With the intention to build a strong eco-system for nurturing innovation and Startups in the country, the Hon’ble Prime Minister launched Startup India Action Plan on January 16, 2016 in New Delhi. The Government through this initiative aims to empower Startups to grow through innovation and design and to accelerate spreading of the Startup movement. Given below is a glimpse of the progress Startup India has made:
Status Report on Startup India
AMENDED DEFINATION OF STARTUP AND SIMPLIFIED RECOGNITION PROCESS
Acknowledging the long gestation period for Startups, the definition has been amended where an entity shall be considered as a Startup for up to 7 years (from earlier 5 years) and a Biotechnology Startup for up to 10 years from the date of its incorporation/ registration. Also, scope of definition has been broadened to include scalable business model with high potential of employment generation or wealth creation. Additionally, no letter of recommendation from an incubator/industry association shall be required for either recognition or tax benefits.
Out of the applications received, 4536 have been recognised as Startups by DIPP. 74Startups have been approved for availing tax benefits by IMB, as of 3rd week of Oct, 2017.
COMPLIANCE REGIME BASED ON SELF-CERTIFICATION
Compliance norms have been eased in order to reduce the regulatory burden on Startups thereby allowing them to focus on their core business.
- Startups falling under the list of 36 “white” category industries will not require Environment clearance under 3 Environment related Acts viz. The Water (Prevention & Control of Pollution) Act, 1974; the Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003 and the Air (Prevention & Control of Pollution) Act, 1981. Click here to get the list of “white” category industries.
- Ministry of Skill Development and Entrepreneurship (MSDE) has issued advisory to states to allow startups to self-certify compliance for a period of 1 year with the Apprenticeship Rules, 1992 of Apprenticeship Act 1961.
- As per the advisory issued by Ministry of Labour & Employment (MoLE) on 12.01.2016, Startups may self-certify compliance under 6 Labour Laws; 24 states viz. Andhra Pradesh, Assam, Chhattisgarh, Chandigarh, Daman & Diu, Delhi, Gujarat, Himachal Pradesh, Mizoram, Odisha, Punjab, Tripura, West Bengal, Uttar Pradesh, Haryana, Jharkhand, Madhya Pradesh, Maharashtra, Tamil Nadu, Telangana, Uttarakhand, Rajasthan, Karnataka and Bihar have confirmed compliance.
MoLE has now increased the tenure of compliance of self-certification under 6 Labour laws from 3 to 5 years. Further, 9 States viz. Haryana, Jharkhand, Madhya Pradesh, Maharashtra, Tamilnadu, Telangana, Uttarakhand, Rajashtan and Karnataka have confirmed compliance with new advisory.
STARTUP INDIA HUB
Startup India hub was operationalised on 1st April, 2016 to resolve queries and provide handholding support to Startups. The hub has handled more than 69,000 queries from Startups through telephone, email and Twitter. To seek clarifications pertaining to Certificate of Recognition as a “Startup”, Certificate of Eligibility to avail tax benefits, seeking information on incubators or funding, one can get in touch with the Hub on Toll- Free number: 1800115565 or Email ID: email@example.com. The hub has mentored more than 450 Startups for incubation, funding support, on business plans, pitching support, etc. A Startup India Online Hub launched on 19th June, 2017 will serve as an online platform where all the stakeholders of the Startup ecosystem can collaborate and synergize their efforts. Already, 10,000 users have registered. To register, click here.
A Panel of 423 facilitators for patent and design applications and 596 facilitators for Trademarks applications has been constituted for assistance in filing Intellectual Property (IP) applications and to fast track the process of patent filing and acquisition. DIPP bears the facilitation cost on behalf of Startups and also provides rebate in the statutory fee for filing application.
Under the scheme for Startups Intellectual Property Protection, Patent applicants have received the benefit of up to 80% rebate in patent fees and free legal assistance. Startups have also availed benefit of fees rebate in expedited examination filing fees (Form 18(A)). Trademark Rules, 2017 has been recently amended to provide 50% rebate in Trademarks filing fee to Startups. Overall, 826 Startup cases have been facilitated under the scheme.
Relaxed Norms Of Procurement
To create a conducive ecosystem for growth of Startups and provide an equal platform to Startups vis-à-vis the experienced entrepreneurs/companies in public procurement, relaxed norms of public procurement for micro and small enterprises have been provisioned in the Procurement Policy of Ministry of Micro, Small and Medium Enterprises (MSME). Department of Expenditure has also notified that all Central Ministries / Departments shall relax condition of prior experience and prior turnover in public procurement to all Startups (whether MSEs or otherwise) subject to meeting of quality and technical specifications. Department of Public Enterprises has expanded the relaxation to Central Public Sector Undertakings (CPSUs). GFR 2017 has incorporated rules which provide for relaxation of conditions of prior turnover, prior experience and exemption from submission of Earnest Money Deposit (EMD) for Startups.
- Tax Exemption
The Finance Act, 2016 had made provision for Startups to get income tax exemption for 3 years in a block of 5 years, if they are incorporated between 1st April 2016 and 31st March 2019. In the Union Budget 2017-18, the Government has increased this period of profit-linked deductions available to the eligible startups to 7 years. To avail these benefits one must get a Certificate of Eligibility from the Inter-Ministerial Board of DIPP.
- Tax Exemption on Capital Gains
Section 54 EE has been introduced under the Finance Act, 2016 which provides for exemption of capital gain up to INR 50 lakhs arising out of transfer of long term capital asset invested in a fund notified by Central Government.
Also, Section 54 GB of Income-Tax Act, 1961 has been amended to provide exemption from tax on capital gains arising out of sale of residential house or a residential plot of land if the amount of net consideration is invested in equity shares of eligible Startup for utilizing the same for purchase of specified asset.
- Removal of Angel Tax
Tax exemptions on investments above Fair Market Value have been introduced on 14 June 2016 for investments made in Startups.
LEARNING & DEVELOPMENT MODULE
Startup India has launched an interactive online learning and development module to educate Startups and aspiring entrepreneurs, through various stages of their entrepreneurial journey. Over more than 1,77,000 applicants have signed up for the course, out of which more than 6,900 applicants have completed 100% of the course successfully. The learning and development module is available through the Startup India portal.
FUND OF FUNDS FOR STARTUPS (FFS)
A 'fund of funds' of INR 10,000 crores to support innovation driven Startups has been established which is being managed by SIDBI. The corpus shall be released over two Finance Commission cycles, by 2025. FFS invests in SEBI registered Alternative Investment Funds (AIFs) which, in turn, will invest in Startups. INR 600 crore has been released to SIDBI. Total commitments stand at INR 605.7 crore to 17 AIFs. 75 Startups have received funding from various AIFs. For details, click here.
ATAL INNOVATION MISSION
The guidelines for harnessing private sector expertise to set up incubators, organizing annual grand challenge for innovative solutions to problems faced by industry and those posed by Ministries as well as establishment of tinkering labs have been formulated and published on NITI Aayog’s and Startup India’s website.
ESTABLISHMENT OF TINKERING LABS
As per the Startup India Action Plan, 500 Tinkering Labs are to be established. NITI Aayog has selected 941 schools for establishing Tinkering Labs. Of the 457 selected in FY2016- 17, 374 Tinkering Labs have received a Grant-in-Aid of INR 12 Lakh each.
New incubation centres will be established under Atal Innovation Mission across India through financial support. The incubators would provide necessary infrastructure and assistance to Startupsin their early stages of growth.
NITI Aayog has received applications for setting up Atal Incubation Centres (AICs) in public and private sector as well as scaling up of Established Incubation Centres (EICs). In respect to establishment of new incubators in institutions and as well as in the private sector, NITI Aayog has approved 10 institutes and other 3 institutes are at an advanced stage of approval to establish new incubators with a grant of INR 10 Crores each.
A grant-in-aid of INR 10 Crore would be provided to each Established Incubator Centre (EIC) for a maximum of 5 years to cover the capital and operational costs in running a centre. 6 established incubators have received the scale-up grant of INR 2.5 Crore as first instalment. The second round of screening and selection of Atal Incubation Centres (AICs) and Established Incubation Centres (EICs) was held on June 2, 2017. Applications for setting up AICs are invited till 31st August 2017.
The objective of setting up Research Parks is to propel successful innovation through incubation and joint Research and Development (R&D) efforts between academia and industry. 7 Research Parkswill be set up as perthe Startup India Action Plan. Research Park at IIT Kharagpur is under construction and INR 74.83 crore has been released. The Research Park at IIT Gandhinagar is being set up by DST which has sanctioned INR 90 crore and disbursed an initial instalment of INR 40 crore. The remaining 5 are being set up by Ministry of Human Resource Development (MHRD) and DST at IIT Guwahati, IIT Hyderabad, IIT Kanpur, IIT Delhi and IISC Bangalore. In addition, another Research Park at IIT Bombay is under construction and INR 34 crore Lakh has been released.
PROMOTING STARTUPS IN THE BIOTECHNOLOGY SECTOR
Under Biotech Equity fund, INR 1 crore each to be given to Bio-incubators. 3 Bio-incubators have been selected as recipients of the above mentioned Equity Fund. A total of 24 bio-incubators have been supported by DBT. 2 BIRAC Regional Centres have been operationalized in Hyderabad and Bengaluru. 3 (out of 5) bio clusters have received disbursement of INR 138 Cr by DBT. The impact has been multi-fold as a total of 290 Startups have received benefits (sanction amount of INR 185 Cr) from these bio-incubators under various programmes like Biotechnology Ignition Grant, IIPME (Industry Innovation Programme on Medical Electronics), Sparsh, Grand Challenges, BioNEST, etc. 4 entrepreneurs have joined and 1 is in the process of joining the Harvard University, USA under Bengaluru-Boston Biotech Gateway.
TECHNOLOGY BUSINESS INCUBATORS (TBIs) AND STARTUP CENTRES
The objective is to propel successful innovation through augmentation of incubation and R&D efforts. 15 TBIs and 15 Startup centres are being set up. 11 TBIs have been approved and other 4 are in advanced stages.
Funding amount of INR 3.75 lakh for each of the 10 Startup Centres has been released by MHRD as 1st instalment of the grant. Funds for the other 5 Startup Centres is at various stages of approval. INR 42 crore has been sanctioned and INR 17 crore has been disbursed already to 11 TBIs.
UCCHATAR AAVISHKAR YOJANA (UAY)
The objective of UAY is to promote industry and outcome-oriented research projects by students. INR 475 crore for 2016-18 has been earmarked under UAY and 92 research proposals from IITs have been approved. Under this scheme, INR 75 crore has been disbursed for research proposals from IITs under 6 domains.
MILLION MINDS AUGMENTING NATIONAL ASPIRATIONS AND KNOWLEDGE (MANAK) SCHEME
INSPIRE Awards scheme has been rechristened as INSPIRE Awards-MANAK. 10 lakh ideas will be targeted from 5 lakh schools of all boards across the country in a Financial Year. Over 1 lakh INSPIRE Awardees competed at District & State Level out of which 588 were selected to participate in the 6th National Level Exhibition and Project Competition, Delhi. Top 60 projects were showcased at the Annual Festival of Innovations in Rashtrapati Bhavan from 4th -10th March 2017.
SMART INDIA HACKATHON 2017
Smart India Hackathon, under MHRD was conducted on 1st April 2017. About 7500 teams from tier 2-3 cities including 40,000+ students, 29 Government Departments participated in the 36 hour non-stop digital programming event.
FASTER EXIT FOR STARTUPS
The Insolvency and Bankruptcy Board of India has been constituted and the provisions regarding corporate insolvency resolution have been implemented on 1st December, 2016. The provisions related to liquidation have been notified on 9th December, 2016. On 16th June 2017, Ministry of Corporate Affairs (MCA) notified the relevant sections 55 to 58 of Insolvency and Bankruptcy Code, 2016 pertaining to the Fast Track process and also notified that the process shall apply to Startup (other than the partnership firm) as defined by DIPP. With this notification, Startups shall now be able to wind up their business within a period of 90 days from making an application for the same as compared to the 180 day period for other firms.
NIDHI (NATIONAL INITIATIVE FOR DEVELOPMENT AND HARNESSING INNOVATIONS)
The 8 components under NIDHI would provide a range of funding support to Startups from idea to market. Ignition grant/award of INR 10 lakh to be given. Guidelines and pro-forma for submission of proposals have been published on the website. 19 new TBIs have been established and 9 TBIs supported for Seed Support System (SSS). 10 NIDHI-PRAYAS and 10 NIDHI-EIR have been sanctioned. Also, Grand challenge was conducted to promote entrepreneurship amongst student community. 224 applications were received and out of 30 finalists selected, 12 student run teams were awarded ₹ 10 Lakh each.
STATES WITH STARTUP POLICIES
15 States viz. Gujarat, Madhya Pradesh, Karnataka, Telengana, Jharkhand, Uttar Pradesh, Odisha, Chhattisgarh, Bihar, West Bengal, Uttarakhand, Andhra Pradesh, Rajasthan, Kerala, Goa have formulated Startup Policies since October 2014.
UNION BUDGET 2017
The incentives affecting Startupsin the Union Budget 2017 include:
Proposal to reduce the Income Tax rate for companies with an annual turnover of upto INR 50 crore to 25%. This would provide MSMEs a reduction of 5% from the current applicable rate of 30%.
The Government has announced that a Startup would be able to avail income tax exemption for 3 consecutive assessment years out of a block of 7 years.