“Startup India” is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Start-ups in the country that will drive sustainable economic growth and generate large scale employment opportunities.
- Definition of Start-up to qualify under this program
Annexure 1 of the plan defines Startup as
“Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property
Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.
Provided also that an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration.
Provided further that a Start-up shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.”
- Compliance Regime based on Self Certification
The govt. wants to reduce the regulatory burden on Start-ups so that they can focus on their core business and keep compliance cost low. Therefore, compliance would be self-certified. This self-certification will apply to laws like labour and environment laws as Startups are often unaware of the complexities and can be time consuming.
- Startup India Hub
Govt. wants to create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding
The “Startup India Hub” will be a key stakeholder in this vibrant ecosystem and will
- Work in a hub and spoke model and collaborate with Central & State governments, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and R&D institutions
- Assist Start-ups through their lifecycle with specific focus on important aspects like obtaining financing, feasibility testing, business structuring advisory, and enhancement of marketing skills, technology commercialization and management evaluation
- Organize mentorship programs in collaboration with government organizations, incubation centres, educational institutions and private organizations who aspire to foster innovation.
- Mobile Portal and App
Govt. has launched a website and app to facilitate the startups. A startup will be able to set up by just filling up a short form through a mobile app and online portal. A mobile app will be launched on April 1 through which startups can be registered in a day. There will also be a portal for clearances, approvals and registrations.
- Legal Support and Fast-tracking Patent Examination at Lower Costs
The Govt. is working to promote awareness and adoption of IPRs by Startups. The Govt. would extend legal support and reduce costs of IPR’s and patents to promote innovation. Patent costs to be reduced by 80%.
- Relaxed Norms in Public Procurement
When a tender is made open, Central and State Government companies usually come up with eligibility criterion like “past experience” or “past turnover”. The government would lift this requirement for Startup. The Startups will also have to demonstrate requisite capability to execute the project as per the requirements and should have their own manufacturing facility in India.
- Faster Exit for Startup
Government will make provisions for easier and faster exit of Startups to wind up operations
- Providing Funding Support through a Fund of Funds with a Corpus of Rs 10,000 crore
The government has aside a corpus of Rs 10,000 crore to provide funding support for development and growth of innovation driven enterprises. Government would not invest directly but through a fund of funds i.e. it would provide funds to SEBI registered VC’s who would invest in these companies. The list is available on our website.
- Credit Guarantee Fund
A National Credit Guarantee Trust Company is being envisaged with a budgetary allocation of Rs 500 crore per year for the next four years. This being done so to help flow of venture debt from banking system.
- Tax Exemption on Capital Gains
Investments mad in Startup would be exempted from Capital Gains provided these gains are invested in fund of funds of the Government.
- Tax Exemption for 3 years
Profits of Startup would be exempted from Tax for period of 3 years
- Tax Exemption on Investments above Fair market value
Where a Startup receives any consideration for issue of shares which exceeds the Fair Market Value of such shares, such excess consideration is taxable in the hands of recipient as Income from Other Sources. However, in Startups in initial stages determining FMV becomes difficult. Currently VC’s are exempted from this law which has been extended to incubators.
- Organising Startup Fests
Innovation core programs for students in 5 lakh schools. There will also be an annual incubator grand challenge to create world class incubators.
- Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program
The purpose of this to create a platform for promotion of world-class Innovation Hubs, Grand Challenges, Startup businesses and other self-employment activities, particularly in technology driven areas.
- Using PPP for setting up incubators
Government will set up 35 with the help of private partnerships to facilitate
- Building Innovation Centres at National Institutes
31 innovation centres will be setup at national institutes for innovation and entrepreneurship. Out of these 13 would be Startup centres with annual funding of 50 lakhs for first 3 years on 50:50 between DST and MHRD. 18 would be technology business incubators at NITs/IITs/IIMs etc. as per funding model of DST with MHRD providing smooth approvals for TBI to have separate society and built up space
- Setting up of 7 research parks
The Government shall set up 7 new Research Parks in institutes indicated below with an initial investment of INR 100 crore each. This would be modelled on research parks of IIT Madras
- Promoting Startups in the Biotechnology Sector
5 new bio clusters, 50 new bio incubators, 150 technology transfer offices and 20 bio connect offices will be established.
- Launching of Innovation Focused Programs for Students
Government in order to inculcate a culture of innovation in the field of Science and Technology amongst students would launch Innovation Core program, NIDHI program and Ucchatar Avishkar Yojana
- Annual Incubator Grand Challenge
An event which would be organised annually to identify successful incubators. It would help in supporting the creation of successful world class incubators in India