Last Updated On:
July 13, 2020, 1:28 p.m.
Startup India is an initiative of the Government of India. The campaign was first announced by Indian Prime Minister, Shri Narender Modi on 15th August 2015, in New Delhi.
Later Startup event was introduced on 16th January 2016 by The Ex-Finance Minister of India, Shri Arun Jaitley, and launched Startup India.
Meaning of Startup?
- an entity, incorporated or registered in India
- not prior to ten years,
- with annual turnover not exceeding Rs.100 crore
- in any preceeding financial year and
- working towards innovation, development, deployment or commercialization of new products processes or services driven by technology or intellectual property
Which companies are recognized as Startup?
- Must be private limited companies/LLP/Partnership firms.
- Turnover should not exceed 100 crores.
- Should develop an innovative product that should add to the values of customers and should be commercial.
- It is working towards-
- The innovation of new products or processes or services, or
- Development of new products or processes or services, or
- Improvement of existing products or processes or services
Meaning of Startup India?
Startup India Hub is a one-stop platform for all stakeholders in the Startup ecosystem to
- interact amongst each other,
- exchange knowledge and
- form successful partnerships in a highly dynamic environment
Benefits Provided under Startup India Scheme:
- Self-Certification: Self-certify and comply under 3 Environmental & 6 Labour Laws.
- Tax Exemption: Income Tax exemption for a period of 3 consecutive years and exemption on capital and investments above Fair Market Value.
- Easy Winding of Company: In 90 days under Insolvency & Bankruptcy Code, 2016.
- Startup Patent Application & IPR Protection: Fast track patent application with up to 80% rebate in filing patents.
- Easier Public Procurement Norms: Exemption from requirement of an earnest money deposit, prior turnover, and experience requirements in government tenders.
- SIDBI Fund of Funds: Funds for investment into startups through Alternate Investment Funds.
All these have been dealt in detailed.
Any Startup can get registered as DPIIT (Department for Promotion of Industry and Internal Trade) and avail Benefits:
Objective: To reduce the regulatory burden on Startups, thereby allowing them to focus on their core business and keep compliance costs low.
Eligibility: Startups that are within 5 years of incorporation, are eligible for availing benefits.
Benefits: Following benefits would be available –
- Startups shall be allowed to self-certify compliance for 6 Labour Laws and 3 Environmental Laws through a simple online procedure.
Six Labour Laws which can self-certify are as follows:
- The Building and Other Constructions Workers (Regulation of Employment & Conditions of Service) Act, 1996
- The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
- The Payment of Gratuity Act, 1972
- The Contract Labour (Regulation and Abolition) Act, 1970
- The Employees Provident Funds and Miscellaneous Provisions Act, 1952
- The Employees State Insurance Act, 1948
Three Environmental Laws which can self-certify are as follows:
- The Water Act, 1974 (Prevention & Control of Pollution)
- The Water Cess (Amendment) Act, 2003 (Prevention & Control of Pollution)
- The Air Act, 1981(Prevention & Control of Pollution)
- In the case of labour laws, no inspections will be conducted for a period of 5 years. Startups may be inspected only on receipt of a credible and verifiable complaint of violation, filed in writing, and approved by at least one level senior to the inspecting officer.
- In the case of environment laws, startups that fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and only random checks would be carried out in such cases.
By giving a self-declaration on the Shram Suvidha portal, you can avail Benefits.
- Click on the link https://shramsuvidha.gov.in/home.action
- Create a Shram Suvidha Account
- After successfully registering, login to your account by entering your username and password.
- After successful login, click the link "Is Any of your Establishment a Startup?"
Startup Patent Application & IPR Protection: Reduction in the cost and time taken for a startup to acquire a patent, making it financially viable for them to protect their innovations and encouraging them to innovate further. Under this scheme, the Central Government shall bear the entire fees of the facilitators for any number of patents, trademarks, or designs that a Startup may file, and the Startups shall bear the cost of only the statutory fees payable. Also, Startups shall be provided an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years.
Easier Public Procurement Norms: Public procurement refers to the process by which governments and state-owned enterprises purchase goods and services from the private sector. In order to promote startups, the Government shall exempt Startups in the manufacturing sector from the criteria of “prior experience/ turnover” without any compromise on the stated quality standards or technical parameters. The Startups will also have to demonstrate the requisite capability to execute the project as per the requirements and should have their own manufacturing facility in India. Also, DPIIT recognized startups have been exempted from submitting Earnest Money Deposit (EMD) or bid security while filling government tenders.
DPIIT recognized startups can get the following Exemptions under the Income Tax Act under the Startup India Initiative
- Tax Exemption u/s 80IAC:
Eligible startups can be exempted from paying income tax for 3 consecutive financial years out of their first ten years since incorporation.
Eligibility Criteria to avail exemption-
- The entity should be a DPIIT recognized startup, and
- Only Private Limited Companies or Limited Liability Partnerships are eligible for tax exemption under Section 80IAC, and
- The startup should have been incorporated after 1st April 2016.
- Tax Exemption u/s 56:
- Exemption under Section 56(2)(VIIB)
- Investments into eligible startups by listed companies with a net worth of more than INR 100 Crore or turnover more than INR 250 Crore shall be exempt under Section 56 (2) VIIB
- Investments into eligible Startups by Accredited Investors, Non-Residents, AIFs (Category I), & listed companies with a net worth more than 100 crores or turnover more than INR 250 Crore, shall be exempt under Section 56(2)(VIIB)
- Consideration of shares received by eligible startups shall be exempt up to an aggregate limit of INR 25 Crore
Eligibility Criteria to avail exemption-
- Should be a private limited company, and
- The entity should be a DPIIT recognized startup, and
- A startup should not be investing in immovable property, transport vehicles above INR 10 Lakh, Loans and advances, capital contribution to other entities, except in the ordinary course of business.
Easy Winding of Company
- As per the Insolvency and Bankruptcy Code, 2016, startups with simple debt structures, or those meeting certain income specified criteria can be wound up within 90 days of filing an application for insolvency.
- An insolvency professional shall be appointed for the Startup, who shall thereafter be in charge of the company (the promoters and management shall no longer run the company) including liquidation of its assets and paying its creditors within six months of such appointment.
- Upon appointment of the insolvency professional, the liquidator shall be responsible for the swift closure of the business, sale of assets, and repayment of creditors in accordance with the distribution waterfall set out in the IBC. This process will respect the concept of limited liability.
- Exemption from levy of angel tax under section 56(2) (viib) is available subject to the following conditions:
It does not invest in any of the following assets for a period of 7 years from the end of the latest financial year in which the shares are issued at a premium:
- Land or building, being a residential house, other than that used for the purposes of renting or held as stock-in-trade in the ordinary course of business
- Land or building, not being a residential house, other than that occupied by the start-up for its business or renting purposes or held as stock-in-trade in the ordinary course of business
- Loans and advances, if a start-up is not engaged in the ordinary business of lending of money
- Capital contributions to any other entity
- Shares and securities
- Motor vehicle, aircraft, yacht or any other mode of transport, if the cost of such an asset exceeds Rs. 10 lakhs other than that held by the Start-up for the purpose of plying, hiring, leasing or as stock-in-trade in the ordinary course of business
- Jewellery held otherwise than as stock-in-trade.
- Archaeological collections, drawings, paintings, sculptures, any work of art or bullion.
In case of failure to comply with these conditions, the consideration received from the issue of shares, as exceeding the fair market value of such shares, shall be deemed to be the income of the company chargeable to tax for the previous year in which such failure takes place.
Requirements for Registration-
- Certificate of Incorporation or Registration and PAN
- Total Number of directors or partners and details of each director or partner with respect to Name, Mobile Number, Email ID, and complete address.
- Entity details with respect to Industry, sector, and category in which it deals.
- Details of Authorised Representative (Name, Designation, Mobile Number and Email ID)
- Number of Employees including founders
- Whether any awards or recognition received by the entity? if yes, need to upload the document with respect to award/recognition received.
- What is the problem the startup is solving? It needs to be explained in a maximum of 250 words.
- How does your startup propose to solve the above-mentioned problem? It needs to be explained in a maximum of 250 words.
- What is the uniqueness of your solution? It needs to be explained in a maximum of 250 words.
- How does your startup generate revenue? It needs to be explained in a maximum of 250 words.
- Links or upload additional documents to support your application. (Such as Website link, Videos, Pitch Deck, Patents, etc.). It is mandatory to provide anyone.
How to Register on Startup India?
- Click on the link https://www.startupindia.gov.in/
- Click on 'Register' and enter the following details
- Email Id,
- Mobile No,
An OTP will be sent to your registered email address and mobile number, post submitting OTP your profile will get created.
- You will have an option to select your profile. Your profile goes under moderation for 24-48 Hours, post which you will be able to avail all benefits on https://www.startupindia.gov.in/