India’s revised startup framework: Key reforms

India has revised its startup regulatory framework with the aim of supporting innovation and strengthening the startup ecosystem. On 4 February 2026, the Ministry of Commerce and Industry, through the Department for Promotion of Industry and Internal Trade (‘DPIIT’), issued Gazette Notification G.S.R. 108(E) (‘New Framework’). This New Framework supersedes the earlier framework issued under G.S.R. 127(E), dated 19 February 2019.

The significant changes under the New Framework include an increase in the turnover threshold for startup recognition. The earlier framework set the maximum limit at INR 100 crore (Indian Rupees One Hundred Crore only), whereas the New Framework raises this threshold to INR 200 crore (Indian Rupees Two Hundred Crore only). This expansion of eligibility criteria allows growth-stage entities to continue accessing startup-linked regulatory and tax benefits for a longer period.

Additionally, the definition of ‘Startup’ has been broadened to include Multi-State Cooperative Societies registered under the Multi-State Cooperative Societies Act, 2002, as well as State and Union Territory Cooperative Societies registered under their respective applicable laws.

Further, a new regulatory category for ‘Deep Tech Startups’ has been introduced, which did not exist under the earlier framework. A ‘Deep Tech Startup’ refers to a startup that, in addition to meeting the general eligibility conditions, demonstrates specific technology-intensive characteristics. Broadly, an entity may qualify as a Deep Tech Startup if it: i) works on producing a solution based on new knowledge or advancements within one or more scientific or engineering disciplines, which is either yet to be developed or is in the process of being developed; (ii) incurs relatively high expenditure on research and development as a percentage of its revenue or funding; (iii) owns or is in the process of creating significant novel intellectual property and is taking steps toward its commercialization; and (iv) operates in sectors involving long development timelines and gestation periods, high capital or infrastructure requirements, and substantial technological or scientific uncertainty.

While general startups remain eligible for recognition for up to 10 years from incorporation with a turnover cap of INR 200 crore, Deep Tech Startups may qualify for recognition for up to 20 years with a turnover cap of INR 300 crore. This serves as a significant incentive for founders to pursue problem-solving and research and development-oriented ventures, supporting India’s push for self-reliance and domestically grown companies. The New Framework is also aligned with Finance Act, 2024 that abolished the angel tax regime.

The New Framework marks a clear shift in India’s startup policy towards supporting longer innovation cycles, higher capital requirements, and delayed commercialization, particularly in deep tech, research intensive sectors. While this is a progressive step, some practical gaps remain that could limit its impact if not addressed. One important issue lies in the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (‘NDI Rules’). Although both the earlier framework and the New Framework recognize Limited Liability Partnership (‘LLP’) firms as eligible startup entities, the NDI Rules continue to specifically permit and recognise startups as ‘startup companies,’ and do not include LLP(s) within the ambit of startups. This inconsistency means that startup LLP(s) are unable to access several foreign investment benefits (for example, investment by way of convertible notes) that recognized startups otherwise enjoy.

Overall, this is a timely and forward-looking reform. With clearer operational guidance and effective implementation, the New Framework has the potential to significantly boost innovation-led startups and position India as a strong competitor in the global deep-tech and evolving innovation landscape.

[The author is an Associate in Corporate and M&A practice at Lakshmikumaran & Sridharan Attorneys, Hyderabad]