As India celebrates its first ever ‘National Startup Day’ on January 16, 2022, here are 20 things you should know about the government’s key initiatives around Startup India.
Startup India
Startup India is Government of India’s flagship initiative aimed at catalysing the startup culture, and building a strong and inclusive ecosystem for innovation and entrepreneurship in India.
National Startup Day
While National Startup Day will be celebrated on January 16, 2022, it was on the same date six years ago in 2016 that the Startup India Action Plan was launched with the objective of supporting entrepreneurs, building up a robust startup ecosystem and transforming India into a country of job creators instead of job seekers.
Department for Promotion of Industry and Internal Trade (DPIIT)
The Department for Promotion of Industry and Internal Trade (DPIIT), under the aegis of the Ministry of Commerce and Industry, Government of India, acts as the nodal department for Startup India – coordinating the efforts of all central government departments and the state governments.
What is a ‘startup’ ?
On Feb. 19, 2019, the definition of ‘startup’ was modified. An entity is now considered as a ‘startup’ up to ten years from the date of its incorporation/ registration, with an annual turnover not exceeding Rs 100 crore for any of the financial years since incorporation/ registration.
‘Fund of Funds for Startups’ (FFS)
In order to provide fund support for startups, the Government of India has created a ‘Fund of Funds for Startups’ (FFS) at Small Industries Development Bank of India (SIDBI) with a corpus of Rs 10,000 crore.
Alternate Investment Funds (AIFs)
The FFS can contribute to the corpus of Alternate Investment Funds (AIFs) for investing in equity and equity linked instruments of various startups. On the latest count, Rs 6,495 crore has been committed to 80 AIFs.
Investments
Compared to Rs 4,509 crore worth of investments made in 384 startups, at the start of Dec’ 2020, the FFS has invested Rs 8,085 crore in 540 startups on the latest count.
Income tax exemption
Eligible startups enjoy 100 percent income tax exemption for consecutive assessment years out of seven years from the year of its incorporation, and this is done with a view to stimulate their development, and provide them a competitive platform.
DPIIT recognised startups
DPIIT recognised startups are exempt from tax under Section 56(2)(viib) of the Income Tax Act, when they receive any consideration for issue of shares which exceeds the shares’ Fair Market Value of such shares.
Startups IPR Protection (SIPP)
Eligible startups also benefit from the scheme for Startups IPR Protection (SIPP) for facilitating fast-track filing of Patents, Trademarks and Designs, and expedited examination of patents filed by startups, which reduces the time taken in getting patents.
Atal Innovation Mission (AIM)
As per DPIIT’s FY 2021 annual report, Atal Innovation Mission (AIM) had selected 86 incubators across the country to provide financial support through grants in aid, and had already disbursed grants worth Rs 201 crore to 68 incubators.
Atal Incubation Centers
As per DPIIT’s FY 2021 annual report, 1,250-plus startups have been incubated in the Atal Incubation Centers/ Established Incubation Centers, out of which nearly 500 are women-led startups.
Startup India Seed Fund Scheme (SISFS)
On the latest count, under the Startup India Seed Fund Scheme (SISFS), grants worth Rs 233 crore have been approved across 58 selected incubators.
External Commercial Borrowing (ECB)
Since Oct’ 2016, startup enterprises are permitted to access loans up to $3 million under the External Commercial Borrowing (ECB) framework of the Reserve Bank of India (RBI).
Foreign Venture Capital Investor (FVCI)
Since Aug’ 2017, a Securities and Exchange Board of India (SEBI) registered Foreign Venture Capital Investor (FVCI) may contribute up to 100 percent of the capital of an Indian company engaged in any activity mentioned in Schedule 6 of Notification No. FEMA 20/2000, including startups irrespective of the sector in which it is engaged, under the automatic route.
Lock-in period for investments
The lock-in period for investments made by an Angel Fund was reduced from 3 years to 1 year, upon the amendment by the SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016, with effect from Jan 4, 2017.
Alternative Investment Funds
Angel funds are allowed to invest upto 25 percent of their investible corpus in overseas venture capital undertakings, in line with other AIFs, as provided by the SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016, with effect from Jan 4, 2017.
Upper limit for number of angel investors
The upper limit for the number of angel investors in a scheme has been increased from 49 to 200, upon the amendment by the SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016, with effect from Jan 4, 2017.
Minimum investment amount
The requirements of minimum investment amount by an angel fund in any venture capital undertaking was reduced from Rs 50 lakh to Rs 25 lakh, upon the amendment by the SEBI (Alternative Investment Funds) (Amendment) Regulations, 2016, with effect from Jan 4, 2017.
Patents (Amendment) Rules 2016
The Patents (Amendment) Rules 2016, enacted on May 16, 2016, provide 80 percent fee concession, as compared to other legal entities, to startups in respect of their patent applications along with expedited examination. Similarly, Trade Marks Rules, amended with effect from Mar 6, 2017 provide 50 percent fee concession for startup applications.
