"STARTUP INDIA" A STEP FORWARD IN RIGHT DIRECTION

Startup India is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower Startups to grow through innovation and design. In order to meet the objectives  of the initiative, Government of India is announcing this Action Plan that addresses all aspects of the Startup ecosystem.

With this Action Plan the Government hopes to accelerate spreading of the Startup movement:

• From digital/ technology sector to a wide array of sectors including agriculture, manufacturing, social sector, healthcare, education, etc.; and

• From existing tier 1 cities to tier 2 and tier 3 cities including semi-urban and rural areas.

The Action Plan is divided across the following areas:

• Simplification and Hand holding

• Funding Support and Incentives

• Industry-Academia Partnership and Incubation

1 Compliance Regime based on Self-Certification

Objective

To reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low.

Details

Regulatory formalities requiring compliance with various labour and environment laws are time consuming and difficult in nature. Often, new and small firms are unaware of nuances of the issues and can be subjected to intrusive action by regulatory agencies. In order to make compliance for Startups friendly and flexible, simplifications are required in the regulatory regime.

Accordingly, the process of conducting inspections shall be made more meaningful and simple. Startups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and environment laws (refer below). In case of the labour laws, no inspections will be conducted for a period of 3 years. Startups may be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.

In case of environment laws, Startups which 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.

Labour Laws:

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.

Environment Laws:

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

2 Startup India Hub

Objective

To create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding.

Details

Young Indians today have the conviction to venture out on their own and a conducive ecosystem lets them watch their ideas come to life. In today’s environment we have more Startups and entrepreneurs than ever before and the movement is at the cusp of a revolution. However, many Startups do not reach their full potential due to limited guidance and access.

The Government of India has taken various measures to improve the ease of doing business and is also building an exciting and enabling environment for these Startups, with the launch of the “Startup India” movement.

The “Startup India Hub” will be a key stakeholder in this vibrant ecosystem and will:

Work in a hub and spoke model and collaborate with Central & State governments, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and R&D institutions Assist Startups through their life cycle with specific focus on important aspects like obtaining financing, feasibility testing, business structuring advisory, enhancement of marketing skills, technology commercialization and management evaluation. Organize mentorship programs in collaboration with government organizations, incubation centres, educational institutions and private organizations who aspire to foster innovation.

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.

3 Rolling-out of Mobile App and Portal

Objective

To serve as the single platform for Startups for interacting with Government and Regulatory Institutions for all business needs and information exchange among various stakeholders.

Details

In order to commence operations, Startups require registration with relevant regulatory authorities. Delays or lack of clarity in registration process may lead to delays in establishment and operations of Startups, thereby reducing the ability of the business to get bank loans, employ workers and generate incomes. Enabling registration process in an easy and timely manner can reduce this burden significantly.

Besides, Startups often suffer from the uncertainty regarding the exact regulatory requirements to set up its operations. In order to ensure that such information is readily available, it is intended that a checklist of required licenses covering labour licensing, environmental clearances etc. be made available. Currently, the Startup ecosystem in India also lacks formal platform(s) for Startups to connect and collaborate with other ecosystem partners.

Towards these efforts, the Government shall introduce a Mobile App to provide on-the-go accessibility for:

Registering Startups with relevant agencies of the Government. A simple form shall be made available for the same. The Mobile App shall have backend integration with Ministry of Corporate Affairs and Registrar of Firms for seamless information exchange and processing of the registration application.

Tracking the status of the registration application and anytime downloading of the registration certificate. A digital version of the final registration certificate shall be made available for downloading through the Mobile App Filing for compliance and obtaining information on various clearances/ approvals/ registrations required.

Collaborating with various Startup ecosystem partners. The App shall provide a collaborative platform with a national network of stakeholders (including venture funds, incubators, academia, mentors etc.) of the Startup ecosystem to have discussions towards enhancing and bolstering the ecosystem.

Applying for various schemes being undertaken under the Startup India Action Plan.

The App shall be made available from April 01, 2016 on all leading mobile/ smart devices’ platforms. The Startup portal shall have similar functionalities (being offered through the mobile app) using a richer web-based User Interface.

4 Legal Support and Fast-tracking Patent Examination at Lower Costs

Objective

To promote awareness and adoption of IPRs by Startups and facilitate them in protecting and commercializing the IPRs by providing access to high quality Intellectual Property services and resources, including fast-track examination of patent applications and rebate in fees.

Details

Intellectual Property Rights (IPR) are emerging as a strategic business tool for any business organization to enhance industrial competitiveness. Startups with limited resources and manpower, can sustain in this highly competitive world only through continuous growth and development oriented innovations; for this, it is equally crucial that they protect their IPRs. The scheme for Startup Intellectual Property Protection (SIPP) shall facilitate filing of Patents, Trademarks and Designs by innovative Startups. Various measures being taken in this regard include:

Fast-tracking of Startup patent applications: The valuation of any innovation goes up immensely, once it gets the protective cover of a patent. To this end, the 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.

Panel of facilitators to assist in filing of IP applications: For effective implementation of the scheme, a panel of “facilitators” shall be empanelled by the Controller General of Patents, Designs and Trademarks (CGPDTM), who shall also regulate their conduct and functions. Facilitators will be responsible for providing general advisory on different IPRs as also information on protecting and promoting IPRs in other countries. They shall also provide assistance in filing and disposal of the IP applications related to patents, trademarks and designs under relevant Acts, including appearing on behalf of Startups at hearings and contesting opposition, if any, by other parties, till final disposal of the IPR application. Government to bear facilitation cost: Under this scheme, the 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.

Rebate on filing of application: Startups shall be provided an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years. The scheme is being launched initially on a pilot basis for 1 year; based on the experience gained, further steps shall be taken.

5 Relaxed Norms of Public Procurement for Startups

Objective

To provide an equal platform to Startups (in the manufacturing sector) vis-à-vis the experienced entrepreneurs/ companies in public procurement.

Details

Typically, whenever a tender is floated by a Government entity or by a PSU, very often the eligibility condition specifies either “prior experience” or “prior turnover”. Such a stipulation prohibits/ impedes Startups from participating in such tenders.

At present, effective April 1, 2015 Central Government, State Government and PSUs have to mandatory procure at least 20% from the Micro Small and Medium Enterprise (MSME).

In order to promote Startups, Government shall exempt Startups (in the manufacturing sector) from the criteria of “prior experience/ turnover” without any relaxation in quality standards or technical parameters. The Startups will also have to demonstrate requisite capability to execute the project as per the requirements and should have their own manufacturing facility in India.

6 Faster Exit for Startups

Objective

To make it easier for Startups to wind up operations.

Details

Given the innovative nature of Startups, a significant percentage fail to succeed. In the event of a business failure, it is critical to reallocate capital and resources to more productive avenues and accordingly a swift and simple process has been proposed for Startups to wind-up operations. This will promote entrepreneurs to experiment with new and innovative ideas, without having the fear of facing a complex and long-drawn exit process where their capital remain interminably stuck.

The Insolvency and Bankruptcy Bill 2015 (“IBB”), tabled in the Lok Sabha in December 2015 has provisions for the fast track and / or voluntary closure of businesses.

In terms of the 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. On appointment of the insolvency professional, the liquidator shall be responsible for the swift closure of the business, sale of assets and repayment of creditors in accordance with the distribution waterfall set out in the IBB. This process will respect the concept of limited liability.

7 Providing Funding Support through a Fund of Funds with a Corpus of INR 10,000 Crore

Objective

To provide funding support for development and growth of innovation driven enterprises.

Details

One of key challenges faced by Startups in India has been access to finance. Often Startups, due to lack of collaterals or existing cash flows, fail to justify the loans. Besides, the high risk nature of Startups wherein a significant percentage fail to take-off, hampers their investment attractiveness.

In order to provide funding support to Startups, 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.

Key Features of the Fund of Funds are Highlighted Below:

The Fund of Funds shall be managed by a Board with private professionals drawn from industry bodies, academia, and successful Startups.

Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds.

The Fund of Funds shall contribute to a maximum of 50% of the stated daughter fund size. In order to be able to receive the contribution, the daughter fund should have already raised the balance 50% or more of the stated fund size as the case maybe. The Fund of Funds shall have representation on the governance structure/ board of the venture fund based on the contribution made.

The Fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health, education, etc. 

8 Credit Guarantee Fund for Startups

Objective

To catalyse entrepreneurship by providing credit to innovators across all sections of society.

Details

In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general and to encourage experimentation among Startup entrepreneurs through disruptive business models, credit guarantee comfort would help flow of Venture Debt from the formal Banking System.

Debt funding to Startups is also perceived as high risk area and to encourage Banks and other Lenders to provide Venture Debts to Startups, Credit guarantee mechanism 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.

9 Tax Exemption on Capital Gains

Objective

To promote investments into Startups by mobilizing the capital gains arising from sale of capital assets.

Details

Due to their high risk nature, Startups are not able to attract investment in their initial stage. It is therefore important that suitable incentives are provided to investors for investing in the Startup ecosystem. With this objective, exemption shall be given to persons who have capital gains during the year, if they have invested such capital gains in the Fund of Funds recognized by the Government.

This will augment the funds available to various VCs/AIFs for investment in Startups. In addition, existing capital gain tax exemption for investment in newly formed manufacturing MSMEs by individuals shall be extended to all Startups. Currently, such an entity needs to purchase “new assets” with the capital gain received to avail such an exemption. Investment in ‘computer or computer software’ (as used in core business activity) shall also be considered  as purchase of ‘new assets’ in order to promote technology driven Startups.

10 Tax Exemption to Startups for 3 Years

Objective

To promote the growth of Startups and address working capital requirements.

Details

Innovation is the essence of every Startup. Young minds kindle new ideas every day to think beyond conventional strategies of the existing corporate world.

During the initial years, budding entrepreneurs struggle to evaluate the feasibility of their business idea. Significant capital investment is made in embracing ever-changing technology, fighting rising competition and navigating through the unique challenges arising from their venture. Also, there are limited alternative sources of finance available to the small and growing entrepreneurs, leading to constrained cash funds.

With a view to stimulate the development of Startups in India and provide them a competitive platform, it is imperative that the profits of Startup initiatives are exempted from income-tax for a period of 3 years. This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations. The exemption shall be available subject to non-distribution of dividend by the Startup.

11 Tax Exemption on Investments above Fair Market Value

Objective

To encourage seed-capital investment in Startups

Details

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 is taxable in the hands of recipient as Income from Other Sources.

In the context of Startups, where the idea is at a conceptualization or development stage, it is often difficult to determine the FMV of such shares. In majority of the cases, FMV is also significantly lower than the value at which the capital investment is made. This results into the tax being levied under section 56(2) (viib).

Currently, investment by venture capital funds in Startups is exempted from operations of this provision. The same shall be extended to investment made by incubators in the Startups.

12 Organizing Startup Fests for Showcasing Innovation and Providing a Collaboration Platform

Objective

To galvanize the Startup ecosystem and to provide national and international visibility to the Startup ecosystem in India.

Details

A pivotal component for growth of Startups is regular communication and collaboration within the Startup community, both national as well international. An effective Startup ecosystem can’t be created by the Startups alone. It is dependent on active participation of academia, investors, industry and other stakeholders.

To bolster the Startup ecosystem in India, the Government is proposing to introduce Startup fests at national and international stages.

These fests would provide a platform to Startups in India to showcase their ideas and work with a larger audience comprising of potential investors, mentors and fellow Startups. As part of “Make in India” initiative, Government proposes to:

Hold one fest at the national level annually to enable all the stakeholders of Startup ecosystem to come together on one platform. Hold one fest at the international level annually in an international city known for its Startup ecosystem.

The fests shall have activities such as sessions to connect with investors, mentors, incubators and Startups, showcasing innovations, exhibitions and product launches, pitches by Startups, mentoring sessions, curated Startup walks, talks by disruptive innovators, competitions such as Hackathon, Maker space, etc., announcements of rewards and recognitions, panels and conferences with industry leaders, etc.

13 Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program

Objective

To serve as a platform for promotion of world-class Innovation Hubs, Grand Challenges, Startup businesses and other self-employment activities, particularly in technology driven areas

Details

The Atal Innovation Mission (AIM) shall have two core functions:

Entrepreneurship promotion through Self-Employment and Talent Utilization (SETU), wherein innovators would be supported and mentored to become successful entrepreneurs.

Innovation promotion: to provide a platform where innovative ideas are generated 

The main components proposed to be undertaken as part of the mission include:

Entrepreneurship promotion:

Establishment of sector specific Incubators including in PPP mode (refer 14 of this Action Plan)

Establishment of 500 Tinkering Labs Pre-incubation training to potential entrepreneurs in various technology areas in collaboration with various academic institutions having expertise in the field Strengthening of incubation facilities in existing incubators and mentoring of Startups Seed funding to potentially successful and high growth Startups 

Innovation Promotion:

Institution of Innovation Awards (3 per state/UT) and 3 National level awards
Providing support to State Innovation Councils for awareness creation and organizing state level workshops/conferences. Launch of Grand Innovation Challenge Awards for finding ultra-low cost solutions to India’s pressing and intractable problems

14 Harnessing Private Sector Expertise for Incubator Setup

Objective

To ensure professional management of Government sponsored / funded incubators, Government will create a policy and framework for setting-up of incubators across the country in public private partnership.

Details

India currently lacks availability of incubation facilities across various parts of the country. Incubation facilities typically include physical infrastructure, provision of mentorship support, access to networks, access to market, etc. Of all these features, physical infrastructure entails large capital investments which can generally be facilitated by the Government. However, requisite skills for operating an incubator are pivotal as well, for which expertise of the private sector needs to be leveraged. Considering this, Government shall encourage setting up of;

35 new incubators in existing institutions. Funding support of 40% (subject to a maximum of INR 10 crore) shall be provided by Central Government for establishment of new incubators for which 40% funding by the respective State Government and 20% funding by the private sector has been committed. The incubator shall be managed and operated by the private sector.

35 new private sector incubators. A grant of 50% (subject to a maximum of INR 10 crore) shall be provided by Central Government for incubators established by private sector in existing institutions. The incubator shall be managed and operated by the private sector.

The funding for setting up of the incubators shall be provided by NITI Aayog as part of Atal Innovation Mission (refer #13 of this Action Plan). Participating departments and agencies for setting up of new incubators shall be Department of Science and Technology, Department of Biotechnology, Department of Electronics and Information Technology, Ministry of Micro, Small and Medium Enterprises, Department of Higher Education, Department of Industrial Policy and Promotion and NITI Aayog.

Each of the above mentioned departments/agencies would enter into a standard MoU with identified private sector players for creation of academia-industry tie-ups for nurturing innovations in academic institutions.

15 Building Innovation Centres at National Institutes

Objective

To propel successful innovation through augmentation of incubation and R&D efforts.

Details

In order to augment the incubation and R&D efforts in the country, the Government will set up/ scale up 31 centres (to provide facilities for over 1,200 new Startups) of innovation and entrepreneurship at national institutes, including:

Setting-up 13 Startup centres: Annual funding support of INR 50 lakhs (shared 50:50 by DST and MHRD) shall be provided for three years for encouraging student driven Startups from the host institute.

Setting-up/ Scaling-up 18 Technology Business Incubators (TBIs) at NITs/IITs/IIMs etc. as per funding model of DST with MHRD providing smooth approvals for TBI to have separate society and built up space.

Startup Centres		Technology Business Incubators
RGIIM Shillong	NIT Goa	MANIT Bhopal	IISER Bhopal	NIT Warangal
NIT Delhi	NIT Agartala	NIT Rourkela	IIM Rohtak	MNIT Jaipur
MNIT Allahabad	NIT Silchar	NIT Jalandhar	IIT Mandi	NIT Tiruchirappalli
VNIT Nagpur	IIT Bhubaneswar	IIM Udaipur	IISER Mohali	IIT Patna
IIITDM Kancheepuram	NIT Patna	NIT Calicut	IIT Roorkee
PDPM-IIITDM Jabalpur	NIT Arunachal Pradesh	IIT Ropar	IIM Kozhikode
ABVIIITM Gwalior	IISER Thiruvananthapuram	IIM Raipur

16 Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras

Objective

To propel successful innovation through incubation and joint R&D efforts between academia and industry

Details

The Government shall set up 7 new Research Parks in institutes indicated below with an initial investment of INR 100 crore each. The Research Parks shall be modeled based on the Research Park setup at IIT Madras.

Research Parks

IIT Guwahati

IIT Hyderabad

IIT Kanpur

IIT Kharagpur

IISc Bangalore

IIT Delhi

The IIT Madras Research Park endeavors to enable companies with a research focus to set up a base in the Park and leverage the expertise of IIT Madras. The Research Park breaks down the traditional, artificial barriers of innovation through its connectivity and collaborative interaction. This helps industry to create, integrate and apply advancements in knowledge. It leverages best practices from successful Research Parks such as those at Stanford, MIT and Cambridge.

The guiding principles behind the park include:

Creating a collaborative environment between industry and academia through joint research projects and consulting assignments.

Creating a self-sustaining and technologically fertile environment.

Encouraging and enabling R&D activities and Startups that are aligned to potential needs of the industry.

Providing world class infrastructure for R&D activities and incubation.

Enabling development of high quality personnel and motivating professional growth for researchers in companies through part time Masters and PhD Programs.

17 Promoting Startups in the Biotechnology Sector

Objectives

To foster and facilitate bio-entrepreneurship

Details

The Biotechnology sector in India is on a strong, growth trajectory. Department of Biotechnology endeavors to scale up the number of Startups in the sector by nurturing approximately 300-500 new Startups each year to have around 2,000 Startups by 2020. In order to promote Startups in the sector, The Department of Biotechnology shall be implementing the following measures along with its Public Sector Undertaking Biotechnology Research Assistance Council (BIRAC):

Bio-incubators, Seed Fund and Equity Funding:

5 New Bio-clusters, 50 new Bio-Incubators, 150 technology transfer offices and 20 Bio-Connect offices will be set up in research institutes and universities across India.

Biotech Equity Fund – BIRAC AcE Fund in partnership with National and Global Equity Funds (Bharat Fund, India Aspiration Fund amongst others) will provide financial assistance to young Biotech Startups.

Encouraging and leveraging global partnerships:

Bengaluru-Boston Biotech Gateway to India has been formed. Letter of Intent has been signed between DBT, GoI and Department of IT, Government of Karnataka for the same. Through this initiative, a range of institutes in Boston (Harvard/ MIT) and Bengaluru will be able to connect to share ideas and mentor the entrepreneurs especially in the areas of Genomics, Computational Biology, Drug Discovery and new vaccines.

Amplification of Bio-entrepreneurship through BIRAC Regional Entrepreneurship Centres (BREC). The BREC aims to impart bio-entrepreneurs with the necessary knowledge and skills required for converting innovative ideas into successful ventures. Department of Biotechnology shall set up 5 Regional centres or Mini-BIRACs in the next 5 years.

18 Launching of Innovation Focused Programs for Students

Objective

To foster a culture of innovation in the field of Science and Technology amongst students.

Details

In order to promote research and innovation among young students, the Government shall implement the following measures:

Innovation Core :

Innovation Core program shall be initiated to target school kids with an outreach to 10 lakh innovations from 5 lakh schools. One lakh innovations would be targeted and the top 10,000 innovations would be provided prototyping support. Of these 10,000 innovations, the best 100 would be shortlisted and showcased at the Annual Festival of Innovations in the Rashtrapati Bhavan.

NIDHI :

A Grand Challenge program (“National Initiative for Developing and Harnessing Innovations) shall be instituted through Innovation and Entrepreneurship Development Centres (IEDCs) to support and award INR 10 lakhs to 20 student innovations from IEDCs.

Uchhattar Avishkar Yojana :

A joint MHRD-DST scheme which has earmarked INR 250 crore per annum towards fostering “very high quality” research amongst IIT students. The funding towards this research will be 50% contribution from MHRD, 25% from DST and 25% from industry. This format has been devised to ensure that the research and funding gets utilized bearing in mind its relevance to the industry. Each project may amount to INR 5 crore only. This scheme will initially apply to IITs only.

19 Annual Incubator Grand Challenge

Objective

To support creation of successful world class incubators in India.

Details

For a new idea to become a successful commercial venture, adequate support and mentoring at various stages of the business lifecycle is required. Incubators play an important role in identifying early stage Startups and supporting them across various phases of their lifecycle. In order to build an effective Startup ecosystem, it is imperative that world class incubators, adopting leading industry practices, are setup in the country.

The Government is proposing to make forward looking investments towards building world class incubators. In its first phase, the aim is to establish 10 such incubators. To enable this, GoI shall identify and select 10 incubators who have the potential to become world class. These incubators would be given INR 10 crore each as financial assistance which may be used for ramping up the quality of service offerings. The incubators shall also become reference models for other incubators aspiring to offer best-in-class services. Video interviews of these incubators would be showcased on the Startup India portal.

An “Incubator Grand Challenge” exercise shall be carried out for identification of these incubators. The exercise shall entail:

Open invitation of applications from incubators :

Screening and evaluation based on pre-defined Key Performance Indicators (KPIs) The Incubator Grand Challenge shall be an annual exercise. 

Part A: Definition of Startup (only for the purpose of Government schemes)

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.

Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence. Provided also that an 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. Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

Term	Definition
Entity	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)
Identification of businesses covered under the definition in Part A above	A business is covered under the definition if it aims to develop and commercialize • a new product or service or process; or • a significantly improved existing product or service or process, that will create or add value for customers or workflow. The mere act of developing • products or services or processes which do not have potential for commercialization; or • undifferentiated products or services or processes; or • products or services or processes with no or limited incremental value for customers or workflow would not be covered under this definition. In order for a “Startup” to be considered eligible, the Startup should • be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post-graduate college in India; or • be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or • be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI; or  • be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/ Accelerator/Angel Network duly registered with SEBI* that endorses innovative nature of the business; or • be funded by GoI as part of any specified scheme to promote innovation; or • have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted. * DIPP may publish a ‘negative’ list of funds which are not eligible for this initiative.
Turnover	As defined under The Companies Act, 2013
Inter-Ministerial Board	An Inter-Ministerial Board setup by DIPP to validate the innovative nature of the business for granting tax related benefits Approval from the Inter-Ministerial Board shall not in any manner, limit or absolve the entity(ies) from any liability incurred in case of any misrepresentation/ fraud arising from submission of such application and/ or supporting such application.

#	Acronym	Description
1	ABVIIITM	Atal Bihari Vajpayee Indian Institute of Information Technology and Management
2	AIF	Alternate Investment Fund
3	AIM	Atal Innovation Mission
4	CGPDTM	Controller General of Patents, Designs and Trade Marks
5	DBT	Department of Biotechnology
6	DICCI	Dalit Indian Chamber of Commerce & Industry
7	DIPP	Department of Industrial Policy and Promotion
8	DST	Department of Science and Technology
9	EDP	Entrepreneurship Development Programme
10	FMV	Fair Market Value
11	GoI	Government of India
12	IIITDM	Indian Institute of Information Technology, Design & Manufacturing
13	IIM	Indian Institute of Management
14	IISc	Indian Institute of Science
15	IISER	Indian Institute of Science Education and Research
16	IIT	Indian Institute of Technology
17	IPR	Intellectual Property Rights
18	KPI	Key Performance Indicator
19	LIC	Life Insurance Corporation
20	LLP	Limited Liability Partnership
21	MANIT	Maulana Azad National Institute of Technology
22	MCA	Ministry of Corporate Affairs
23	MHRD	Ministry of Human Resource Development
24	MNIT	Motilal Nehru National Institute of Technology
25	MoU	Memorandum of Understanding
26	MSME	Micro, Small and Medium Enterprise
27	NIT	National Institute of Technology
28	NITI	National Institution for Transforming India
29	PhD	Doctor of Philosophy
30	PPP	Public Private Partnership
31	R&D	Research & Development
32	RGIIM	Rajiv Gandhi Indian Institute of Management
33	SEBI	Securities and Exchange Board of India
34	SETU	Self-Employment and Talent Utilization
35	SIDBI	Small Industries Development Bank of India
36	VC	Venture Capitalist
37	VNIT	Visvesvaraya National Institute of Technology

For a startup to be recognized as one:

1. It must be an entity registered/incorporated as a Private Limited Company under the Companies Act, 2013; or Registered Partnership firm under the Indian Partnership Act, 1932; or Limited Liability Partnership under the Limited Liability Partnership Act, 2008.

2. Five years must not have elapsed from the date of incorporation/registration.
Annual turnover (as defined in the Companies Act, 2013) in any preceding financial year must not exceed Rs. 25 crore.

3. Startup must be working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.

The Startup must aim to develop and commercialise:

a) a new product or service or process; or 

b) a significantly improved existing product or service or process that will create or add value for customers or workflow.

The Startup must not merely be engaged in:

a. developing products or services or processes which do not have potential for commercialization, or

b. undifferentiated products or services or processes; or

c. products or services or processes with no or limited incremental value for customers or workflow. The Startup must not be formed by splitting up, or reconstruction, of a business already in existence.

The Startup has obtained certification from the Inter-Ministerial Board, setup by DIPP to validate the innovative nature of the business, and

a. be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an incubator established in a post-graduate college in India; or

b. be supported by an incubator which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation; or

c. be supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an incubator recognized by GoI; or

d. be funded by an Incubation Fund/Angel Fund/Private Equity Fund/Accelerator/Angel Network duly registered with SEBI* that endorses innovative nature of the business; or

e. be funded by the Government of India as part of any specified scheme to promote innovation; or

f. have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.

Startup India campaign Key points:

Single Window Clearance even with the help of a mobile application 10,000 crore funds of fund 80% reduction in patent registration fee Modified and more friendly Bankruptcy Code to ensure 90-day exit window Freedom from mystifying inspections for 3 years.

Freedom from Capital Gain Tax for 3 years Freedom from tax in profits for 3 years
Eliminating red tape Self-certification compliance Innovation hub under Atal Innovation Mission Starting with 5 lakh schools to target 10 lakh children for innovation programme

Launch

The event was inaugurated on 16 January 2016 by the finance minister Arun Jaitley. Among the attendees were around 40 top CEOs and startup founders and investors from Silicon Valley as special guests including Masayoshi Son, CEO of SoftBank, Kunal Bahl, founder Snaa, Travis Kalanick, founder of Uber, Adam Nuemann, CEO of WeWork, Sachin Bansal, founder of Flipkart and others.

Govt.'s Role

The Ministry of Human Resource Development and the Department of Science and Technology have agreed to partner in an initiative to set up over 75 such startup support hubs in the National Institutes of Technology (NITs), the Indian Institutes of Information Technology (IIITs), the Indian Institutes of Science Education and Research (IISERs) and National Institutes of Pharmaceutical Education and Research (NIPERs).

Investments

Soft Bank, which is headquarterd in Japan, has invested $2 billion into Indian startups. The Japanese firm had pledged the total investments at $10 billion. Google declared to launch a startup, based on the highest votes in which the top three startups will be allowed to join the next Google Launchpad Week, and the final winner could win an amount of $100,000 in Google cloud credits. PMMY (Pradhan Mantri Mudra Yojana) is also one of the similar initiatives to refinance the micro units.

States Assessment

Southern States of the nation have shown great performance, like Karnataka, Kerala, Andhra Pradesh and Telangana which have results better than the rest of the country in terms of their policies implementations for supporting startups. Their focus has been on improving infrastructure, especially in the Tier-II cities. Bengaluru , a metro city of Karnataka, is known as the Silicon Valley of India.

Kerala is well known for the government’s startup policy, "Kerala IT Mission", which focus on fetching ₹50 billion (US$740 million) in investments for the State’s startup ecosystem. It also made India’s first telecom incubator Startup village in 2012. The state also matches the funding raised by its incubator from Central government with 1:1. Telangana has launched the largest incubation center in India as "T-Hub". Andhra Pradesh has allocated a 17,000-sq.ft.

Technological Research and Innovation Park as a Research and Development laboratory. It has also created a fund called "Initial Innovation Fund" of ₹100 crore (US$15 million) for entrepreneurs. The government of Madhya Pradesh has collaborated with the Small Industries Development Bank of India (SIDBI) to create a fund of ₹200 crore (US$30 million). Rajasthan has also launched "Start-up Oasis" scheme.

Educational Institution Alliances

Under the scheme, a group of start-ups will acknowledge an MOU with the prestigious institutions and will also establish the start-up centers in the campus. NIT-Silchar (The National Institute of Technology, Silchar) is one of the institutions of the country to have joined the program. IIT Madras is also linked with this campaign. The institution has been successfully managing seven research parks that has incubated many start-ups.

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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.