Recognizing the evolving startup ecosystem and the need for a regulatory framework that accommodates research-intensive businesses, the Department for Promotion of Industry and Internal Trade has issued a notification in 2026 (G.S.R. 108(E) (“2026 Notification”) superseding the earlier startup recognition framework which was introduced in 2019. This revised framework is more than a mere routine update and formalizes the recognition of Deep Tech Startups and expansion of the scope of eligible entities along with the introduction of greater governance requirements with the intent to strengthen India’s position as a competitive global innovation hub.

Formal Recognition of Deep Tech Startups

The most significant development under the 2026 Notification is the introduction of a separate category for Deep Tech Startups. It recognises that businesses operating in sectors such as artificial intelligence, biotechnology, semiconductors, and allied works require longer development cycles, significant research and development investment, extensive infrastructure and creation of valuable intellectual property before commercialization. Accordingly, a Deep Tech Startup is required to demonstrate scientific or engineering innovation, substantial R&D expenditure, ownership or development of novel intellectual property and operation in areas which are characterized by long gestation periods and technological uncertainty.

The introduction of this category is a notable shift as it recognises the unique operational and financial challenges faced by startups in these sectors and therefore is a motivating factor for entrepreneurs to build and explore the Deep Tech sector.

Enhanced Eligibility Criteria

The 2026 Notification significantly broadens the eligibility criteria for startup recognition. For all regular startups that do not fall within the Deep Tech sector, the turnover has increased from INR 100 crore to INR 200 crore, which will now help many growth stage enterprises to continue enjoying startup recognition and the associated regulatory and fiscal benefits. Additionally, recognizing the longer development and commercialization timelines associated with deep tech ventures, the 2026 Notification now provides for separate eligibility frameworks for such startups. It extends the recognition period from 10 years to 20 years from incorporation and increases the turnover threshold to INR 300 crore. Further, the revised framework also extends the scope of eligible entities by including State Cooperative Societies and Multi-State Cooperative Societies, thereby extending startup recognition to a wider range or organizational structures and promoting innovation across diverse sectors.

Continued Access to Tax Benefits

The 2026 Notification retains the framework for obtaining certification under the Income Tax Act, 2025, enabling eligible startups to continue seeking tax incentives through certification by the Inter-Ministerial Board. The revised framework further streamlines the certification and recognition process through the DPIIT portal. However, Deep Tech startups are required to submit additional documentation and must furnish evidence demonstrating R&D investments, technological sophistication and intellectual property development. It is important to note, however, that the 2026 Notification does not restrict the concept of intellectual property development to any specific requirements.

Greater Focus on Compliance and Responsible Deployment of Funds

The 2026 Notification has introduced a stronger compliance regime. Recognised startups are now required to deploy their funds primarily towards innovation, research, scaling and operational requirements. Further, they are generally restricted from investing in non-core or speculative assets such as non-operational real estate, luxury assets, certain passive investments in securities, high-value vehicles, jewelry etc. unless such investments form an integral part of the startup’s core business.

This represents a clear policy decision to ensure that startup recognition and associated benefits are used for genuine business growth and innovation rather than passive asset accumulation or treasury style investments. This would therefore now require founders to establish tighter governance controls over capital allocation.

Importantly, the 2026 Notification also empowers the Inter-Ministerial Board to revoke certifications obtained through false or misleading information, reinforcing the Government’s emphasis on transparency and accountability in the use of startup related benefits.

Conclusion

The 2026 Notification signifies a strategic shift in India’s startup policy and now recognizes a regime that differentiates between conventional startups and research-driven, technology heavy startups. By extending regulatory support to Deep Tech startups, expanding eligibility, increasing recognition thresholds and strengthening governance requirements, this notification intends to create an ecosystem that supports long-term innovation while also ensuring government incentives are directed towards genuine entrepreneurial and technological innovation and development. The reform is likely to provide greater certainty to founders, investors and incubators, particularly in sectors where innovation cycles are longer and capital requirements are significantly higher.

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