The Prime Minister of India, Shri Narendra Modi had this year in his Independence Day speech announced the “Start-up India” initiative. This initiative aims at fostering entrepreneurship and promoting innovation by creating an ecosystem that is conducive for growth of Start-ups.
- 10,000 crore fund of funds
- Modified and more friendly Bankruptcy Code to ensure 90-day exit window
- Freedom from mystifying inspections for 3 years
- Freedom from Capital Gain Tax for 3 years
- Freedom from tax in profits for 3 years
- Self-certification compliance
- Innovation hub under Atal Innovation Mission
- new schemes to provide IPR protection to start-ups and new firms
- Encourage entrepreneurship
Key Highlights of the Startup India Action Plan
- Relaxed Norms
- Faster Exit
- Tax Exemption
- Tax Exemption for 3 years
- Harnessing Private Sector Expertise for Incubator Setup
- Building Innovation Centres at National Institutes
- Setting up Research Parks
- Promoting Startups in the Biotechnology Sector
While it is not exactly part of action plan, this probably is the biggest positive change that has been bought by the Government ‘Startup’. Now, Startups will be ‘Startups’ and not a ‘Business’. Till date a Startup was not separated in various policies of the Government. All were businesses. Now, we have definition for a startup and a clear direction for them from Government. The most encouraging aspect is that Government is now looking at startups as a serious growth engine for India and wants to help them achieve success.
Government wants to reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low. Startups shall be allowed to self-certify compliance.
Going forward, norms for Startups will be relaxed when they are applying for Tenders floated by PSU. Earlier, this was not possible as all tenders require either “prior experience” or “prior turnover”. Now, this will not be roadblock anymore.
Government plans to make it easier for startups to close and exit their businesses incase they are winding up operations.
Government plans to provide Tax exemptions to persons who have capital gains during the year, if they have invested such capital gains in the Fund of Funds recognized by the Government.
In what could be termed as one of the most positive moves, exemption for Income tax shall be given on profits generated by startups for a period of first 3 years.
Government intends to create a policy and framework for setting-up of incubators across the country in public private partnership. 35 new incubators in existing institutions will be setup along with funding support of 40% shall be provided by Central Government. Government will also provide grant of 50 percent for 35 new incubators established by private sector.
The Government shall set up some new Research Centre in IIT Guwahati, IIT Hyderabad, IIT Kanpur, IIT Kharagpur, IISc Bangalore, IIT Gandhinagar, and IIT Delhi with an initial investment of INR 100 crore each. The research Parks shall be modeled based on the Research Park setup at IIT Madras
To foster and facilitate bio-entrepreneurship, 5 new Bio-clusters, 50 new Bio-Incubators, 150 technology transfer offices and 20 Bio-Connect offices will be set up in research institutes and universities across India. Source : http://trak.in/tags/business/2016/01/18/startup-india-action-plan-20-key-highlights/
Eligibility Criteria for Startup India Benefits:
- * It must be an entity registered/incorporated as a: Private Limited Company under the Companies Act, 2013; or b. Registered Partnership firm under the Indian Partnership Act, 1932; or c. Limited Liability Partnership under the Limited Liability Partnership Act, 2008.
- * Five years must not have elapsed from the date of incorporation/registration.
- * Annual turnover (as defined in the Companies Act, 2013) in any preceding financial year must not exceed Rs. 25 crore.
- * Startup must be working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.
- * The Startup must aim to develop and commercialise: 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.
- * The Startup must not merely be engaged in: developing products or services or processes which do not have potential for commercialisation; or b. undifferentiated products or services or processes; or c. products or services or processes with no or limited incremental value for customers or workflow
- * The Startup must not be formed by splitting up, or reconstruction, of a business already in existence.
- * The Startup has obtained certification from the Inter-Ministerial Board, setup by DIPP to validate the innovative nature of the business, and
- 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
- 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
- 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
- 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
- be funded by the Government of India as part of any specified scheme to promote innovation; or
- 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.
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Key Highlights of the Startup India Action Plan STARTUP INDIA