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Benefits of Startup India initiative for Companies in India

Startups are becoming very popular in India nowadays. The government under the leadership of PM Narendra Modi has started and promoted Startup India. Startup India initiative intends to build a strong ecosystem that is conducive to the growth of startups. It aims to empower startups to achieve growth through innovation and technology.

To promote growth and help the Indian economy, many benefits are being given to entrepreneurs establishing startups. The startups recognized through the Startup India initiative are provided ample benefits for starting their own business in India.

To get detailed knowledge about it you can refer to – Startup India Initiative: A detailed discussion about Startup and DPIIT

DPIIT-Recognized Startups are eligible for the following benefits:

  • Intellectual Property Rights (IPR) benefits
  • Relaxation in public procurements norms
  • Self-certification under Labour & Environment laws
  • Fund of Funds for Startups (FFS)
  • Faster exit for Startups
  • Seed Fund Scheme

Intellectual Property Rights (IPR)

To promote awareness and adoption of IPRs by Startups and facilitate them in protecting and commercializing the IPRs, Startup India provides access to high-quality intellectual
property services and resources, including:

  • Fast-tracking of startup patent applications

The patent application of startups is fast-tracked for examination and disposal. The process is much faster for Recognized Startups.

  • The panel of facilitators to assist in IP applications.

Facilitators are responsible for providing general advisory on different IPRs, and information on protecting and promoting IPRs in other countries. Central Government bears the entire fees of the facilitators for any number of patents, trademark, or designs, and startups only bear the cost of the statutory fees payable

  • Rebate on the filing of the application

Startups are provided with an 80% rebate in filing patents vis-a-vis other companies, bringing down the cost from INR 8,000 to INR 1,600. This helps them cut down on costs in their early
years. 50% rebate is also provided in the filing of trademarks vis-a-vis other companies decreasing the cost from INR 10,000 to INR 5,000.

 

Relaxation in Public Procurement Norms

The government of India has authorized its ministries, departments, and public sector undertakings to relax norms in all public procurements. Startups are entitled to avail exemption on:

  • Prior Turnover
  • Prior Experience
  • Earnest Money Deposit

DPIIT recognized startups can now get listed as sellers on the Government of India’s largest e-procurement portal:

  • Government e-Marketplace.
  • Get recognized and visit https://gem.gov.in/ to avail the benefits!

Recognized Startups can also become preferred bidders on CPPP portals, which sees over 2,00,000 tenders every year.

Visit eprocure.gov.in and etenders.gov.in to know more about Government Department Procurement.

A grievance redressal form has been hosted on the Startup India Website where any DPIIT recognized startup can submit their public procurement-related grievance. The submitted application shall be reviewed and if found valid will be resolved by DPIIT in coordination with relevant Government Departments.

Self-certification under Labour & Environment Laws

  • To reduce the regulatory burden on Startups, thereby allowing them to focus on their core business and keep compliance costs low.
  • Startups are allowed to self-certify their compliance under 6 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporation.
  • In respect of 3 Environment laws, units operating under 36 white category industries (as published on the website of the Central Pollution Control Board) do not require clearance under 3 Environment-related Acts for 3 years.

Faster Exit for Startups

Ministry of Corporate Affairs has notified Startups as ‘fast track firms’ enabling them to wind up operations within 90 days vis-a-vis 180 days for other companies. Startups 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.

Tax Exemption for 3 Years

  • The recognized startups that are granted an Inter-Ministerial Board Certificate are exempted from income-tax for a period of 3 consecutive years out of 10 years since incorporation.
  • Startups incorporated on or after 1st April 2016 but before 1st April 2021 can apply for income tax exemption under Section 80-IAC of the IT Act

Exemption for the Purpose of Clause VIIb of Sub-Section 2 of Section 56 of the Act

  • A DPIIT recognized startup is eligible for exemption from the provisions of section 56(2)(viib) of the Income Tax Act
  • The Startup has to file a duly signed declaration in Form 2 to DPIIT {as per notification G.S.R. 127 (E)} to claim the exemption from the provisions of Section 56(2)(viib) of the Income Tax Act

New Amendments

  • Revamping the Incorporation Process

The government of India has revamped the incorporation process in February 2020 wherein the number of procedures to incorporate a company in India has reduced to 3 as against 10 earlier. The time taken to incorporate a company has also been reduced to 4 days as against 18 days earlier for starting a Business in India.

  • Deferring TDS or Tax Payment in Respect of Income Pertaining to Employee Stock Option Plan (ESOP) of Startups

In order to ease the burden of payment of taxes by the employees of the eligible start-ups or TDS by the start-up employer, TDS or tax payment has been deferred by five years or till the employee leaves the company or sells their shares, whichever is earliest.

Fund of Funds for Startups

To provide equity funding support for the development and growth of innovation-driven enterprises, the government has set aside a corpus fund of INR 10,000 Cr managed by SIDBI. The fund is in the nature of Fund of Funds, which means that the government participates in the capital of SEBI registered Venture Funds, which invest twice the amount in startups. The flow of funds is Government > SIDBI > Venture Capitals > Startups

Seed Fund Scheme

Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry is initiating Startup India Seed Fund Scheme (SISFS) with an outlay of INR 945 Crore. The scheme was announced by the Hon’ble Prime Minister during Startup India International Summit “Prarambh” on 16th January 2021.

Startup India Seed Fund Scheme (SISFS) aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization. This would enable these startups to graduate to a level where they will be able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions. The Seed Fund will be disbursed to eligible startups through eligible incubators across India.

Vikas TaxClue
Vikas Sharmahttp://taxclue.in
A writer by passion. Reading and traveling in my free time enhances my creativity in work. I enjoy exploring my creative side, and so I keep myself engaged in learning new skills.

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