Start-up India Scheme

On 16 January, 2016, Union Government had launched a “Start-up India” action plan to give boost to the Start-up India Movement. Stat-up India is a flagship scheme which seeks to create an strong ecosystem for nurturing innovation and start-ups in the country to drive sustainable economic growth and generate large scale employment opportunities.

Start-up India Action Plan

The government has announced a Start-up India Action Plan which chalks out the roadmap to achieve objectives of the Start-up India programme. The action plan as 19 points which can be divided into four categories as follows:

1. Simple Rules, Processes and Compliance
2. Tax sops
3. Funding Support
4. Other actions

Each of them has been discussed briefly here:

A.        Simple Rules, Processes and Compliance

This includes the following:

1. Compliance regime based on self-certification

• This action point aims to simplify compliance norms; keep compliance cost low and to allow the start-ups to focus on their core business, so that they are allowed to self-certify their compliance with respect to 9 labour and environment laws.
• With respect to labour laws, Start-ups are exempted from inspection by authorities for 3 years. In case of environment laws, Start-ups declared under the ‘white category’ can self-certify their compliance and only random checks will be conducted.

2. Mobile app and portal

• A mobile app has been lunched and start-ups have been allowed to be set up by just filing a form through mobile app and online portal.

3. Faster patent examination

This includes:

• A fast-track system for patent examination at lower costs.
• 80% rebate on filing the patents to start-ups
• A new scheme called Start-up Intellectual Property Protection (SIPP). This scheme was launched and currently facilitates filing of Patents, Trademarks and Designs by innovative Start-ups.

4. Faster exits

• This includes making exit process simpler. As per Insolvency and Bankruptcy Bill, 2015, the firms now get faster process of wounding up of business within a period of 90 days.

5. Start-up India Hub

• An all-India start-up hub will be created to act as single contact point for start-ups in India to help entrepreneurs to exchange ideas and to access financial aid.

6. Relaxed norms of public procurement

• This action point focuses on relaxing norms in public procurement {such as procuring from only experienced firms} so that start-ups can showcase their innovation and can participate in government procurement of goods and services.

B.        Tax Sops

This category includes the following action points:

7. Tax Exemption on Capital Gains

• Tax exceptions on capital gains are given to encourage flow of funds to start-ups.

8. Tax Exemption For 3 Years

• Profits of start-ups have been given a three year exception from taxes.

9. Tax Exemption in Investments Above Fair Market Value

• The government has also exempted tax above fair market value for incubators in start-ups. Earlier, the exemption was given to venture capital funds investing in start-ups.

C. Funding Support

10. Rs. 10,000-Crore Fund of Funds

• To provide funding support to start-ups, a fund will be set up by the government with an initial corpus of 2,500 crore rupees and a total of 10,000 crore rupees over next four years. The fund will be act as a Fund of Funds (FoF) i.e. it will not be invested directly in start-ups, but it will participate in the capital of the SEBI registered venture funds.
• Life Insurance Corporation (LIC) will be an investor in the FoF. The FoF will be managed by a board with private professionals from industries, academia and successful start-ups.  The FoF will provide support to various sectors such as agriculture, manufacturing, health, education, etc.

11. Credit Guarantee Fund

• Debt funding to start-ups is considered as a high risk area by the banks and other financial institutions. To encourage debt funding to start-ups, a credit guarantee mechanism through National Credit Guarantee Trust Company (NCGTC) is being envisaged with a budgetary Corpus of INR 500 crore per year for the next four years.
• The loan will be secured by National Credit Guarantee Trustee Company Ltd. (NCGTC) through a credit guarantee scheme for which Department of Financial Services will be key agency. The objective of this initiative is to institutionalize a credit structure in country to offer loans between Rs 10 lakhs to Rs. 100 lakhs payable in 7 years. It also aims to help non-farm sectors by SCs, STs and women borrowers and serve under served pollution.
• The margin money of the composite loans will be up to 25% and state schemes are expected to further reduce actual requirement of margin money for loans. The initiative also proposes to develop credit history of borrowers through credit bureaus.

D. Other Initiatives

Other initiatives include:

12.  Startup Fests

• The government will implement the various measures for promoting research and innovation among students.

13. Atal Innovation Mission

• The Atal Innovation Mission (AIM) will have two core functions viz. entrepreneurship promotion through Self-Employment and Talent Utilization (SETU), wherein innovators would be supported and mentored to become successful entrepreneurs, and innovation promotion to provide a platform where innovative ideas are generated.

14. Innovation Centres at National Institutes

• The government will set up 35 new incubators, 31 innovation centres at national institutes. Seven new research parks – six in IITs and one in IISc shall be set up by government with an initial investment of Rs.100 crore each.

15. Biotechnology Boost

• Five new bio clusters, 50 new bio incubators, 150 technology transfer offices and 20 bio connect offices will be established.

16. Innovation Core {Programmes For Students}

It shall be launched to target school children in 5 lakh schools. Out of the total innovations from school children, the best 100 would be selected and are showcased at the Annual Festival of Innovations in the Rashtrapati Bhavan.

17. Nidhi

• The National Initiative for Developing and Harnessing Innovations is a grand challenge programme to support and award 10 lakh rupees to 20 student innovations from Innovation and Entrepreneurship Development Centres (IEDCs).

18. Uchhattar Avishkar Yojana

• It is a joint programme of Ministry of HRD and Department of Science and Technology that aimed at fostering ‘very high quality’ research among IIT students. The scheme will make a bridge between the academics and the practical working on field.

19. Annual Incubator Grand Challenge

• This will be launched to select 10 incubators who have the potential to become world class. The government plans Rs. 10 crore assistance for them to ramp up capacity.

Eligibility

To be eligible to avail benefits under the Start-up action plan, an entity must be:

• Incorporated or registered in India.
• It must be set up in the past five years.
• Its annual turnover does not exceed 25 crore rupees in any preceding financial year.
• It must be working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.

An entity developing products and services that have no commercial potential or have no limited incremental value for customers cannot be considered as a start-up. An entity formed by splitting up or reconstruction of an existing business cannot be a start-up. A Start-up shall be allowed to get tax benefits, only if it is certified by an inter-ministerial board, setup for such purpose.