The government has certified 20 private organizations, including Nasscom and iSprit, as incubators under the Start-up India Action Plan (“Action Plan”).
The Action Plan is a part of a flagship initiative of the government of India, intended to build a strong eco-system for nurturing innovation and start-ups in the country. “Start- up” under the Action plan means a private limited company, partnership firm or a LLP, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 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. In order to be recognized as a “Start-up” by the Department of Industrial Policy and Promotion (“DIPP”), the applications have to be submitted using the mobile app/portal of Startup India.
Only upon such registration, a “Start-up” becomes eligible for obtaining the various benefits under the Action Plan and also under various other recent schemes and notifications. However, the applications for such registrations have to be accompanied by a letter of recommendation/support/funding from an incubator. (Know more about the procedure of recognition of a Start-up). In order to obtain tax benefits, a Start-up so identified after registration is required to obtain a certificate of an eligible business from the Inter- Ministerial Board of Certification.
The benefits that have already been made available to a Start-up as part of the Action Plan are as follows:
- Self-certify compliance: Start-ups are allowed to self-certify compliance (through the start-ups mobile app) with 9 labour and environment laws. In case of the labour laws, no inspections will be conducted for a period of 3 years. Start-ups may be inspected on receipt of credible and verifiable complaint of violation. In case of environment laws, Start-ups which fall under the ‘white category’ (as defined by the Central Pollution Control Board) are able to self-certify compliance and only random checks would be carried out in such cases.
- Start-up India Hub: A friend, mentor and guide for Start-ups that collaborates with central and state governments, Indian and foreign VCs, angel networks, incubators and helps them in obtaining financing, business structuring advice, etc.
- Mobile App and Portal: To provide on-the-go accessibility for registering Start-ups, tracking status of registration, filing for compliances, collaborating with various Start-up ecosystem partners like VCs, incubators, etc. and for applying for various schemes under the Action Plan.
- Start-up India Intellectual Property Protection (“SIPP”) Scheme: The SIPP provides fast-tracking of Start-up patent applications, panel of facilitators to assist in filing of IP applications, the government bears the cost of such facilitation and 80% rebate on filing of patents.
- Relaxed norms of Public Procurement: Start-ups in the manufacturing sector are exempted from the criteria of “prior experience/ turnover”, whenever a tender is floated by a government entity or a PSU, without any relaxation in quality standards or technical parameters.
- Faster Exits: In light of the Insolvency and Bankruptcy Code, 2016, the Start-ups can now be wound up within a period of 90 days from making of an application for winding up on a fast track basis.
- Fund of Funds: A ‘fund of funds’ of INR 10,000 crores for Start-ups has been established which is managed by Small Industries Development Bank of India. The fund invests in SEBI registered Alternative Investment Funds which, in turn, invest in Start-ups. The Fund of Funds can contribute to a maximum of 50% of the stated daughter fund size. In order to be able to receive the contribution, the daughter fund should have already raised the balance 50% or more of the stated fund size as the case maybe.
- Tax-exemption to start-ups for a period of 3 years in a block of 5 years: The Start-ups need to be incorporated between April 1, 2016 and March 31, 2019. Subject to non-distribution of dividend by the Start-up.
- Tax exemption on investments above Fair Market Value have been introduced for investments made by any ‘person’ as defined under Section 2(31) of the Income Tax Act, 1961 in Start-ups.
- Launch of Atal Innovation Mission (“AIM”) with Self-Employment and Talent Utilization Program (“SETU”): For establishment of sector specific Incubators including in PPP mode, establishment of 500 Tinkering Labs, providing pre-incubation training, seed-funding of start-ups, institution of innovation awards, launch of Grand Innovation Challenge Award to motivate start-ups. Call for applications are on for different programs under the Atal Innovation Mission and the guidelines for the same have also been made available on the Start-up India portal.
- Harnessing Incubator Set-up: Government is encouraging already established incubation centres with a grant in support of INR 10 crores in two annual instalments. The eligibility for the same is set out in the Guidelines for Scale-up support to Established Incubation Centres under Atal Innovation Mission issued by the government. The government is also encouraging in establishing new incubation centres either in public funded institutions or private sector funded institutions or in public private partnership (PPP) mode. The incubation centres are provided financial support in the form of Grant-in-aid for a maximum of 5 years The funding for setting up of the incubators is provided by NITI Aayog as part of Atal Innovation Mission.
- RBI proposed Regulatory Relaxations: like enabling Start-up enterprises, irrespective of the sector in which they are engaged, to receive foreign venture capital investment and also explicitly enabling transfer of shares from Foreign Venture Capital Investors to other residents or non-residents. (Know more)
- An Indian Start-up, having an overseas subsidiary, may open a foreign currency account with a bank outside India for the purpose of crediting to the account the foreign exchange earnings out of exports/sales made by the said Start-up or its overseas subsidiary. The balances held in such accounts, to the extent they represent exports from India, shall be repatriated to India within the period prescribed for realization of exports. In addition, payments received in foreign exchange by an Indian Start up arising out of sales/ export made by the Start-up or its overseas subsidiaries will be a permissible credit to the Exchange Earners Foreign Currency (EEFC) account maintained in India by the start up (notification).
This post was reposted from Novojuris