Presentation on startup india by :

Neelam Mishra & Sakshi Dandekar

What is a Startup ?
An entity shall be considered as a Startup:

 If it is incorporated as a private limited company or registered as a partnership firm or a limited

liability partnership.

 Up to ten years from the date of its incorporation/ registration.

 If its turnover for any of the financial years since incorporation/registration has not exceeded 100
Crore.

 If it is working towards innovation, development or improvement of products or processes or services,

or if it is a scalable business model with a high potential of employment generation or wealth creation.

*Provided that any such entity formed by splitting up or reconstruction of a business already in
existence shall not be considered a ‘Startup’.
Registration of start-ups
Step 1: Incorporate your business

First incorporate your business as a Private Limited Company or a Partnership firm or a 

Limited Liability Partnership. You have to follow all the normal procedures for registration of any business
like obtaining the certificate of Incorporation/Partnership registration, PAN, and other required compliances.  
Step 2: Register with Start-up India
Then the business must be registered as a start-up. The entire process is simple and online. All you need to
do is log on to the Start-up India website(www.startupindia.gov.in) and fill up the form with details of
your business and upload certain documents.

Step 3: Documents to be uploaded (in PDF format only)

(a) A letter of recommendation/support :
A letter of recommendation must be submitted along with the registration form. Any of the following
will be valid-
(i) A recommendation (regarding innovative nature of business) from an Incubator established in a
post-graduate college in India , in a format specified by the Department of Industrial Policy and
Promotion (DIPP); OR
(ii) A letter of support by an incubator, which is funded (in relation to the project) by Government of
India as part of any specified scheme to promote innovation; OR
iii) A letter of  recommendation (regarding innovative nature of business), from an Incubator, recognized
by the Government of India in DIPP specified format; OR

(iv) A letter of funding of not less than 20% in equity, by any Incubation Fund/Angel Fund/Private
Equity Fund/Accelerator/Angel Network, duly registered with SEBI that endorses innovative nature of
the business; OR

(v) A letter of funding by Government of India or any State Government as part of any specified scheme
to promote innovation; OR

(vi) A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the
nature of the business being promoted

b) Incorporation/Registration Certificate
You need to upload the certificate of incorporation of your company/LLP (Registration Certificate in
case of partnership)

c) Description of your business in brief

A brief description of the innovative nature of your products/services.
 Business incubator
• A business incubator is a company that helps new and startup
companies to develop by providing services such as
management training or office space. The National Business
Incubation Association defines business incubators as a catalyst
tool for either regional or national economic development.
Step 4: Answer whether you would like to avail tax benefits
Start-ups are exempted from income tax for 3 years. But to avail these benefits, they must be certified by the
Inter-Ministerial Board (IMB). Start-ups recognized by DIPP, Govt. of India can now directly avail IPR related
benefits without requiring any additional certification from IMB.

Step 5: Finally, you must self-certify that you satisfy the following conditions
a) You must register your new company as a Private Limited Company, Partnership firm or a Limited
Liability Partnership
b) Your business must be incorporated/registered in India, not before 10 years.
c) Turnover must be less than 100 crores per year.
d) Innovation is a must– the business must be working towards innovating something new or significantly
improving the existing used technology.
e) Your business must not be as a result of splitting up or reconstruction of an existing business.
Step 6: Immediately get recognition number
You will immediately get a recognition number for your start-up. The certificate of recognition will be issued
after the examination of all your documents.
However, be careful while uploading the documents. If on subsequent verification, it is found to be obtained
that the required document is not uploaded/wrong document uploaded or a forged document has been uploaded
then you shall be liable to a fine of 50% of your paid-up capital of the start-up with a minimum fine of Rs.
25,000.
Step 7: Other areas
a) Patents, trademarks and/or design registration
If you need a patent for your innovation or a trademark for your business, you can easily approach any from
the list of facilitators issued by the government. You will need to bear only the statutory fees thus getting an
80% reduction in fees
b) Funding
One of the key challenges faced by many start-ups has been accessing to finance. In order to provide funding
support, Government has 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. The Fund is in the nature of Fund of Funds, which means that it will not
invest directly into Start-ups, but shall participate in the capital of SEBI registered Venture Funds.
 Flowchart for eligibility of start-up India Scheme
A Must be Pvt Ltd Co/LLP/Partnership firm
D
B C Should commercially
develop an
Co. not older than 10 innovative product
Turnover should not
Yrs from or service than what
exceed 100 Cr.
Incorporation. is existing in the
market.

E Certificate from IMB(DIPP)

F1 F2 F3 F4 F5
Recommenda Recommenda Is funded by
Has patent
Recommendation tion letter by an incubation
tion letter by granted by
letter by incubator incubator fund/pvt
incubator Indian patent
in post graduate recognized by equity
funded by and
Indian college. GOI. fund/Angel
GOI. trademark
Network

If you meet conditions A+B+C+D+E & any F series then = Eligible Start-up
1. Angel investors
These investors are the first few people who will listen to your pitch. On foreseeing a
promising association, they will also invest in the idea. Angel investors do not invest a
very big amount but they also don’t get into the technicalities of the venture.

2. Venture capitalists
Venture capitalists are investors who lend money only upon liking a business model
and after contemplating prospects. Usually, venture capitalists invest in a lump sum
and are known for expecting high returns.

3. Business incubators
Every industry today has programmes called business incubators to assist start-ups
with proper financing and training The programmes consist of industry experts serving
as mentors-cum-investors to help entrepreneurs understand the current growth
trends.
4. Crowdfunding
A very popular type of fundraising, crowdfunding is opted by a number of start-ups
today. Certain websites are dedicated to collecting investments from a host of investors
just so they can help budding start-ups in setting up their business.

5. SME lending
There are millions of micro-financing firms offering both secured and unsecured
working capital loans. The only disadvantage is that they come with higher interest
rates.
6. Grants
This type of funding typically applies to businesses operating in the research and
development process. Grants are offered to them by the government because most of
these start-ups are run and regulated by the government itself All that being said, every
entrepreneur should envisage the pros and cons of their idea before they lay it on the
ground. A good funding will help a start-up go a long way without losing balance.
 Tax Benefits
 Income Tax Exemption on profits u/s 80-IAC of IT Act :

A DPIIT recognised start- up is eligible to apply to the Interministerial Board for full deduction on the profits and
gains from business provided following conditions are fulfilled.
• A private Limited Company or LLP.
• Incorporated on or after 1st April 2016 but before 1st April 2021
• Products or services or processes are undifferentiated, have potential for commercialization and have
significant incremental value for customers or workflow

  Exemption from tax on Long-term capital gains:

New section 54 EE has been inserted in the IT Act for the eligible start-ups to exempt their tax on LTCG if such a
LTCG or a part thereof is invested (amount not exceeding 50 lakh) in a fund notified by CG within a period of six
months from the date of transfer of the asset. Such amount shall be remain invested in the specified fund for a
period of 3 years . If withdrawn before 3 years, then exemption will be revoked in the year in which money is
withdrawn.
  Exemption from tax u/s 56(2)(viib)of the IT Act

DPIIT Recognised Start-ups are exempt from tax u/s 56(2)(viib)of the IT Act i.e. when such a start-ups
receives any consideration for issue of shares which exceeds the Fair market value of such shares
 Tax exemption to Individual/HUF on investment of long-term capital gain in equity shares of
Eligible Start-ups u/s 54GB.

Thus, if an individual or HUF sells a residential property and invests the capital gains to subscribe the 50% or
more equity shares of the eligible start-ups, then tax on long term capital will be exempt provided that such
shares are not sold or transferred within 5 years from the date of its acquisition. The start-ups shall also use
the amount invested to purchase assets and should not transfer asset purchased within 5 years from the
date of its purchase.

 Set off of carry forward losses 

The carry forward of losses in respect of eligible start-ups is allowed if  all the shareholders of such company
who held shares carrying voting power on the last day of the year in which the loss was incurred continue to
hold shares on the last day of previous year in which such loss is to be carry forward. The restriction of
 holding of 51 per cent of voting rights to be remaining unchanged u/s 79 has been relaxed in case of eligible
start-ups.
 Other Incentives for start-ups

• Simple process

Government of India has launched a mobile app and a website for easy registration for start-ups.
Anyone interested in setting up a start-up can fill up a simple form on the website and upload certain documents

• Reduction in cost

The government also provides lists of facilitators of patents and trademarks The government will bear all facilitator
fees and the start-up will bear only the statutory fees. They will enjoy 80%reduction in cost of filing patents.

• Easy access to Funds

10,000 crore rupees fund is set-up by government to provide funds to the start-ups as venture
capital. The government is also giving guarantee to the lenders to encourage banks and other
financial institutions for providing venture capital.
• Tax saving for investors
People investing their capital gains in the venture funds setup by government will get exemption from capital
gains. This will help start-ups to attract more investors.

• Choose your investor

The start-ups will have an option to choose between the VCs, giving them the liberty to choose their investors.

• Easy exit
In case of exit, a start up can close its business within 90 days from the date of application of winding up

• Meet other entrepreneur

Government has proposed to hold 2 start-up fests annually both nationally and internationally to enable the
various stakeholders of a start-up to meet. This will provide huge networking opportunities.
• Tax holiday for 3 Year
Start-ups will be exempted from income tax for 3 years provided they get a certification from Inter-
Ministerial Board (IMB).

• Apply for tenders

Start-ups can apply for government tenders. They are exempted from the “prior experience/turnover”
criteria applicable for normal companies answering to government tenders.

• R&D facilities
Seven new Research Parks will be set up to provide facilities to start-ups in the R&D sector.

• No time-consuming compliances
Various compliances have been simplified for start-ups to save time and money. Start-ups shall be allowed to
self-certify compliance (through the Startup mobile app) with 6 labour and 3 environment laws.
Under the Start-up India initiative, eligible
companies can get recognised as Start-ups by
DPIIT(Department of promotion of industry and
internal trade), in order to access a host of tax
benefits, easier compliance, IPR fast-tracking &
more
 Self Certification
• It aims to reduce the regulatory burden on Start-ups, thereby allowing them to focus on their core
business and keep compliance costs low.

• Start-ups shall be allowed to self-certify compliance for 6 Labour Laws and 3 Environmental Laws
through a simple online procedure.

• In the case of labour laws, no inspections will be conducted for a period of 5 years. Start-ups may be
inspected only on receipt of credible and verifiable complaint of violation.
Labour Laws Environment Laws
The Building and Other Constructions Workers’ (Regulation The Water (Prevention & Control of Pollution) Act, 1974
of Employment & Conditions of Service) Act, 1996
The Inter-State Migrant Workmen (Regulation of The Water (Prevention & Control of Pollution) Cess
Employment & Conditions of Service) Act, 1979 (Amendment) Act, 2003
The Payment of Gratuity Act, 1972 The Air (Prevention & Control of Pollution) Act, 1981
The Contract Labour (Regulation and  Abolition) Act, 1970
The Employees’ Provident Funds and Miscellaneous
Provisions Act, 1952   
The Employees’ State Insurance Act, 1948
 Start-up India Hub
• It aims to create a single point of contact for the entire Start-up ecosystem and enable knowledge
exchange and access to funding

• 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 Start-ups through their lifecycle 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 centers,

educational institutions and private organizations who aspire to foster innovation.
Legal Support and Fast-tracking Patent Examination at Lower Costs

• To promote awareness and adoption of IPRs by Start-ups and facilitate them in protecting and
commercializing the IPRs by providing access to high quality Intellectual Property services and
resources.

• It also includes fast-track examination of patent applications and rebate in fees

• Panel of facilitators to assist in filing of IP applications for effective implementation of the scheme

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

• Start-ups shall be provided an 80% rebate in filing of patents vis-a-vis other companies.
 Faster Exit for Start-ups

• It aims to make it easier for Start-ups to shut down or wind up operations, with the objective of allowing
entrepreneurs to reallocate capital and resources to more productive avenues faster.

• To encourage entrepreneurs to experiment with new and innovative ideas, without having to face complex and
long-drawn exit processes where their capital becomes interminably stuck in the event of business failure.

• As per the Insolvency and Bankruptcy Code, 2016, start-ups with simple debt structures, or those meeting certain
income specified criteria* can be wound up within 90 days of filing an application for insolvency.

• An insolvency professional shall be appointed for the Start-up, who shall thereafter be in charge of the company
including liquidation of its assets and paying its creditors within six months of such appointment

• 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 IBC. This process will respect the concept of limited
liability.
 Rolling-out of Mobile App and Portal
• To serve as the single platform for Start-ups for interacting with Government and Regulatory Institutions for
all business needs and information exchange among various stakeholders

• A simple form shall be made available for registration of start-ups. 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

• A digital version of the final registration certificate shall be made available for downloading through the
Mobile App

• Collaborating with various Start-up ecosystem partners. The App shall provide a collaborative platform with
a national network of stakeholders

• Applying for various schemes being undertaken under the Start-up India Action Plan

*The Start-up portal shall have similar functionalities (being offered through the mobile app) using a richer
web-based User Interface.
Benefits to Start-ups under Companies Act, 2013
 The Companies (Acceptance of Deposit) Rules, 2014 have been amended to provide that an amount of
twenty five lakh rupees or more received by a start-up company, by way of a convertible note (convertible
into equity shares or repayable within a period not exceeding five years from the date of issue) in a single
tranche, from a person shall not be treated as a deposit.

 The provisions of clauses (a) to (e) of Section 73 of the Act shall not apply to a start-up company for five
years from the date of its incorporation.

 The upper limit on the acceptance of deposits has been enhanced to 35% of net worth instead of earlier
25%;

 Start-ups are allowed to issue Employee Stock Options to promoters working as employees;

 The limits with regard to sweat equity that can be issued by a start-up company from 25% of paid up
capital to 50% of paid up capital;
 A Start-up Company is exempt from preparing a Cash Flow Statement under the Companies Act 2013

 For start-ups, convening at least one meeting of the board of directors in each half of a calendar year
with the gap between the two meetings of not less than Ninety (90) days is sufficient to meet the
requirement of Section 173 (5) of the Act.
SIDBI MAKE IN INDIA SOFT LOAN FUND FOR MICRO SMALL AND MEDIUM
ENTERPRISES (SMILE)
Objective Of The Scheme

The objective of the Scheme is to provide soft loan, in the nature of quasi-equity and term loan on relatively soft
terms to MSMEs to meet the required debt-equity ratio for establishment of an MSME as also for pursuing
opportunities for growth for existing MSMEs.

Eligibility Criteria
• Emphasis will be on covering new enterprises in the manufacturing as well as services sector         
     
• The emphasis will however, be on financing smaller enterprises within MSME

• Existing enterprises undertaking expansion, to take advantage of new emerging opportunities, as also
undertaking modernization, technology upgradation or other projects for growing their business will also be
covered

• Minimum Loan Size - ₹ 10 lakh for Equipment Finance & Others : ₹ 25 lakh.
                                                                
SIDBI MAKE IN INDIA SOFT LOAN FUND FOR MICRO SMALL AND MEDIUM
ENTERPRISES (SMILE)
     
SIDBI Make in India Loan for Enterprises (SMILE) was also launched
by Mr. Jaitley. The Scheme is intended to take forward Government
of India’s ‘Make in India’ campaign and help MSMEs take part in the
campaign.
The focus will be on identified 25 sectors under ‘Make in India’
programme’ with emphasis on financing smaller enterprises within
the MSME sector. The scheme is expected to benefit approximately
13,000 enterprises, with employment for nearly 2 lakh persons.         
                                                    
Tenure & Moratorium
• Longer repayment period upto 10 years including moratorium of upto 36 months.
• Minimum Promoter Contribution of 15% subject to Maximum DER of 3:1

Security
Term Loan
• First charge over all assets created under the project  
• Personal guarantee of promoter(s) 
• Cases involving term loan up to 2 crore may be covered under Credit Guarantee Scheme of CGTMSE        
Soft Loan 
• Residual charge over the entire assets
• Personal Guarantee of the Promoter(s)  
Some of the most notable and popular schemes offered by the Indian government for start-ups
and MSMEs are as follows:

Bank Credit Facilitation Scheme -

Headed by the National Small Industries Corporation (NSIC), this scheme is targeted at meeting the credit needs
of the MSME units. The NSIC has partnered with various banks to provide loans to the MSME units. The
repayment tenure of the scheme ranges between 5 years and 7 years but in special cases, it can be extended up to
11 years.

Pradhan Mantri Mudra Yojana (PMMY) - 

Launched in 2015, this scheme is headed by the Micro Units Development and Refinance Agency (MUDRA) and
it aims at offering loans to all kinds of manufacturing, trading, and service sector activities. The scheme offers
loan under three categories – Shishu, Kishor, and Tarun in amounts ranging between Rs.50,000 and Rs.10 lakh.
The Mudra Loan can be availed by artisans, shopkeepers, vegetable vendors, machine operators, repair shops, etc.
Credit Guarantee Scheme (CGS) - 
This loan can be availed by both new and existing MSMEs that are involved in service or manufacturing activities
but excludes educational institutions, agriculture, retail trade, Self Help Groups (SHGs), etc. Up to Rs.200 lakh
can be borrowed under this scheme headed by the Credit Guarantee Fund Trust for Micro and Small Enterprises
(CGTMSE).

Standup India - 
Launched in April 2016 and headed by SIDBI, this scheme extends loans to enterprises in manufacturing, trading,
or services. Under this scheme, loans ranging between Rs.10 lakh and Rs.1 crore can be availed. The repayment
of loans taken under this scheme can be done in seven years while the maximum moratorium period allowed is 18
months.

Sustainable Finance Scheme –

This scheme is also headed by the SIDBI and aims at offering loans to industries that deal in green energy,
renewable energy, technology hardware, and non-renewable energy. The government started this scheme with an
intent to offer support to the entire value chain of cleaner production/energy efficiency and sustainable
development projects.
 MP Incubation and Startup Policy

Interest Subsidy

Eligible startups shall be provided interest subsidy of 8% per annum for a period of 3 years on
the rate of interest paid on loans obtained from scheduled banks/financial institutions subject
to a maximum limit of Rs. 4 lakhs per year. 

Lease Rental Subsidy

Reimbursement of 25% of lease rental subsidy to startup units established in the state
operating from incubators shall be eligible for a period of 3 years subject to a ceiling of
Rs. 3 lakhs per year from the date of rent payment to incubator.
Patent /Quality Promotion Subsidy
Cost reimbursement for patent/quality certification per unit up to a limit of Rs. 2 lakhs for
domestic & Rs. 5 lakhs for international patent/quality certification upon successfully
receiving them. 

Lease Rental Subsidy

One time marketing assistance of maximum Rs. 10 Lakhs to eligible startups for their
product/service launch in the market upon securing of minimum funding of 25% from a
registered angel/venture fund/ registered incubator by the startup.
Snapshot of Indian start-up ecosystem