India’s Startup Revolution 2.0: How New Deep Tech Rules Are Fueling a Global Innovation Ambition 

In a transformative move to cement India’s position as a global innovation leader, the government has overhauled its Startup India policy, creating a dedicated category for deep technology ventures and significantly relaxing eligibility criteria for all startups. The new framework, issued in February 2026, extends the recognition period for deep tech firms—those built on novel scientific R&D and intellectual property—to 20 years and raises their turnover cap to ₹300 crore, acknowledging their long gestation periods and high capital needs. For the broader ecosystem, the turnover limit for all startups has been doubled to ₹200 crore, and cooperative societies are now included, democratizing entrepreneurship. This strategic shift aims to provide patient capital and policy stability for R&D-intensive sectors like AI and biotech while fueling scalable growth across the board, signaling India’s transition from a tech-adopting nation to a pioneering technology creator.

India’s Startup Revolution 2.0: How New Deep Tech Rules Are Fueling a Global Innovation Ambition 

In a decisive move to propel India from a tech-adopting nation to a global innovation powerhouse, the government has fundamentally rewritten the rulebook for its startup ecosystem. On February 4, 2026, the Department for Promotion of Industry and Internal Trade (DPIIT) issued a gazette notification introducing a dedicated regulatory category for deep technology firms and significantly widening the eligibility net for all startups. This policy overhaul, which supersedes the 2019 framework, is a direct response to a maturing ecosystem and a clear signal of India’s strategic intent to dominate the next frontier of technology innovation. 

Why the Rulebook Needed a Rewrite 

The Startup India initiative, launched in 2016, has been a phenomenal success, fostering over 200,000 recognized startups and creating the world’s third-largest startup ecosystem. However, the very nature of innovation has evolved. A significant shift has occurred towards sectors with longer innovation cycles, higher capital intensity, and delayed commercialisation—such as artificial intelligence, quantum computing, biotechnology, and advanced manufacturing. 

The government recognized a critical flaw: pioneering companies in these deep tech domains were outgrowing the old eligibility thresholds (10 years, ₹100 crore turnover) while still being in the costly, pre-revenue research and development phase. They were losing vital policy support and tax benefits just when they needed it most. The revised framework aims to fix this misalignment by providing long-term patient capital and extended runway for the startups that promise the most transformative impact. 

A Detailed Look at the New Thresholds 

The notification introduces a two-tiered structure, creating a clear distinction between regular startups and deep tech entities. The following table summarises the key changes: 

Key Expansion of Eligible Entities: A pivotal, often overlooked change is the inclusion of cooperative societies. Multi-state and state-registered cooperatives are now eligible for startup recognition, a move designed to spur grassroots innovation in agriculture, rural industries, and community-based enterprises. This democratizes entrepreneurship, extending the startup boom beyond metropolitan hubs. 

What Exactly is a “Deep Tech Startup”? 

For the first time, the government has provided a clear, three-pronged definition. To qualify as a deep tech startup, an entity must meet all of the following criteria: 

• Core Technology: Be developing a solution based on new or emerging scientific or engineering knowledge or a significant advancement within an existing discipline. 

• R&D Investment: Demonstrate a high proportion of expenditure on research and development as a percentage of its revenues or funding. 

• Intellectual Property: Own or be in the process of creating significant novel intellectual property with clear plans for commercialisation. 

This definition acknowledges the inherent challenges of the sector: high technical uncertainty, lengthy gestation periods, and substantial capital requirements. During its recognition period, a deep tech startup faces stricter fund usage restrictions, barred from investing in real estate, luxury assets, or any speculative, non-productive activities unrelated to its core business. 

Strategic Implications and Stakeholder Impact 

This policy shift is more than an administrative update; it’s a strategic economic lever with far-reaching consequences. 

• For Deep Tech Founders: The extended 20-year horizon is a game-changer. It aligns government support with the actual timeline of hard tech innovation, which can take 9-15 years to commercialize. The higher turnover ceiling allows them to achieve meaningful scale without the fear of prematurely losing benefits. As Sandeepp Jhunjhunwala of Nangia Global Advisors noted, this “showcases that India is prioritising deep tech to move from a nation of technology adoption to one of technology innovation”. 

• For the Broader Startup Ecosystem: Doubling the turnover limit to ₹200 crore is a major boost for scaling startups in all sectors, from SaaS to fintech. It provides a longer safety net and acknowledges the increased capital and time required to build substantial, sustainable businesses in today’s market. 

• For Investors: The policy injects confidence. It signals government commitment to de-risking long-gestation investments in R&D-heavy sectors. This is complemented by Budget 2026 initiatives like the ₹10,000 crore Biopharma SHAKTI Fund and the expansion of the Fund of Funds, which channel patient capital into venture funds. The goal is to attract more domestic and international “patient capital” into deep tech. 

• For India’s Global Standing: This is a calculated move in global tech competition. By creating a fertile, supportive environment for breakthrough technologies, India aims to become a preferred global hub for high-technology entrepreneurship and manufacturing-led growth. It’s a direct play to capture a larger share of the future global economy. 

Navigating the New Landscape: Practical Steps 

For entrepreneurs, understanding how to leverage this new framework is crucial. 

• Check Your Eligibility: Founders in sectors like AI/ML, cleantech, advanced materials, space tech, and biotech should meticulously assess their operations against the three deep tech criteria. 

• Access Unchanged Benefits: Remember, all recognized startups—deep tech or not—continue to have access to the foundational benefits of Startup India: 

• Tax Exemptions: Eligibility for a 100% tax holiday on profits for 3 years under Section 80-IAC and exemption from the so-called “Angel Tax” under Section 56(2)(viib) for investments up to ₹25 crore. 

• Regulatory Ease: Self-certification under 6 labour and 3 environmental laws, reducing compliance burdens. 

• IPR Support: 80% rebate on patent filing fees and access to a network of government-funded facilitators. 

• Public Procurement: Exemption from prior experience criteria and earnest money deposits in government tenders via the Government e-Marketplace (GeM). 

1. Apply via the Right Channel: Recognition applications are processed through the DPIIT portal on the National Single Window System (NSWS). Deep tech startups will need to provide additional documentation to substantiate their R&D focus and IP creation plans. 

The Path Forward: Building Responsibly 

The government has balanced this expansion with safeguards. Entities formed by splitting or reconstructing existing businesses are ineligible. The tightened restrictions on non-core investments ensure that capital and benefits flow to genuine, building-focused entrepreneurs. 

Commerce and Industry Minister Piyush Goyal stated the reforms aim to take “India’s startup journey into its next phase of growth”. This next phase is unmistakably technology-led, patient, and inclusive. By formally bringing deep tech and grassroots cooperatives into the fold, India is not just expanding its startup definition—it is boldly defining its economic and innovative future. The message to the world’s scientists, engineers, and visionary entrepreneurs is clear: India is open for business, ready to build, and prepared to back the ideas that will shape the coming decades.