In order to make it easier for startups to secure funding, 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. This exemption, provided by the Ministry of Corporate Affairs through a notification, has only been made for companies that could be defined as startups under the notification issued by Department of Industrial Policy and Promotion (DIPP). A convertible note means an instrument either converted into equity or repaid within five years from the date of funding.
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