Startup India Scheme – Eligibility & Benefits 17/05/2016, by Anand Kumar, Ashna Pillai

Startup India Scheme – Eligibility & Benefits 17/05/2016, by Anand Kumar, Ashna Pillai

“I see startups, technology, and innovation as exciting and effective instruments for India’s transformation.”        -Shri Narendra Modi, Prime Minister of India

Startup India is an initiative of the Government of India which aims to foster entrepreneurship and to empower startups to grow through innovation and design.

Certain conditions are to be satisfied for a startup to be included under startup India initiative:

·       The entity should be a Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2008)

·       An entity registered or incorporated not prior to five years.

·       An entity, whose annual turnover not exceeding INR 25 crore in any preceding financial years.

·       The entity shall cease to be a Startup if its turnover has exceeded INR 25 crore in any previous financial years or it has completed 5 years from incorporation/ registration.

·       The entity should be working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

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·       A business is covered under the definition if it aims to develop and commercialize

a.     a new product or service or process; or

b.     a significantly improved existing product or service or process, that will create or add value for customers or workflow.

·       Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.

·       Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

·       In order for a “Startup” to be considered eligible, the Startup should

a.     be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post-graduate college in India; or

b.     be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or

c.     be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI; or

d.    be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/ Accelerator/Angel Network duly registered with SEBI that endorses innovative nature of the business; or

e.     be funded by GoI as part of any specified scheme to promote innovation; or

f.      have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.

DIPP may publish a ‘negative’ list of funds which are not eligible for this initiative.

Benefits available to a startup India entity:

1.     Startups have the facility to self-certify compliance with various labour and environment laws. No inspections will be conducted in connection with labour laws for a period of 3 years.

2.     Startup India Hub will improve the ease of doing business by working in a hub and spoke model, assisting startups through their lifecycle, organising mentorship programs etc.

3.     Mobile-App and Web Portal Serves as the single platform for Startups for interacting with Government and Regulatory Institutions for all business needs including registration and information exchange.

4.     Startups shall be provided an 80% rebate in filing of patents with regard to other companies and fast track examination and disposal of patent application.

5.     Faster exit for startups within 90 days will promote entrepreneurs to experiment with new and innovative ideas, without having the fear of facing a complex and long-drawn exit process.

6.     Providing Funding Support through a Fund of Funds with a Corpus of INR 10,000 crore over a period of 4 years.

7.     Credit Guarantee Fund for Startups

To encourage Banks and other Lenders to provide Venture Debts to Startups, Credit guarantee mechanism through National Credit Guarantee Trust Company (NCGTC)/ SIDBI is being envisaged with a budgetary Corpus of INR 500 crore per year for the next four years.

8.     Tax Exemption on Capital Gains, if such capital gains have been invested in fund of funds recognized by the government.

9.     Exemption from Income tax up to 3 years subject to non – distribution of dividend.

10.  Tax Exemption on Investments by venture capital funds/incubators in startup above Fair Market Value of shares.

11.  Organizing Startup Fests for Showcasing Innovation and Providing a Collaboration Platform

12.  Annual Incubator Grand of INR 10 crore each will be given to 10 successful world class incubators as financial assistance.

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