Know your rights: Incentives for business start-ups

India is currently the 3rd largest start-up ecosystem in the world, with about 80,000 registered start-ups. Startups are increasingly playing a greater role and the startup ecosystem is now more methodical, structured, systematic, and mainstream.

There is a need for increased collaboration from incubators and accelerators, governing agencies, academic and research institutions, and the investor fraternity to achieve the full potential of these start-ups. Under the start-up India initiative of the Government of India, eligible companies can get recognised as start-ups by the DPIIT.

Eligibility for recognition by DPIIT

The start-up must be incorporated as a private limited company, a registered partnership firm or a limited liability partnership. The period of existence and operations should not exceed 10 years from the date of incorporation. The annual turnover should not exceed Rs100 crore for any of the financial years since its incorporation. The entity should not have been formed by splitting up or reconstructing an already existing business and should work towards the development or improvement of a product, process or service and / or have a scalable business model withhighpotentialfor the creation of wealth and employment.

Benefits for registration

Start-ups shall be allowed to be self-certify compliant for six labour laws and three environmental laws through a simple online procedure. In the case of labour laws, no inspections will be conducted for a period of five years. Start-ups may be inspected only on receipt of credible and verifiable complaints of violation, filed in writing and approved by at least one level senior to the inspecting officer.

In the case of environmental laws, start-ups that fall under the ‘white category' – as defined by the Central Pollution Control Board (CPCB) – would be able to self-certify compliance and only random checks would be carried out in such cases.

Other benefits for start-ups

Easy access to Funds

The fund of funds for startups (FFS) scheme with a corpus of Rs10,000 crore has been set up by the government to provide venture capital. The government is also giving a guarantee to the lenders to encourage banks and other financial institutions for providing venture capital.

Reduction in cost for filing patents & trademarks

The government also provides lists of facilitators of patents and trademarks. They will provide high-quality intellectual property rights services including fast examination of patents at lower fees. The government will bear all facilitator fees and the start-up will bear only the statutory fees. They will enjoy an 80% reduction in the cost of filing patents.

Tax holiday for 3 years

Start-ups are exempted from income tax for three years provided they get a certificationfrom Inter-Ministerial Board (IMB).

Tax savings for investors

People investing their capital gains inthe venture funds set up by the government will get an exemption from capital gains. This will help start-ups to attract more investors.

Easy exit

In case of exit, a start-up can close its business within 90 days from the date of application of winding up.

Relaxed tendering & public procurement norms

Exemption from requirement of earnest money deposit, prior turnover and experience requirements in government tenders for registered start-ups.

Two start-up fests are to be held annually – both nationally and internationally – to enable the various stakeholders of a start-up to meet.

This will provide huge networking opportunities.

Portal for start-up registration: https://www.startupindia.gov.in/

Published on: Monday, October 10, 2022, 09:32 AM IST