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Paras Mehra

CA Paras Mehra is a thinker, writer, reader and speaker. He is also professionally associated with hubco.in, a brand for trademark registration and other related services.

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Startup India Redefined: 5 Common Mistakes to Avoid in Startup India Scheme

Sharing the knowledge is a way to thank the God for pouring the knowledge into us. Hence, don’t forget to share this article or comment on it.

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Someone wisely defined a startup as a company that is confused about what its product is? Who its customers are? How to make money? However, government has done in somewhat another manner. Discussing the startup definition isn’t a good idea because it lacks clarity.

After dealing with more than 1000 startups, I have got a particular idea about the common mistakes made by the startups all around which creates a problem for them.

Hence, learn to be proactive rather than reactive. The following 8 points will help you to avoid some common mistakes while filing for startup India scheme:

1. No, me too Products:
Congratulations for building your new e-commerce website, but we have bad news for you. You cannot register something which already been live on the market until you add some innovation to it.
Always ask yourself the following questions:

What problem do your startups is solving?

Does your startup affect the public at large?

What value does your startup add to the existing business?

Does your startup simplify any process in the country?

Does your startup contribute to the social cause?

The above questions are not exclusive; they are just common. Just ask yourself these questions, and I must repeat that they solve a lot of your problem and confusion.

You can also read the following article:

- 8 Startups That Are Making Waves By Solving Big Problems (Click here)

2. Startup and Tax benefit: There is a fundamental difference between being recognized as startup and startup with a tax benefit. In all the benefit that government is providing, the tax benefit is the most lucrative one. Hence, you need to understand that being recognized as a startup does not as per se means that you are eligible for tax benefit.

The tax benefit is provided by the government under section 80 IAC of the income tax act, 1961. Further, the following points are important in this regard:

- To avail any tax benefit, the company should be incorporated on or after 1st April 2016.
- The turnover of the company should not in any previous year exceed 25 crores.
- It holds a valid certificate from Inter-ministerial board.

Further, before claiming any deduction, you must consult the tax professional in this regard.

3. Your business Entity: People usually start with proprietorship to save cost and time. However, if they do so then they become ineligible for startup recognition. Then which entity is eligible to be recognized as a startup?

We will provide you the answer. There are only four types of entities that are allowed to recognize as a startup:

- Partnership (as registered under Indian Partnership Act, 1932)

- Limited Liability Partnerships (LLP) – as registered under Limited Liability Partnership Act, 2008.

- Private Limited Company under Companies Act, 2013.

- One Person Company under Companies Act, 2013.

Entrepreneurs and startups usually prefer Limited Liability Partnership or Private Limited Company. They always fall in a dilemma that which entity to choose Private company or LLP?

So you can read the article on which form to choose? LLP or Company.

4. Letter of Recommendation: This is the only hurdle in startup recognition and it has also become a myth that startup recognition is only for funded startups, but it is not.

Sometimes our psychological fault limits ourselves against any hurdle. But if we could think beyond that then we could also come over it. Just remember the following points in this regard:

- It is not a difficult job: Directly reach out to the incubators via email or phone and tell them your case correctly.
- Fill the Startup application: After your connection, the incubators will send you the application form which you need to fill out properly along with the necessary documents.
- Visit the incubators: It may also be possible that incubators may call you for the meeting, and you may have to visit it personally.
- Business should be working: Whatever your business model is, it should be working. Propose business will not be considered by incubators.
- Fees: The incubators may charge you Rs.5000 for this task. If your application is taken up by an expert panel, then the cost will further rise by Rs.5,000/-. In any case, it will not be more than Rs.10,000/-.

Further, in case you want to know more about the startup's recognition, you can request for the complete guide.

5. Understand the instructions given by government: Any government authority or decision-making authorities does not have the judicial powers. i.e. they cannot act on their own. They have to follow certain principles or procedures.

Similarly, the incubators or the Department of Policy and Promotion (DIPP) had already been given instructions that how to choose startups. Some points have already been discussed in point no. 1. But, there are three categories which are explicitly blacklisted from being recognized as a startup.

The blacklisted categories are as follows:
o NonCommercialization: Suppose you built a product which has no revenue model or problem-solving ability, then your startup might fall in trouble.
Your case can be straight away dismissed. So, always built a viable product because business in itself is defined as any activity conducted with the intent to earn the profits.

o No me too: If you are doing the same business as your competitors are doing and you are not different, then you will not be recognized as a startup.

We had seen in the past when Flipkart was raising millions of dollars, that everybody was looking forward to built an online marketplace.
“They didn’t start because they want to, but because they saw other growing.”

So be original and your chances of succeeding will be more.

The bottom line

Now since you have read the article carefully, always remember that you should plan something actionable for you and work upon it immediately after complete reading.

There is a lot of innovation going around in this era, so don’t be slow, be the change you want to see in the world. Prepare the application well, file it, follow up on it and try again, until you succeed.

The famous line: Sharing the knowledge is a way to thank the God for pouring the knowledge into us. Hence, don’t forget to share this article or comment on it.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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