Published on Oct 24, 2018
Startup India is a flagship initiative of the Government of India, intended to build astrong eco-system for nurturing innovation and Startups in the country that will drive sustainableeconomic growth and generate large scale employment opportunities. The Government throughthis initiative aims to empower Startups to grow through innovation and design.
• E- registration will be done.
• A self certification system will be launched
• A dedicated web portal and mobile app
• Arrangement of self certificate based compliance
• No inspection during the first 3 years
• 80 percent reduction in the application fee of start up patent
• Easy exit policy
• Inclusion of Credit Guarantee Fund
• Relaxation in Income Tax for first three year
• Special Arrangement for Female applicants
Since you are starting young and intend to enter thus market, i would recommend you start as a firm. (it requires minimum investment). Eventually, you can upgrade the same to a company, when business grows and you have clients who give lot of importance to companies than firms.
The challenges you will face during the process are many.
The process of registration is not as smooth as they show in media
The taxation structure (till GST comes) is very complex. VAT changes from state to state. Add to this, the side taxes like entry tax, etc. You need to understand them before identifying what you intend to sell.
The licenses required to run a business have to be understood, This holds true, wen you plan to start industry, restaurant, etc. There are a lot of permissions required to start the venture. You have to identify them all before you land in trouble.
Arrangement of funds. I know this point has got nothing to do with the registration of a company but at some stage you will need the funds. Believe me, irrespective of how much our government boast about campaigns like MUDRA, etc. The funds for young entrepreneurs are not easy to come by. I don't know the business you plan to enter but if its a small industry or something which requires a lot of investment. Keep in mind the money you will need to cover all registration expenses. They don't come cheap.
The biggest challenge is the unspoken secret of market. The bribe process. Although, we did not face a lot of it since we were in IT services. I have heard of scary stories of industries, etc earning the wrath of government officers for not paying bribes to "smooth en" the process.
Startup India, the campaign of our government is supposed to help ease the process for startups with a lot of initiatives
We have to required following things -
a) a Legal Entity
b) a Recommendation Letter From Incubator/VC/Angel Investor or Patent.
c) a Certification for the Innovative idea of the business by the govt recognized incubator. they have policy for the fee i.e is nearby 5000 INR Min.
d) Turnover have less than 5 cr.
e) For the Tax Exemption required evaluation from the Inter ministerial board separate
The app will allow users to apply for Recognition of Startups and Incubators and also allow users to validate Recognition of Startups and Incubators.
The app can be downloaded from your mobile through the following link- https://play.google.com/store/apps/details?id=com.startupindia&hl=en
• Companies eligible for scheme:-
o An entity (Private Limited Company or Registered Partnership Firm or Limited Liability Partnership) shall be considered a “Startup” –
o Upto 5 years from the date of its incorporation/ registration, and
o If its turnover for any of the financial years has not exceeded INR 25 crore, and
o It is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.
o The entity should not have been formed by splitting up or reconstruction of a business already in existence. A proprietorship or a public limited company is not eligible as startup. A one person company, being a private limited company is entitled to be recognized as a 'startup'.
• The Startup has obtained certification from the Inter-Ministerial Board, setup by DIPP to validate the innovative nature of the business and
o 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
o Be supported by an incubator which is funded (in relation to the project) from Government of India (GoI) as part of any specified scheme to promote innovation; or
o Be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI; or
o 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
o Be funded by GoI as part of any specified scheme to promote innovation; or
o Have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.
To create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding.
Young Indians today have the conviction to venture out on their own and a conducive ecosystem lets them watch their ideas come to life. In today’s environment we have more Startups and entrepreneurs than ever before and the movement is at the cusp of a revolution.
However, many Startups do not reac h their full potential due to limited guidance and access. The Government of India has taken various measures to improve the ease of doing business and is also building an exciting and enabling environment for these Startups, with the launch of the “Startup India” movement.
The “Startup 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, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and R&D institutions
• Assist Startups through their lifecycle with specific focus on important aspects like obtaining financing, feasibility testing, business structuring advisory, 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.
To all young Indians who have the courage 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.
There are the major benefits of the Startups India -
1. Tax exemption for start-ups for three years.
2. Rs. 10,000 crore corpus fund to support start-ups.
3. Capital gains tax to be exempted for venture capital investments.
4. 80% reduction in patent registration fee.
5. Govt. to ensure 90-day window for start-ups to close businesses.
6. Self-certification compliance for start-ups across India.
7. No government inspection for three years for newly-formed start-ups.
8. New scheme to provide IPR protection to start-ups and new firms.
9. Innovation programme to start 5 lakh schools to target 10 lakh children.
10. Government is all set to launch an app to create a platform for interaction with start-ups.
Availing tax benefits under the Startup India needs lots of criteria to be fulfilled. All startups cannot avail the tax benefit. Here is how one may enjoy the tax benefits.
i) The business for which the rebate is applied must be an innovative one. Startup India supports only those who have a fresh idea in manufacturing or service which is profitable for the society.
ii) The product of one's business must add value to its customer or industry. Value adding is a must-have feature to qualify for tax rebate.
iii) One's product must have the quality of solving at least one problem of the society. If your product comes in a luxurious item, then the tax concession is not applicable to your business.
iv) The private limited company (including One person Company) or Limited Liability Partnership (LLP) which is applying for tax benefits must be registered on or after 1st April, 2016.
v) You have to fill up the form carefully while registering your business for startup India scheme. While filing for startup India registration, one must select the option of “registration with tax benefit” to avail tax benefits.
vi) The business model which you are going to execute must be a working business model or else the incubators may reject your application stating the business model will not work in real time.
vii) One has to obtain a recommendation letter in order to avail the tax benefit. The recommendation letter should be obtained from any of the followings.
• Incubators established in postgraduate college
• Incubator which is funded from Central or state government
• Incubator recognized by the Government of India.
• Letter of funding of not less than 20 percent in equity
• Letter of funding from Central or state government
• Patent filed and published in the journal
The Startup India scheme is very helpful for the young entrepreneurs with a product which is helpful for the society. A tax holiday for three consecutive years will make them invest that amount in their business to increase the revenue. Once the business is established than paying 30% of tax will not be a big deal for any entrepreneur.
With this Action Plan the Government hopes to accelerate spreading of the Startup movement:
• From digital/ technology sector to a wide array of sectors including agriculture, manufacturing, social sector, healthcare, education, etc.; and
• From existing tier 1 cities to tier 2 and tier 3 citites including semi-urban and rural areas.
The Action Plan is divided across the following areas:
• Simplification and Handholding
• Funding Support and Incentives
• Industry-Academia Partnership and Incubation
Given the innovative nature of Startups, a significant percentage fail to succeed. In the event of a business failure, it is critical to reallocate capital and resources to more productive avenues and accordingly a swift and simple process has been proposed for Startups to wind-up operations. This will promote entrepreneurs to experiment with new and innovative ideas, without having the fear of facing a complex and long-drawn exit process where their capital remain interminably stuck.
The Insolvency and Bankruptcy Bill 2015 (“IBB”), tabled in the Lok Sabha in December 2015 has provisions for the fast track and / or voluntary closure of businesses. In terms of the IBB, 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.
In such instances, an insolvency professional shall be appointed for the Startup, who shall be in charge of the company (the promoters and management shall no longer run the company) for liquidating its assets and paying its creditors within six months of such appointment. On appointment of the insolvency professional, the liquidator shall be responsible for the swift closure of the business, sale of assets and repayment of creditors in accordance with the distribution waterfall set out in the IBB. This process will respect the concept of limited liability.
In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general and to encourage experimentation among Startup entrepreneurs through disruptive business models, credit guarantee comfort would help flow of Venture Debt from the formal Banking System. Debt funding to Startups is also perceived as high risk area and to encourage Banks and other Lenders to provide Venture Debts to Startups, 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.
Due to their high risk nature, Startups are not able to attract investment in their initial stge. It is therefore important that suitable incentives are provided to investors for investing in the Startup ecosystem. With this objective, exemption shall be given to persons who have capital gains during the year, if they have invested such capital gains in the Fund of Funds recognized by the Government. This will augment the funds available to various VCs/AIFs for investment in Startups. In addition, existing capital gain tax exemption for investment in newly formed manufacturing MSMEs by individuals shall be extended to all Startups. Currently, such an entity needs to purchase “new assests” with the capital gain received to avail such an exemption. Investment in ‘computer or computer software’ (as used in core business activity) shall also be considered as purchase of ‘new assets’ in order to promote technology driven Startups.
During the initial years, budding entrepreneurs struggle to evaluate the feasibility of their business idea. Significant capital investment is made in embracing ever-changing technology, fighting rising competition and navigating through the unique challenges arising from their venture. Also, there are limited alternative sources of finance available to the small and growing entrepreneurs, leading to constrained cash funds. With a view to stimulate the development of Startups in India and provide them a competitive platform, it is imperative that the profits of Startup initiatives are exempted from income-tax for a period of 3 years. This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations. The exemption shall be available subject to non-distribution of dividend by the Startup.
Mumbai-based real estate developer Ajmera Group will invest up to $10 million in technology-based startups, with a focus on fintech and software-as-a-service (SaaS), as part of its expansion plan. It has already picked up stakes in three startups and plans to invest in another seven by the end of June 2019, said a top executive.
“We are primarily in real estate, but with opportunities coming up in the startup space and the vision of the government, I feel it is a great business opportunity. The future definitely looks good. It gives us an opportunity to enter into a line of business which will grow organically,” said Dhaval Ajmera, director at Ajmera Group.
According to Ajmera, Ajmera Group will also consider acquisitions of such companies. Two years ago, it had backed BookMeIn, an online marketplace for services, besides investing in The Sports Gurukul, which runs sports programmes in schools and colleges, and ModuleX, a modular kitchen development startup.
Ajmera, founded 50 years ago, has diversified into various sectors over the years, including power, steel and education. In September, Ajmera entered Bahrain and London with their first international project, according to a Business Standard report. The company also plans to develop residential projects in Rajkot, Bengaluru and Mumbai.
In September 2017, the Lodha Group had tied up with Mumbai-based start-up incubator Zone Start-up India (ZSI) and had launched Palava Accelerator. Lodha had initially invested about $7.8 million in real estate and smart cities.
The Start-up India initiative of the Government of India envisages to build a robust Start-up ecosystem in the country for nurturing innovation and providing opportunities to budding entrepreneurs. The active support of State/UT Governments is crucial for achieving the overall objectives of the program. An Action Plan with 19 action points for Start-up India initiative was unveiled by the Hon’ble Prime Minister on January 16, 2016. This Action Plan laid down a roadmap for the creation of a conducive ecosystem for Start-ups in India. Subsequently, many activities have been undertaken to encourage Startups.
In order to achieve the vision of building a strong ecosystem in India, it is imperative that collaborative and concerted efforts are undertaken by Centre and States/UTs together for effectively nurturing and supporting Start-ups for their success. With this objective, a set of recommendations has been drafted on which State/UT Government can act upon and implement to develop an enabling Start-up ecosystem.
The ‘State/UT Startup Ranking Framework’ is spread across 7 areas of interventions with a total of 38 action points and overall score of 100 marks. The framework also provides
the guidelines to support implementation of action points along with good practices against each action point. In order to evaluate States/UTs in a balanced and
transparent manner, the implementation of action points by the State/UT Government and feedback from Startup ecosystem components have been given due weightage.
Under the framework, out of 38 action points, 21 action points require submission of supporting document(s), 1 action point requires only stakeholder feedback and 16 action points require both the components (supporting document(s) and stakeholder feedback) for assessment of the State/UT Startup initiatives.
