Govt‘s ‘Start-up India’ Scheme for Startup Companies : Details & Benefits

The central Government has recently launched the much anticipated and needed initiative called as ‘Start-up India’. The government has issued an action plan to help startup companies and encourage entrepreneurship in India.

We all know that how difficult and challenging it is to establish a Start up company in India. A start up company may have to handle corruption issues, lack of financial resources, complex approval processes etc., to see the light of the day. Also, most of the start-ups are either opposed or killed by the big corporates at the initial stage itself.

Most of the funding of Indian start-ups (around 90%) comes from foreign venture capitalists and PE funds (Private Equity). For example, Grofers, a grocery startup has raised 166.5 million from Sequia Capital & Soft Bank. This is the case in most of the start-ups. Various start-ups like Grey Orange Robotics, Ola Cabs etc have had funding from foreign Venture Capitalists only.

To change this scenario in India, to remove risk aversion and to encourage free and fair competition, ‘the Start-up India action plan’ lists out a comprehensive set of structural and regulatory reforms.

Startup India is a flagship initiative of the Government of India, intended to build a strong Eco-system for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities.

What is a Startup Company?

A startup is a newly formed business which is in the first stage of its business operations.  Startups are usually small and initially financed by few founders or angel investors. It can be in the form of a company, a partnership firs or even a sole-proprietorship firm.

Top Startup Companies in India

Below are some of the popular Startups in India; (Click on the image to open it in a new browser window)

Govt’s ‘Startup India, Standup India’ Scheme : Eligibility conditions

• To avail the benefits under this initiative, the startup entity could be a Private Limited Company (or) a registered Partnership firm (or) a Limited Liability Partnership Firm (LLP).
• The Startup entity should not be more than 5 year old one.
• The annual turnover of the start-up company should not have exceeded Rs 25 crore in any preceding Financial Year.
• Any entity which has been created by just splitting the existing business or company will not be treated as a Startup company.
• A startup company should aim to develop a new product or service which is commercially viable (which have the potential for commercialization) and should create or add value for customers.

Key highlights of Startup India Action plan

Below are some of the key benefits that are mentioned in Govt’s Start-up Action plan;

• Income Tax Exemption for the first 3 years on the profits made by the startup companies.
• Exemption on Capital Gains taxes. (The 20% tax will be exempted on the capital gains made by the govt approved Venture Capitalists)
• The government will initially set up a corpus of Rs 2,000 crore to provide funding support to startup companies. (A total of Rs 10,000 cr corpus will be provided over the next 4 years)
• Fast track examination of Patent & Intellectual Property Rights applications filed by the start-up companies. IPR protection to start-ups and new firms will be provided. The government offers free legal support for filing patents and 80% reduction in filing patent fee. This way, an entrepreneur would not lose his ideas to another.
• The startup companies will have the option to self-certify themselves with respect to most of the rules related to ‘Labour & Environment Laws’. The self-certification can be done through ‘Startup India Mobile App’ which will be launched by the govt in April 2016. (Laws related to Gratuity, Employees Provident Fund, pollution control etc.,)
• Industry wise ‘Startup incubators’ will be set up across the country.
• New and special schemes targeting Women entrepreneurs will also be launched.
• In case of failure (bankrupt) of a startup enterprise, the government aims at providing speedy winding up procedures.
• Single-point contact centre will be established for all the works & issues related to startup companies. Innovation hub under Atal Innovation Mission will be created.
• Registration of a startup company can be done in a single day through Startup India Mobile app / portal from April 2016.

My opinion

Around 40% of India’s total population is below 20 years old.  There is no dearth of supply of educated/qualified young talents in India. The govt has to provide an ecosystem to encourage small entrepreneurs to set up new companies and generate employment in India.

• As per the action plan, the start-up company requires a ‘recommendation’ from a govt owned incubator centre or from an incubator of a govt recognized post-graduate institution. This again may lead to unwanted layer of bureaucracy which can go against the very essence of setting up this initiative. The government involvement should be minimal.
• Startup companies from all streams / industries (be it manufacturing , service sector or agriculture) should be encourage, not just technology-based companies.
• Start-up India is in-line with the PM’s call for innovation i.e., Digital India. The Start-up India Action plan is a good start to this. Let’s hope this initiative is implemented in true spirit and brings revolution among the youth of India, making them job-seekers to job-creators.

What could be the implementation challenges for ‘Startup India’ scheme? Will this scheme be beneficial? Kindly share your views on ‘Startup India’ initiative.

Latest News (31-March-2016) : The Govt has launched the Startup India portal startupindia and also mobile APP. Click here to download the detailed FAQs on Startup India Program.

(Image courtesy of Sira Anamwong at FreeDigitalPhotos.net) (Top Startups Picture source : yourstory.com)