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Norms relaxed for Start- ups

Topics Covered:

  1. Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
  2. Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.


Norms relaxed for Start- ups


What to study?

  • For Prelims: What is Angel tax, recently relaxed norms- overview.
  • For Mains: Significance of start- ups and the need for policies to support them.


Context: The government has relaxed the norms under the definition of Start-Ups. The relaxations are in line with the government’s vision to promote the culture of entrepreneurship and ease of doing business in India.

The new norms aim to catalyse entrepreneurship by enabling angel investments by innovators across all sections of society and all sectors of economy.


The changes brought in are:

  • The investment limit of angel investors to seek exemption under the Income Tax Act, 1961 has been increased to Rs 25 crore from 10 Crore.
  • An entity shall be considered a start-up up to 10 years from its date of incorporation/registration instead of the previous period of 7 years.
  • An entity would be considered as a startup up to a turnover of Rs 100 crore as against the earlier limit of Rs 25 crore.


Exemptions Proposed:

  1. A start-up cannot invest in a building or land unless it is for its business or used by it for purposes of renting or held by it as stock-in-trade.
  2. A start-up cannot offer loans or advances, other than those where lending money is part of its business.
  3. A start-up cannot make any capital contribution to any other entity or invest in shares, car, any vehicle or mode of transport that costs more than Rs 10 lakh.


Sources: the hindu.