The Indian Government is very keen on encouraging the growth of start-ups in India and the concept of easy business to boost the economy. Under government-funded schemes, start-ups in India, irrespective of the sector they fall under can avail certain benefits, concessions, tax exemptions and so on.
The Benefits Start-ups Can Avail from the Government
Many of the government’s schemes provide aid to start-ups in need of incubation and seed-funding by connecting investors and incubation centres with new businesses. This allows start-ups to avail the benefits of these programs in the shape of initial seed-stage funding, customised mentorship programs, business and marketing strategising, as well as aid with filing patents and registration forms.
Start-ups in India also receive tax exemptions in the form of a complete tax removal on angel investments and a partial tax reduction of Foreign Venture Capital in the Indian start-up ecosystem.
What are the parameters for being considered for government schemes?
To qualify as a legally recognised start-up in India:
- The organization’s turnover should not exceed Rs 25 crores in any of the preceding financial years.
- The organization is headquartered in India
- The organization has been recognized to be working towards innovation, development, deployment, and commercialization of products/ delivery of services powered by technology or intellectual property.
- It has to be registered under the Companies Act, 2013, the Indian Partnership Act, 1932 or be a registered as an LLP under the Limited Liability Partnership Act, 2002.
The Start-up India Initiative
There are many popular schemes provided by the government for start-ups. One such popular scheme is the ‘Start-up India Initiative’ and ‘Start-up India Seed Fund’. The Seed Fund was launched on 16 January 2021 and has a valuation of around Rs 1000 crores. The Start-up India Initiative which was set up in 2016 as an overarching scheme that aids in the continued growth of the start-up ecosystem.
Financial benefits – Start-ups can avail up to 80 per cent on the fees spent on patents and Intellectual Property Right (IPR) registrations.
Registration benefits – The registration process for start-ups is streamlined into a single portal, allowing companies to get registered within a day through the start-up-hub India.
Tax benefits – Businesses are eligible to be exempt from tax for the first three years under the condition that they obtain a certificate from an Inter-Ministerial Board. Additionally, as per Section 54EE of the Income Tax Act, start-ups are exempt from long-term capital gains tax.
Special/Other benefits
- National Credit Guarantee Trust Company ensures guaranteed funds for over four years.
- Labour Laws inspections will not be held in the first three years of incorporation.
- Environment law compliances are only mandatory after self-certification.
- Winding up of the company can be done in just under 90 days under the Insolvency and Bankruptcy Code.
All these benefits aside, the government of India is driven to see the start-up culture in the country grow and there is no shortage of schemes and initiatives to look to.
