“We have a million problems, but at the same time, we have over a billion minds”- Narendra Modi
In 2014, India witnessed a sudden startup wave shaking the nation with its million-dollar ideas and cutting-edge solutions to modern problems, and it hasn’t ceased ever since. Startup India is an inventiveness of the Government of India. The campaign was first announced by the Indian Prime Minister, Narendra Modi, during his 15 August 2015 address from the Red Fort in New Delhi. Later in 2016, India’s government inaugurated the Startup India Scheme to promote its new startups by providing startup funding support, guidance, and industry-academia partnership & incubation opportunities. The overall idea intricate in launching the Startup India initiative was to generate employment amongst the unemployed via startups while simultaneously working towards building self-employment for sole keepers.
Thus, to increase job creation and entrepreneurship, the Government of India launched the Startup India Scheme. Under this scheme, the government intends to give a host of tax benefits, make compliance easy, fast track IPR tracking, and offer another set of services. These advantages are provided to focus on their core business and do not have any regulatory burden.
Action-Plan of Startup India
Startup India is a flagship initiative of India’s Government to build a healthy ecosystem for nurturing innovation and startups to drive sustainable economic growth and generate colossal scale employment opportunities. The Government, through this initiative, strives to empower Startups to grow through innovation and design. To meet the initiative’s objectives, India’s Government announces this Action Plan that addresses all aspects of the Startup ecosystem. With this Action Plan, the Government hopes to accelerate the spreading of the Startup movement:
1. Simplification Of Work
This initiative makes more explicit the work for the newcomers to motivate them. The objective is to create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and funding access. To all young Indians who dare to enter an environment of risk, the Startup India Hub will be their friend, mentor, and guide to hold their hand and walk with them through this journey. The government has set-up Startup India hubs where all the works related to incorporation, registration, grievance handling, etc. are completed. An application and an online portal are set-ups by the government to facilitate registration from anywhere and anytime. Patent acquisition and registration are now fast for startups. Lastly, according to the Insolvency and Bankruptcy Bill, 2015 facilitates fast winding up of the startups. A new startup can wind-up itself within 90 days of the incorporation.
2. Finance Support
To inspire and motivate the startups, the government offers various financial support. The government has set up an anatomy of Rs.10,000 crores for four years (Rs.2500 crore each year). From such funds, the government invests in different startups. Special funds are provided, which leads to exclusion from the income tax on the Capital Gain. Income tax exemption is accessible for the startups for the first three years after the affiliation. Under The Income Tax Act, where a Startup (company) receives any consideration for shares that exceeds the Fair Market Value of the claims, such excess review is taxable in the recipient’s hands as Income from Other Sources. Investment by venture capital funds in Startups is exempted from the application of this provision. The same extends to the investment made by incubators in the Startups.
3. Government’s Schemes
The Ministry of Human Resource Development and the Department of Science and Technology have agreed to join hands in an initiative to set up over 75 such startup support hubs in the National Institutes of Technology (NITs), the Indian Institutes of Information Technology (IIITs), the Indian Institute of Science Education and Research (IISERs) and National Institutes of Pharmaceutical Education and Research (NIPERs). According to The Reserve Bank of India’s claims, it would improve the ‘ease of doing business’ in the country and contribute to an ecosystem beneficial to start-up businesses’ growth.
Eligibility for Registration under Startup India Scheme
As per the Startup India Action plan, the followings conditions must be fulfilled to be eligible as a Startup :
- Being affiliated or registered in India for less than seven years and biotechnology startups up to 10 years from its incorporation date.
- Annual turnover not exceeding Rs 25 crores in any of the preceding financial years.
- Aims to work towards innovation, development, deployment, or commercialization of new products, processes, or services driven by technology or intellectual property.
- It is not formed by breaking up or reconstruction of a business already in existence.
- It must obtain certification from the Inter-Ministerial Board set up for such a purpose.
- It can be incorporated as a private limited company, a registered partnership firm, or a limited liability partnership.
Benefits of Startup India
The startups fulfilling the eligibility criteria for the StartUp India Scheme can avail of the following services:
- Financial Benefits: Most of the startups are licensed. It means they provide unique goods or services. To register their patents, they have to incur a high cost known as the Patent Cost. Under this scheme, the government provides an 80% rebate on the patent costs. Moreover, the process of patent registration and related work is faster for them. Also, the government pays the fees of the facilitator to obtain the patent.
2. Income Tax Benefits: Startups celebrate a fair amount of benefits under the Income Tax head. The government exempts their three years income tax post the incorporation year. But they can avail of it only after getting a certificate from the Inter-Ministerial Board. Also, they can claim exemption from tax on Capital Gains if they invest money in specified funds.
3. Registration Benefits: Everyone believes that incorporation and registration of business are far more complicated than running it. It is because of the long and detailed steps of registration. Under the Startup India scheme, an application is there to facilitate registration. A single meeting is arranged at the Start-up India hub. Also, there is a single doubt and problem-solving window for them.
4. Government Tender: Everyone seeks to acquire Government tenders because of high payments and large projects. But it is not easy to purchase the government tenders. Under this scheme, the startups get priority in getting government tenders. Also, they are not required to have any prior experience.
5. Tremendous Networking Opportunities: Networking Opportunities means the opportunity to meet with various startup stakeholders at a particular place and time. The government provides this opportunity by conducting two startups annually (both at the domestic and international levels). The Startup India scheme also provides Intellectual Property awareness workshops and awareness.
Challenges Faced by Startup India
People generally speculate startups are just about thinking about a new idea or plan. But in reality, the enactment of such a project is more necessary than just thinking about it. The view or perspective of the government on the startup India plan is relatively short-term in nature. It does not look at the long-term path of the startups. For the success of any new business, a competent workforce is necessary. But in the case of startups, a skilled workforce is not possible due to the lack of funds at the initial phase. The risk of reaching failure is more significant in startups as compared to other organizations. It is because they tend to take steps quite fast.
Startups in India have been continuously proving their place in the market by adopting the latest advanced technology and hard work in the nation, which has marked its position as one of the world’s largest startup hubs. Success takes hard work and dedication, but perhaps more than anything, it takes passion. You need to believe in what you’re doing-especially if it’s a big project like a start.