Timeline says you can submit your application from 5-apr-2013 to 30-apr-2013. I dont think they have an expectation of a working prototype from what I've read on the various pages. Independently, I met an angel investment group head, and their expectation was just a business idea. So I think the expectation for Indian startups is a lot lower, at least in this 1st batch.
in the form, they ask you specifically at what stage the startup is at, so it seems they would be looking at all startup submissions... Though of course, if you have a prototype it would not hurt... :)