The Make in India program was first launched by the Prime Minister of India, Narendra Modi, to promote homegrown production and economic development. As part of this initiative, The Startup India Program was created to boost entrepreneurship and develop a strong startup ecosystem. Jobsrose
India is currently ranked 130th out of 190 countries on the World Bank’s ease of doing business index from a starting rank in 2013 at 142nd position. This is primarily due to heavy regulation and bureaucratic hurdles like lack or availability of risk capital for startups; weak infrastructure for internet connectivity; lack or absence of effective systems for procurement processes; long gestation periods for launching infrastructure projects; lack or scarcity of qualified professionals with relevant domain knowledge etc.
11 Benefits Provided under Startup India :
1. FDI in Startup
The number of foreign direct investment (FDI) into India has consistently increased in recent years. However, many startups that are seeking to raise capital for their business find themselves victim to the border security system where companies are required to seek approval from multiple government agencies before they can begin.
FDI is therefore a very important aspect of startup growth which will help reduce risks associated with raising capital. For example, Airwheel Inc S home-grown electric scooter developed and sourced most of its components from China while it was also facing problems to ship the product back home out of the Indian market.
The government is seeking to simplify these processes for startups, so that investors no longer have to wait for an approval. The amendment will also allow startups to raise up to $1 million from external investors without prior approval.
2. Intellectual Property (IP) Protection
Ideas and products are the key assets of any business, and in the case of startups, it is the lifeblood of it’s growth. Intellectual Property (IP) plays a crucial role in boosting economic growth and creating jobs in a country like India which has a vibrant entrepreneurial ecosystem. India has a low rate of IPR protection compared to other world-class economies.
For example, while the European Union (EU) has around 63,000 patents filed and granted annually and the United States (US) has approximately 167,000 patents filed and granted every year. India is ranked way behind other economic heavyweights of the world in terms of IP protection.
3. Online Registration
Online business registration will be a blessing for startups and small businesses as it will allow them to file online and pay taxes online too. It will save them the hassle of physically visiting government offices to file documents and make payments.
In addition, the government is making several services accessible digitally like filing an application for a PAN card or filing a tax return using the GST portal. All these measures will reduce unnecessary paperwork and help businesses grow faster by reducing their cost of doing business.
4. Tax Exemption for 3 Years
The Indian Government has provided tax exemptions for startups in the manufacturing, trading and services industry under section 80-IAC of the Income Tax Act, 1961. These exemptions were launched to help startups grow their business and create jobs.
Since these are the first three years, there is no upper limit in terms of how much money will be exempted. This move will encourage more startups to get off the ground and it will also encourage the startup ecosystem to grow faster by attracting foreign investment leading to higher job creation.
5. New Startup Investment Scheme: Fincubator
The government has launched a new investment scheme, ‘Fincubator’ which aims to help existing startups expand or scale-up their operations by providing them with 100% equity free funding along with flexible working conditions to help them reduce costs and start expanding their business quickly and efficiently.
The government will also select and fund up to 20 new startups every year with a goal of driving innovation, creating jobs, and increasing the growth potential of the economy.
6. Income Tax Exemption for Startups
The government is launching a tax exemption scheme for startups which will be in place for three years from the date of incorporation. Startups that are incorporated on or before 31st March 2019 will be eligible to apply for an income tax exemption under this scheme.
Income tax exemption will be available (if applicable) on capital gains arising from transfer of unlisted securities; however, listed shares on stock exchanges may attract capital gains taxation.
7. Assistance from Banks
The government has also introduced a number of policy initiatives to ensure that small and medium enterprises have easier access to finance. The banks have been encouraged to provide loans and advances with limited documents, which will reduce processing time and financial requirements for startups. In fact, the government is encouraging banks to extend loans up to INR 1 crore without pledging any collateral or security.
