11 key incentives proposed for start-ups

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11 key incentives proposed for start-ups
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11 Key Incentives for Start-Ups
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What is Start-Ups

• Start-up shall mean an entity
• Incorporated or registered in India not prior to
  five years, with annual turnover not exceeding
  Rs. 25 crore in any preceding financial year
• Working towards innovation, development,
  deployment or commercialization of new products,
  processes or services driven by technology or
  intellectual property.
• Note Such entity should not be formed by
  splitting up, or reconstruction, of a business
  already in existence. Further the entity shall
  cease to be a Start-up if its turnover for the
  previous financial years has exceeded Rs. 25
  crore or it has completed 5 years from the date
  of incorporation/ registration.
• Eligible businesses for Start-up
• A business which aims to develop and
  commercialize
• a) A new product or service or process or
• b) A significantly improved existing product or
  service or process that will create or add value
  for
• customers or workflow.
• However the mere act of developing products or
  services or processes which do not have potential
  for commercialization or undifferentiated
  products or services or processes or products or
  services or processes with no or limited
  incremental value for customers or workflow would
  not be considered as eligible business.

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How to get recognized as a Start-up? The
Start-up should be   ? Supported by a
recommendation (with regard to innovative nature
of business), in a format specified by
DIPP, from an Incubator established in a
post-graduate college in India or   ? Supported
by an incubator which is funded (in relation to
the project) from Govt. as part of any specified
scheme to promote innovation or   ?
Supported by a recommendation (with regard to
innovative nature of business), in a format
specified by DIPP, from an Incubator
recognized by Government or   ? Funded by an
Incubation Fund/Angel Fund/Private Equity
Fund/Accelerator/ Angel Network duly
registered with SEBI that endorses innovative
nature of the business or   ? Funded by Govt.
as part of any specified scheme to promote
innovation or   ? Have a patent granted by the
Indian Patent and Trademark Office in areas
affiliated with the nature of business
being promoted.
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11 Key Incentives for Start-Ups
Start-up India is a novel scheme of the
Government of India so as to build a strong
eco-system for start-ups. This initiative will
drive sustainable growth and generate large scale
employment opportunities in the country. The
Government has announced Action plans to
addresses all aspects of the Start-up ecosystem.
Key incentives proposed under this start-up
scheme are as under

• Self-Certification  Start-ups would be allowed
  self-certification of compliances with certain
  labour laws and environment laws so as to reduce
  the regulatory burden. Further in case of the
  labour laws, no inspections will be conducted for
  initial period of 3 years.
• Patent registration at lower cost Patent
  applications of Start-ups shall be fast tracked
  for examination and disposal, so that they can
  realize the value of their IPR at the earliest
  possible. A Panel of facilitators will be
  empanelled to assist in filing of IP
  applications. The Government shall bear the
  entire fees of the facilitators and the Start-up
  shall bear the cost of only statutory fees.
  Further, Start-ups shall be provided 80 rebate
  in filing of patents vis-à-vis other companies.
• Mobile App for tracking The Government of India
  shall provide mobile app for
•    a) Registering Start-ups with relevant
  agencies of Government.
•    b) Tracking the status of registration
  application and downloading of the registration
  certificate.
•    c) Filing for compliances and obtaining
  information on various clearances and approval
  required.
•    d) Applying for various schemes being
  undertaken under the Start-up India Action Plan.
• The Mobile App shall be made available from April
  1, 2016 on all leading mobile/ smart devices'
  platforms.

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• Faster exit for Start-ups In terms of the
  Insolvency and Bankruptcy Bill 2015, Start-ups
  with simple debt structures or those meeting such
  criteria as may be specified may be wound up
  within a period of 90 days from making of an
  application for winding up on a fast track basis.
• Exemption if capital gain is invested in
  start-ups Exemption shall be given in respect of
  a capital gain which is invested in the Start-up
  ecosystem.
• Tax exemption for 3 years Profits of Start-up
  initiatives shall be exempted from income-tax for
  a period of 3 years. The exemption shall be
  available subject to non-distribution of dividend
  by the Start-up. A Start-up shall be eligible for
  tax benefits only after it has obtained
  certification from the Inter-Ministerial Board,
  setup for such purpose.
• Investments in start-ups above FMV is not
  taxable Consideration received by a Start-ups
  for issuing shares at a price higher than its
  Fair Market Value would not be taxable as income
  from other Sources in the hands of recipient
  under section 56(2)(viib) of the Income-tax Act.
• Start-up India Hub The Government has announced
  launch of Start-up India Hub to create single
  point of contact for the entire Start-up
  ecosystem and enable knowledge exchange and
  access to funding. The "Start-up India Hub" will
  be a key stakeholder in this vibrant ecosystem
  and will
• Work in a hub and spoke model and collaborate
  with Central State Governments of Indian and
  foreign VCs, angel networks, banks, incubators,
  legal partners, consultants, universities and RD
  institutions.
• Assist Start-ups through their lifecycle with
  specific focus on important aspects like
  obtaining financing, feasibility testing,
  business structuring advisory, and enhancement of
  marketing skills, technology commercialization
  and management evaluation.
• Organize mentorship programs in collaboration
  with Government organizations, incubation
  centers, educational institutions and private
  organizations who aspire to foster innovation.

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•  Relaxation in Public tender Typically whenever
  a tender is floated by a Government entity or by
  a PSU, a very often eligibility condition
  specifies either "prior experience/turnover".
  Such a stipulation prohibits/impedes Start-ups
  from participating in such tenders. In order to
  promote Start-ups, Government shall exempt
  Start-ups (in the manufacturing sector) from the
  criteria of "prior experience/turnover" for
  filing of public tenders.
• Creating corpus of Rs. 10,000 crore Government
  will set up a fund with an initial corpus of Rs.
  2,500 crore and a total corpus of Rs. 10,000
  crore over a period 4 years (i.e. Rs. 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 Start-ups, but shall participate in
  the capital of SEBI registered Venture Funds.
• Credit Guarantee fund Debt funding to Start-ups
  is also perceived as high risk area and to
  encourage Banks and other Lenders to provide
  Venture Debts to Start-ups, 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.
• DIPP (Department of Industrial Policy and
  Promotion) may publish a 'negative' list of funds
  which are not
• eligible for this initiative.
• Info-graphic on Key Incentives

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