The Indian Government has started a scheme known as the “Startup India” with an aim to create employment as well as to strengthen the nation. The scheme looks forward to an affluent India with an objective to create wealth. The main goal behind this nation wide project in India is to bring an innovative change in the production of goods and services. The government has been working hard on one the biggest problems of the country that is unemployment and this scheme helps in reducing it to a great extent. The scheme was launched on the 16th of January, 2016 by the Honourable Prime Minster of India – Shri Narendra Modi.
The action plan of the scheme – Startup India
Major advantage of the scheme is financial aid and simplification of work along with network opportunities and government tenders. The action plan of Startup India Scheme is based on a list of factors which are listed below for you –
Financial Aid – The Government has offered a variety of financial support under the Startup India Scheme in order to encourage the startups. Some of the financial initiatives by the government are mentioned below –
- For the first three year, since the day of incorporation, the Startups have been exempted from the income tax.
- The government itself is looking forward to invest in various startup projects as it has set up a fund of Rs 2500 every year, for the next four years.
- As per the Income Tax Act, if a startup or a company has received consideration on the issue of the shares and the amount is exceeding the fair market worth of the company’s share then such excess amount of consideration is taxable as the Income from Other Sources in the hands of its beneficiary.
- Venture capital fund investments in a startup company is exempted just like the investments done through incubators.
Simplifying Work –The Scheme aims at simplifying the work processes for the fresh candidates. This simplification of tasks is performed with an aim to motivate people and entrants. For the encouragement of the people, Government of India has included a list of activities, which are mentioned below –
- To start with, the Indian Government has set-up hubs at several locations where the work related to the registration, incorporation and grievance management of the Startup India Scheme is executed.
- An online portal is launched for the public to fill out the form of registration easily without any hassle from anywhere and during any hour of the day.
- The registration procedure and patent acquisition process is now much faster than before for the startups.
- The winding up procedure of a startup has been made less complicated and easier as per the Insolvency and Bankruptcy Bill introduced in the year 2015.
- A fresh startup company can easily windup itself in just ninety days since the day of incorporation.
Key Points –
- The aim is to promote the nation all over the world as a startup centre
- Freedom from income tax and capital gain taxes for first three years of functioning
- To motivate entrepreneurship within India
- Reduction of the patent registration charges
- To offer IPR protection to the start-ups by introducing new schemes
- To target the innovation related programs more
- Set up of funding pool of ten thousand crores for start-ups.
- To develop the biggest innovation centre, under Atal innovation mission
Are you eligible for getting registered under the Startup India Scheme, Let’s find out –
- Firstly, the company or the start-up to be launched must come under a partnership firm with limited liability or under a private limited company.
- Secondly, the start-ups to be formed must obtain permission from the Department of Industrial Policy and Promotion.
- Thirdly, The start-up must offer innovative idea, products, scheme or services.
- It needs to be a new company not old than 5 years.
- An incubator letter of recommendation is compulsory.
- The company must not be a result of reconstruction, split up of an already existing business.
- The total turnover limit of the company is fixed at Rs 25 crores.
There are a variety of companies; you can register a start-up in the following ways –
Advantages of the Startup India Scheme
Income Tax Exemptions
Better Networking Opportunities
Simplified Registration – Everyone thinks that registration and incorporation of a company is a very difficult and complicated procedure. People are afraid of the long and tedious registration procedure. Under the scheme of Startup India, an application is offered to smoothen the procedure of registration and single meet is arranged at the main start-up hub. Plus, a window for clearing doubts and trouble shoot is also available for the people. In India, some businessmen might not be educated like others but they do have a creative mind and to encourage such minds to come forward, the government wants to minimize the burden of the registration and incorporation procedure, as much as possible.
Financial Support – Start-ups are generally patent based which means they create and offer innovative products and services. So, in order to register the patents of a start-up, a heavy fee needs to be paid off known as patent cost. But under the Startup India Scheme, the Government of India provides up to 80 percent rebate or reduction on the total cost of patent. Additionally, the entire registration procedure of the patent is comparatively faster and less complicated, as compared to the earlier times. Moreover, the government also pays the facilitator fees to get the patent. Most of the innovative people mainly drop the idea of starting something of their own is because of the financial risk involved in it but with the help of government financial aids and support, the creative people can come forward and start their own business.
Exemption in income tax – The Start-ups receive a great deal of benefits when it comes to taxation. Under the Income tax Act, the government of India has exempted three years of tax on income to the Start-ups, starting from the day of incorporation. In order to avail this benefit, the start-ups need to get a Inter-Ministerial Board Certificate. Additionally, investment in specified funds also provides the benefit of exemption of capital gain taxes. The tax rebates have always been a great way to encourage people in getting in the business of self-employment and under this scheme, it aims to motivate thousands of innovative minds to give a shape to their thoughts.
Government Tenders –Every business seeks to get Government tenders mainly because of good pay and long term projects but it is very difficult to acquire one especially keeping the competition in mind. But, under the Startup India scheme, the government gives priority to the start-ups in acquiring the tenders plus no past experiences are required to get a project for your company. This helps and encourages people with innovative ideas to start trying to acquire the upcoming government tenders and create employment and an income source for themselves.
Good Networking Opportunities–Networking chances or opportunities means the chance to get to know different stakeholders at start-ups at a specific time and place. The Indian Government aims at providing equal opportunities to almost every start-up by conducting two fests, every year at national as well as the global level. The scheme also offers awareness and intellectual property workshop. The major aim behind the workshop, cultural events and annual fest is to help the entrants to understand the Indian and the Global market. It helps in providing equal business opportunities to all the newly launched start-ups companies so that they can build a strong and reliable networking base for themselves. In order to improve your marketing strategies, you need such opportunities.
Thus, these are some of the most obvious benefits of starting a start-up under the Startup India Scheme but there are some challenges, as well which are listed below for your help.
The challenges to be faced under the Startup India Scheme
- People generally believe that their thoughts and ideas to set up a business is quite unique and helpful. But, sometimes the execution of plan is not done as you may have planned it. So, it is important to complete research and experiment your idea before you set up a company, on its basis.
- The Startup India Scheme has a funding pool for next four years which indicates that it is short term scheme and long term projects are not very favourable.
- In order to launch a successful business, one needs a competent workforce. But, since the start-up capital is generally limited therefore hiring skilled staff is quite difficult for them especially at the initial stage due to lack of required funds.
- The amount of risk of failure involved in a start up is much more than compared to the other sort of businesses or organisations. Since, start-ups are all about fresh ideas, products and services therefore, it is fifty-fifty percent chance whether people will like the thought or not.
Result So Far
The scheme has encouraged thousands of creative men and women to come forward and start their own start-ups especially in the state of Gujarat, Kerala and Karnataka.