Startup India

Start-up India campaign aims at promoting bank financing for start-up ventures to boost entrepr

Startup India campaign aims at promoting bank financing for start-up ventures to boost entrepreneurship and encourage all start-ups including startups like small software companies in India with jobs creation. The Prime Minister of India, Mr. Narendra Modi had announced the “Start-up India” initiative in his Independence Day speech this year. This initiative aims at boosting entrepreneurship and promoting new ideas by creating an ecosystem that is encouraging for growth of Start-ups. The objective is that India must become a nation of job creators instead of being a nation of job seekers.

Startup:

A start-up is an entity, private, partnership or limited liability partnership (LLP) firm whose headquarter is in India, which was opened less than five years ago and have a turnover less than Rs. 25 crore annually. To be eligible for considering as start-up, the entity should not be formed by splitting up from any established company  and its turnover should not have crossed Rs25 crore during its existence.

(Allonmoney.com, 2016) Benefits given to Startups by Startup India:

  • All startups include software development companies startup will be exempted from paying income tax on their income for the first 3 years.
  • 80% rebate on filing a patent application.
  • Exemption of tax on capital gain.
  • Faster patent registration and protection for Intellectual Property Rights (IPRs) is provided under the Scheme.
  • The government launched a mobile app on 1 April 2016 recently and a web portal that will allow all companies to register in a day.
  • Compliance regime based on self-certification
  • No inspection for 3 years of start-up businesses in respect of labour, environment law compliance post self-certification
  • Easier norms for start-ups to exit within 90 days. Bill will be introduced in the parliament.

Government's role in boosting start-up:

The Ministry of Human Resource Development (HRD) and the Department of Science and Technology have agreed to partner in an initiative to set up over 75 start-up 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).

(Allonmoney.com, Startup India Event 2016, 2016) Special Benefits:

  • Start-ups in the manufacturing sector are exempted from the criteria of prior experience/ turnover without any relaxation in quality standards or technical parameters in public procurement.
  • Income Tax exemption is available for first three years. However, for example, software development startup will be eligible for tax benefits only after obtaining certificate from the Inter-Ministerial Board.
  • Rs10,000-crore fund for new enterprises, equal opportunity in government procurement, a Rs500-crore credit guarantee scheme and easier exit norms.
  • Japanese Softbank, which had already invested $2 billion in Indian startups, has pledged total investments of $10 billion.  

Eligibility for start-up:

  • To become eligible as a start-up and get a green signal from the Inter-Ministerial Board, the entity should be the one which aims to develop and commercialise, a new product or service or process or a significantly improved existing product or service or process that will create or add value for customers or workflow.
  • To be considered as eligible as start-up the entity, should be supported by an incubator, which is funded from Government of India as part of any specified scheme to promote innovation.

Conclusion:

Though startups face difficulties in terms of compliance, taxation regulation with Digital India, as far as the Department of IT is concerned, there is a significant number of VC, funding, and mentorship to support all startups including software outsourcing companies in India.