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A Startup is a DPIIT-recognized business eligible for tax exemptions, funding, and compliance benefits, whereas a normal company operates without government startup incentives.
What Is a Startup?
A startup is a business entity recognized by DPIIT under the Startup India initiative. It must be incorporated as a Private Limited Company, LLP, or Partnership Firm and should focus on innovation, scalability, or improvement of products or services.
Startups enjoy special government benefits such as tax exemptions, angel tax relief, funding schemes, and easier compliance. Recognition is valid for up to 10 years from incorporation.
What Is a Normal Company?
A normal company is a business registered under the Companies Act, 2013 but not recognized as a startup by DPIIT. It follows standard legal and tax rules applicable to all companies.
Such companies do not get startup-specific incentives and must comply with regular taxation, inspections, and regulatory requirements from the beginning.
Startup vs Normal Company – Detailed Comparison
|
Basis |
Startup (DPIIT Recognized) |
Normal Company |
|
Government Recognition |
Yes (DPIIT) |
No |
|
Income Tax Exemption |
Available (80-IAC) |
Not available |
|
Angel Tax Exemption |
Yes |
No |
|
Compliance Burden |
Relaxed |
Full compliance |
|
Government Funding |
Eligible |
Not eligible |
|
IPR Benefits |
High rebates |
Normal fees |
|
Tender Eligibility |
Relaxed norms |
Strict norms |
Tax Benefits: Startup vs Normal Company
Startups can claim 100% income tax exemption for 3 consecutive years under Section 80-IAC. They may also receive exemption from angel tax under Section 56(2)(viib).
Normal companies must pay corporate tax from the first year and do not get any angel tax relief, even if they are newly incorporated.
Compliance & Regulatory Differences
Startups enjoy self-certification under labor and environmental laws, reducing inspections during the early years. They also benefit from simplified winding-up procedures.
Normal companies must follow all statutory compliances strictly, including regular inspections and longer exit processes.
Funding & Growth Opportunities
Investors prefer DPIIT-recognized startups due to tax benefits and government validation. Startups can access Seed Fund Schemes, SIDBI funds, and incubators.
Normal companies depend entirely on private funding and bank loans, often with stricter eligibility criteria.
Which One Should You Choose?
Choose a Startup if:
- Your business is innovative or scalable
- You plan to raise funding
- You want tax exemptions and government support
Choose a Normal Company if:
- Your business is traditional
- You don’t need startup incentives
- You want simple operations without eligibility checks
FAQs
Q1. Is every new company a startup?
No, only DPIIT-recognized entities are startups.
Q2. Can a normal company later become a startup?
Yes, by applying for DPIIT recognition if eligible.
Q3. Is startup registration mandatory?
No, but mandatory to claim startup benefits.
Q4. Do startups pay zero tax always?
No, tax exemption applies only if approved under Section 80-IAC.
Confused between Startup or Normal Company?
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