Startup India Scheme is known to be as an initiative that is started by the Government of India relating to the generation of employment and wealth creation. The main aim of Startup India is the development as well as innovation of goods and services and increasing the rate of employment in India.
The major benefits of Startup India Scheme are the simplification of Work, Financial support, Government tenders, networking opportunities. Startup India has been launched by Prime Minister Narendra Modi on 16th January 2016.
Registration of the Startup India Scheme could be carried out only from following types of firms
1. Partnership Firm
2. Limited Liability Partnership Firm
3. Private Limited Company
Startup India Scheme Action plan
Towards meeting the objectives of the Startup India Scheme initiative, Government of India Action Plan that addressed all aspects of the Startup ecosystem was announced. By means of this Action Plan the Government aims to accelerate spreading of the Startup movement:
• From digital or technology sector towards a wide range of sectors which includes agriculture, manufacturing, social sector, healthcare, education, etc.; and
• From existing tier 1 city to tier 2 and tier 3 cities which includes semi-urban and rural areas.
The Action Plan is divided into the following areas:
• Simplification and Handholding
• Funding Support as well as Incentives
• Industry-Academia Partnership and Incubation
Simplification and Handholding
• Compliance Regime depending on Self-Certification - Startups would be allowed towards self-certifying compliance (through the Startup mobile app) with 9 labour and environment laws. For the labour laws, no inspections shall be conducted for a period of 3 years. Startups might be inspected on receiving of credible and verifiable grievance of the violation, filed in writing and accepted by at least one level senior towards the inspecting officer. In case of the environment laws, Startups which comes under the ‘white category’ (as listed by the Central Pollution Control Board (CPCB)) would be capable towards self-certifying compliance and only random checks would be carried out in such matters.
• Startup India Hub – For creating a single point of contact for the entire Startup ecosystem as well as permit knowledge exchange and access towards funding.
• Rolling out of Mobile Application and Portal – Towards serving as the single medium for Startups for interacting with Government and Regulatory Institutions for each business necessities and information exchange between various stakeholders
Legal Support and Fast-tracking Patent Examination at Lower Costs – According to the Startup India Scheme;
• the Central Government would bear the complete fees of the facilitators for any number of patents, trademarks or designs that a Startup might file, and the Startups would bear the price of only the statutory fees payable.
• Also, Startups would be given an 80% rebate in filing of patents vis-a-vis other corporations. The Startup India Scheme is being set up firstly on a pilot basis for 1 year; depending on the experience gained, further steps would be considered.
• Relaxed Standards of Public Procurement for Startups - For promoting Startups, the Government would exempt Startups (in the manufacturing segment) from the standards of “prior experience/ turnover” without any relaxation in quality standards or technical considerations. The Startups would also have to show requisite competence to implement the project according to the requirements and must have their own manufacturing facility in India.
• Faster Exit for Startups - Startups might be wound up within a period of 90 days from making of an application for winding up on a fast track factor, according to the recently presented Insolvency and Bankruptcy Bill 2015, which has clauses for voluntary closure of businesses. This procedure would respect the idea of limited liability.
Funding Support and Incentives.
• Providing Funding Support through a Fund of Funds with an Amount of Rs 10,000 crore – Towards providing funding support to Startups, Government would form a fund with an initial amount of Rs 2,500 crore and a total amount of Rs 10,000 crore over a period 4 years (i.e. Rs 2,500 crore every year). The Fund would be in the nature of Fund of Funds, which implies that it would not invest directly into Startups, but may participate in the capital of SEBI registered Venture Funds.
• Credit Guarantee Fund for Startup India Scheme- Credit guarantee method through National Credit Guarantee Trust Company (NCGTC)/ SIDBI has been presented with a budgetary sum of Rs 500 crore each year for the next 4 years.
• Tax Exemption on Capital Gains - With this intent, the exemption would be given to individuals who have capital gains during the year, if they have put in such capital gains in the Fund of Funds recognized through the Government. Furthermore, existing capital gain tax exemption for investment in lately made manufacturing MSMEs through individuals would be extended towards all Startups.
• Tax Exemption to Startups for 3 years - The profits of Startup India Schemes initiatives are exempted from income-tax for a period of 3 years. The exemption would be available subject to non-distribution of dividend through the Startup.
• Tax Exemption on Investments above Fair Market Value – As per the Income Tax Act, 1961, where a Startup (corporation) receives any consideration for issue of shares which goes beyond the Fair Market Value (FMV) of such shares, such excess consideration is taxable relating to the recipient as Income from Other Sources. Investment through venture capital funds in Startups is exempted from operations of this provision. The same would be extended towards investment made by incubators in the Startups.
Industry-Academia Partnership and Incubation for the Startup India Scheme
• Organizing Startup Fests for Showcasing Innovation and Furnishing a Collaboration Medium - To strengthen the Startup India Scheme ecosystem in India, the Government is proposing towards introducing Startup fests at national as well as international stages.
• Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program - The Atal Innovation Mission was made with an aim to serve as a medium for promotion of world-class Innovation Hubs, Grand Challenges, and Startup businesses as well as other self-employment actions, mainly in technology-driven areas.
• Harnessing Private Sector Expertise for Incubator Setup - with an intent to make certain professional management of Government sponsored/financed incubators, Government would form policy as well as framework for setting-up of incubators all over the nation in a public-private partnership.
• Building Innovation Centres at National Institutes - For augmenting the incubation and Research and Development efforts in the nation, the Government would set up/ scale-up 31 centres (towards providing services for over 1,200 new Startups) of innovation as well as entrepreneurship at national institutes
• Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras - The Government would establish 7 new Research Parks in institutes with a preliminary investment of Rs 100 crore each. The Research Parks would be modelled depending on the Research Park setup at IIT Madras.
• Promoting Startups in the Biotechnology Sector with intent towards fostering and facilitating bio-entrepreneurship.
• Launching of Innovation Focused Programs for Students - with intent towards fostering a culture of innovation in the sector of Science and Technology amongst students.
• Annual Incubator Grand Challenge - with intent towards supporting the creation of successful world-class incubators in India.
Eligibility for Registration under the Startup India Scheme
1. The corporation to be formed should be a private limited company or a limited liability partnership firm.
2. Then the corporations must have acquired approval from the Department of Industrial Policy and Promotion.
3. It should have a recommendation letter by incubation.
4. The corporation than should furnish innovative schemes or products.
5. It must be a new corporation or not older than 5 years.
6. The total turnover of the corporation must be not exceeding 25 crores.
7. Lastly, it must not be a result of splitting up, or reconstruction, of a business already in presence.
Highlights of the Startup India scheme
The highlights of the Startup India scheme that makes the scheme notable are:
• New-entrants are fixed duty time-off for 3 years.
• The government has provided a subsidy of Rs.2500 crore for startup firms; just as credits ensure a reserve of Rs.500 crore rupees.
• The requirement of being eligible for Startup Registration
• The organization to be formed must be a private limited company or a constrained risk joint venture.
• It must be a new firm or not established before more than 5 years, and the total turnover of the organization must be not exceeding 25 crores.
• The organizations must have acquired the endorsement from the Department of Industrial Policy and Promotion (DIPP).
• In order to get agreement from DIPP, the business must be funded by an Incubation subsidize, Angel investor or Private Equity Fund.
• The firm must have acquired a guarantor from the Indian Patent and Trademark Office.
• The firm should have a recommendation letter under proper inspection.
• Capital profit is let off from income tax under the startup India Scheme campaign.
• The firm must provide inventive for the Startup India Scheme.
• Angel investor, Incubation finance, Accelerators, Private Equity Fund, as well as Angel network should be enlisted with SEBI (Securities and Exchange Board of India).
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