3/12/2016

StartupIndiaScheme

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Start-up India Scheme

Start-up India is a agship initiative of the Government of India, intended to build a strong ecosystem for nurturing innovation and Start-ups in the country that will drive sustainable economic
growth and generate large scale employment opportunities. The Government through this initiative
aims to empower Start-ups to grow through innovation and design.
In order to meet the objectives of the initiative, Government of India is announcing this Action Plan
that addresses all aspects of the Start-up ecosystem. With this Action Plan the Government hopes to
accelerate spreading of the Start-up movement
From digital/ technology sector to a wide array of sectors including agriculture, manufacturing,
social sector, healthcare, education, etc.; and
From existing tier1 cities to tier 2 and tier 3 cities including semi-urban and rural areas.

Key Features:
1.Denition:
Start-up hasbeen dened to mean an entityincorporated or registered inIndia, with an annual
turnovernot exceeding Rs.25 Cr in anypreceding nancial year, andworking towards
innovation,development of new products,or services driven by technologyor intellectual property.
2.Self Certication:
Start-ups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour
and environment laws such as employees state insurance act (1948) or Water (Prevention & Control
of Pollution) Act, 1974 etc.
3.Single Window Platform:
In order to commence operations, Start-ups require registration with relevant regulatory authorities.
Delays or lack of clarity in registration process may lead to delays in establishment and operations of
Start-ups, thereby reducing the ability of the business to get bank loans, employ workers and
generate incomes.
Government has decided to set up a mobile app and web portal for the purpose of easy registration
of company and ling for compliances/obtaining information on various clearances/ approvals/
registration.
4.Fast Track Patent Approval at Lower Costs:
Intellectual Property Rights (IPR) are emerging as a strategic business tool for any business
organization to enhance industrial competitiveness. Startups 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 IPRs.
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Government to bear facilitation cost: Under this scheme, the Central Government shall bear the
entire fees of the facilitators for any number of patents, trademarks or designs that a Start-up may
le, and the Start-ups shall bear the cost of only the statutory fees payable.
Rebate on ling of application: Start-ups shall be provided an 80% rebate in ling of patents vis-a-vis
other companies. This will help them pare costs in the crucial formative years.
The patent application of Startups shall be fast-tracked for examination and disposal, so that they
can realize the value of their IPRs at the earliest possible.
5.Fund ofFunds:
One of key challenges faced by Start-ups in India has been access to nance. Often Start-ups, due to
lack of collaterals or existing cash ows, fail to justify the loans.
In order to provide funding support to Start-ups, Government will set up 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 be in the nature of Fund of Funds, which means that it will not invest directly into
Start-ups, but shall participate in the capital of SEBI registered Venture Funds.
The Fund of Funds shall be managed by a Board with private professionals drawn from industry
bodies, academia, and successful Start-ups. It is important that this corpus is not managed by
Politicians or bureaucrats, but smart, savvy fund managers who have a track record on investing.
The Fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health,
education, etc.
6.Credit Guarantee Fund for Start-ups:
Credit Guarantee Fund aims to catalyse entrepreneurship through credit to innovators across all
sections of society and will be rolled out through SIDBI.
7.Tax Exemptions:
Due to their high risk nature, Start-ups are not able to attract investment in their initial stage. It is
therefore important to provide suitable incentives to investors for investing in the Start-up
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.
With a view to stimulate the development of Start-ups in India and provide them a competitive
platform, it is imperative that the prots of Start-up initiatives are exempted from income-tax for a
period of 3 years.
8.Start-up India hub:
In todays environment we have more Start-ups and entrepreneurs than ever before and the
movement is at the cusp of a revolution. However, many Start-ups do not reach their full potential
due to limited guidance and access
Start-up India Hub will act as a single-point of entire Start-up ecosystem and enable knowledge
exchange for start-ups such as collaborate with Government, angel investors, incubators, banks, legal
consultants etc.
9.Start-up Fest:
As part of Make in India initiative,
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Government proposes to:

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As part of Make in India initiative, Government proposes to:

Hold one fest at the national level annually to enable all the stakeholders of Start-up ecosystem to
come together on one platform.
Hold one fest at the international level annually in an international city known for its Start-up
ecosystem.
10. Incubator set up by PPP:
To ensure professional 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. The incubator shall be managed and operated by the private sector.
35 new incubators in existing institutions. Funding support of 40% shall be provided by Central
Government, 40% funding by the respective State Government and 20% funding by the private
sectorfor establishment of new incubators.
35 new private sector incubators. A grant of 50% (subject to a maximum of INR 10 crore) shall be
provided by Central Government for incubators established by private sector in existing institutions.
11. Launch of AtalInnovationMission (AIM)
The Atal Innovation Mission (AIM) shall have two core functions:
Entrepreneurship promotion through Self-Employment and Talent Utilization (SETU), wherein
innovators would be supported and mentored to become successful entrepreneurs.
Innovation promotion: to provide a platform where innovative ideas are generated.

Critical Analysis
The scheme is criticized by professionals because of denition of Start-up provided in the scheme.
The denition states that mere act of developing products or services that do not have potential for
commercialisation or have no or limited incremental value for customers would not be a start-up.
Most of Start-ups would lie outside purview of this denition.
Further eligibility of start-up,lies under denition or not, shall be approved or certied by an interministerial board which is a retrograde step and against government policy of Min Government Max
Governance.
After getting approval from inter-ministerial board, Start-up might not get benet of 100% deduction
from income tax for 3 out of rst ve years as government has made them liable for Minimum
Alternate Tax (MAT) for initial years. MAT is currently charged at 18.5%on book prot.
Also the capital gains exemption benets provided to investors are subject to various regulations like
approval or shall be invested those capital gains only in Fund of Funds etc. These conditions might
dilute the objective of start-up India scheme and scheme may remain as another good scheme on
paper but not on ground level.
But apart from all these concerns Start-up India has potential tosolve India's problems and create
jobs. Start-up India scheme is a st of its kind initiative by government andhas potential to create an
environment of starting your own business in India but not only depending on jobs provided by
industry. Start-up India Action plan is a good start to this but will need continued support and
evolution to make this a true, deep revolution for the youth of India.

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