Startup India

In this article, Leepakshi Rajpal discusses eight conditions for eligibility and eleven benefits of Startup India Scheme.

Introduction

Ever since the announcement of the startup India plan or programme launched by the Prime Minister, all the youth is going haywire for creating a startup and getting it funded by the government. The colleges are encouraging the students to build their own startups and forming cells within the college for the creation of new and fresh ideas that help transform the latest industry. The initial steps of this plan must be known before applying for the funding and the benefits of it too. Therefore, this blog tells you about the eleven benefits that the startup India plan offers and the eligibility criterion for availing those benefits.

How to Register for the Startup India Scheme

Incorporate your business

Incorporation of the business means that the business must be in existence in the very first place and only when you bring your business into existence, you can register your business then. The problem is that for Incorporation of the company you have to follow all the procedures of establishment, such as fill the forms INC-1 and others based on the type of company you want to incorporate. This step is an important step in the registration of the business under the Startup India Scheme.

Register With Startup India Scheme

When you begin something new, it is labelled as a startup for the first seven years after the incorporation, therefore to register the process is really simple and sober. You just have to go online to this link https://startupindia.gov.in/registration.php, and fill in all the required details so as to register your business or entity for the Startup India Scheme.

Documents to Be Uploaded

Once you are registering under the Startup India Scheme, you have to be very careful regarding the documents you upload. All the documents must be uploaded in the PDF format only and not in any other format including .doc and .docx. Therefore, be careful that any document you upload is in the PDF format only.

What all to be Included in Documents

There are certain necessary requirements of the Startup India Programme, that you need to anyhow upload, and again specifying that should be in the PDF format only.

  • A Letter of Recommendation is required  

A Letter of recommendation is a must while registering yourself and the reason is that someone qualified must recommend you, so that you are amongst the top few who can really do the work and whom the government should actually give the funding. Check whether you have a recommendation from the required people mentioned in the link given https://startupindia.gov.in/registration.php and then If it is there, go ahead and register yourself and If not, do get a recommendation letter from the required person.

  • Incorporation or Registration Certificate

Incorporation or Registration Certificate means that the certificate which identifies your entity’s existence. When you incorporate your entity, the certificate which you get for your incorporation is the one which registrar will give on the successful incorporation of your entity.

  • Description of your business in Brief

When you describe the business while registering for the Startup India Scheme you need to keep in mind that the government wants to know what your business is, so as to provide a funding under the scheme. So, once you provide a brief of what your business is while registering for the same, you provide details regarding the establishment of the business and the innovation of the business that you are carrying on and based on that the government will decide whether it will provide benefits under the Scheme or not.

Mention in the Registration form whether you want to avail tax benefits or not

While you register the details of the incorporation and the other details, also mention side by side that you want to avail tax benefits while registering for the Startup India Programme. therefore if you do not mention that specifically, then you may not be entitled to the benefit of the Startup India Scheme.

You must Self Attest your documents

The documents which are mentioned in the link given above should be self attested and make sure that they are not misrepresenting, cheating or committing a fraud because you can be held criminally liable then.

Get your Recognition Number

Once you register yourself successfully, then you will immediately get the recognition number for your startup or business entity. Which means that once the Recognition number is set then the certificate will be given, only after your documents have been carefully examined.

Eight Eligibility Conditions

So, this field has been inserted in the blog to make sure that you qualify for the benefits that this startup India plan offers. There are majorly 8 fields of eligibility that one must qualify for availing the benefits of this programme.

It must be an entity

  • Which is incorporated as a Private Limited company under the Companies Act, 2013 or
  • Be a registered partnership firm under the Indian Partnership Act, 1932 or
  • A Limited Liability Partnership under the Limited Liability Partnership Act, 2008.

Which means that it should be incorporated and should be in existence in accordance with either the Companies Act, 2013, or Indian Partnership Act or the Limited Liability Partnership Act, 2008.

Startup for a Period Of almost 7 Years or less

After the incorporation, a startup can be called a startup for a period of about 7 years and not more than that, therefore, any entity which is more than 7 years is the one which does not qualify as a startup.

Annual turnover Less than Rs. 25 crores

The annual turnover of the startup as defined and explained by the Companies Act, 2013 in any preceding financial year must not exceed Rs.25 crores.

Innovation and Development

The startup should not be any random startup but the one which is working towards innovation, development, deployment or commercialisation of the new products, processes or services driven by technology or intellectual property. Which means that the startup would not be a startup qualifying for the benefits of the startup India programme if its object mentioned in the MOA and the AOA does not focus on the innovation or on the development of the service that it is providing.

Aim of Commercialisation

The startup must also aim to commercialise-

  • A new product or service or process,
  • A significantly improved existing product or service or process that will create or add value for customers or workflow.

Which means that the startup should either bring up something new in the market or create a new version of something old, which will ultimately amount to some innovation.

It should not be engaged in illegal or unrequired practices

The startup must not be engaged in:-

  • Developing products or services or processes which do not have potential for commercialisation.
  • Undifferentiated products, services or processes.
  • Products or services or processes with no or limited incremental value for customers or workflow.
Must not be formed by splitting up

The startup must not be formed by splitting up, or reconstruction, of a business already in existence.

Should have proper certification

The startup has obtained certification from the Inter-Ministerial Board, setup by DIPPto validate the innovative nature of the business and following should be followed :-

  • It should be supported by a recommendation letter with regard to the innovation in the business, in a format specified by the DIPP, from an incubator established in post graduate college in India or
  • It should be supported by an incubator which is funded in the relation to the project from Government of India as part of any specified scheme to promote the innovation; or
  • It should be supported by the recommendation with regard to the innovation in the business in a format specified by the DIPP, and from an incubator recognised by the government of India, or
  • It should be funded by an incubation Fund/Angel Fund/Private Equity Fund/Accelerator/ Angel Network duly registered with SEBI that endorses innovative nature of the business; or
  • Be funded by the government of India as a part of any specified scheme to promote innovation, or
  • It should have a patent granted by the Indian Patent Trademark office in areas affiliated with the nature of business being promoted.

NOTE:- DIPP may publish a negative list of funds which are not eligible for the initiative of the startup India Programme.

Eleven Benefits Arising Out of the Startup India Programme

Once, you enrol yourself in this programme, you would definitely be wanting some benefits to derive out of it or the benefits may be the reason for you enrolling in the startup India programme which serves as the consideration to the ones enrolling.

Therefore some of the benefits that arise out of this plan are appended below:-

Simple Process

So, who amongst us does not want a simple life and simpler ways of life? Every one of us right? So, One of the major benefits for enrolling in this programme is the simple process of registration, therefore the startups would not face a problem as to the registration process is concerned because Government of India has formed a website as well as an app which can directly register the startup for this programme. Also any entity which is eligible to be called as a startup can be formed into a start up by filling a simple form, therefore it makes life easy.

Reduction in Cost

While we go from here to there doing a lot of expenses for setting up a startup, this feature of the startup India plan helps us to do the budget. The Government of India also provides for the list of patent and trademark registrars therefore, provides high quality intellectual property rights services. Also, while registering the innovation in your company, it provides 80% reduction in the total cost of registration of Intellectual Property i.e. in the filing of the patents. Therefore, it is a saving option available to the startups.

Easy Access to Funds

Most of us are generally confused in the beginning, as to how far the startup will go and where will it end up, therefore this benefit arising from this programme enables to get hands on access to funds. The Government of India has set up the policy of giving a Rs.10,000 Crore fund as venture capital to the startups. The government is also giving guarantee to the lenders to encourage banks and other financial institutions for providing venture capital.

Tax Holiday for 3 years

So, every one of us want to evade taxes because who wants a penalty on the earnings, right? There are people who illegally evade taxes and therefore, end up paying more than they ever save. Therefore, the government of India provides this exemption to the startups to evade the income tax for a period of three years from its incorporation and they also get the certification from the Inter ministerial Board, which certifies that they are exempted from giving income tax for a period of three years.

Apply for Tenders

It is usually a myth that tenders can be accessible to those who are more prominent in the market and can bid more, but this benefit arising out of the startup India plan can be a boost for the startups.This feature makes it possible for the startups to apply for the government tenders. They are exempted from the “prior experience/turnover” criterion applicable for normal companies answering to government tenders which means that now with this plan, startups can be a participant in the government tenders and are waived off with the previous requirement of the turnover or the experience.

R&D facilities

We all know how important a research and development cell is and especially in a startup where the innovation is on the peak and the idea is to bring something new in the market or create something new out of the old, the government of India, under this scheme of the startup India, decides to benefit the baby players in the market.It has decided to launch seven new research parks to provide facilities of research and development within the startups and help them grow connections and business overtime being a part of this programme.

No time consuming compliances

There are various compliances which have been simplified for the startups to save time and money.startups shall be allowed to self-certify compliance through the app which the government of India has launched this programme, with nine labour laws and three environmental laws in its list.

Tax Saving for Investors

As an investor, I would always want to save my tax. Generally, it is a myth that the people do not invest in the startups because they are sceptical about their performance in the market but through this programme of the startup India, people investing their funds or the capital gains in the venture funds set up by the government of India will get exemption from capital gains.

This will help startups to attract more investors. Therefore, even the People investing their capital gains in the venture funds setup by government will get exemption from capital gains. This way the startups will be able to gain reputation in the market as well as build trust amongst the investors.

Choose your Investor

Generally, there is no choice of choosing investors, therefore when this plan is introduced the startups now have an option to choose between the VC’s, giving them the liberty to choose their investors.

Easy Exit

A startup is always at a risk in the market and therefore it is always doubtful as to its existence in the market, keeping into consideration the competition another major companies in that sector itself. So, after this programme, in case the startup wants to exit, it can close its business within ninety days from the date of application of winding up.

Meet other entrepreneurs

When you are a startup, you always need to build on contacts and communications, therefore in order to build contacts in the market, government of India, has launched two startup fests annually both nationally as well as internationally, to enable various stakeholders of a startup to meet. This fest will provide huge networking opportunities to the startups and give them an opportunity to grow and rise in their own respective fields.

What Practical Problems Do startups Face?

There are certain problems that startups face while registering under the Startup India Programme.

What this means is that the startups that register themselves under the Startup India Scheme, are the ones that do not have completely new innovation or are not even new version of something old. So, the very purpose of Startup India Programme which was to ensure the new in being, was hit hard and therefore not much technological advancement was found in the Startups.

Corruption Involved due to the Human Intervention

Since, there is a lot of human intervention in the process of funding and that the funding procedure is not online, as a part of inherent feature, Corruption has still shown that it is very rampant in the Indian Society no matter how hard it tries to bring something new and innovative, corruption will destroy the purpose.

Market Problems

There are instances when the government through its intervention is trying to bring in the new startups into being, but the market already in existence is not yet ready for it. Therefore, a lot of problems are created in the market when suddenly so many startups arise.

The government said that the New VC’s could only fund the Startups

The government funded the VC’s on a condition that they would fund the new startups, however the VC’s are not ensuring so and because of which a lot of confusion and chaos has taken place in the process of funding.

Getting tax benefits under the scheme is not as easy as it sounds

The startup India Scheme offered the benefit of the tax exemption to a limit to all the startups under the scheme but what is happening is they are again classifying among the startups and not many startups have been able to successfully classify themselves under the heading of the tax exemption category, therefore one of the major reasons of they registering under the scheme is defeated, which does not encourage more startups to join the scheme.

Excessively High Valuation and Irrational Funding

This means that when the government comes up with something like this, it is able to do nothing but the valuation in the market becomes very high and the funding becomes irrational. Therefore, the funding which is nothing but the taxes paid by the citizen of the country goes into the bin.

Conclusion

So, now that you know the benefits and the eligibility criteria of the startup programme, I am sure you would love to be a part of it. So, what are you waiting for, get started with a startup and turn your future round the table. These benefits will give a huge rise not only to these startups but to the whole of economy and this step will take India to a greater rank of doing businesses in the world.

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