Startup India: what the scheme offers

Startup India is a government initiative run by the Department for Promotion of Industry and Internal Trade (DPIIT). It was announced in 2016 with an action plan that had three aims: simplify rules for new companies, give them funding support, and build links between founders, investors and incubators.

It is not one scheme but a bundle. There is a tax holiday, a fund that invests through venture funds, a seed grant programme, relaxed inspections, cheaper patent filing, easier government tenders and a faster way to close a company. Each part is run by a different office, so each has its own form, its own rules and its own wait.

To use almost any of them, the company first needs DPIIT recognition. The guide on DPIIT recognition explains who qualifies. This guide covers what you can do once you have the certificate.

Under Section 80-IAC of the Income-tax Act, an eligible startup can apply for a deduction of all its profits for three consecutive years, chosen from its first ten years. It is a holiday on the tax on profits, not on other taxes such as GST or payroll deductions.

Three points trip founders up. First, the holiday is only for private limited companies and LLPs, not for partnership firms. Second, it needs a separate approval from an inter-ministerial board, on top of DPIIT recognition. Third, the law attaches a window of incorporation dates and other conditions, and that window has been extended before. Check the current dates on the Startup India portal and the Income Tax Department site, because the Income-tax rules were also reorganised in 2026.

Since most early startups make losses, the holiday helps only when the company is profitable. A founder who expects losses for five years may find that the three-year window can be picked later, so it is worth asking a chartered accountant how to time it.

The Fund of Funds for Startups (FFS) has a corpus of ₹10,000 crore, spread over two Finance Commission cycles, and is managed by the Small Industries Development Bank of India (SIDBI). The key point is that it does not invest in startups directly. It puts money into venture funds registered with SEBI as Alternative Investment Funds (AIFs). Those funds then invest in startups.

In practice, a founder cannot apply to the Fund of Funds for a cheque. But the fund changes who gets funded, because many Indian venture funds have taken money from it, and these funds then back startups of their own choosing. The founder's task is to pitch the venture fund as usual. See the guides on SEBI AIF categories and how VC funds work for the other side of this relationship.

The Startup India Seed Fund Scheme (SISFS) gives early money to startups for proof of concept, prototype building, product trials and entering the market. A recognised startup applies to an approved incubator, and the incubator decides whom to back, using funds the government has given it.

As reported on the programme pages, the money comes in two forms: a grant of up to about ₹20 lakh for validating the idea or building a prototype, and a larger amount, reported as up to ₹50 lakh, through convertible instruments or debt-linked instruments for scaling. Eligibility usually asks that the startup is young, often incorporated within the last two years, and not already funded beyond a limit by other government schemes. Amounts and conditions change by round, so read the current guidelines on the portal.

Recognised startups may self-certify that they follow a list of labour laws and environment laws, for a period after incorporation. Official material describes this as covering nine labour laws and three environment laws, for between three and five years. Inspections in that period happen only if there is a written, credible complaint, and a senior officer must approve the inspection.

This does not mean the laws do not apply. The startup must still follow them, pay wages and provident fund, and keep records. The relief is that routine inspectors do not walk in without cause. Sources differ on the exact count of laws and the length of the period, so confirm the current list before you rely on it.

Recognised startups get a rebate on patent filing fees, and a faster examination for patent applications. The same applies for trademark filings. The rebates reduce the cost of protecting an idea, which matters for deep-tech and product startups.

For public procurement, recognised startups can bid for government contracts without showing years of past experience or past turnover, provided they meet the quality and technical requirements of the tender. In practice, how well this works depends on the buying department.

The government has also set up a credit guarantee scheme for loans to startups, in which a guarantee covers part of the loan so that banks and lenders are more willing to lend. Terms differ by lender, so ask the bank what it asks from the founder. And in the other direction, startups can use a faster exit under the insolvency law, which aims to close a company within about a year instead of many years. The guides on venture debt and on shutting down a startup go deeper.

How to claim all this: get recognition, create a profile on the Startup India portal, then apply to each scheme separately. Keep papers ready, track deadlines, and expect that some programmes pause or change. This is general information, not legal or tax advice. Check with a chartered accountant or company secretary before relying on any benefit.