Startup India DPIIT Recognition

Under Gazette Notification G.S.R. 127(E) dated February 19, 2019, an entity is eligible for DPIIT recognition if it is incorporated as a private limited company, a registered partnership firm, or an LLP and is not more than ten years old from the date of incorporation. The entity's annual turnover must not have exceeded Rs 100 crore in any of the previous financial years. It must be working toward innovation, development, or improvement of products, processes, or services, or be a scalable business model with a high potential of employment generation or wealth creation. An entity formed by splitting or reconstructing an existing business does not qualify, and a subsidiary or associate of an existing company formed for splitting purposes is similarly excluded under Para 2 of the Startup India notification.

A DPIIT-recognised startup that obtains inter-ministerial board (IMB) certification is eligible for a 100% income tax deduction on profits for any three consecutive assessment years out of the first ten years from incorporation under Section 80-IAC of the Income Tax Act 1961, subject to the startup's total turnover not exceeding Rs 100 crore in the year of claim. The Section 56(2)(viib) angel tax on issue of shares above fair market value was abolished with effect from April 1, 2025 by the Finance Act 2025, so DPIIT-recognised startups no longer need a separate angel tax exemption notification. Carry-forward and set-off of losses is permitted for seven years even upon change in shareholding under Section 79 of the Income Tax Act 1961, which is a relaxation not available to ordinary companies. Capital gains exemption is available under Section 54GB if an individual invests capital gains from the sale of a residential property into eligible startup equity.

DPIIT recognition is obtained by filing a self-declaration on the Startup India portal (startupindia.gov.in) in the application form prescribed under the Startup India scheme, certifying compliance with all eligibility conditions under G.S.R. 127(E). No physical documents are required to be submitted at the time of application; the declaration is sufficient for DPIIT to issue the recognition certificate, typically within two working days of a complete application. The certificate carries a system-generated DPIIT recognition number that is used for accessing benefits including fast-tracking of patent applications (80% fee rebate under Para 5(A) of the Startup India action plan) and self-certification of nine labour and three environment laws. If any condition is found violated post-recognition, DPIIT can revoke recognition and the startup becomes liable to taxes and penalties as if it were never recognised.

DPIIT recognition alone is not sufficient to claim the Section 80-IAC deduction — the startup must additionally obtain a certificate from an Inter-Ministerial Board (IMB) constituted by DIPP, confirming that the entity's business involves innovation and technology. The IMB certificate application is filed separately on the Startup India portal with a detailed project description and supporting evidence of innovation or scalable business model. Once the IMB certificate is obtained, the deduction is claimed in the ITR of the relevant assessment year by filling Schedule 80-IAC, and the claim is subject to scrutiny assessment under Section 143(3) of the Income Tax Act 1961. The deduction is available only for a company or LLP, not for a registered partnership firm under the current statutory text of Section 80-IAC(1).

Yes, the eligibility criteria under G.S.R. 127(E) do not restrict DPIIT recognition on the basis of foreign shareholding or foreign investment. A private limited company with foreign investors holding shares under the automatic route of the Foreign Exchange Management (Non-Debt Instruments) Rules 2019 can apply for and receive DPIIT recognition without any additional approvals. However, for the purpose of the Section 80-IAC deduction, the eligible startup must be a company or LLP incorporated in India, and all conditions under Section 80-IAC of the Income Tax Act 1961 including the turnover and age criteria must be satisfied independently of DPIIT recognition. Foreign-owned startups must ensure that their share issuances comply with FDI pricing guidelines under Rule 21(7) of the NDI Rules 2019, particularly relevant now that the angel tax on share premiums has been abolished from April 1, 2025.