import, export, labours etc.). The proposal to make the PAN as the single identity is a strong move to provide flexibility and dynamic for new companies to emerge and for the hustle free works on the various new levels.

The single identity concept will help to each and every person who is being involved in business. Companies, regardless of whether they are registered abroad or in India, are required to pay the tax for the businesses carried out in the country. Without the PAN, government will deduct tax at the highest possible rate.

 The level of business has risen that much now, with that the secure system should also be there. With the private company, if the company need to be registered, firstly they need to be registered with the Registrar of the companies, with that the CIN is to be allotted to them. Based on this,it applies for the PAN from the income tax department.

With it, that would be easy to obtain a common registration. It is a step toward a single-window clearance mechanism at the central level. The accomplished aim is doing away with the need for separate registration with the various departments for the companies in the business. The essence and the beneficial factor of PAN as the single identity for the business in India, the ease of doing business in improvised and clear manner which would facilitatesto free business spectrum.

Government is committed to making things easy for doing business, it means not only minimising or quickening the industry interface with the government and its agencies, but unveiling policy measures to create more business opportunities and an environment that makes investments less risky and more attractive. PAN to be the single identity for the business in India is termed with the ease of doing business.

Author: This blog is written by Ms. Deepshikha Dabi, student of Vivekananda Institute of Professional Studies, a passionate blogger & intern at  Aapka Consultant.

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Amendment Companies Act, 2015

Amendment Companies Act, 2015

It was always the intention of the legislature to make an environment which will burgeon naïve entrepreneurs.  A much needed amendments were needed in the Companies Act, 2013 in this direction. These changes were brought about  by Amendment Act of 2015 in Companies act. These changes made sure that there is an ease of doing business in India. Changes are enlisted below:

• No Minimum Paid-up Share Capital (Section 2(68) & 2(71)): Minimum share capital for incorporating company has done away with. One can setup asetup a Private company without paying minimum paid up share capital of one lakh in case of public company five lakhs.

• Common Seal is now Optional (Section 9, 12, 22, 46, 223): Company Act,2013 required a common seal for authorisation of certain documents. Now Common seal requirement has been made optional.

• Copies of Board resolution: Under Section 399, no person shall be entitled to obtain copy of board resolutions passed by the company under section 179(3), filled with registrar under Section 117(3).

• Reporting Fraud by Editor: Amendment act 2015 says that a threshold limits will be prescribed for reporting of frauds to the central government. Frauds which are below the threshold will be reported to the Board or the Audit committee and will be needed to report in the annual report of the company. Now it will be accessible to the public.

• Related party transaction (Section 188): Amendment Act of 2015 has prescribed for relaxing  the approval requirement from a special resolution  to an ordinary resolution in case of related party transactions which require shareholders’ approval. Further ithas done away with the requirement of a special resolution in the certain casesfor providing the accounts of the wholly owned subsidiary consolidated with the accounts of the holding company, and placed before the shareholders at a general meeting for approval.

• Loan to Directors (Section 185): Section 185 deals with loans, guarantees and securities provided by the company to its directors or any other person. Two provisions have been added to the exceptions list in this section which includes (i) Loan made or guarantee given or security provided by the holding company to its wholly owned subsidiary company, (ii) Guarantee given or security provided by the company in respect of loan made by the bank or financial institution to its subsidiary.

• Commencement of Business (Section 11): Section 11 has been now omitted, which provided for a requirement for making a declaration that every subscriber has paid the value of shares paid by him or her, before the commencement of business.

 These six changes provided by the Company amendment act will help in ease of doing business in India. These are welcome moves towards encouraging start-ups every day.

Author: This blog is written by Mr. Vishal Aggarwal, student of Amity Law School, a passionate blogger & intern at  Aapka Consultant.

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Cost and fee of Company Registration in India

Cost and fee of Company Registration in India

Cost of Registering a Private limited company is directly proportional to the authorized share capital which you want your company to raise. If you want a company with minimum requirements then, your cost for company registration will be less. Generally four factors are at force affecting the cost of registration, these include:  Initial Authorized Capital, Number of Directors, Stamp Duty as well as Professional Fee Charged by Chartered Accountants or Company Secretaries.

Alongside there are several other costs which one can observe at each stage of Registration Process. These include:

• Getting Digital Signature Certificate: This can be obtained by applying to the certifying agencies. There is no requirement of CS or CA. This can be generally obtained for a validity for two years costing between Rs.1500 to 1700 varying from professional to professional.

• Getting Director Identification Number(DIN) :This is the first step towards getting your company registered. One has to file a DIN application, which will be then electronically certified by your Chartered Accountant or Company Secretary. It involves cost of Application i.e. Rs.500 along with certifying fees taken by CS or CA.

• Getting your Company Name Approved: Getting approval of your company name from Ministry of Corporate Affairs will not cost much. Name will be approved for a cost around  1000.

• Registering Private Limited Company: Majority part of your fees goes in the final round of registering a Private Limited Company. Following costs are involved at this stage of Company registration process:

1. Fee for MOA
2. Fee for AOA
3. Fee for Form INC7
4. Fee for Form INC22
5. Fee for Form DIR12

Cost of these forms can be easily be known from Ministry of Corporate Affairs Website. There you can easily calculate the cost of these forms depending upon the Authorized share capital of your company.

• Stamp Duty: Stamp duty on involves charges on your MOA, AOA and Form INC7 registration. This Varies from state to state, depending upon the place where your company is getting registered.

These are the following costs and Fees in the Registration process of Company in India.

Author: This blog is written by Mr. Vishal Aggarwal, student of Amity Law School, a passionate blogger & intern at  Aapka Consultant.

How Aapka Consultant can help you:-

• Get free expert consultancy from experts.
• We available every time to solving your legal queries.
• Get one stop solution for all legal compliances.
• Process application within 24 Hours.
• Trusted by Most Valuable Startups.
• We Understand Startup Budget & their needs.
• Get quality services at pocket price.

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Importance of Trademark Registration in India

Importance of Trademark Registration in India

With the emergence of competitive market economy, manufacturers began to identify their products by certain symbols, marks or devices so as to distinguish their goods from similar goods manufactured and marketed by others. This led to the emergence of trademark in the developing economies.  Trade mark serves two important purposes (i) it protects the public from confusion and deception by identifying the source or origin of particular products and (ii) it protects the trade mark owner’s trade and business as well as the goodwill which is attached to his trademark.

Registration of trademark serves an important purpose in line of securing a trademark from being misused. In order to observe the importance of registration, we need to look at the Benefits which are conferred through registration. Section 28 of the Trade Marks Act, 1999 talks about Rights conferred through Registration. This section clearly explains how registration gives the exclusive right to use the trade mark in relation to the goods and services in respect of which the trade mark is registered. It further establishes that one can obtain relief in respect of infringement of the trademark in the manner provided by the act.

Another way of observing the importance of registration is to consider drawback of not being a registered user. This can be explained through section 27 of the Trade Mark Act, 1999 which talks about “Passing Off”. This section explains that, no person shall be entitled to institute any proceeding to prevent , or to recover damages for the infringement of an unregistered Trademark.

This clearly establishes that, if a trademark is not a registered trade mark, then it becomes difficult to make exclusive use of it. Further when it comes to suing for infringement and obtaining relief, it becomes easy when the Trademark is registered trademark.  This clearly shows that it is imperative and in the interest of the user to get his trademark registered.

Author: This blog is written by Mr. Vishal Aggarwal, student of Amity Law School, a passionate blogger & intern at  Aapka Consultant.

How Aapka Consultant can help you:-

• Get free expert consultancy from experts.
• We available every time to solving your legal queries.
• Get one stop solution for all legal compliances.
• Process application within 24 Hours.
• Trusted by Most Valuable Startups.
• We Understand Startup Budget & their needs.
• Get quality services at pocket price.

Visit: Aapka Consultant to get Online Services of CA CS & Lawyers.

Registration process of LLP

Registration process of LLP

Recently most entrepreneurs have started forming Limited Liability Partnerships (LLP).  It is a hybrid of both partnership as well as companies, including the best features of both such as Separate Legal entity, liability of partner limited to the share contributed by him mentioned in the agreement and several others. In this light, it becomes imperative to understand the registration process of LLP. Registration process can be understood in certain steps, these are:

Step 1: Obtaining Designated Identification Number (DIN)

• Person who will be appointment as a member to LLP needs to obtain a Director Identification Number (DIN). AN electronic form needs to be filled along with a fixed fee of Rs. 100. No physical submission of documents if required for obtaining this number.

• While filling of DIN number , certain safeguards have to be taken, which includes, Name as exactly same as mentioned in Identity proof, Full face photograph of the applicant, Income tax PAN number for Indian nationals, proof of residence of the applicant like passport.

Step 2:Digital signature or Designated partner needs to be registered

• Partner of LLP whose signature has to be affixed on e-forms is required to obtain class 2 or class 3 digital signature certificate form any authorized agency. Digital signature of designated partner has to be registered on Ministry of Corporate affairs (MCA) website.

Step 3: File form 1 for Name Availability

• Name search facility is available on MCA site for free. You can download the form and reserve a name. You can enter up to six names giving a brief reason for choosing a particular name.

• Minimum of two designated partners have to fill their details, of which one of them must be resident of India, at the time of reservation of name.

Step 4: Form 2 for Incorporation and Subscription

• One has to mention total number of partners in LLP. Along with that the proposed monetary value of partner’s contribution in figures. Details about names of partners, their signatures. A proof about the registered office.

• One has to pay the prescribed registration fee as per LLP rules, based on the total monetary value of contribution of partners in the proposed LLP.

• Once the registrar is satisfied that there is compliance with relevant provisions of LLP act, he will register LLP and issue certificate of incorporation.

Step 5: Drafting of LLP Agreement

• Drafting of LLP agreement is done in compliance with LLP act. It is not mandatory to file LLP agreement at the time of registration and same can be done in 30 days. Following clauses are important to be included in LLP agreement: Name, Object and Register office of LLP, Contribution made by each partner, appointment of arbitrator , maintenance of books of accounts, rights and duties of partners, Indemnity clause, goodwill clause, admission of new partner, meeting , cessation of existing partner.

Step 6: Filling Form 3- LLP agreement

• LLP agreement is required to be uploaded. Once it gets approved, formalities for registration get completed.

Author: This blog is written by Mr. Vishal Aggarwal, student of Amity Law School, a passionate blogger & intern at  Aapka Consultant.

How Aapka Consultant can help you:-

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• We available every time to solving your legal queries.
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• We Understand Startup Budget & their needs.
• Get quality services at pocket price.

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Registration Process of Private Limited Company

Registration Process of Private Limited Company

Procedure for Incorporation/Registration of Private Company can be explained through Section 7 of Companies Act, 2013 along with Companies (Incorporation) Rules 2014.

This involves the following procedure:

1. Selection of Type of Company: The promoters may select the type of company they wish to form i.e., private company.

2. Preliminary Requirements: All the directors should ensure that they have Directors Identification Numbers (DIN). Out of all the proposed directors of a company, at least one should have DIN. This can be obtained by submitting Digital Signature along with the attested copies of PAN Card and Address proof. Any of the Proposed Directors can obtain a Class-II Digital Signature Certificate by applying to any agency authorised by Ministry of Corporate Affairs (MCA).

3. Reservation of Name: One of the Promoters should apply to the Registrar of Companies for Reservation of Name. For this e-form INC No. 1 has to be used along with prescribed fees of Rs. 1000. Along with this Promoter has to prescribe six names in order of their preference.

4. Preparation of Memorandum of Association (MOA) and Articles of Association (AOA): Drafting of MOA and AOA is generally a step after reservation of the name. These two documents are charter and internal rules and regulations of the company. These have to be drafted with utmost care and with the advice of the experts. The ancillary clause for the attainment of the main object clause has to be drafted in a very broad sense.

5. Filling of Documents with the Registrar of Companies: An application has to be filled with the Registrar of the Company within whose jurisdiction the propose company is proposed to be situated. Forms INC 2 is required to be filled for One person Company along with the following documents:

• Memorandum and Articles duly signed by all subscribers as mention in Companies (Incorporation) Rules 2014.

• a declaration as mention in INC 8 by any Lawyer or Chartered Accountant or Company Secretary or Cost Accountant in practice certifying that all the requirement of this act and rules there under have been compiled with.

• An affidavit in the form of INC 9 by the subscriber to the memorandum and by all the persons named as first directors that they are not convicted of any offence in connection with promotion, formation or management of the company.

• Address for correspondence till its registered office is established.

• Copy of Power of Attorney signed by the subscribers to the memorandum delegating power to a person to do acts in their favour.

• Particulars of the first directors mentioned in articles including their surname, addresses, nationality and DIN.

6. Certificate of Incorporation and Allotment of Corporate Identity Number: If the registrar of the company is satisfied that everything is complied with in regard to incorporation of company, then he shall issue a certificate in the form of INC 11, normally within the 7 days of the receipt of the documents.

Author: This blog is written by Mr. Vishal Aggarwal, student of Amity Law School, a passionate blogger & intern at  Aapka Consultant.

How Aapka Consultant can help you:-

• Get free expert consultancy from experts.
• We available every time to solving your legal queries.
• Get one stop solution for all legal compliances.
• Process application within 24 Hours.
• Trusted by Most Valuable Startups.
• We Understand Startup Budget & their needs.
• Get quality services at pocket price.

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Mandatory Compliances for an LLP

The Limited Liability Partnership Bill having been passed in Dec, 2008 by both the Houses of Parliament received the assent of the President on 7th January, 2009. It came on the statute books as The Limited Liability Partnership Act, 2009(6 of 2009). This act provides that the liability of LLPs would be limited to the extent of the assets owned by them; the liability of the partners would be limited to the extent of their contribution. Besides that limit no partner would be liable on account of the independent or un-authorized actions of other partners, allowing individual partners to be secured from joint liability created by another partner’s wrongful business decision or misconduct.  The main purpose of enacting LLP law is to make small and medium entrepreneurs, especially professionals like lawyers, accountants, architects, etc.

Features and Requirements

• It is a body corporate with distinct legal entity and perpetual succession. It is an artificial person created by law having a distinct name, a common seal, which can sue and can be sued.

• Minimum two partners are required for its formation of whom one has to be Indian resident and there is no limit on maximum number of partners.

• Corporate and professionals will be allowed to form LLPs.

• Liability of partners will be limited except in the case of fraud and negligence.

• Every LLP shall have at least two designated partners, they will be answerable for the all acts, matters and things as are required to be done under LLP Act including filing of any document, return or any statement.There are three mandatory compliance requirements to be followed by LLPs.

1. Filing of Annual Return
2. Filing of Statement of the Accounts or Financial Statements

• Filing of Income Tax Returns

With respect to annual return, every LLP is required to file annual return in form 11 to the registrar within 60 days from the closure of the financial year. What each LLP is required to do is the maintenance of the Books of Accounts in Double entry System and also need to prepare a statement of solvency every year.  Another thing which to be complied is that if the annual turnover of the LLP exceeds Rs. 40 lakh or whose contribution is more than 25 lakh, the accounts of LLP must be audited by the qualified Chartered Accountant mandatorily.

• The annual return of an LLP having turnover up to 5 crore rupees during the corresponding financial year or contribution up to 50 lakh rupees shall be accompanied with a certificate from a designated partner, other than the signatory to the annual return, to the effect that annual return contains true and correct information.

• The limited liability partnership shall maintain such proper books of accounts as may be prescribed relating to its affairs for each year of its existence on cash basis or accrual basis and according to double entry system of accounting and shall maintain the same at its registered office for such period as may be prescribed.

• Every limited liability partnership shall keep books of accounts which are sufficient to show and explain the limited liability partnership‘s transactions and are such as to—

(a) Disclose with reasonable accuracy, the financial position of the limited liability partnership at that time; and

(b) Enable the designated partners to ensure that any Statement of Account and Solvency prepared under this rule complies with the requirements of the Act.

• The accounting records shall in particular contain— (a) entries from day to day of all sums of money received and expended by the limited liability partnership, and the matters in respect of which the receipt and expenditure takes place, and a record of the assets and liabilities of the limited liability partnership.

• Preservation of Books of Account; the books of account which a limited liability partnership is required to keep shall be preserved for eight years from the date on which they are made.

• Destruction of old records Source; every LLP shall preserve the documents permanently as specified but the records in his office may be destroyed after the expiration of the period of their preservation.

• Record of documents destroyed to be maintained; the Registrar of Companies shall maintain a Register in two parts, wherein he shall enter brief particulars of the records destroyed and shall certify by his own hand writing therein the date and mode of destruction.

• Statement of Account and Solvency; every limited liability partnership shall, within a period of six months from the end of each financial year, prepare a Statement of Account and Solvency for the financial year as at the last day of the said financial year in such form as may be prescribed, and such statement shall be signed by the designated partners of the limited liability partnership. Every limited liability partnership shall file the Statement of Account and Solvency within a period of thirty days from the end of six months of the financial year to which the Statement of Account and Solvency relates.

• The Finance (No.2) Act, 2009 had introduced the provisions regarding taxation aspect of the Limited Liability Partnership. Section 2(23) of the Income Tax Act had been amended by the Finance Act, 2009 to include LLP‘ & its Partners under the Income Tax Act, 1961. According to the Act, tax treatment of LLPs is to be same as that of Partnership Firms.

Penalties

In contravention to any of the requirements of the LLP to file Annual Return in the prescribed manner or fails to maintain the proper books of accounts and other records, prepare Statement of Account and Solvency, get its accounts audited along with fees shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees. Also in case of failure of LLP, the designated partner of such LLP shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

So it becomes necessary to comply with the provisions of LLP Act, 2008 otherwise it will invoke liability on the individual or the partners of the partnership.

Author: This blog is written by  Ms. Roopanshi Virang, student of Banasthali University, a passionate blogger & intern at  Aapka Consultant.

How Aapka Consultant can help you:-

• Get free expert consultancy from experts.
• We available every time to solving your legal queries.
• Get one stop solution for all legal compliances.
• Process application within 24 Hours.
• Trusted by Most Valuable Startups.
• We Understand Startup Budget & their needs.
• Get quality services at pocket price.

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How to Register Sole Proprietorship Firm in India

Sole Proprietorship Registration is best business arrangement for doing the business in India. It’s an extremely straightforward system with less compliance and costing and fees. It’s an extremely famous business development and a large portion of the disconnected neighborhood based business pick this type of business arrangement.

Sole Proprietorship needs Minimum one Person for the Registration. The individual is called sole proprietor. A sole proprietor is the proprietor of the business. He can be contracted likewise by somebody for maintaining their business as an employee.

Sole Proprietorship Firm comprises of a great deal of things so as per the rules of The Government of India there is no registration for sole proprietorship firm so Sole Proprietor can be enlisted in anyone’s tax legislations.

The main objective in these firms is opening a current bank account but for opening of such a bank account, one needs a lawful confirmation to show as a business legal entity.In the case of firm it is known as tax registration or shop and establishment license or any other kind of local license.

Therefore we divide business into two categories, as tax registrations depend either on the service based or on product based business.

Firstly, we divide business into two categories:

• Service Based Business:-

The service based Business classification includes the effective e-Commerce Marketplace, Service Based Online Consultancy, Cab Service, Classifieds Website, Website Development Service, App Development Service and numerous different services based business. Service Based Business require the following two Registration processes on account of sole Proprietorship Firm. They being:-

1. a) Service Tax Registration –

Service Tax Registration is required by the sole proprietorship when they crossed the turnover of 9 lakh rupees in a year however, on account of sole proprietorship firm, there is a requirement for service tax registration certificate by banks Initially in light of the fact that you need to give one proof as a business lawful element that is service tax registration certificate.

1. b) Chartered Accountant Certification –

Chartered Accountant Certification is additionally required by the business on account of sole proprietorship firm. Chartered Accountant Certification affirms the way of the matter of the sole proprietorship firm.

• Product based Business:-

Product based Business requires two kinds of registration processes –

1. a) VAT/CST Registration:-

VAT Registration in required by the all different business entities like companies or LLP at whatever point their turnover is crossed 5 lakhs Rupees. This is not a settled breaking point since VAT/CST relies upon the rules made by the State Government because it is more or less a state made tax. So in each state guidelines and regulations is distinctive for the breaking points and rates. VAT Certificate is exceptionally useful to open a present financial balance when you are dealing in VAT qualified Products.

1. b) Chartered Accountant Certification –

Chartered Accountant Certification is likewise required by the Product based business on account of sole proprietorship firm. Chartered Accountant Certification guarantees the nature of the business of the sole proprietorship firm.

Archives Required on account of sole Proprietorship Firm as Service Based Business

• Container Card of the sole Proprietor.
• ID Proof and Address Proof of the sole Proprietor as Adhar Card, Driving License or identification and so forth.
• Lease Agreement, No Objection Certification or Electricity bills of the property where business is to be enlisted.
• On the off chance that Proprietor has possessed property then it needs deals deed duplicate or power bills.
• Bank Statement duplicates or scratched off check duplicate.
• A few archives like undertaking and other which is set up by the legitimate counsel.

Records Required on account of sole Proprietorship Firm as Product Based Business:-

• Dish Card of the sole Proprietor.
• ID Proof and Address Proof of the sole Proprietor as Adhar Card, Driving License or international ID and so on.
• Lease Agreement, No Objection Certification or Electricity bills of the property where business is to be enlisted.
• In the event that Sole Proprietor has possessed property then it needs deals deed duplicates or power bills.
• Bank Statement duplicates or wiped out check duplicate.
• Security Amount or Guarantors are also required in some state for the VAT/CST Registration. In some state like Delhi, there is no security at this moment.

Strategy to register sole Proprietorship Firm –

Archives required for sole Proprietorship Registration.

• Apply for the Service Tax or VAT
• Get Service duty or VAT Registration Certificate.
• Apply for a present ledger in any, manages an account with your total documentation.

The registration of as sole proprietorship firm can be done online also and it is considered to be the most effective way of doing the registration. There are many websites available to register a sole proprietorship firm. MyOnlineCA can be the option for the registration as we are moving towards a digital India. It is a Startup Friendly Online lawful administration in India and adored by new businesses. It’s made legitimate readily available with energetic lawful specialists. It has a bigger system of connecting Chartered Accountants, Company Secretary and Lawyers in India.

The online procedure is:-

• Put a Request on MyOnlineCA
• MyOnlineCA startup benevolent group will interface by means of call/mail/talk.
• Help to comprehension about legitimate things for your startup.
• Get the sensible evaluating and 70% less expensive as contrast with customary disconnected legitimate administrations.
• Send them your records by means of mail as examined duplicates or pictures dispatch or through their pickup benefit.
• Pay in Installments and get the last affirmation.

Thus, these are the simple ways to register a sole proprietorship firm in India.

Author: This blog is written by  Ms. Harshita Tomar, student of Hidayatullah National Law University (HNLU), Raipur, a passionate blogger & intern at  Aapka Consultant.

How Aapka Consultant can help you:-

• Get free expert consultancy from experts.
• We available every time to solving your legal queries.
• Get one stop solution for all legal compliances.
• Process application within 24 Hours.
• Trusted by Most Valuable Startups.
• We Understand Startup Budget & their needs.
• Get quality services at pocket price.

Visit: Aapka Consultant to get Online Services of CA CS & Lawyers.

Startup India Action Plan: – The Beginning of a BigBang for India!

Startup India Action Plan: – The Beginning of a BigBang for India!

“I see startups, technology and innovation as exciting and effective instruments for India’s transformation.”      – Shri Narendra Modi

16th January 2016 was the day when Prime Minister Narendra Modi took a major step to transform his words into actions. PM Modi announced the idea of Startup India on 70thIndependence Day of India at Red Fort and now he has unveiled an Action Plan highlighting various schemes and initiatives which will help in building a stronger ecosystem for startups to succeed. The Action Plan aims to spread the startup movement not only across various sectors covering information technology, social sector, education, agriculture, etc. but also in semi-urban or rural areas.

Following major announcements were made by the government during Startup India conclave held at Vigyan Bhawan on 16th January 2016: –

Definition of a ‘startup’: – There are no statutes present which define ‘startup’ and hence it was pivotal for the government to come up with a definition so that one could know as to what all falls under the definition and who all can be benefited by this initiative.

The Startup India Action Plan defines startup as: –

“Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding Rs. 25 crores in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.”

Entity formed by splitting up, or reconstruction of a business which already exist will not be considered as a startup.

Also all those entities shall cease to exist as a Startup if they have completed 5 years from the date of incorporation or have their turnover for the previous financial year exceeding Rs 25 crores.

Moreover, a startup is eligible for all these tax benefits only if it obtains certification from the Inter-Ministerial Board.

In order to come under the ambit of this scheme, the startup should be working towards: 

1. Innovation
2. Development
3. Commercialization of new products, processes or services driven by technology or intellectual property.

This creates a dilemma as it is uncertain that whether an entity which does not use technology for providing its services can still be considered as a startup or not. For example, there is a company which rents jewelleries and clothes for various occasions as people faces difficulty in purchasing clothes and jewelleries for every occasion. Such kind of business is an innovation as it solves problem of majority of people but the business is not technologically regulated. Would a business like this can be considered as a startup?

It should fall under the definition of startup and it should not be mandatory for companies to heavily rely on technology. Therefore, the government should resolve such dilemma by rectifying the definition.

It is made clear in the Action Plan that an Inter-Ministerial Board will be set up in order to give necessary certification for tax benefits. But the process of certification should be completely online and time bound. There should be no physical interaction between the board and the company unless the members of the company want to give a detailed oral submission for the Board to reconsider its decision.

Quick exits for startups: – ‘Exits’ here means closing and winding up the startup. Earlier for this purpose the government was relying on the Insolvency and Bankruptcy Bill, 2015 but it still needs President’s assent in order to convert into a statute. Meanwhile the government is forming schemes with which the process of winding up will become inexpensive and less time consuming.

Startups to have a three years’ tax exemption: – This was the most important and most awaited announcement made by the government that exempt the startups from tax burden for three years. Though it is unclear that whether this three-years period will apply to startups once they start making profit or from the day of its incorporation. It will be futile if the latter becomes true as most of the startups do not make profit from the beginning of their incorporation.

Startup Action Plan is an optimistic approach to encourage young entrepreneurs of India to convert their ideas into actions and to think big without fearing of losing out. Modi government has finally given shape to its idea of ‘Startup India: – Standup India’ and we expect a lot more in the coming months as a lot of things are still uncertain. The Startup India Action Plan is kind of westernized model to encourage entrepreneurship in India and with few changes it would become much simpler and efficient. It should be of utmost importance for the government to form a team consisting of angel investors, business expertise, lawyers, and accountants to ensure that the final policies are as flawless as possible.

Author: This blog is written by  Mr. Aman Tiwari, student of National Law University Odisha, Cuttack, a passionate blogger & intern at  Aapka Consultant.

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