Startup India Initiative

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(Last Updated On: December 9, 2017)

Startup India Initiative

Startup India initiative – In line with the announcement of the Prime Minister Mr. Narendra Modi on Independence Day speech the Government formally launched an initiative for startup on 16th January 2016. The action plan was also released on the same date emphasizing the government action plan, schemes, incentives in form of tax exemption and a system of speedy grant of a patent. Following are the important announcements with respect to the startup India:

1. Compliance regime based on self-certification: Startup india initiative

The emphasis is on self-certification by the business owners/ compliance officers/entrepreneurs/ directors of the company so that the startups are relieved of the regulatory burden. The self-certification is applied in cases of regulatory requirement of laws dealing with payment of gratuity, contract labor, employment provident fund and activities pertaining to water and air pollution etc.

2. A startup India hub: Startup india initiative

To enable knowledge exchange, free flow of information and access to funds government is creating a single point contact for entire startup eco­system which shall be known as startup India hub. The startup India hub was operationalized on first April 2016 to resolve queries and hand holding support for startups so far more than 12000 queries were received by the hub through phone, email and twitter.

3. Simplification of startup registration process:

At present, registration of the company normally takes a month time in India whereas in developed economies like US and UK the same can be registered in a daytime. This considerable delay is recognized as an obstacle towards the culture of startup and entrepreneurship. Government is taking steps so that the registration of the company can be completed in India. Also towards this recently a new form 29 was introduced by a ministry of corporate affairs which intends to issue the certificate of incorporation within 24 hrs. Further, the entire process of incorporation of a company has been centralized at Manesar near Delhi.

4. Patent protection:

At present, the grant of the patent takes on an average 4 years. In some cases, the patent is granted after more than 20 years which discourages invention. Hence, the Government shall be taking steps to fastrack the examination of a patent application. IPR is emerging as a strategic business tool for any business organization to enhance industrial competitiveness. Startups, with limited resources and manpower, can sustain in this highly competitive market only through continuous growth and development oriented inventions. For this, it is equally crucial that they protect their IPRs. Subsequent to an announcement made by prime minister while launching the startup initiative, a scheme for startup intellectual property protection (SIPP) was launched with a vision to protect and promote IPR of startups and thus encouraging innovation and creativity among them. Recently Government announced 80% rebate in the Government filing fee for filing the patent application for startups.

5. Establishment of funds with a corpus of Rs. 10 crores:

In order to, facilitate the availability of funding to the startups the Government of India shall set up a fund especially for the purpose of financial assistance to the startups. It is established with an initial corpus of 2500 crores which shall be increased to 10000 crores over a period of 4 years. This fund shall be managed by private professionals drawn from industry whereas LIC shall be the co-investor of the fund.

6. Exemption from capital gain tax:

In current scenario the capital gain accrued to the venture capital funds out of their investment in startups are exempt in terms of the provision of income tax act, however, the same is taxable if the investment is made by the incubators. The Government recognizing the role of incubators toward the startups have also extended the exemption on capital gain to the investment made by the incubators in the startups.

7. Tax exemption for startups:

To encourage more startups a scheme of income tax exemption was announced by the prime minister. Subsequent to that in the finance act 2016 a specific provision is introduced to give income tax exemption to 3 years in a block of 5 years to the startups provided the startup was incorporated b/w first April 2016 to 31st March 2019. To avail, the tax exemption benefits a startup must get a certificate of eligibility from the inter­ministerial board of DIPP. As per the Times of India report dated 2nd July 2016 so far 571 startup/entrepreneur have filed the application with the department of industrial policy and promotion (DIPP) for recognition for the purpose of tax exemption, out of which only 12 were found to be eligible.

8. Other miscellaneous announcements:

Apart from setting up a startup hub, self certification based compliance regime, simplification of startup registration, intellectual property rights initiative, capital gain exemption and income tax holidays government proposed to launch Atal Innovation Mission, setting up of 35 new incubators and 31 innovation centers across national institutes like IIT, IIM etc, setting up of 7 new research park with an investment of 100 crores each at six IITs and one Indian institute of science, to promote biotechnology based entrepreneurs five new bioclusters, 15 new bio incubators, 150 technology transfer offices and 20 bioconnect offices will be established. Other measures are related to relaxed norms for public procurements of startups and exit for startups.

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