India's Startup Recognition Framework Gets Major Overhaul to Support Growth
In a significant policy reset aimed at bolstering innovation and economic growth, the Indian government has revised the Startup Recognition Framework under the Startup India Action Plan. The changes, announced last week by the commerce ministry, expand eligibility timelines and ease thresholds to help more startups access crucial benefits for longer periods.
Key Changes in the Revised Startup Recognition Rules
The government has made several important modifications to make the framework more inclusive for scaling and innovation-led businesses. The turnover limit for startups has been raised from ₹100 crore to ₹200 crore, allowing growing companies to retain recognition and associated benefits that officially recognized startups enjoy.
Perhaps the most significant change is the introduction of a new deep-tech startup sub-category for firms working on cutting-edge technologies. These ventures can now be recognized up to 20 years from incorporation instead of the previous 10-year timeline, and with a turnover of up to ₹300 crore. This move acknowledges the inherently longer product development timelines and higher capital requirements of deep-tech companies.
Expanded Eligibility Beyond Traditional Startups
The revised rules have expanded startup recognition eligibility to include cooperative societies, both multi-state and state-level cooperatives, provided they meet other applicable startup criteria. Traditionally organized around shared ownership and community services, cooperatives can now tap into startup incentives, broadening the reach of the Startup India initiative.
According to a notification from the commerce and industry ministry, the primary idea behind this expansion is to promote innovation-driven growth at the grassroots level through community-led enterprises, agriculture, allied sectors, and rural industries. Cooperative societies typically focus on service rather than profit, promoting sustainable and equitable economic growth.
Why the Government Made These Strategic Changes
The revised notification reflects a deliberate shift in the government's view of startup growth and innovation. Previously, startups were defined largely with a focus on internet and consumer technology companies with shorter product cycles. India's startup ecosystem has evolved significantly, with a growing number of research-intensive and capital-heavy ventures in areas such as advanced materials, artificial intelligence (AI), biotechnology, space, and robotics.
These businesses require more time to build and need substantial investment and regulatory support. Data from Tracxn shows funding into Indian deep-tech startups rose to about $1.15 billion in 2025, from $843 million in 2024. By creating a dedicated deep-tech category, the government has acknowledged that such companies face longer gestation periods and need more runway to benefit from government incentives.
Tangible Benefits for Recognized Startups
The benefits enjoyed by officially recognized startups typically include tax exemptions, preferential access to government schemes, faster regulatory clearances, and greater visibility in public procurement channels. Key government programmes for recognized startups include:
- Technology Incubation and Development of Entrepreneurs (TIDE 2.0)
- Funds of Funds for Startups (FFs)
- Credit Guarantee Scheme for Startups (CGSS)
- Technology Development Fund (TDF)
- Startup Intellectual Property Protection (SIPP)
Startups close to or crossing the ₹100 crore revenue mark often found themselves falling out of the ecosystem prematurely, even while still building core products and markets. The higher limit gives them policy continuity as they bridge from early-stage growth to full commercial scale.
Impact on Startup Funding and Investor Confidence
The policy changes have given founders a longer runway to demonstrate progress without losing access to government incentives, which, according to investors, would make it easier to attract patient capital such as long-term venture funds, strategic corporate investors, and government-backed research and development (R&D) grants.
For deep-tech startups specifically, the alignment between policy support and longer business timelines reduces regulatory uncertainty. Investors view this as a signal of a more mature and credible startup policy environment, which could encourage larger cheque sizes, longer holding periods, and increased participation from global funds focused on research-led innovation.
The revised framework represents a significant step toward creating a more supportive environment for India's diverse startup ecosystem, recognizing the varying needs of different types of ventures and providing them with the policy stability needed for long-term growth.
