Startup India - Empowering Startups for Growth
Startup India is a Government of India flagship initiative to build Startups and nurture innovation. Through this initiative, the Government plans to empower Startup ventures to boost entrepreneurship, economic growth and employment across India.
The Government’s Action Plan will help accelerate the growth of Startups throughout India, across all important sectors – in Tier 1, 2 and 3 cities, including semi-urban and rural areas – and includes promoting entrepreneurship among SCs/STs and women communities.
The 19-point Action Plan, organized by the Department for Promotion of Industry and Internal Trade (DPIIT), focuses both on restricting hindrances and promoting faster growth by way of:
- Simplification and Handholding
- Funding Support and Incentives
- Industry-Academia Partnership and Incubation
Why Startup India
Startup India is about creating prosperity in India. Many enterprising people who dream of starting their own business lack the resources to do so. As a result, their ideas, talent and capabilities remain untapped – and the country loses out on wealth creation, economic growth and employment.
Startup India will help boost entrepreneurship and economic development – by ensuring that people who have the potential to innovate and start their own business are encouraged – with proactive support and incentives at multiple levels.
In the words of Prime Minister, Narendra Modi:
Startup India is a revolutionary scheme that has been started to help the people who wish to start their own business. These people have ideas and capability, so the government will give them support to make sure they can implement their ideas and grow. Success of this scheme will eventually make India, a better economy and a strong nation.1According to data from the Department of Economic Affairs, as of August 27, 2021, foreign exchange reserves in India reached US$ 633.5 billion mark.
Startup India’s 19-Point Action Plan
- Self-certification Compliance
- Single Point of Contact via Startup India Hub
- Simplifying Processes with Mobile App and Portal
(for registration, filing compliances & obtaining information)
- Legal Support, Fast Tracking & 80% reduction in patent registration fee
- Relaxed Norms of Public Procurement
- Easier & Faster Exit
- Funding Support via a Fund of Funds corpus of INR 10,000 crore
- Credit Guarantee Funding
- Tax Exemption on Capital gains
- 3-Year Income Tax Exemption
- Tax Exemption on Investments above Fair Market Value (FMV)
- Annual Startup Fests (national & international)
- Launch of World-class Innovation Hubs under Atal Innovation Mission (AIM)
- Set up of country-wide Incubator Network
- Innovation Centres to augment Incubation and R&D
- Research Parks to propel innovation
- Promote Entrepreneurship in Biotechnology
- Innovation Focused Programs for Students
- Annual Incubator Grand Challenge
Launch of Startup India Action Plan
The Startup India Action Plan was unveiled by Prime Minister Narendra Modi on 16th January, 2016 to highlight several initiatives and schemes proposed by the Government of India to build a strong eco-system to nurture innovation and empower Startups across India.
The 19-point Action Plan envisages several incubation centres, easier patent filing, tax exemptions, ease of setting-up of business, a INR 10,000 crore corpus fund, a faster exit mechanism, among others.
Over 1500 CEOs, Startup founders and investors who attended the Startup India launch included:
- Mr. Masayoshi Son, CEO of SoftBank
- Mr. Travis Kalanick, founder of Uber
- Mr. Adam Nuemann, CEO of WeWork
- Mr. Sachin Bansal, founder of Flipkart
- Mr. Kunal Bahl, founder of Snapdeal
- Mr. Bhavish Aggarwal, founder of Ola
- Mr. Vijay Shekhar Sharma, founder of Paytm
Support for Startup India
Startup India campaign has received worldwide support for its attempt to bring Startups to the forefront of India's growth story. It allows entrepreneurs to focus on their core business (instead of time-delaying regulatory compliances) – while empowering them with a strong eco-system to support their creativity and growth.
Definition of a Startup (for the purpose of Government Schemes only)
A Startup means an entity:
- incorporated or registered in India not prior to five years
- with an 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
The entity shall cease to be a Startup if:
- it is formed by splitting up, or reconstruction, of a business already in existence
- its turnover for the previous financial years has exceeded INR 25 crore
- it has completed 5 years from the date of incorporation/registration
Further, the Startup shall be eligible for tax benefits only after it has obtained certification
from the Inter-Ministerial Board, set up for such purpose.
Definition of Terms
Entity: Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2008).
Identification of businesses covered under the definition: A business is covered under the definition if it aims to develop and commercialize:
India has a potential to increase its goods and services export to Australia to US$ 15 billion by 2025 and US$ 35 billion by 2035.
- Entity: Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2008).
- Identification of businesses covered under the definition: A business is covered under the definition if it aims to develop and commercialize:
- 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.
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 covered under this definition.
In order for a “Startup” to be considered eligible, the Startup should
- be supported by a recommendation (with regard to innovative nature of business), in a format specified by DPIIT, from an Incubator established in a post-graduate college in India; or
- be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or
- be supported by a recommendation (with regard to innovative nature of business), in a format specified by DPIIT, from an Incubator recognized by GoI; or
- be 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
- be funded by GoI 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
* DPIIT may publish a ‘negative’ list of funds which are not eligible for this initiative.
- Turnover: As defined under The Companies Act, 2013
- Inter-Ministerial Board: An Inter-Ministerial Board setup by DPIIT to validate the innovative
nature of the business for granting tax related benefits Approval from the Inter-Ministerial Board shall not in any manner, limit or absolve the entity(ies) from any liability incurred in case of any misrepresentation/ fraud arising from submission of such application and/or supporting such application.