19 Reasons for Startups to Cheer!

Ever tried your hands at starting an online business? Have ideas but feel faint at heart to pursue it due to the various policy and paperwork hurdles? Sounds like your story? Still thinking how to work around to make your start-up dreams a reality?

Cheer up, for this year the government has come up with many policy and regulation changes to help foster growth of startup up environment in India. The Startup India action plan is the government’s gift for enthusiastic Indians who wish to use innovative ideas and technology to become entrepreneurs.

India is a hub of as many as 4200 startups and the government of India has set the wheels of growth rolling for them. PM Modi had coined the slogan “Startup India, Standup India” from the ramparts of the Red Fort during his Independence Day speech in August 2015. This was followed by the government’s action plan for all the stakeholders - venture capitalists, angel investors, incubators and startups.

The Changes and how will they help the Indian Start-Up Ecosystem

If you are launching your webstore this year, you can use the following announcements to your advantage. The Indian Government is playing the role of the enabler for start-ups and this can mean a much smoother launch of your online business. Have a look what’s in store for you and your business:

1. Compliance regime based on self certification

Startups shall be allowed to self-certify compliance with labour and environment laws. The objective is to reduce the regulatory burden on startups. This self-certification will apply to laws like payment of gratuity, contract labour, employees’ provident fund, water and air pollution acts.

2. Startup India hub

It will be single-point of contact and hand-holding for startups to enable knowledge exchange and access to funding.

3. Simplifying the startup process

A startup can easily set up by just filling up a short form through a mobile app and online portal.  A mobile app will be launched on April 1, 2016 through which startups can be registered in a day.

4. Patent protection

The government will work to fast-track patent examination at lower costs. It will promote awareness and adoption of Intellectual Property Rights (IPRs) by startups and help them protect and commercialize IPRs.

5. A corpus of Rs 10,000 crore

In order to provide funding support to startups, the 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 four years.

6. Credit Guarantee Fund

To promote entrepreneurship through credit to innovators, a National Credit Guarantee Trust Company is being envisaged with a budgetary allocation of Rs 500 crore per year for the next four years.

7. Exemption from Capital Gains Tax

Exemptions shall be given in case capital gains are invested in the fund of funds recognized 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. Tax exemption for startups

To spur the growth of startups, profit of startups which are set up after April 1,2016 shall be exempted from income-tax for a period of three years.

9. Legal support and assistance in filing of patent application by facilitators

Facilitators shall provide assistance for startups in filing and disposal of patent applications related to patents, trademarks and design under relevant acts.

10. 80% rebate on filing patent applications

To enable startups to reduce costs startups shall be provided an 80% rebate in filing patents.

11.  Relaxed norms of 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.

12.  Faster exits for startups

A 90-day window period has been provided to make it easier for startups to exit.

13. Tax exemption on investments above Fair Market Value

In line with the exemption available to venture capital funds to invest in startups above fair market value (FMV), investments made by incubators above FMV shall also be exempted.

14. Startup fests

For showcasing innovation and providing a collaboration platform

15. Launch of Atal Innovation Mission

To give an impetus to innovation and encourage the talent among the people. It will grant seed funds and help strengthen existing incubation facilities. It will also offer pre-incubation training to entrepreneurs, among other things.

16. Setting up of 35 new incubators in institutions

PPP model being considered for 35 new incubators, 31 innovation centres at national institutes.

17.  Setting up of 7 new research parks

Government shall set up seven new research parks – six in IITs, one in IISc with an initial investment of Rs 100 crore each.

18. Promote entrepreneurship in biotechnology

Five new bio clusters, 50 new bio incubators, 150 technology transfer offices and 20 bio connect offices will be established.

19. Innovation focused programmes for students

Innovation core program shall be initiated to target school kids with an outreach to 10 lakh innovations from five lakh schools.

Also read: Startup India Stand Up India: How will it change the face of Indian e-commerce Ecosystem?

A good start but more needs to be done

The startup plan will attract both Indian and overseas investors and create a climate of change for Indian entrepreneurs. While all the steps are a welcome move, but it remains to be seen how these policies actually take shape. Apart from the measures announced by the government, startups will need a sound infrastructure like roads and electricity, better internet/broadband capabilities, clean environment, minimal interaction with bureaucracy and curbs on corruption. Until now, startups have faced issues like red tape, poor infrastructure, corruption and requirement of too many clearances. It remains to be seen whether the government sets up a team to ensure flawless execution of all the policies and enable transparency. 

Rajiv Kumar, CEO, Hippo Innovations points out, “The startup India action plan is a welcome move but more than exemption on Income tax; the statutory and regulatory compliance related to various filings like Service Tax returns, MCA filings, TDS returns and various state specific compliances are the ones which consume a lot of time and bogs down a startup. Most of the startups do not start making profits for initial few years, so income tax exemption might not help them as much as would be exemption or deferred timeline for various compliances. Govt. also needs to be careful about the misuse of the exemption as it might also act as another channel for tax savings.”

Also read: 'Create a million entrepreneurs rather than a million jobs’

Rajiv further adds, “Dedicated Corpus of Funds will greatly help entrepreneurs and startups as a lot of them struggle with funds in the initial stages. However, Govt. must make sure that the funds are judiciously allocated so that a) there is uniform distribution across different industry sectors b) there is limit on funds allocated to one startup. The goal should be to give million entrepreneurs a chance rather than creating only a handful of entrepreneurs.”

Startup India marks the beginning of a new, young and dynamic India. It has opened the doors for more people to join the entrepreneurial brigade, which will eventually lead to opening up of new businesses, creation of jobs, wealth generation and a better economy but it will need in-depth analysis and continued support to shape up the ‘Startup India’ dream!