What is Startup India Scheme?
Startup India scheme initiated by the govt of India. The aim was the generation of more employment and wealth.
The main goal of this innovation was to build an ecosystem for the innovation of products and services. Also to develop new employment opportunities.
This scheme would also encourage sustainable economic growth. So through this scheme, the Government projected to empower Startups. So that they can grow with their innovations and design.
On 16th January 2016, Honorable Prime Minister Shri. Narendra Modi launched the Startup India scheme. Let us see the advantages, eligibility, and registration process under this scheme.
What’s in it for me?
- Startup India Scheme action plan
- Advantages of Startup India Scheme
- Eligibility for Startup India Scheme
- Eligibility for DPIIT Registration
- Registration for Startup India Scheme with DPIIT recognition
- Challenges faced by Startups
- Conclusion
- Frequently Asked Questions (FAQ)
Startup India Scheme action plan
The action plan of the govt of India will define the following factors.
1: Simple and Flexible
To promote the Startup’s govt of India has taken several steps to simplify their work:
Self Certify
Startups should self certify compliance by going through the Startup mobile app. Along with nine labor and environment laws as referred by the Government of India in their Plan.
So those come under the case of labor laws. Then there will be no inspections done for three years.
Startups can also get inspected on the receipt of a credible and verifiable complaint of violation. They get filed in writing. They should get approval by at least one level senior to the inspecting officer.
In the case of environment laws, Startups that fall into the ‘white category’ would be able to self certify. There will be only random checks conducted. The white category is defined by the Central Pollution control board (CPCB).
Startup Hub
The startup hub has been set up for the ease of doing business. Also to build an exciting environment for startups.
Here all the works get completed related to the following:
- incorporation
- registration
- obtaining financing
- business structuring advisory
- grievance handling
- feasibility testing etc.
An App for Registration
An app and online portal introduced by the govt of India to startups. This app allows them to register themselves through the agencies of Government.
They can also track their application from anywhere. Also, they can download their registration anytime and anywhere.
This app also allows:
- filing for compliance and
- obtaining information about registration and approvals.
Patent Filing and Examination
Govt also introduced lower cost and fast-tracking patent examinations and even legal support.
Public Procurement Norms
Govt has also given a relax in the Public Procurement Norms for Startups.
Faster Exit
To make it easier for the Startups to wind up their business govt has introduced a faster exit for the startups.
In this, according to Insolvency and Bankruptcy Bill, 2015, which states the fast track closure of the businesses, now startups can wind up themselves within 90 days from the date of Incorporation.
2: Financial support
Some of the plans taken by the Government of India in the field of financial supports:
Fund of Funds
The Indian Government has initiated the fund of funds. It has the initial corpus of ₹2500 crore per year and the total corpus of ₹10000 crores for four years.
Credit Guarantee Fund
Govt. has introduced a credit guarantee fund for the startups. This is to overcome the failure of startups. Also to allow them for experimentation with disruptive business models.
Exemption of Tax for Investors
It is challenging for startups to get investment in the initial state of the Startup. So it must provide incentives to investors for investing in the startup ecosystems.
Govt of India introduced the Exemption of tax for the investors. It is for those who have invested capital gains in the fund of funds. It is recognized by the Govt of India in the current year.
Exemption of Tax for Startup
The Government of India provides an exemption of tax on the profits of Startup. It is for three years from the date of Incorporation.
This helps in the growth of startups. It also meets the working capital need during the initial state of operations.
Provision
The startup receives some consideration for the issue of shares. This is the case when it exceeds the Fair Market Value of such shares.
Under The Income Tax Act, 1961, such excess consideration is taxable. It is in the hands of recipients as Income from Other Sources.
Some investments are done by venture capital in Startups. These are exempted from the operations of this provision. It must be extended to investments made by incubators in the Startups.
You might also want to know about MSME loans for startups under the government scheme.
Advantages of Startup India Scheme:
Patent registration and cost
A patent is required for startups that produce unique and innovative products. It is the most challenging task for startups. Patent registration incurs heavy costs known as Patent Cost.
The government of India bears the facilitation cost of the patent. In other words, they provide the 80% rebate on the Patent Cost. Patent registration by Startup is also faster to realize their value.
Tax benefit
Startups tax get exempted by the Government. It is for the three consecutive years from their date of incorporation.
But Startups should be DPIIT recognized. Also, it should have been incorporated after 1st April 2016.
Online registration
The startup faces difficulty in registration and incorporation of the business. They find it to be more difficult than running it. So the startup India scheme helps to register through the app.
Only a single meeting is arranged at the startup hub. A particular window is provided for their doubt and problems.
Preference from government
Startups get preference in the govt tenders. Even without having any kind of experience. Every company wants to crack govt tenders.
It is because of their large projects and higher payments. It is not so easy to get into it. But startups get much easier entry than any other company.
Startup fest
Govt conducts two startup fests at domestic and at international levels. As a result, Startups increase their network. It is by meeting various startup stakeholders at one time and one place.
If you are any of the following
- Mentor
- Incubator
- Investor
- Stakeholders
- Accelerators
- Government Departments
Above all, you might want to know, How to create and host a Program?
Eligibility for Startup India Scheme:
Your Company should meet the following criteria. So that it becomes eligible for startup India Scheme:
- Your Company should be registered under the following terms:
- Private limited firm
- A limited liability partnership firm
- A registered Partnership Firm
- Your firm should get approval from the DIPP. It is the Department of Industrial policy and promotion. Also, get a recommendation from the incubation or Startup. They can either be funded by the state or central government authorities. Or by an incubator that is recognized by govt of India.
- The company should have unique and innovative products and services.
- Your company’s age should not exceed five years. Also, the company should not exceed the annual turnover of ₹25 crores.
- It should not be formed by reconstructing or splitting of any other existing firm or Business.
Eligibility for DPIIT Registration:
DPIIT registration is required for availing of the tax benefits for the Company. Your Company should meet the following criteria to be eligible for DPIIT Registration and startup India Scheme:
- Company Age:
Your Company’s age of existence and operations should not exceed more than ten years from the date of registration or Incorporation. - Company Type:
Your Company should be registered or incorporated under the following types:- Private Limited Company
- A limited liability Partnership Firm
- A Registered Partnership Firm
- Annual Turnover:
Your Company should not have exceeded the yearly turnover of ₹100 crores in any of the financial years from the year of registration or Incorporation. - Original Entity:
Your Company should be an original entity which means that it should not be formed by reconstructing or spitting of already registered Entity or business. - Innovative and Scalable:
Your Company should be innovative, which means it should work for the improvement and development of the Product or service. Or your Company should have a scalable business model that has a high potential for generating employment and wealth.
How to register for startup India Scheme with DPIIT recognition:
You should follow the following steps to register your business under Startup India Scheme
-
Incorporation and registration of your Business under private limited or Limited Liability firm.
-
Register your self in the Startup India Scheme:
The record for the Startup India Scheme is very simple. All you need is to logon to the Startup India Website with the required documents.
Required Documents for registering under startup scheme:
a) Recommendation letter from the following
b) Any patent filed and published in patent journals available online or offline.
c) Incubators established in post-graduation colleges in India.
d) Support letter from one among the startups, funded through central or Government authorities or any incubator, duly recognized by the govt of India.
e) Letter of funding which shouldn’t be but 20% in equity by angel our incubation fund.
f) Certificate of Incorporation or registration
g) Description of innovation in your services or Product in brief. -
Choose if you want tax benefits:
After getting this done, you should get the approval from the inter-ministry board.
It depends upon the ministry, whether they will accept your application or not. If you got approval from their side, then you are eligible for getting tax benefits. -
Certify your documentation regarding your idea so that it should not be copied. Your Business should not exceed the annual turnover of ₹25 crores and should not exceed the five years of Incorporation.
-
After doing all this legally without any forge documentation, you will get a recognition number.
You should follow the following steps to register your business under Startup India Scheme
Challenges faced by Startups:
- People think that Startup is just thinking of an idea. But they don’t know that its execution is much more important than that.
- For the success of any Startup competent workforce is necessary, which is one of the difficult tasks for startups due to lack of initial funds.
- The failure rate is much higher in startups as compared to other organizations. One of the main reasons is that they take quite fast decisions.
Conclusion
To sum up, by now you must have understood all about the Startup India Scheme, its benefits, and the registration process. Also, about the challenges faced by startups.
If you have a startup then you can take the benefit of this scheme. As a result, it will be very helpful to you to scale and boost your business.
In addition, you must read business ideas in India for startups.
Frequently Asked Questions (FAQ)
An entity would lose its startup recognition if it exceeds the five years of incorporation period or exceeds the annual turnover of ₹25 crores.
Any entity that has at least one registered office in India will be able to register under this scheme.
