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1. Startup-Definition

Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Condition:

• Such entity is not formed by splitting up, or reconstruction, of a business already in existence.

• Entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration.

• They shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

• Only the Entity naming Private Limited Company (under The Companies Act, 2013) or a Registered Partnership Firm (under The Indian Partnership Act, 1932) or Limited Liability Partnership (under The Limited Liability Partnership Act, 2008) will be covered.

• Business will be covered under the definition only if its aims to develop and commercialize

• a new product or service or process; or

• a significantly improved existing product or service or process,

2. Compliance Regime:

There will be no Inspection under following labour law during the first three year.

  • The Building and Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996
  • The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
  • The Payment of Gratuity Act, 1972
  • The Contract Labour (Regulation and Abolition) Act, 1970
  • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
  • The Employees’ State Insurance Act, 1948

They will be allowed to self clarify compliance for following environmental Law.

  • The Water (Prevention & Control of Pollution) Act, 1974
  • The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003
  • The Air (Prevention & Control of Pollution) Act, 1981

3. Tax Exemption to Startups for 3 years

The profits of Startup initiatives are exempted from income-tax for a period of 3 years.

4. Tax Exemption on Investments above Fair Market Value

Under The Income Tax Act, 1961, where a Startup (company) receives any consideration for issue of shares which exceeds the Fair Market Value (FMV) of such shares, such excess consideration will be exempt in the hands of recipient.

5. Tax Exemption on Capital Gains

Capital gain arising from sale of capital assets will be exempt from tax if they have invested such capital gain in the fund(s) recognized by the central government.

6. Credit Guarantee Fund for Startups

 Credit guarantee will be available to Bank and other lenders through National Credit Guarantee Trust Company (NCGTC)/ SIDBI is being envisaged with a budgetary Corpus of INR 500  crore per year for the next four years.

7. Funding Support through a Fund of Funds with a Corpus of INR 10,000 crore

Government will set up a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500 crore per year) . The Fund will be in the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of SEBI registered Venture Funds.

8. Creation of Startup India Hubs

To all young Indians who have the courage to enter an environment of risk, the Startup India Hub will be their friend, mentor and guide to hold their hand and walk with them through this journey. The “Startup India Hub” will be a key stakeholder in this vibrant ecosystem and will:

Work in Hub and spoke Model

Collaborate with Central & State Government, Indian and foreign VCs, angle network, bank, legal partners and consultant

Focus on important aspects like obtaining financing, feasibility testing, business structuring advisory and enhancement of marketing skills.  

9. Rolling-out of Mobile App and Portal:

Government will introduce a mobile app which will be available from April 01, 2016 with the following accessibility

• Registering startups with relevant agencies of government

• Tracing the status of registration application

• Filling for compliance and obtaining the information on various clearances/approvals/registration

• Applying for various scheme being undertaken under startup India Action Plan

10. Legal Support and Fast-tracking Patent Examination at Lower Costs

• Patent application of Startups shall be fast-tracked for examination and disposal, so that they can realize the value of their IPRs at the earliest possible.

• Startups shall be provided an 80% rebate in filing of patents vis-à-vis other companies.

• Central Government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a Startup may file, and the Startups shall bear the cost of only the statutory fees payable.

Note:  This is being launched initially on a pilot basis for 1 year; based on the experience gained, further steps shall be taken.

11. Relaxed Norms of Public Procurement for Startups

The condition of prior experience/turnover for participating in tenders floated by a government entity or PSU will be exempt but without any relaxation in quality standards or technical parameters.

12. Faster Exit for Startups

In terms of the IBB ( Insolvency and Bankruptcy Bill 2015 (“ IBB”), Startups with simple debt structures or those meeting such criteria as may be specified may be wound up within a period of 90 days from making of an application for winding up on a fast track basis. In such instances, an insolvency professional shall be appointed for the Startup, who shall be in charge of the company (the promoters and management shall no longer run the company) for liquidating its assets and paying its creditors within six months of such appointment.

By CA Pooja Gupta
B.com, C.A., C.S.
Amit S.K. Gupta & Co.
1x06 First Floor, ILD Trade Cetre, Sohna Road, Gurgaon-122001

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