Startup India is a flagship scheme of Government of India instituted for the sole purpose of promoting the start-up culture and to build a strong ecosystem for innovation and entrepreneurship in India.
Through this initiative, the Government plans to empower Startup ventures to boost entrepreneurship, economic growth and employment across India, with its main objective to transform India into a country of job creators instead of job seekers.
Since the launch of this initiative on 16th January 2016, Startup India has turned out to be an effective scheme by rolling out several programs with the objective of supporting entrepreneurs in India. These programs are managed by a dedicated Startup India team, which reports to the Department for Industrial Policy and Promotion (DPIIT).
To ease the process for recognition as a startup under the Startup India action plan, the Government acting as a facilitator has provided a platform through its website startupindia.gov.in, wherein Startup India hub online portal has been created for startups and entrepreneurs to allow them to network, access free tools and participate in programs and challenges.
Adhering to the latest amendments and notifications issued by the Ministry of Commerce and Industry, DPIIT on 19th February 2019 in supersession to the earlier notification amended the startup policy (“Notification”), stating that an entity shall be considered as a Startup if it is incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India, up to a period of 10 years from the date of incorporation/ registration, with its turnover not exceeding INR 100 (Indian Rupees One Hundred) crores in any of the financial years since its incorporation/registration.
In addition to the afforested, the entity should be working towards innovation, development, or improvement of products or processes or services or if it is a scalable business model with a high potential of employment generation or wealth creation.
The Notification further provides that an entity which is formed by splitting up or reconstruction of an existing business entity shall not be considered as a Startup. Moreover stating that an entity shall cease to be a Startup in the event where the turnover for any of its previous financial year exceeds INR 100 (Indian Rupees One Hundred) crores or the entity has completed 10 (ten) years from the date of its incorporation/registration.
Some of the salient benefits extended to the entities which are recognized as startups by the DPIIT are enlisted below:
Under the Startup India scheme, the startup entities shall be allowed to self-certify their compliances under few labour and environment laws as notified by the government. Such benefits are given to the startups in order to ensure their business efficiency, effectiveness and to keep their focus on the core business with relatively low cost on compliances.
In addition to the above, the startups are exempted from an inspection conducted pertaining to the labour laws for a period of 3 (three) years, hence no inspection shall be conducted for startups for the said period.
In order to promote startups and recognize their business models, Startup India provides new startups with a few intellectual property rights benefits which are stated as follows:
The startups which are recognized by the DPIIT are entitled to apply for an exemption of 100% income tax under Section 80-IAC (Deduction in respect of specified Business) of the Income Tax Act, 1961 for a period of 3 (three) years out of 10 (ten) years since the entity’s incorporation/registration, subject to certain conditions as notified by the Government from time to time.
The startups are also eligible to claim an exemption under the Section 56 (2) (viib) (Income From Other Sources) of the Income Tax Act, 1961, where a startup receives any consideration for issue of shares which exceeds the fair market value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall not be taxable by filing a simple declaration in Form-2 and adhering to the conditions mentioned hereinbelow:
It is to be noted that ordinarily whenever a tender is floated by a Government entity or Public Sector Undertaking, the eligibility criteria only calls for entities who have prior experience or prior turnover in lieu of such work. This practice prohibits or restricts Startups from even participating in the bidding of such tenders.
Startups have been provided with an opportunity to list their products or services on Government e-Marketplace portal, wherein the portal furnishes the said exemption from “prior experience” along with submission of Earnest Money Deposit (EMD) in order to promote new entrepreneurs and provide them with equal opportunity.
The Startups are also known as “fast track firms” as notified by Ministry of Corporate Affairs are granted permission which enables the Startups to wind up their operations within a period of 90 (ninety) days.
An insolvency professional shall be appointed for the Startup, who shall be in charge of the company for liquidating its assets and paying its creditors after filing the application pertaining to the same.
The Startup India Regime will be beneficial to the legal fraternity as any startups will seek the assistance of a lawyer or a law firm to aid and guide them through each and every phase of their growth process, including but not limited to the process of incorporation, structuring, adhering to the appropriate compliances according to the relevant laws, exploring all the investment/funding options, making applications for intellectual property rights, assisting the startups in employment and labour related matters and thereby support the startups with such related problems and hurdles.
Thus, in the words of the Prime Minister of India “Startup India is a revolutionary scheme that has been started to help the people who wish to start their own business. These people have ideas and capability, so the government will give them support to make sure they can implement their ideas and grow. Success of this scheme will eventually make India, a better economy and a strong nation.”
Comprehensive Guide to Share Transfer Provisions under the Companies Act, 2013 and FEMA, 1999
View MoreExplore the comprehensive legal framework governing e-signatures and e-contracts in India. Gain insights into the regulations and implications for electronic transactions.
View MoreThe Securities and Exchange Board of India (“SEBI”) in an announcement in December 2022
View More
Comments
Post A Comment
Your email address will not be published *