July 1, 2016: The government has exempted any advance of more than Rs 25 lakh to a startup from being treated as deposit provided that the person giving the money does it in the form of convertible note in order to make it easier for startups to secure funding.
According to the Companies Act of 2013, any company including startups that received money from any person for over 365 days, it was considered as a deposit and the company had to follow the stringent acceptance of deposit rules to keep that deposit.
The exemption has only been made for companies that could be defined as startups under the notification issued by Department of Industrial Policy and Promotion (DIPP).
Also Read: Indian Government Removes ‘Angel Tax’ To Promote Start-Ups