Start-up India campaign
(Ministry of Commerce and Industry)
Aspects of the campaign
Evaluation of the campaign
Changes in the norms
- Startup India is an initiative of the Government of India.
- It was launched on 16th of January 2016.
- Promotion of startups, generation of employment, and wealth creation are key objectives of the scheme.
- various Ministries of the Government of India have initiated a number of activities for the purpose of promoting start-ups. Thus, it is an inter-ministerial scheme.
A startup defined as an entity that is-
- headquartered in India,
- An entity will be considered a startup for up to 10 years (earlier it was 7 years) from the date of incorporation.
- has an annual turnover less than ₹100 crore (earlier it was RS 25 crore).
- Should be working towards innovation, development, deployment or commercialization of new products, processes and services.
- The firms should have obtained the approval from the Department of Industrial Policy and Promotion (DIPP).
An entity means-
- private limited company (as defined in the Companies Act, 2013), or
- a registered partnership firm (registered under section 59 of the Partnership Act, 1932) or
- a limited liability partnership (under the Limited Liability Partnership Act, 2002).
Any such entity formed by splitting up or reconstruction of a business already in existence shall not be considered a ‘startup’.
- From digital/ technology sector to a wide array of sectors including agriculture, manufacturing, social sector, healthcare, education, etc.
- All over the country including urban, semi-urban and rural areas.
The Ministry of Human Resource Development and the Department of Science and Technology have agreed to partner in an initiative to set up over 75 such startup support hubs in the-
- National Institutes of Technology (NITs),
- The Indian Institutes of Information Technology (IIITs),
- The Indian Institutes of Science Education and Research (IISERs) and
- National Institutes of Pharmaceutical Education and Research (NIPERs).
Aspects of the campaign
All aspects of the program could be defined through the action plan based on the three pillars of the scheme:
(1) Simplification and Handholding
(2) Funding Support and Incentives
(3) Industry-Academia Partnership and Incubation
Simplification and Handholding
(1) Compliance Regime based on self-certification:
Startups shall be allowed to self-certify compliance (through the Startup mobile app) with labour and environment laws. In case of the labour laws, no inspections will be conducted for a period of 3 years.
(2) Start Up India Hub:
The government has launched the ‘Startup India Hub’, a virtual online platform. The portal will host startups, investors, funds, mentors, academia, incubators, accelerators, corporates, government bodies, and more.
(3) Legal support and Fast-tracking patent Examinations at lower costs:
Legal support and fast track patent examination by reducing 80% of the patent cost.
(4) Relaxed norms of public procurement for startups:
Startups can apply for government tenders. They are exempted from the “prior experience/turnover” criteria applicable for normal companies answering to government tenders.
(5) Faster exit for startups:
In case of exit – A startup can close its business within 90 days from the date of application of winding up operations.
Funding Support and Incentives
(1) Providing funding support through a fund of funds:
- In order to provide funding support to Startups, Government will set up a fund with a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year).
- The Fund will be in the nature of Fund of Funds, which means that it will not invest directly into Startups but shall participate in the capital of SEBI registered Venture Funds. (discussed in detail in the video)
(2) Credit guarantee fund for startups:
Credit guarantee mechanism through National Credit Guarantee Trust Company (NCGTC)/ SIDBI) is being envisaged with a budgetary Corpus of INR 500 crore per year for the next four years.
(3) Tax exemption for investors:
People investing their capital gains in the venture funds setup by government will get exemption from capital gains. This will help startups to attract more investors.
(4) Tax exemption to startups:
To promote the growth of Startups and address working capital requirements,
Startups will be exempted from income tax for 3 years.
(5) Tax Exemption on Investments above Fair Market Value (Angel Tax):
Angle tax (which is 30.9% in India) is a term used to refer to the income tax payable on capital raised by unlisted companies via issue of shares where the share price is seen in excess of the fair market valueof the shares sold. The excess realization is treated as income and taxed accordingly.
What are the exemption limits for Angel Tax?
- Startups, whose aggregate amount of paid up share capital (money received from shareholders in exchange for shares of stock) and share premium (the difference between the par value and the selling price) does not exceed Rs 25 crore (earlier it was Rs. 10 crore) are eligible for angel tax exemption.
2. Startups where the total investment including funding from angel investors did not exceed Rs 25 crore (earlier it was RS. 10 Crore) are eligible for angel tax exemption.
Industry-Academia Partnership and Incubation
(1) Organizing Startup Fests:
The Government is proposing to introduce Startup fests at national and international stages for Showcasing Innovation and Providing a Collaboration Platform.
(2) Launch of Atal Innovation Mission (AIM):
The government has launched the Startup India Hub (innovation hub), a virtual online platform for all stakeholders of the entrepreneurial ecosystem in India to discover, connect, and engage with each other. It is done through Atal Innovation Mission (AIM) with Self-Employment and talent utilization (SETU) program of NITI Aayog.
(3) Harnessing Private Sector Expertise for Incubator Setup:
An incubator is an early investor who helps a start-up by providing a defined set of services to individuals or small companies. This may include specific types of office space, flexible lease terms, access to technology, financing, and technical assistance (such as marketing, legal, finance, HR, and other business development services).
India currently lacks availability of incubation facilities across various parts of the country. To ensure professional management of Government sponsored / funded incubators, Government will create a policy and framework for setting-up of incubators across the country in public private partnership.
Considering this, Government shall encourage setting up of;
- 35 new incubators in existing institutions with funding support of 40 % by central government + 40% by respective state government + 20% private sector.
- 35 new incubators stablished by private sector. A grant of 50% shall be provided by the central government.
The funding for setting up of the incubators shall be provided by NITI Aayog as part of Atal Innovation mission.
(4) Building Innovation Centres at National Institutes:
In order to augment the incubation and R&D efforts in the country, the Government will set up 31 centers (to provide facilities for over 1,200 new Startups) of innovation and entrepreneurship.
(5) Setting up of 7 New Research Parks:
To propel successful innovation through incubation and joint R&D efforts between academia and industry, the Government shall set up 7 new research parks in IIT institutes with an initial investment of RS. 100 crore each.
(6) Launching of Innovation Focused Programs for Students:
In order to promote research and innovation among young students, the Government shall implement the following measures:
- Innovation core program,
- NIDHI (National Initiative for Developing and Harnessing Innovations) and
- Uchhattar Avishkar Yojana.
(7) Annual Incubator Grand Challenge:
An “Incubator Grand Challenge” exercise shall be carried out for identification of world class incubators in India.
Evaluation of the campaign
- Between 2016-2019, 15,113 startups were recognized under the Startup India programme.
- 13,176 recognized startups have reportedly created 1,48,897 jobs.
- 45% recognized startups have at least one or more women directors.
- 24 Indian states have introduced a startup policy.