StartUp India Action Plan 2016
On the last Independence Day, Prime Minister Narendra Modi had introduced the Start-up India, Stand Up India’ initiative.The Government of India had launched the “Start-up India,” movement on January 16th, 2016 in New Delhi. The event aimed at celebrating the entrepreneurship spirit of country’s youth and attended by CEOs and founders of top Start-ups (over 1500) from across the country.
Here are the highlights of the action plan relased by the Prime Minister in Delhi today:
1. Compliance based on Self-Certification
Businesses operating in India have to comply with various Central and State regulations ranging from labour to environment laws. These regulations are very cumbersome and non-compliance could lead to stringent penalties and fines. Hence, compliance with many of the laws require significant effort in terms of time, money and effort on the part of the business.
The Startup India Action Plan 2016 proposes to remove these complexities and usher in an era of self-certification wherein compliance is easy and friendly. Accordingly, startups can now self-certify (self declare they are compliant from time to time) with 9 labour and environment laws. Based on the self-certification, no inspection will be conducted by departments like ESI or PF at business places of startups for a period of three years. Inspection can be conducted by the ESI or PF department only on receipt of a credible and verifable complaint of violation, filed in writing and approved by atleast one level senior to the inspecting officer. In case of environment laws, startups under the “white category” can self-certify and will be subject to random checks only.
2. Tax Exemption to Startup for 3 Years
In a view to promote Startups and provide them with better chances of succeeding, Startup India Action Plan has announced a three year income tax exemption for Startups, provided the dividends of the Starts are not distributed.
3. StartUp India hub
An all-India hub will be created as a single contact point for start-up foundations in India, which will help the entrepreneurs to exchange knowledge and access financial aid.
4. Patent protection
The Startup India Action Plan proposes fast tracking of Patent Applications and empanelment of facilitators to assist in filing of IP applications with the Government bearing facilitation cost for any number of patents, trademarks or designs that a Startup may file. Under this scheme, Startups would bear the cost of only the statutory fees payable. The Government would bear facilitation cost.
5. Register through Mobile app
The Startup India Action Plan 2016 proposes to create a mobile app and portal which would have seamless integration with the Ministry of Corporate Affairs. The app would allow users to track the status or registration applications, applying for various schemes under Startup India 2016 and collaborating with startup ecosystem partners.
6. Rs 10,000 crore fund
To provide funding support for development and growth of innovation driven enterprises, Government will set up a fund with an initial corpus of Rs 2,500 crore and a total corpus of Rs 10,000 crore over a period of 4 years.
7. No Capital Gains Tax
Exemptions shall be given in case capital gains are invested in the fund of funds recognised by the government. In addition, existing capital gain tax exemption for investment in newly formed MSMEs by individuals shall be extended to all startups.
8. Atal Innovation Mission (AIM)
To serve as a Platform for promotion of world-class innovation hubs, grand challenges, startup businesses and other self-employment activities, the Startup India Action Plan has announced the launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) program. The Atal Innovation Mission shall have functions of:
- Entrepreneurship promotion through self-employment and talent utlization, wherein innovators would be supported and mentored to become successful entrepreneurs.
- Innovation promotion: to provide a platform where innovative ideas are generated.
9. Promote entrepreneurship in biotechnology
Five new bio clusters, 50 new bio incubators, 150 technology transfer offices and 20 bio connect offices will be established.
10. Tax Exemption for Investments above Fair Market Value
Under the Income Tax Act, if a Startup (Company) receives any consideration for issue of shares which exceed the fair market value of such shares, then excess consideration is taxable in the hands of the recipient as Income from Other Sources. In the context of Startups, it is very difficult to determine the FMV of such shares and sometimes lead to heavy taxes being levied. Hence, to promote investment by VC funds and incubators, startups will be exempted from this provisions.
11. Credit Guarantee for Startups
To catalyse entrepreneurship through credit to innovators across all sections of society, credit guarantee mechanism through National Credit Guarantee Trust Company/SIDBI shall be rolled out with a budgetary corpus of Rs 500 cr per year for the next four years.
12. Research parks
The government plans to set up seven new research parks, including six in the Indian Institute of Technology campuses and one in the Indian Institute of Science campus, with an investment of Rs 100 crore each.
13. 80% rebate on filing patent applications by startups
To enable startups to reduce costs in their crucial formative years, startups shall be provided an 80% rebate in filing patents vis-a-vis other companies.
14. Relaxed norms of public procurement for startups
To provide an equal platform to startups vis-a-vis the experienced startups/companies in public procurement,startups (in the manufacturing sector) shall be exempted from the criteria of prior ‘experience/turnover’ without any relaxation in quality standards or technical parameters.
15. Startup Fest for Showcasing Innovation
To create an effective startup ecosystem, active participation from academia, investors, industry and other stakeholders is required. To bolster such a ecosystem, the Government is proposing to introduce Startup Fests at National and International stages. As per the Startup India Action Plan, the Government proposes to conduct one fest at the national level and one event at the international level. The fests will have activities to connect with investors, mentors, incubators and Startups.
16. Panel of facilitators to provide legal support and assist in filing of patent application
Facilitators shall provide assistance for startups in filing and disposal of patent applications related to patents, trademarks and design under relevant Acts. Government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a startup may file.
17. Innovation Centres at National Institutes
The Startup India Action Plan has announced the setting up or scaling up of 31 centres of innovation and entrepreneurship at National institutes, 13 Startup centres and 18 Technology Business Incubators to propel successful innovation through augmentation of incubation and R&D efforts.
18. Dedicated programmes in schools
The government will introduce innovation-related programems for students in over 5 lakh schools.
19. Faster Exit for Startups
If a start-up fails, the government will also assist the entrepreneurs to find suitable solutions for their problems. In the event of business failure, Startups must be quickly able to reallocate capital and resources to more productive areas. This will help more Entrepreneurs take up business without the fear of failure.