The government has expanded the definition of startups under the Startup India programme to formally include deep technology firms, creating a separate regulatory category for businesses built on scientific and engineering breakthroughs that typically require longer development timelines and sustained research spending.
In a gazette notification issued on February 4, the Department for Promotion of Industry and Internal Trade (DPIIT) said startups recognised as deep tech entities will be eligible for benefits for up to 20 years from the date of incorporation, compared with the 10-year recognition window applicable to other startups. The turnover ceiling for such firms has also been raised to Rs 300 crore, while the limit for regular startups remains unchanged at Rs 200 crore.
The notification takes effect immediately and supersedes the startup definition issued in February 2019.
What qualifies as a deep tech startup?
For the first time, the government has clearly defined what constitutes a deep tech startup. According to the notification, such entities must be developing solutions based on new scientific or engineering knowledge, demonstrate a high proportion of expenditure on research and development, and own or be in the process of creating significant novel intellectual property with plans for commercialisation.
The framework also acknowledges that deep tech businesses face higher capital requirements, longer gestation periods and greater technical or scientific uncertainty.
Core startup definition remains unchanged
The revised rules clarify that the broader startup definition remains intact. To qualify, an entity must be incorporated or registered in India as a private limited company, partnership firm, limited liability partnership or cooperative society, and be focused on innovation or a scalable business model with the potential for employment or wealth creation.
Recognition process and exit conditions
Recognition will continue to be granted through the DPIIT portal. Applicants must submit incorporation or registration documents along with a write-up outlining their innovation or scalability, while deep tech startups will be required to provide additional information to demonstrate that they meet the prescribed criteria. DPIIT will assess applications based on frameworks and guidelines issued by the department.
The notification also sets out clear exit conditions from the framework. Regular startups will cease to be recognised after completing 10 years from incorporation or if their annual turnover exceeds Rs 200 crore in any financial year. Deep tech startups will lose their status after 20 years or upon breaching the Rs 300 crore turnover threshold, whichever is earlier.
Tax benefits and restrictions on use of funds
Recognised startups, including deep tech firms, may apply for income-tax exemptions under Section 80-IAC of the Income-tax Act, subject to certification by the Inter-Ministerial Board. The government has retained the power to revoke such certification if it is found to have been obtained through misrepresentation or false information.
The revised framework also tightens restrictions on the use of funds during the recognition period. Startups are barred from investing in residential real estate, non-core land and buildings, loans and advances unrelated to the core business, capital contributions to other entities, shares and securities not linked to core operations, luxury assets and other speculative or non-productive activities.
The Centre has also reserved the right to relax or modify the applicability of these conditions for specific classes of startups or individual cases.
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