Deeptech startups get 20-year window as Centre overhauls new norms, doubles turnover cap

The Ministry of Commerce and Industry has issued a fresh notification revising the definition and recognition norms for startups, with a distinct policy thrust on deeptech enterprises, signalling the government’s intent to support innovation-led and research-intensive businesses.

Under the revised framework, a startup will be defined as an entity that is up to 10 years from the date of incorporation or registration and has recorded a turnover not exceeding Rs 200 crore in any financial year since incorporation. This marks a significant enhancement from earlier thresholds. For entities recognised as ‘Deep Tech Startups’, the eligibility window has been extended to 20 years, while the turnover ceiling has been raised to ₹300 crore for any such financial year.

The notification clearly states that entities formed through the splitting up or reconstruction of an existing business will not qualify as startups. It also lays down detailed attributes for deep tech startups, describing them as entities working on solutions based on new scientific or engineering knowledge, often spanning multiple disciplines. Such startups typically incur a high proportion of expenditure on research and development, own or are in the process of creating novel intellectual property, and operate under conditions marked by long gestation periods, high capital and infrastructure needs, and significant technical or scientific uncertainty.

Further, the notification reiterates restrictions on asset investments during the period of recognition. Startups, including deep tech startups, are barred from investing in assets such as residential real estate, high-value vehicles, aircraft, yachts, loans and advances, jewellery, or luxury assets, unless such investments are integral to their core business operations or held as stock-in-trade. A new provision also allows the Central government to notify speculative or non-productive assets as non-permissible. Importantly, the government has retained the power to relax or modify these conditions for specific classes of startups or individual cases under special circumstances.

Commenting on the move, Sandeep Jhunjhunwala, M&A Tax Partner at Nangia Global Advisors, said the revised thresholds and the formal inclusion of deep tech startups reflect India’s ambition to shift from being a technology adopter to a technology innovator. However, he pointed out that despite India having over two lakh DPIIT-recognised startups, only around 2% currently benefit from the Section 80-IAC income tax exemption, highlighting the need for broader access to fiscal incentives.