Startup India Scheme is an initiative by the Government of India for the generation of employment and wealth creation. The goal of Startup India is the development and innovation of products and services and increase the employment rate in India. Benefits of the Startup India Scheme are Simplification of Work, Finance support, Government tenders, Networking opportunities. Startup India was launched by Prime Minister Shri. Narendra Modi on 16th January 2016. Let us learn more about the Benefits and Eligibility of Startup India.
Definition of “Startup”
Any company which falls into the below list of categories will be called a “Startup” and eligible to be recognized by the DPIIT to avail the benefits from the Government of India.
- Age of the Company – The Date of Incorporation should not exceed 10 years
- Type of Company – Should have been Incorporated as a Private Limited Company or a Registered Partnership Firm or a Limited Liability Partnership
- Annual Turnover – Should not exceed Rs.100 crore for any of the financial years since its Incorporation
- Original Entity – The company or Entity should have been formed originally by the promoters and should not have been formed by splitting up or reconstructing an existing business
- Innovative & Scalable – Should have a plan for development or improvement of a product, process, or service and/or have a scalable business model with high potential for the creation of wealth & employment.
Self Certification
The procedure to self-certification is to reduce the regulatory burden on Startups. Also, the Startups could focus on the core business.
Action Plan of Startup India Scheme
The action plan of Startup India is based on the following factors:
1. Simplification of Work
This initiative simplifies the work for the new entrants in order to motivate them. This includes the following steps taken by the government:
- Firstly, the government has set up Startup India hubs where all the works related to incorporation, registration, grievance handling, etc.
- Secondly, an application and an online portal are set up by the government to facilitate registration from anywhere and anytime.
- Thirdly, patent acquisition and registration are now fast for startups.
- Lastly, according to the Insolvency and Bankruptcy Bill, 2015 facilitates the fast winding up of startups. A new startup can wind up itself within 90 days of the incorporation.
Image Source: officechai.com
2. Finance Support
In order to motivate the startups, the government provides various financial supports. These steps taken by the government are as follows:
The government has set up a corpus of Rs.10,000 crores for 4 years (Rs.2500 crore each year). From such funds, the government invests in various startups.
Special funds are provided, investment in which leads to exemption from the income tax on the Capital Gain.
Income tax exemption is available for the startups for the first 3 years after the incorporation.
Under The Income Tax Act, where a Startup (company) receives any consideration for the issue of shares that exceeds the Fair Market Value of the shares, such excess consideration is taxable in the hands of the recipient as Income from Other Sources.
Investment by venture capital funds in Startups is exempted from the application of this provision. The same extends to the investment made by incubators in the Startups.
Benefits of Startup India
- Financial Benefits
- Income Tax Benefits
- Registration Benefits
- Government Tenders
- Huge Networking Opportunities
1. Financial Benefits
Most of the startups are patent-based. It means they produce or provide unique goods or services. In order to register their patents, they have to incur a heavy cost which is known as the Patent Cost.
Under this scheme, the government provides an 80% rebate on the patent costs. Moreover, the process of patent registration and related is faster for them. Also, the government pays the fees of the facilitator to obtain the patent.
2. Income Tax Benefits
Startups enjoy a good amount of benefits under the Income Tax head. The government exempts their 3 years income tax post the incorporation year.
But they can avail it only after getting a certificate from the Inter-Ministerial Board. Also, they can claim exemption from tax on Capital Gains if they invest money in specified funds.
3. Registration Benefits
Everyone believes that the incorporation and registration of a business are far more difficult than running it. It is because of the long and complex steps of registration.
Under the Startup India scheme, an application is there to facilitate registration. A single meeting is arranged to at the Start-up India hub. Also, there is a single doubt and problem-solving window for them.
4. Government Tenders
Everyone seeks to acquire Government tenders because of high payments and large projects. But it is not easy to acquire government tenders.
Under this scheme, the startups get priority in getting government tenders. Also, they are not required to have any prior experience.
5. Huge Networking Opportunities
Networking Opportunities mean the opportunity to meet with various startup stakeholders at a particular place and time. The government provides this opportunity by conducting 2 startups fests annually (both at the domestic as well as the international level).
Startup India scheme also provides Intellectual Property awareness workshops and awareness.
Registration of the Startup can be done only from the following types of companies
- Partnership Firm
- Limited Liability Partnership Firm
- Private Limited Company
Eligibility for Registration under Startup India Scheme
1. Firstly, the company to be formed must be a private limited company or a limited liability partnership firm.
2. Secondly, the firms should have obtained approval from the Department of Industrial Policy and Promotion.
3. Thirdly, it must have a recommendation letter by an incubation.
4. The firm must provide innovative schemes or products.
5. It should be a new firm or not older than five years.
6. The total turnover of the company should not exceed 25 crores.
7. Lastly, it should not be a result of splitting up, or reconstruction, of a business already in existence.
Action Plan of Startup India Scheme
The action plan of Startup India is based on the following factors:
1. Simplification of Work
This initiative simplifies the work for the new entrants in order to motivate them. This includes the following steps taken by the government:
- Firstly, the government has set up Startup India hubs where all the works related to incorporation, registration, grievance handling, etc.
- Secondly, an application and an online portal are set up by the government to facilitate registration from anywhere and anytime.
- Thirdly, patent acquisition and registration are now fast for startups.
- Lastly, according to the Insolvency and Bankruptcy Bill, 2015 facilitates the fast winding up of startups. A new startup can wind up itself within 90 days of the incorporation.
Image Source: officechai.com
2. Finance Support
In order to motivate the startups, the government provides various financial supports. These steps taken by the government are as follows:
The government has set up a corpus of Rs.10,000 crores for 4 years (Rs.2500 crore each year). From such funds, the government invests in various startups.
Special funds are provided, investment in which leads to exemption from the income tax on the Capital Gain.
Income tax exemption is available for the startups for the first 3 years after the incorporation.
Under The Income Tax Act, where a Startup (company) receives any consideration for the issue of shares that exceeds the Fair Market Value of the shares, such excess consideration is taxable in the hands of the recipient as Income from Other Sources.
Investment by venture capital funds in Startups is exempted from the application of this provision. The same extends to the investment made by incubators in the Startups.
Benefits of Startup India
- Financial Benefits
- Income Tax Benefits
- Registration Benefits
- Government Tenders
- Huge Networking Opportunities
1. Financial Benefits
Most of the startups are patent-based. It means they produce or provide unique goods or services. In order to register their patents, they have to incur a heavy cost which is known as the Patent Cost.
Under this scheme, the government provides an 80% rebate on the patent costs. Moreover, the process of patent registration and related is faster for them. Also, the government pays the fees of the facilitator to obtain the patent.
2. Income Tax Benefits
Startups enjoy a good amount of benefits under the Income Tax head. The government exempts their 3 years income tax post the incorporation year.
But they can avail it only after getting a certificate from the Inter-Ministerial Board. Also, they can claim exemption from tax on Capital Gains if they invest money in specified funds.
3. Registration Benefits
Everyone believes that the incorporation and registration of a business are far more difficult than running it. It is because of the long and complex steps of registration.
Under the Startup India scheme, an application is there to facilitate registration. A single meeting is arranged at the Start-up India hub. Also, there is a single doubt and problem-solving window for them.
4. Government Tenders
Everyone seeks to acquire Government tenders because of high payments and large projects. But it is not easy to acquire government tenders.
Under this scheme, the startups get priority in getting government tenders. Also, they are not required to have any prior experience.
5. Huge Networking Opportunities
Networking Opportunities mean the opportunity to meet with various startup stakeholders at a particular place and time. The government provides this opportunity by conducting 2 startups fests annually (both at the domestic as well as the international level).
Startup India scheme also provides Intellectual Property awareness workshops and awareness.
Registration of the Startup can be done only from the following types of companies
- Partnership Firm
- Limited Liability Partnership Firm
- Private Limited Company
Eligibility for Registration under Startup India Scheme
1. Firstly, the company to be formed must be a private limited company or a limited liability partnership firm.
2. Secondly, the firms should have obtained approval from the Department of Industrial Policy and Promotion.
3. Thirdly, it must have a recommendation letter by an incubation.
4. The firm must provide innovative schemes or products.
5. It should be a new firm or not older than five years.
6. The total turnover of the company should not exceed 25 crores.
7. Lastly, it should not be a result of splitting up, or reconstruction, of a business already in existence.
