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 emphasising the government action plan, schemes, incentives in form of tax exemption and a system of speedy grant of patent. Following are the important announcements with respect to the startup India:
1. Compliance regime based on self certification:
The emphasis is on self certification by the business owners/ compliance officers/entrepreneurs/ directors of the company so that the startups are relieved of regulatory burden. The self certification is applied in cases of regulatory requirement of laws dealing with payment of gratuity, contract labour, employment provident fund and act pertaining to water and air pollution etc.
2. A startup India hub:
To enable knowledge exchange, free flow of information, and access of 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 operationalised on first April 2016 to resolve queries and hand holding support for startups so far more than 12000 queries were received by the hub throughphone, email and twitter.
3. Simplification of startup registration process:
At present, registration of the company normally takes a month time in India where as in developed economies like US and UK the same can be registered in a day time. This considerable delay is recognised 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 ministry of corporate affairs which intends to issue the certificate of incorporation within 24 hrs. Further, the entire process of incorporation of company has been centralised at Manesar near Delhi.
4. Patent protection:
At present the grant of 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 patent application. IPR is emerging as a strategic business tool for any business organisation 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 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 patent application for startups.
5. Establishment of funds with a corpus of Rs. 10 crores:
In order to,facilitate 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 recognising 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 were incorporated b/w first april 2016 to 31st march 2019. To avail the tax exemption benefits astartup 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 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 announcement:
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.