What is a startup as per the Government of India?

As per DPIIT, a startup is an entity (Private Limited Company, LLP or Registered Partnership Firm) incorporated in India, within 10 years of incorporation (longer for Deep Tech), with annual turnover not exceeding the prescribed limit in any year, working towards innovation, development or improvement of products, services or processes, or having a scalable business model with high potential for employment or wealth creation. It must not have been formed by splitting up or reconstructing an existing business.

What are the main types of startups?

Startups are commonly classified by model and ambition — scalable tech startups, small-business startups, lifestyle startups, social enterprises, buyable startups, and large-company or offshoot startups. By sector they include fintech, edtech, healthtech, agritech, SaaS, e-commerce, D2C and deep-tech startups. The type influences the right funding route and structure.

What are the stages of startup funding?

The typical progression is bootstrapping, pre-seed, seed, Series A, Series B, and later rounds (Series C onwards), followed eventually by an exit such as acquisition or IPO. Each stage suits different sources — founders and grants early, angels and seed VCs next, and institutional VCs as the model is proven.

What is DPIIT recognition?

DPIIT recognition is the official certificate from the Department for Promotion of Industry and Internal Trade that makes an entity a recognised startup under Startup India. It is free, applied online, and unlocks tax holidays, angel tax exemption, seed funding eligibility, IPR rebates, self-certification and public procurement benefits.

Is DPIIT recognition free?

Yes. There is no government fee for DPIIT recognition. The application is made online through the Startup India / NSWS portal, and recognition is typically granted within a few days for a well-prepared application.

What is the 80-IAC tax exemption?

Section 80-IAC gives DPIIT-recognised startups a 100% income tax exemption on profits for any 3 consecutive financial years out of their first 10 years, subject to approval by the Inter-Ministerial Board (IMB) and eligibility conditions.

What is angel tax and are startups exempt?

Angel tax was a tax on the premium a startup received when issuing shares above fair market value. DPIIT-recognised startups have been given exemption from angel tax under the prescribed conditions, and recent reforms have substantially eased this area for startups.

What is the Startup India Seed Fund Scheme (SISFS)?

SISFS provides early-stage funding to DPIIT-recognised startups through approved incubators — grants of up to Rs. 20 lakh for proof of concept and prototype development, and up to Rs. 50 lakh for market entry and commercialisation via convertible or debt instruments. Funds are routed through incubators, not paid directly by the government.

What is the Fund of Funds for Startups (FFS)?

The Fund of Funds for Startups is a government corpus operated through SIDBI that invests in SEBI-registered Alternative Investment Funds (AIFs), which in turn invest in startups. The government does not invest directly in startups; it amplifies private venture capital available to them.

What are the modes of raising startup funding?

Common modes are equity (issuing shares to founders, angels, VCs), debt (bank loans, venture debt, NBFC loans), grants (government schemes, competitions), convertible instruments (convertible notes, CCPS), revenue-based financing, crowdfunding, and incubator/accelerator support. Most startups combine several over their lifecycle.

Can an LLP get DPIIT recognition?

Yes. A Limited Liability Partnership, a Private Limited Company and a Registered Partnership Firm are all eligible for DPIIT recognition. Sole proprietorships and unregistered businesses are not eligible.

What documents are needed for DPIIT recognition?

Core documents include the certificate of incorporation or registration, PAN of the entity, details and PAN/Aadhaar of directors or partners, a brief write-up on the innovation and scalability of the business, and optionally a website, pitch deck, patents or recommendation letters that strengthen the application.

Which business structure is best for a startup?

A Private Limited Company is usually best for startups that intend to raise external equity funding, because investors prefer its share-based structure and governance. An LLP suits founder-funded or service businesses wanting limited liability with lighter compliance. The right choice depends on funding plans, ownership and growth ambition.

How long does it take to register a startup?

Incorporating a Private Limited Company or LLP typically takes about 7 to 15 working days with documents ready, and DPIIT recognition is usually granted within a few days of a complete application. So a startup can often be fully set up and recognised within two to three weeks.

What is bootstrapping?

Bootstrapping means funding the startup from the founders' own savings and the revenue the business generates, without raising external capital. It avoids equity dilution and debt, but growth is limited to the founders' resources. Many successful startups bootstrap before raising outside money.

What is the difference between angel investors and venture capital?

Angel investors are high-net-worth individuals investing their own money, usually at the pre-seed or seed stage in smaller amounts. Venture capital funds are institutions investing pooled money, typically from Series A onwards in larger amounts, with active governance, board seats and reporting rights.

What is a convertible note?

A convertible note is a short-term debt instrument that converts into equity at a later funding round, usually at a discount or with a valuation cap. It lets startups raise early money quickly without fixing a valuation immediately.

Do startups need GST registration?

A startup needs GST registration once its turnover crosses the threshold, or earlier if it makes inter-state supplies, sells through e-commerce, or wants to claim input tax credit. Many startups register voluntarily to work with larger clients and claim credits.

What compliance must a startup maintain?

A startup must maintain ROC/MCA filings (annual returns, financials, director KYC), income tax returns, GST returns where applicable, TDS compliance, and statutory registers. DPIIT-recognised startups get self-certification relief under several labour and environment laws, but core tax and ROC filings remain mandatory.

Can a startup raise foreign investment (FDI)?

Yes. Startups can raise foreign direct investment under the automatic route in most sectors, subject to FEMA pricing guidelines and RBI reporting (such as Form FC-GPR). Some sectors have caps or require government approval, so structuring foreign rounds correctly is important.

What is a pitch deck and why does it matter?

A pitch deck is a concise presentation that explains the problem, solution, market, business model, traction, team and funding ask. It is the primary document investors review, so a clear, evidence-backed deck is essential to raising funding.

What is valuation and how is a startup valued?

Valuation is the agreed worth of the startup used to price an equity round. Early-stage startups are valued using methods like the Berkus method, scorecard method, discounted cash flow or comparable transactions, while later rounds rely more on revenue multiples and traction. A registered valuer's report is required for certain regulatory filings.

What is the role of an incubator or accelerator?

Incubators and accelerators support early startups with mentorship, workspace, networks and sometimes capital. SISFS seed funding is routed through approved incubators, and accelerators often provide funding in exchange for equity along with an intensive growth programme.

Can students or first-time founders start a startup?

Yes. There is no barrier to students or first-time founders incorporating a company or LLP and applying for DPIIT recognition. Many state startup policies and incubators specifically support student and first-generation entrepreneurs.

What are the tax benefits for recognised startups?

Key benefits include the 80-IAC 100% profit tax exemption for 3 years, angel tax exemption on share premium, 80% rebate on patent filing fees and 50% on trademarks, carry-forward of losses despite shareholding changes under conditions, and self-certification compliance relief.

What is equity dilution?

Equity dilution is the reduction in founders' ownership percentage when new shares are issued to investors. Each funding round dilutes existing shareholders, so founders balance the capital raised against the ownership and control they give up.

Can a startup get government tenders?

Yes. DPIIT-recognised startups can register on the Government e-Marketplace (GeM) and are given relaxations in public procurement, such as exemption from prior experience and turnover requirements and from earnest money deposit, helping them win government contracts.

What is a term sheet?

A term sheet is a non-binding document setting out the key terms of an investment — valuation, amount, investor rights, board composition and protective provisions — before the detailed legal agreements are drafted. It is the foundation of any funding deal.

Why should a startup work with a Chartered Accountant?

A startup touches incorporation, DPIIT recognition, valuation, funding documentation, FEMA, tax planning and ongoing compliance — areas where early mistakes are costly and hard to undo. Lalit Tyagi & Company helps founders across Hapur, Ghaziabad, Noida, Meerut and Delhi NCR set up, get recognised, raise funding and stay compliant, so they can focus on building.

Startup Guide India 2026: Types, Funding, Govt Schemes, DPIIT & Process

What is a startup?

A startup is more than a new business — it's a young, innovation-driven venture built to solve a problem and scale fast. India has become one of the world's largest startup ecosystems, with over 1.5 lakh DPIIT-recognised startups, and the government backs them with funding, tax holidays and compliance relief.

The Government of India gives the term a precise legal meaning. Under the Department for Promotion of Industry and Internal Trade (DPIIT), an entity qualifies as a startup if it is a Private Limited Company, LLP or Registered Partnership Firm, incorporated in India, within 10 years of incorporation (longer for Deep Tech ventures), with annual turnover below the prescribed limit in every year since incorporation, that is working towards innovation, development or improvement of products, services or processes, or has a scalable model with high potential for employment or wealth creation. Crucially, it must not have been formed by splitting up or reconstructing an existing business.

💡 Why it matters: meeting this definition and getting DPIIT recognition is the key that unlocks every Startup India benefit — the 80-IAC tax holiday, angel tax exemption, seed funding, IPR rebates and government tenders. Without recognition, none of these are available.

Have an idea or a new company?Find out in minutes whether you qualify as a recognised startup.

🚀 Check Eligibility

Types of startups

Not every startup is the same — and the type you're building shapes your structure, funding route and growth path. Startups are classified two ways: by their business model and by their sector.

By business model & ambition

📈

Scalable (Tech) StartupBuilt to grow fast and large, usually tech-driven, targeting big markets — the classic VC-funded startup.

🏪

Small-Business StartupFounder-run businesses like shops, agencies and restaurants — funded by savings and loans, steady growth.

🌱

Lifestyle StartupBuilt around a founder's passion and independence, prioritising freedom over rapid scale.

🤝

Social EnterpriseSolves a social or environmental problem; may run on grants, impact funds and donations.

💼

Buyable StartupBuilt specifically to be acquired by a larger company as the founders' exit.

🏢

Large-Company / OffshootA new venture spun out of, or inside, an established company to enter a new market.

By sector

💳

FintechPayments, lending, neobanking, wealthtech and insurtech.

📚

EdtechOnline learning, upskilling and test-prep platforms.

🩺

HealthtechTelemedicine, diagnostics, health records and wellness.

🌾

AgritechFarm tech, supply chains and agri-marketplaces.

☁️

SaaSSoftware-as-a-service products sold by subscription.

🛒

E-commerce / D2COnline retail and direct-to-consumer brands.

🔬 The 2026 Startup India framework added a dedicated Deep Tech category — for startups built on substantial scientific or engineering innovation (AI, robotics, biotech, semiconductors) — giving them a longer recognition window and higher thresholds, reflecting their longer research runway.

Choosing the right structure

Your legal structure is the foundation everything else sits on — it decides how you raise money, how you're taxed and how much you'll spend on compliance. For startups, three structures are DPIIT-eligible.

Structure	Best for	Can raise equity?	DPIIT eligible?
Private Limited Company	Startups planning to raise angel/VC funding	Yes — preferred by investors	Yes
LLP	Founder-funded / service businesses wanting low compliance	Limited — no share capital	Yes
Registered Partnership Firm	Small early ventures of 2+ partners	No equity shares	Yes
Sole Proprietorship	Single-owner micro businesses	No	No — not eligible
One Person Company (OPC)	Solo founders wanting a company	Limited	Eligible as a company, but cannot easily take investors

🎯 The rule of thumb: if you intend to raise external equity funding from angels or VCs, register a Private Limited Company — investors fund shares, need a clean cap table, and rarely invest in LLPs or proprietorships. If you're bootstrapping a service business, an LLP gives limited liability with far lighter compliance. See our full structure comparison to decide.

The funding journey — stage by stage

Funding isn't one event — it's a sequence of rounds, each suited to a different point in your growth. Matching your stage to the right investor is the single biggest factor in actually getting funded.

🏦

Bootstrapping · IDEA STAGE

Self-funding from savings and early revenue. No dilution, full control — but limited by your own resources. Even six months of bootstrapping builds leverage for a better raise later.

🌱

Pre-Seed · EARLY PROTOTYPE

The gap between savings and a proper seed round. Sources: friends & family, angel investors, government grants (SISFS), and accelerators. Used to build an MVP.

💫

Seed · WORKING PRODUCT + TRACTION

First meaningful institutional money to find product-market fit. Sources: angel networks, seed-stage VCs, SISFS convertible debt, accelerators.

🚀

Series A · PROVEN FIT, SCALING REVENUE

Institutional VC funds, family offices and venture debt fund the scaling of a model that clearly works. Governance, board seats and reporting begin.

📊

Series B & Beyond · SCALING UNIT ECONOMICS

Growth-equity funds, late-stage VCs and pre-IPO investors fund expansion, new markets and acquisitions as proven economics scale.

🏆

Exit · ACQUISITION OR IPO

Founders and investors realise returns through an acquisition, a strategic sale, or a public listing (IPO).

⚠️ The most common fundraising mistake is pitching the wrong investor for your stage — pre-revenue founders approaching banks, or seed founders pitching growth VCs. Target investors who specifically back your stage, sector and geography, and don't raise more (or dilute more) than the stage needs.

Startup team pitching to investors for seed and venture capital funding in India

Raising capital is not just finding money — it's choosing the right money, on the right terms, at the right time.

Modes of raising funding

Beyond the stages, capital comes in different forms — and each has very different consequences for ownership, repayment and control. Most startups blend several over their lifecycle.

Equity FundingSelling ownership shares to investors (founders, angels, VCs, PE). No repayment, but you dilute ownership and share control.EQUITY · DILUTIVE

Angel InvestmentHigh-net-worth individuals investing personal money early, often the first outside cheque, sometimes with mentorship.EQUITY · EARLY

Venture CapitalInstitutional funds investing pooled money at scale from Series A onwards, with board seats and governance rights.EQUITY · INSTITUTIONAL

Convertible InstrumentsConvertible notes or CCPS — debt now that converts to equity at the next round, often with a discount or cap. Defers valuation.HYBRID

Bank Loans / MUDRATraditional and collateral-free loans repaid with interest. No dilution but creates a repayment obligation.DEBT

Venture DebtDebt provided alongside an equity round to extend runway with minimal dilution; needs traction, often with a warrant.DEBT

Government GrantsNon-dilutive, non-repayable money from schemes like SISFS and state programmes — capital you never give back.GRANT · NON-DILUTIVE

Revenue-Based FinancingCapital repaid as a percentage of future revenue. No fixed EMI, no equity given up — good for revenue-generating startups.REVENUE-LINKED

CrowdfundingRaising small amounts from many people online — reward-based, or equity crowdfunding within regulatory limits.CROWD

Incubators & AcceleratorsMentorship, workspace and networks, sometimes with capital in exchange for equity, through an intensive growth programme.PROGRAMME

💡 Non-dilutive first: a smart funding strategy uses grants, revenue and customer prepayments to fund early work, raising equity only when needed — so founders give up less ownership for the capital they actually require.

Government schemes for startups

India runs one of the most generous startup support systems in the world. These are the major central schemes for DPIIT-recognised startups in 2026 — from non-dilutive grants to collateral-free loans and a fund that powers the whole VC ecosystem.

Startup India Seed Fund (SISFS)Up to ₹50 lakh

Early-stage funding through approved incubators — up to ₹20 lakh as a grant for proof of concept and prototyping, and up to ₹50 lakh for market entry and commercialisation via convertible/debt instruments. Funds are routed through incubators, not paid directly by the government.

Credit Guarantee Scheme (CGSS)Collateral-free loans

Provides credit guarantees on loans given by banks and financial institutions to DPIIT-recognised startups, enabling collateral-free debt up to the prescribed limit — so you can borrow without pledging personal or company assets.

Fund of Funds (FFS)₹10,000 cr corpus

A government corpus operated through SIDBI that invests in SEBI-registered AIFs, which in turn invest in startups. It doesn't fund startups directly — it multiplies the private venture capital available to them across the ecosystem.

MUDRA LoansCollateral-free

Collateral-free loans for micro and small enterprises under Shishu, Kishore and Tarun categories — useful for small-business and early startups needing working capital and asset finance without giving up equity.

State Startup SchemesVaries by state

Most states (including UP's startup policy) run their own seed grants, incubation support, reimbursements and incentives — often stackable with central schemes for startups based in that state.

Sector Schemes (BIRAC, etc.)Grants & soft loans

Sector bodies like BIRAC (biotech), MeitY (tech) and others run dedicated grants, challenges and soft-loan programmes for startups in their domains — strong non-dilutive options for deep-tech ventures.

📌 Order matters: SISFS applicants generally must not have already taken more than ₹10 lakh from other central/state government schemes at the time of applying — so if you plan to use SISFS, apply for it before stacking other government grants.

Want to tap government funding?We assess which schemes fit your startup and prepare a winning application.

💬 Explore Schemes

DPIIT recognition & its benefits

DPIIT recognition is the gateway to everything. It's free, applied entirely online, and a well-prepared application is typically approved within days. Here's what it unlocks for a recognised startup.

💰

80-IAC Tax Holiday100% income tax exemption on profits for any 3 consecutive years in the first 10 (via IMB approval).

😇

Angel Tax ExemptionRelief from tax on share premium above fair market value, under prescribed conditions.

💡

IPR Rebates80% rebate on patent filing fees and 50% on trademark fees, plus fast-tracked examination.

🌱

Seed Fund AccessEligibility for SISFS seed funding through approved incubators.

📋

Self-CertificationSelf-certify compliance under several labour and environment laws, easing the early burden.

🏛️

Public ProcurementGeM access with relaxed prior-experience, turnover and EMD requirements for tenders.

🔄

Loss Carry-ForwardCarry forward losses even after shareholding changes, subject to conditions.

⚡

Faster Winding UpFast-track exit within a shorter timeframe if the startup needs to close.

🤝

Networking & SupportAccess to the Startup India network, mentorship and government events.

⚠️ The #1 rejection reason for DPIIT recognition is a weak innovation write-up — generic language that doesn't clearly name the problem, the solution, the technology, the evidence and the scalability. A specific, well-drafted innovation statement is what gets approved. This is where professional help pays for itself.

Documents required

Keep these ready for incorporation, DPIIT recognition and your first funding round — a complete file means a faster, smoother setup.

For incorporation & DPIIT recognition

PAN & Aadhaar of all directors / partners

Passport-size photos & contact details of founders

Address proof of directors (bank statement / utility bill)

Registered office proof (rent agreement, NOC, utility bill)

Certificate of Incorporation / registration

Entity PAN and MOA/AOA or LLP/partnership deed

Digital Signature (DSC) of authorised signatory

Innovation write-up — problem, solution, tech, scalability

Website / pitch deck (optional, strengthens application)

Patents / awards / recommendation letters (optional)

Additional for raising funding

Pitch deck & financial model / projections

Cap table (shareholding structure)

Valuation report from a registered valuer (where required)

Audited financials & bank statements

Term sheet & shareholders' agreement (at deal stage)

FEMA filings (FC-GPR) for any foreign investment

Step-by-step: from idea to recognised startup

The complete journey from a business idea to a funded, government-recognised startup:

Validate the idea & choose a structure

Test the problem and market, then pick the right entity — a Private Limited Company if you'll raise equity, an LLP for a bootstrapped business.

Incorporate the entity

Get PAN, TAN, GST & bank account

Complete the basic registrations and open a current account in the entity's name to start operating.

Create a Startup India profile

Apply for DPIIT recognition

Submit the recognition application on the NSWS/Startup India portal with the incorporation certificate and a clear, specific innovation write-up. No fee.

Receive the recognition certificate

On approval (usually within a few days), download the DPIIT certificate with its unique recognition number.

Apply for benefits

Apply for the 80-IAC tax holiday via the IMB, angel tax exemption, SISFS seed fund, IPR rebates and GeM registration.

Raise funding & stay compliant

Prepare your deck, valuation and cap table to raise capital — and maintain ROC, tax and GST compliance as you grow.

30 frequently asked questions

Everything founders ask us about starting up, getting recognised and raising funding. Search to jump to any topic.

From idea to funded startup — we'll guide every step

Incorporation, DPIIT recognition, 80-IAC tax holiday, government scheme applications, funding documentation and ongoing compliance — handled end to end by Lalit Tyagi & Company for founders across Hapur, Ghaziabad, Noida, Meerut, Delhi NCR and across India.

📞 Call +91 74179 91060 💬 Book a Startup Consultation ✉️ Request a Callback