India: Startup India, Stand Up India

Last Updated: 25 January 2016
Article by Seema Jhingan and Karan Gandhi

To augment the entrepreneurial spirit of country's youth and tap on the immense potential of innovative ideas, the Government of India has recently launched its ambitious new scheme, 'Startup India'. While vast majority of Indian population is below 35 years of age and the Start-up culture is on the rise, young ventures face many challenges including lack of clarify on regulatory approvals, multiple registrations and compliances, lack of supporting eco-system and most important funding constraints. Sensitive to these constraints, the Government has decided to provide an enabling environment for nurturing talent, simplifying systems and processes, handholding, mentoring and incubating new ventures and most important providing financial support through this new initiative.

A 'Start-up' has been defined under the 'Startup India' action plan dated January 16, 2016 as "an entity, 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."

The entity will not qualify as a Start-up if it is formed by splitting up, or reconstruction, of a business already in existence1.

In essentiality, a Start-up would involve development and commercialization of:-

  • 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.

Some of the interesting features of the action plan are:

  • Compliance Regime based on Self Certification: Easing of compliances and self-certification with respect to 9 labour and environmental laws, no inspections to be conducted for a period of 3 years in case of labour laws and self-certification for environment laws for the Start-ups falling under the 'white category' with only random inspections, if required.
  • Start-up India Hub: Creation of an all-India hub as a single point contact for Start-up entities for exchange and access to knowledge and finance through foreign venture capitalists, angel networks, banks, incubators etc.
  • Rolling-out of Mobile Application and Portal: Launch of a mobile application (with effect from April 1, 2016) to provide 'on the go' accessibility for registration of the Start-ups, checklist covering labour licensing, environmental clearances etc., filing for compliances, collaborating with the other Start-up ecosystem partners etc.
  • Facilitation for Fast-tracking Patent Examination at Lower Costs: Empanelment of facilitators to assist the Start-ups in Intellectual Property related matters including filing of Patents, Trademarks and Designs applications. The facilitation cost for filings and other assistance would be borne by the Government and there will be 80% rebate in filing of patents.
  • Relaxed Norms of Public Procurement for Start-ups: Exemption to Start-ups (in the manufacturing sector) from the criteria of "prior experience/turnover" without any relaxation in quality standards or technical parameters.
  • Faster Exit for Start-ups: Enabling a swift and simple process for Start-ups to wind-up operations. The Insolvency and Bankruptcy Bill 2015 (IBB), tabled in the Indian Parliament in December, 2015 would enable fast track voluntary closure of businesses for Start-ups (with simple debt structures or those meeting the specified criteria), to be wound up within a period of 90 days from making of an application for winding up.
  • Providing Funding Support through a Fund of Funds: Establishment of a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year). The Fund will not invest directly into Start-ups, but will participate in the capital of SEBI registered venture capital funds who would be investing in the Start-ups.
  • Credit Guarantee Fund for Start-ups: Availability of credit guarantee mechanism through National Credit Guarantee Trust Company with a budget of Rs. 500 crore per year for the next four years to support the flow of funds to the Start-ups.
  • Tax Exemption on Capital Gains: Exemption to persons on capital gains during the year where such capital gains are invested in the fund of funds recognized by the Government. In addition, existing capital gain tax exemption for investment in newly formed manufacturing micro, small and medium enterprises by individuals will be extended to all Start-ups.
  • Tax Exemption to Start-up for 3 years: Exemption from income tax on profits of Start-ups for a period of 3 years subject to non-distribution of dividend by the Start-ups. To avail the tax benefit the Start-ups would need to obtain certification from the Inter-Ministerial Board, setup for this purpose.
  • Tax Exemption on Investment above Fair Market Value: In accordance with the Income Tax Act, 1961, where a company receives any consideration for issue of shares which exceeds the Fair Market Value (FMV) of such shares, such excess consideration is taxable in the hands of recipient as income from other sources. However, for a Start-up venture, it is difficult to determine the FMV of such shares which generally is lower than the value at which the capital investment is made which results into levy of tax. Currently, investment by venture capital funds in Start-ups is exempted from operations of the aforesaid provision. The same facility will be extended to investment made by incubators in the Start-ups.
  • Building Entrepreneurs: Introduction of innovation related study plans for students in over 5 lakh schools and holding of an annual incubator grand challenge to develop world class incubators.
  • Atal Innovation Mission: Launch of The Atal Innovation Mission to promote innovation and entrepreneurship through self-employment and talent utilization.
  • Setting up Incubators: Establishment of a private public partnership model for 35 new incubators and 31 innovation centres at national institutes.
  • Research Parks: Establishment of seven new research parks, including 6 in the Indian Institute of Technology campuses and one in the Indian Institute of Science.

The Startup India, Stand up India Initiative of the Government of India is an ambitious scheme to encourage entrepreneurship, create new employment opportunities and promote ease of doing business in India. However, its' success will largely depend on the Government's earnestness in implementing the scheme in letter and spirit, reducing the bureaucratic hurdles and minimizing Government's interference together with facilitation of financial and incubation support to the Start-ups.

On the eve of India's 67th Republic Day, we hope that the Government of India and the energetic Indian Start-up ventures would be able to successfully work towards a dynamic innovative future.

Footnote 

1.In order to avail various exemptions and benefits of the scheme, the following additional eligibility criterion has to be met by a Start-up:

  • The Start-up should be supported by a recommendation (with regard to innovative nature of business), from an incubator established in a post-graduate college in India; or
  • The Start-up should be supported by an incubator which is funded (in relation to the project) from Government as part of any specified scheme to promote innovation; or
  • The Start-up should be supported by a recommendation (with regard to innovative nature of business), from an Incubator recognized by Government; or
  • The Start-up should 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
  • The Start-up should be funded by Government as part of any specified scheme to promote innovation; or
  • The Start-up should have a patent granted by the Indian Patent and Trademark Office in areas affiliated

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Seema Jhingan
Similar Articles
Relevancy Powered by MondaqAI
Infini Juridique
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Infini Juridique
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions