India: Start Up India

Last Updated: 4 July 2017
Article by Infini Juridique

Government of India has announced the START UP India in August 2015. Under “START UP INDIA”, the Govt. intends to build a strong eco system for nurturing innovation and start ups in the country that will drive sustainable economic growth and generate large scale employment opportunities.

In order to meet the objectives of the initiative Government of India has announced the action plan that addresses all aspects of the Start UP Ecosystem.

With the action plan, the Government hopes to accelerate spreading of the Start UP Movement:

  1. From Digital/Technology sector to a wide array of sectors including agriculture, manufacturing, social sector, health care, education etc..
  2. From existing Tier 1 Cities to Tier 2 & Tier 3 cities including semi urban and rural areas.
  3. The Action Plan is divided across the following areas:

    • Simplification and Handholding
    • Funding supported incentives.
    • Industry/academia partnership and incubation

On February 17, 2016, Govt. Of India (Ministry of Commerce & Industry, Department of Industrial Policy and Promotion) issued a Notification G.S.R. 180(E) for Start Ups.

A Start Up would mean 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 for new products, processes or services driven by technology or intellectual property. Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.

An entity shall not be deemed to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration.

Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

To reduce the regulatory burden on startup and for Ease of Doing Business, the Government had introduced simple and flexible simplified regulatory regime for the start-ups. Government has identified the regulatory obstacles for start-ups and has taken initiative to remove them or make it easier for compliance. Six Labor and Three Environmental laws are covered under this head for easy and convenient approval. Under the scheme the Government has allowed “self-certification”, under which Start-Ups can file complainces etc. under Self Certification process.

Furthermore, in instances of Labour Laws, no inspections will be conducted within a period of three years. With respect to Environmental Law any inspection will be made only on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one officer senior to the inspector.

Another important step under the Start-Up India scheme is to create a “Startup India Hub” with an objective to create a single point of contact for the entire start-up ecosystem. Focus of the scheme is on Young Indians by creating a conducive environment. It has been observed that Start-Ups do not reach their full potential due to limited guidance and access as well as resources.

Another important step is “Rolling-Out of Mobile App and Portal”. Realising the delays or lack of clarity in regulatory and registration process. The government has enabled start-ups to register in an easy and timely manner to reduce the delays during registration. The start-ups ecosystem in India shall provide formal platforms for Start-Ups to connect and collaborate with the ecosystem partners and the mobile app shall have backend integration with the Ministry of corporate affairs and Registrar of firms for the seamless information exchange and processing of the registration application. One can also download the digital version of the final registration certificate. Thus, your company is in your hands at all given time.

Government of India shall also provide necessary “Legal Support and Fast- tracking Patent Examination at Lower Costs”. The idea is to not only give support in the protection of Intellectual Property Rights but also to give support in every way that may be possible including providing legal advise and support.  Government of India wants to promote awareness and adoption of the Intellectual Property Rights by start-ups and facilitate them in protecting and commercialising the Intellectual Property Rights.

The government has proposed to introduce fast track examination of Patent applications and rebates in the fees. Start-ups with limited resources and manpower can sustain in this highly competitive world only through continuous growth and development oriented innovations; for this it is equally crucial that they protect their Intellectual Property Rights. For effective implementation of this scheme a panel of facilitators shall be empaneled by the Controller General of Patents, Designs and Trademarks. Furthermore, the central government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a Start-Up may file, and the Start-Ups shall bear the cost of only the statutory fees payable. Start-Ups shall be provided an 80% rebate in filing of patents with the other companies. The scheme will be launched initially on a pilot basis for one year, which may be extended upon the kind of response.

Another important step is “Relaxed Norms of Public Procurement for Startups” to provide an equal platform for start-ups with the experienced companies or entrepreneurs in the public procurement. The government central as well as state and Public Sector Undertakings have to mandatory procure at least 20% from the Micro Small and Medium Enterprise. In furtherance the start-ups shall be exempted from any criteria of prior experience or turnover but no compromise will be made on any aspect of quality or technical parameters. The Start-Ups have to demonstrate requisite quality and capability to execute the project as per the requirements of the project and must have their manufacturing unit in India.

One of the major issue with regard to doing business in India is that the Exit Scheme under the Companies Act does not allow a simple exit. Having recognized this aspect, the Government has announced  “The Faster Exit for Startups”. The government recognized that it is critical to relocate capital and resources to more productive avenues. In the case the start-ups cease to continue, a swift and simple process would be followed to wind up the Start-Ups operations. For this the government has also tabled the “Insolvency and Bankruptcy Bill 2015” before the Lok Sabha, which once passed by both the houses, shall allow a company to file Winding Up application and within a period of 90 days from making of an application for winding up on a fast track basis, an insolvency professional shall be appointed for the start-up who shall be in charge of the company for liquidating its assets and paying its creditors within six months of such appointment.


Another interesting aspect of Start-UP India is the recognition of resource and fund crunch for a Start Up. Having recognized this drawback the Government has drawn a plan for Funding Support through a Fund of Funds with a Corpus of INR 10,000 crore. Initially the government will set up a corpus of Rs.2500 crore for a year which will continue to 4 years amounting to a total corpus of 10,000 crore. The funds will be in the nature of “fund of funds” which means that it will not invest directly into the start-ups but shall participate in the captain of SEBI registered Venture Funds. The funds of funds shall contribute to a maximum of 50% of the stated daughter fund size.

The government having realized that start-ups have a blot associated with the failure of start-up enterprise in general which apprehends the creditors to invest. Therefore, “Credit Guarantee Fund for Startups” which is aimed for Debt Funding to start-ups and is to be made through Banks and other lenders to provide Venture Debts to start-ups. Credit guarantee mechanism through National Credit Guarantee Trust Company (NCGTC) and through Small Investment Development Bank of India (SIDBI) is being envisaged with the budgetary corpus of Rs.500 crore per year for the near next four years.


Another aspect of Start Up India is the “Tax Exemption on Capital Gains”. Exemption shall be given to persons who have capital gains during that year, if they have invested capital gains in the Fund of Funds recognised by the government. Investment in computer or computer software shall also be considered as purchase of ‘new assets’ in order to promote technology driven startups. The Income Tax Exemption for Start Ups is proposed for a period of three years in order to facilitate growth of business and meet the working capital requirements during the initial years of operations. Exemptions shall only be available subject to normal distribution of dividends by the startups. “Tax Exemption on Investments above Fair Market Value” is the second tax exemption.

On important step would be in “Harnessing Private Sector Expertise for Incubator Setup” to ensure operational management of Government sponsored / Funded Incubators. Government will create a policy and framework for setting up of incubators across the country in Public-Private Partnership. 35 new incubators in existing institutions and 35 new private sector incubators.  At the same time Government shall help in “Building Innovation Centre at National Institute”, to propel successful innovation through augmentation of incubation and Research and development efforts. Setting up  of 13 startup  centers,  for encouraging  student driven start-ups from the host Institute and also setting up scaling up 18 technology business incubators at National Institute Technologies, Indian Institute of Technologies and Indian Institute of Management as per funding model with Ministry of human Resource Development and Department of Science and Technology.

 
Government shall be Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras. Investment to the tune of INR 100 crore each for seven new Research Park has been allotted to break down the traditional, artificial barriers of innovation through its connectivity and collaborative interaction.

Special emphasis is being given to promote Startups in Biotechnology Sector. Department of Biotechnology endeavors to scale up the number of startups in the sector by nurturing approximately 300 to 500 new startups each year to have around 2,000 start-ups by 2020. 5 new bio-clusters, 50 new Bio-Incubators, 150 Technology transfer offices and 20 Bio-Connect Offices will be set up in research Institute and universities across India.

Government has also launched Innovation Focused Programs for Students, with an objective to foster a culture of innovation in the field of science and technology amongst students. Innovation core program shall be initiated to target school kids with an outreach to 10 lakh innovations. The best hundred shortlisted Innovations shall be showcased at the Annual Festival of Innovations in the last Rashtrapati Bhawan. It also aims to set up National Initiative for Developing and Harnessing Innovations (NIDHI) through Innovation and Entrepreneurship Development Center’s IEDCs.

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
 
In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.